[Federal Register Volume 69, Number 147 (Monday, August 2, 2004)]
[Notices]
[Pages 46214-46323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16783]



  Federal Register / Vol. 69, No. 147 / Monday, August 2, 2004 / 
Notices  

[[Page 46214]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4883-N-02] HUD-2004-0003


HUD Multifamily Rental Project and Health Care Facility Closing 
Documents: Revisions and Updates and Notice of Information Collection

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: Consistent with the Paperwork Reduction Act of 1995, HUD is 
publishing for public comment a comprehensive set of closing forms and 
documents for use in the Federal Housing Administration (FHA) 
multifamily rental project and health care facility (excluding 
hospitals) programs. In addition to meeting the requirements of the 
Paperwork Reduction Act, this notice seeks public comment for the 
purpose of enlisting input from the lending industry and other 
interested parties in the development and adoption of a set of 
instruments that offer the requisite protection to all parties in these 
FHA-insured mortgage programs, consistent with modern real estate and 
mortgage lending laws and procedures. The development of these forms 
identified outdated language and policies in HUD regulations that 
needed to be changed. These forms are also posted on HUD's website at 
www.HUD.gov. Accordingly, elsewhere in today's Federal Register, HUD is 
publishing a proposed rule that solicits comments on changes to certain 
FHA regulations as described in the preamble to that rule.

DATES: Comment Due Date: October 1, 2004.

ADDRESSES: Interested persons are invited to submit comments regarding 
this notice to the Rules Docket Clerk, Regulations Division, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-0500. 
Communications should refer to the above docket number and title. 
Facsimile (FAX) comments are not acceptable. A copy of each 
communication submitted will be available for public inspection and 
copying between 8 a.m. and 5 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Gains E. Hopkins, Jr., Office of the 
General Counsel, Room 9230, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-0500; 
telephone (202) 708-4090 (this is not a toll-free number). Persons with 
hearing or speech disabilities may access this number through TTY by 
calling the toll-free Federal Information Relay Service at (800) 877-
8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. General Summary of Changes to HUD Multifamily Rental and Health Care 
Facility Closing Documents

    In 1999, HUD developed the Multifamily Accelerated Processing (MAP) 
initiative. It was during the MAP development process that HUD noted 
that the multifamily rental project and health care facility closing 
forms had not been amended or revised in any significant fashion since 
the 1960s. It became clear during the development of MAP that all of 
HUD's multifamily closing forms required thorough review and comparison 
to modern day instruments to offer the requisite protection to all 
parties to the transaction, consistent with modern real estate and 
mortgage lending laws and procedures. Consequently, five committees 
consisting of experienced HUD closing attorneys were assembled to 
review the closing documents and to advise HUD's Office of Housing 
about improvements and recommendations. With input from HUD attorneys, 
FHA multifamily lenders, and counsel to parties to HUD-insured 
transactions, HUD determined how the forms could be revised to reflect 
current departmental policy and current real estate and mortgage 
financing practice. First drafts of revised closing documents were 
posted on a HUD Web site at the end of March 2000, and comments were 
solicited from the public and industry representatives. In response to 
the many comments received, significant changes were made to several of 
the draft documents and those changes are incorporated in the drafts 
being published with this notice.
    The revised documents being published for public comment as part of 
this notice do not include the forms for HUD's Section 202 Housing for 
the Elderly (Section 202) program and Section 811 Housing for Persons 
with Disabilities (Section 811) program. Documents for the Section 202 
and Section 811 programs will be revised in the near future.
    The major changes to the appended closing documents are discussed 
in this notice. Terms that appear in this notice that begin with an 
initial capitalization refer to the titles of closing documents are 
defined terms in the closing documents. Though major changes were made 
to several of the documents, HUD strived to keep all changes consistent 
within current HUD policy and the FHA regulatory framework except where 
otherwise identified in this notice. The requirements for commitment 
and endorsement of a mortgage note are provided in 24 CFR part 200, 
subpart A. Generally, the regulations in this part and subpart provide 
that where specific closing documents are referenced in the regulations 
the regulations provide that the documents shall be in a form as 
prescribed by HUD. The subpart also specifies other closing 
requirements that are reflected in the closing documents. There are 
numerous instances where the existing documents have been clarified, 
expanded, or otherwise modified to reflect current HUD policy and 
regulations, which have changed since the documents were originally 
adopted. One example of such change pertains to the policy that FHA 
regulation of lessees of health care facilities will be to the same 
extent to which owners of health care facilities are regulated. This 
policy is set forth in the new health care facility regulatory 
agreement. Although HUD has always taken the position that any lessee 
or sublessee would be subject to the same regulatory controls to which 
the owner is subjected under a regulatory agreement, this is the first 
time that this policy has been clearly stated in writing. Comment is 
specifically invited on the proposed change in the closing documents. A 
change to HUD regulations to also reflect this policy is included in 
HUD's proposed rule, published elsewhere in today's Federal Register.
    In addition to specific changes to individual documents, HUD 
advises that there are two separate Regulatory Agreement (RA) formats 
published with this notice. When the closing documents were published 
on the HUD Web site in March 2000, only one RA format was published at 
that time, and the single RA format covered both rental housing 
projects and health care facilities. The single RA format was developed 
as a result of public comment that the multiple RA formats, currently 
in use, are confusing, antiquated, and often misapplied. Since 
publication on HUD's Web site, separate formats were developed for (1) 
rental housing programs, and (2) health care facilities under Section 
232 of the National Housing Act (NHA). Certain ``rental'' type 
modifications may be necessary to the health care facilities RA on a 
case-by-case basis to cover assisted living facilities (ALFs) and board 
and care homes (B & C homes) under Section 232. Certain provisions 
relating to

[[Page 46215]]

admission, occupancy and security deposits, among others may need to be 
added depending on state law. The Section 232 RA also briefly mentions 
an Admission Agreement, which is a type of lease between a resident of 
an ALF, B & C home, or Nursing Home. The description of this type of 
admissions agreement may need to be expanded further in certain 
documents depending on state law.
    A major revision that HUD is considering and which is not reflected 
in the closing documents published with this notice is a consolidation 
of the various escrow forms. A consolidation would eliminate several 
forms which are very similar and for which the differences could be 
identified in a set of boxes to be checked. A frequent complaint of 
lenders and other users of the multifamily rental and heath care 
facility mortgage insurance programs has been the confusing nature of 
too many similar forms.
    The FHA Form 2446, Escrow Agreement for Off-Site Facilities, is not 
included in the attached documents. When the consolidated escrow forms 
are published the FHA Form 2446 will be included in the that 
publication and, if it is not appropriate for a consolidated escrow, or 
if a consolidated escrow form is not developed, the FHA Form 2446 will 
be updated since it was last revised in April, 1962. A consolidated 
escrow form would contain an escrow for minor moveables and the 12-
month debt service escrow for Section 232 projects with independent 
units. If these provisions are not included in a consolidated escrow 
form, another separate escrow form will have to be developed. HUD 
invites public comment on this proposal. HUD is considering publishing 
a consolidated escrow form. A consolidated escrow form would represent 
a major change from the policy articulated in the current Section 232 
lessee regulatory agreement.
    An additional change made in the RAs and other relevant documents 
pertains to the definition of ``principal.'' The term ``tenants in 
common'' is being removed from the definition of ``principal'' because 
HUD intends, as a matter of policy, to eliminate tenancies in common as 
eligible mortgagor entities, except for tenancies in common comprised 
of one or more natural persons. No tenancies in common comprised of 
entities such as partnerships and limited liability companies, etc. 
would be eligible as mortgagors.
    Two minor changes will be apparent in reviewing all the published 
forms but the reason for the changes may not be apparent. First, a 
decision was made to adopt a universal numbering system for the closing 
documents, e.g. HUD Form 9XXXXM, for the multifamily rental project and 
health care facility closing documents. A universal numbering system 
should reduce confusion because the documents will appear in the same 
group wherever HUD publishes the documents, e.g. HUDCLIPS. The second 
change is that the terms ``lender'' and ``borrower'' are used 
consistently throughout all the documents, except with respect to the 
title for the document ``Mortgagee's Certificate''. The terms 
``lender'' and ``borrower'' are defined to mean ``mortgagee'' and 
``mortgagor'' as those terms are used in the NHA. Formerly, the 
documents contained a variety of terms to refer to these parties; 
therefore, consistency more in line with modern real estate practice is 
anticipated to make the documents more easily understood.
    Form HUD-3259, Latent Defects Bond, has not been included in the 
closing documents published with this notice and, like FHA Form 2446, 
HUD 3259 does not have the 90000M series number. Similarly, the 
Borrower's Cost Breakdown, HUD-2328, does not have a 90000M series 
number since this form was recently revised. When these forms are 
renewed, HUD will consider including the 3259 and the 2328 forms in the 
90000M series. The FHA Form 2446 will be assigned a 90000M series 
number if it is not consolidated into a master escrow agreement as 
discussed above.
    The description of the significant changes made to the individual 
closing documents follows. The documents are divided into two 
categories: major documents and miscellaneous documents. Most of the 
major documents have been revised in some significant fashion. The 
miscellaneous documents generally have not been revised. Three new 
documents appear in the miscellaneous category, namely, the Escrow 
Agreement for Working Capital, the Sinking Fund Agreement, and the 
Escrow Agreement for Latent Defects (For Use with Completion Assurance 
Agreement).
    The legal authority of HUD to implement these changes to documents 
is found in Titles II and IX of the NHA and in 24 CFR part 200 and the 
separate parts pertaining to each individual multifamily rental and 
health care program, including but not limited to 24 CFR parts 207, 
220, 221, 232, 241, and 244.

B. Major Documents

1. Security Instrument (HUD 94000M)
    The Security Instrument has been changed considerably from the 
numerous state-specific forms currently in use by FHA. The forms 
currently in use were developed in the early days of FHA and have not 
been changed in any significant fashion since the 1960s. Certain 
commenters have questioned the value of instruments that are not 
consistent with documents used by other agencies and the commercial 
real estate market. Perhaps the most significant criticism was that the 
current FHA form Security Instruments do not provide lenders with the 
necessary protection that a modern instrument would offer. In 
developing the new multistate format, HUD made every effort to 
carefully examine the provisions of the security instruments currently 
and compare them with those used in the commercial real estate lending 
market today. Particularly, HUD looked carefully at the Freddie Mac 
multistate format (which differs little from that used by Fannie Mae) 
as well as at recent developments in the law. Consequently, HUD 
developed a multistate format which is consistent with existing HUD 
administrative policy and which is also consistent with modern lending 
and credit enhancement practices. In most areas, the multistate 
Security Instrument uses concepts in the existing FHA form documents 
and expands and clarifies them, as in the case of condemnation, 
property and liability insurance, single-asset borrower, books, records 
and financial reporting. The revised Security Instrument also clarifies 
for the parties to the Security Instrument which actions of the 
borrower and lender require HUD approval. The borrower and lender, 
however, remain the only parties to the Security Instrument, and HUD 
continues to have no direct contractual relationship with the owner 
with respect to the Security Instrument or to the Note. Further, the 
Security Instrument is organized along the same lines as the Freddie 
Mac instrument. State-specific addenda are being developed by HUD field 
counsel for the various jurisdictions and will need to be appended to 
the multistate format comparable to the approach taken by the Freddie 
Mac. The HUD state-specific addenda will differ significantly from the 
Freddie Mac addenda only in that there will be a provision governing 
construction advances in the HUD addenda since HUD insures construction 
advances, unlike Freddie Mac. This construction advances provision 
varies from state to state.

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Also, the HUD instrument is designed to cover health care facilities as 
well as rental housing projects unlike the Freddie Mac instrument, 
which is restricted to rental housing. The following provides a 
description of the major substantive changes that have been made and 
the section numbers cited in the following discussion refer to sections 
in the Security Instrument:
    Personal Liability (Section 6). HUD has decided to hold key 
principals personally liable for the indebtedness, but only if they 
commit the following actions: the borrower ceases to be a single-
purpose, single-asset entity without prior HUD approval; the borrower 
transfers the property without prior HUD approval; the borrower creates 
or permits to be created a lien or encumbrance without prior HUD 
approval; the borrower commits fraud or makes a material 
misrepresentation to HUD or the lender; loss or damage suffered by the 
lender caused by the borrower's failure to pay Rents and security 
deposits it is obligated to pay; the borrower fails to apply insurance 
or condemnation proceeds as specified in the Security Instrument or to 
comply with requirements on the delivery of books, records and reports 
to the mortgagee. See also Sections 1(m), 1(p), 18, 23, 24, 45 and 
Section 8 of the Security Instrument.
    Default (Sections 24 and 45). HUD has developed a new two-tiered 
default scheme: Class A for financial defaults, giving the lender an 
immediate right to an insurance fund claim, and Class B for all other 
bases for default, requiring the prior written approval of HUD for the 
lender to make an insurance fund claim. Class B defaults contains 
several new bases for default and are derived, in part, from the 
Freddie Mac model. The new bases include fraud or material 
misrepresentation or omission by the borrower, its officers, directors, 
trustees, general partners, members, managers or guarantors: (1) In the 
application for the HUD-insured loan; (2) in the application for 
financial assistance other than the HUD-insured loan that is included 
in the definition of ``Indebtedness''; (3) in any financial statement, 
rent roll, or other report or information provided by the borrower 
during the term of the Indebtedness; and (4) in any request for 
lender's consent to any proposed action. Other new bases for default 
include the commencement of a forfeiture action or proceeding, which in 
the lender's reasonable judgment could result in the loss of the 
property or impairment of the lien.
    Mandatory Acceleration (Section 10). HUD has decided to require the 
lender, when directed by HUD, to declare the entire Indebtedness due 
and payable following a declaration of default by HUD under the terms 
of the Regulatory Agreement.
    Waste (Sections 1(y) and 47). HUD has augmented the common law and 
state law definitions of ``Waste'' with an expanded contractual 
definition of and corresponding remedies for its commission. The 
definition of Waste includes the unauthorized modification of the 
property affecting value, failure to maintain the property, violation 
of covenants in the loan documents which require compliance with 
federal regulations regarding physical conditions standards, failure to 
pay certain taxes, and the wrongful retention of rents. This new 
definition is derived from The American Law Institute (ALI) in ALI's 
Restatement of the Law Third, Property (Mortgages)(copyright) 1997, and 
portions of that work are used with ALI's kind permission.
    Assignment of Leases (Section 4). HUD has included an Assignment of 
Leases provision to the Security Instrument. In addition to the 
absolute assignment by the borrower to the lender of all leases on the 
subject property, this section sets forth the mandatory lease 
provisions for non-residential use of the property, including new 
requirements for all leases for telecommunication uses on the mortgaged 
property.
    Health Care Facilities (Sections 1(g) and 1(q)(16)). HUD has 
revised the form of Security Instrument to include health care 
facilities. The changes are:
    a. The title of the revised form is now known as the HUD 
Multifamily/Health Care Facility (Mortgage, Deed of Trust, or other 
designation as appropriate in jurisdiction), Assignment of Rents and 
Security Agreement.
    b. The definition of Health Care Facilities at Section 1(g) has 
been expanded to include a comprehensive list of health care facilities 
authorized under the NHA or other applicable federal law.
    c. The definition of ``Mortgaged Property'' at Section 1(q)(16) has 
been written to include all licenses, Bed Authority, and Certificates 
of Need required that are necessary to operate a facility and receive 
benefits and reimbursement from health care assistance providers that 
were relied upon by HUD to insure the Security Instrument.
    Termination (Section 49). HUD added a provision to clarify that, at 
such time as HUD no longer insures the loan or holds the Security 
Instrument, all obligations of the parties to the Security Instrument 
terminate with respect to HUD, provided that the borrower is in 
compliance with the Regulatory Agreement, and the lender is in 
compliance with the Contract of Insurance.
    Management Contracts (Section 20). HUD has decided to require any 
management contract to contain a provision that the contract shall be 
subject to termination without penalty and without cause upon written 
request of the lender.
    Environmental Hazards (Section 51). HUD has decided to include a 
provision similar to the Freddie Mac model to provide protections to 
the lender with respect to environmental hazards.
2. Multifamily/Multistate Note (HUD 94001M)
    The current version of the HUD Multifamily/Multistate Note is, for 
some states, approximately 30 years old. The HUD Multifamily/Multistate 
Note in some states, such as Pennsylvania, was modeled on a Fannie Mae 
note form from the late 1960's or early 1970's. The proposed new 
version of the mortgage loan HUD Multifamily/Multistate Note is based, 
in part, on the 1999 Freddie Mac multifamily note. The proposed HUD 
Multifamily/Multistate Note is essentially a new form of note. The text 
has been rewritten. Discussion of issues has been expanded. Topics have 
been better organized. The essential concepts remain the same. 
Substantively, there are no major changes except for the issue of 
personal liability. The proposed HUD Multifamily/Multistate Note is now 
directly linked to the proposed Security Instrument and cannot be read 
independent of that document. The HUD Multifamily/Multistate Note is to 
be used for multifamily and healthcare programs. Some consideration was 
given to a revision, which would be consistent with the Government 
National Mortgage Association (Ginnie Mae) electronic payment; however, 
the decision was that such a provision would be confusing and that HUD 
could issue administrative policy directives permitting such changes 
for Ginnie Mae transactions. HUD invites public comment or suggested 
alternatives with respect to that issue. The major changes to the HUD 
Multifamiy/Multistate Note follow and the section numbers cited below 
refer to sections in that note.
    Personal Liability (Section 8). The HUD Multifamily/Multistate Note 
limits personal liability. It is a non-recourse Note. The version 
currently in use does not have a non-recourse provision in the printed 
form, though personal liability language was permitted by a HUD 
Handbook. The revised HUD Multifamily/Multistate Note identifies 
exceptions to the limit on personal

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liability in the Security Instrument, Regulatory Agreement, and the 
Note. The HUD Multifamily/Multistate Note identifies six exceptions to 
the limit on personal liability. A Borrower will be personally liable 
if the Borrower commits any of the six so-called ``bad boy'' acts 
identified in the exceptions. The ``bad boy'' acts concern the failure 
to pay the Lender rents after an event of default, failure to apply 
insurance or condemnation proceeds as required by the Security 
Instrument, the failure to deliver books and records, acquisition of 
property or operation of a business in violation of the Security 
Instrument, transfer or granting of a lien or encumbrance, and fraud or 
misrepresentation.
    Key Principal (Section 1). The revised HUD Multifamily/Multistate 
Note adds a new defined term for ``Key Principal'' which will be 
discussed in an Office of Housing directive. The forthcoming Office of 
Housing directive will explain how to determine who will be a Key 
Principal. The Key Principal will be personally liable for ``bad boy'' 
acts.
    Attachment to the Note. The HUD Multifamily/Multistate Note 
includes the attachment entitled Acknowledgment and Agreement of Key 
Principal to Personal Liability for Exceptions to Non-Recourse 
Liability. This document will make the Key Principal financially liable 
for ``bad boy'' acts.
3. Regulatory Agreement (HUD 92466M)
    HUD extensively modified the Regulatory Agreement with the main 
change being a consolidation of all the various rental housing projects 
currently in use into one document. HUD drafted a separate Regulatory 
Agreement for its health care facilities. Lenders, Borrowers, and 
project managers often complained about the number of forms and the 
duplication of information required by the various forms. Therefore, an 
effort was made to evaluate all of the various Regulatory Agreements 
currently being used, as well as other forms executed by Borrowers in 
an effort to determine which forms could be consolidated without 
unnecessary complication. Additionally, none of the current forms had 
been amended for many years, and some did not fully reflect current 
administrative policy requirements. HUD reorganized the Regulatory 
Agreement by topics for ease of use, included current policy and 
administrative requirements and incorporated the Mortgagor's 
Certificate into the proposed Regulatory Agreement.
    HUD spent considerable time analyzing the issue of whether to 
develop a separate format to cover the Section 232 Health Care 
Facilities program (nursing homes, intermediate care facilities, 
assisted living facilities and board and care homes). The final 
decision was to develop a separate Regulatory Agreement for health care 
facilities. In developing a Regulatory Agreement that will work for the 
various rental housing programs (excluding the FHA subsidy programs 
under which projects are not being initially insured any longer), great 
care was taken to be certain that all provisions are consistent with 
current administrative policy of HUD.
    The proposed Regulatory Agreement is not designed to be used in all 
cases where there is a Transfer of Physical Assets, if the transfer 
involves a project which was initially insured under one of the FHA 
subsidy programs (Section 236 Interest Reduction Program (IRP), Rental 
Assistance Program (RAP), 221(d)(3) Below Market Interest Rate (BMIR), 
Rent Supplement, etc.) In these cases it will be necessary to develop a 
transactional specific Regulatory Agreement based on a combination of 
as much of the new format as will be compatible with those provisions 
of the existing Regulatory Agreement, such as those pertaining to 
occupancy and rental and which are mandated by the subsidy program 
statutes or regulations. On the other hand, the proposed format can be 
used for a transfer of an unsubsidized rental project and with few, if 
any, changes.
    Article I--Definitions. The definitions are found in Article I at 
the beginning of the proposed Regulatory Agreement. In the existing 
Regulatory Agreement, the definitions are found near the end of the 
Regulatory Agreement. Most of the definitions in the Regulatory 
Agreement are the same as the definitions in the proposed Security 
Instrument, and many are similar to definitions found in the Freddie 
Mac closing documents.
    Section 1(a): ``Affiliate'' is a new term. The definition is taken 
from 24 CFR 24.105.
    Section 1(b): HUD decided to use the term ``Borrower'' instead of 
``Owner'' or ``Mortgagor'' so that the same terms would be used in the 
Regulatory Agreement and the Security Instrument. HUD finds this term 
to be more universal than the term ``Mortgagor''. The definition of 
Borrower is expanded to make it clear that the definition includes a 
purchaser of the development that does not assume the Security 
Instrument.
    Section 1(d): ``Directives'' is a new term and includes prospective 
issuances of HUD as well as ones effective on the date the HUD 
Multifamily/Multistate Note was first insured.
    Section 1(p): HUD added an expanded definition of ``Mortgaged 
Property'' including other defined terms, such as ``Fixtures'' (Section 
1(g)) and ``Personalty'' (Section 1(s)), which are not defined in the 
current Regulatory Agreements.
    Section 1(x): HUD added a definition for ``Reasonable operating 
expenses'' to clarify current policy.
    Section 1(aa): HUD chose to use the term ``Security Instrument'' 
instead of ``Mortgage.'' HUD finds this term to be more universally 
understood and used in multifamily project closing transactions than 
the term ``Mortgage.''
    Section 1(z) and Section 1(bb): The proposed Regulatory Agreement 
collectively covers more programs and types of developments than each 
of the current agreements. For this reason, the proposed Regulatory 
Agreement defines both ``Surplus Cash'' (Section 1(bb)) and ``Residual 
Receipts'' (Section 1(z)).
    Section 1(ee): ``Waste'' is a new definition and is the same as the 
definition of ``Waste'' in Section 1(cc) of the proposed Security 
Instrument. Section 21 of the proposed Regulatory Agreement prohibits 
the Borrower from committing Waste.
    Article II--Construction.
    Sections 2-9: HUD decided to merge the Mortgagor's Certificate (FHA 
Form No. 2433) into the proposed Regulatory Agreement.
    Article III--Financial Management.
    Section 11(b): HUD added a provision providing for periodic review 
of the amount to be deposited in the reserve for replacement fund.
    Section 11(c): HUD added a provision requiring that interest earned 
on the reserve for replacement fund be deposited into that fund.
    Section 11(d): HUD added a provision permitting HUD to direct the 
application of the reserve for replacement fund at any time.
    Section 15(b): HUD added additional conditions under which the 
Borrower may take Distributions.
    Section 15(e): HUD clarified when the Borrower may be reimbursed 
for equity or capital contributions.
    Section 19: HUD added a provision concerning the maintenance and 
inspection of books and records of management agents and Affiliates.
    Article IV Project Management. Most of the provisions of this 
Article represent an elaboration of provisions currently found in the 
HUD Regulatory Agreement, HUD-92466.

[[Page 46218]]

    Section 21: This provision derives from the current paragraphs 7 
and 9 and expresses the requirement that the Borrower maintain the 
property and the books in satisfactory condition and that this 
obligation is independent of any obligation of any other entity or 
person.
    Section 22: This provision requiring flood insurance in flood 
hazard areas is new to the Regulatory Agreement, but is not a new 
requirement for Borrowers.
    Sections 23, 24, 25, 26 and 27: These provisions derive from 
paragraph 9 of the current Regulatory Agreement. Section 23 requires 
execution of a Management Agreement and Management Certification. 
Section 25 requires that the Management Agreement and any third party 
vendor contract entered into by the Borrower be terminable at the 
request of HUD. Section 26 provides expanded guidance for contract 
acquisition and management by the Borrower. Section 27 continues the 
existing requirement that the Borrower be responsive to inquiries from 
HUD regarding the operation and management of the Project.
    Section 28: This provision derives from the regulations at 24 CFR 
part 245, as amended by the regulations published on June 7, 2000, at 
65 FR 36272. This provision explains rights of tenants to organize and 
gives tenants remedies against Borrowers who unreasonably interfere 
with these rights.
    Section 29: This provision derives from the current paragraph 10 
and provides a remedy for HUD in the event that the Borrower fails to 
comply with a law that is relevant to the management of the Project.
    Article V--Admissions and Occupancy.
    Section 40: HUD clarified that the Borrower may not charge a 
resident or applicant an admission fee, founders fee, continuing care 
retirement community fee, life-care fee or similar payment.
    Article VI--Actions Requiring the Prior Written Approval of HUD. 
This Article prohibits certain actions without the prior written 
approval of HUD.
    Section 42(a): This provision maintains provisions in the 
Regulatory Agreement currently in use that restricts the alienation of 
real and personal property of the Project. However, unlike the 
Regulatory Agreements currently in use, this section of the revised 
Regulatory Agreement establishes exceptions permitting disposal of 
obsolete or deteriorated equipment and conveyance of property by 
operation of law.
    Sections 42(b), (c), (d), (e), (g), (h): These sections contain 
provisions substantially equivalent provisions to those in the 
Regulatory Agreements currently in use. Clarification and improved 
wording is the primary purpose of any variations from prior 
instruments.
    Section 42(f): The Regulatory Agreements currently in use restrict 
the right of the Borrower from conveying its general partnership 
interests; this provision extends that restriction to other interests, 
in recognition of other forms of Borrower entities being utilized.
    Section 42(i): This provision is not contained in Regulatory 
Agreements currently in use. The provision is designed to avoid a claim 
by the Borrower that certain of its money is an endowment which is not 
permitted to be used to pay Project debt or expenses. The provision 
will permit such a claim only if the money is clearly part of such a 
restricted endowment.
    Section 42(j): This provision, restricting the Borrower's right to 
change provisions of its organizational documents, is not found in the 
Regulatory Agreements currently in use. However, this provision is 
compatible with provisions that HUD has traditionally required to be 
contained in the Borrower's organizational documents themselves.
    Section 42(k): This provision, regulating the institution and 
settling of litigation by the Borrower above $25,000, is not found in 
Regulatory Agreements currently in use. The inclusion of this provision 
by HUD represents a decision by HUD to apply a consistent policy to all 
programs and to clearly state that policy in the Regulatory Agreement.
    Section 42(l): This provision, prohibiting reimbursement without 
the prior written approval of HUD, is not found in Regulatory 
Agreements currently in use. However, the provision is consistent with 
existing HUD policy that prefers that the Borrower or project manager 
pay the expenses of the project directly rather than by reimbursing 
another for these expenses.
    Section 42(m): This provision, prohibiting receipt of various fees 
or payments, is not found in Regulatory Agreements currently in use.
    Article VII--Enforcement.
    Section 43(b) and (c): HUD added additional items which shall 
constitute a violation of the Regulatory Agreement. These include fraud 
or material misrepresentations by the Borrower, its officers, 
directors, trustees, general partners, members, managers or managing 
agent in connection with certain documents submitted to HUD or requests 
for HUD's consent to any proposed action.
    Section 44: In this section, HUD clarified the circumstances under 
which it may declare a default following the existence of a violation.
    Section 44(b): This section provides that instead of being merely 
able to request the holder of the HUD Multifamily/Multistate Note, when 
the note is not held by HUD, to accelerate the HUD Multifamily/
Multistate Note following a declaration of default, HUD will have the 
discretion to require the holder of the HUD Multifamily/Multistate Note 
to accelerate the Note following the declaration of default. There is a 
corresponding provision in the Security Instrument at Section 10.
    Section 44(g): HUD added a new provision to provide for the removal 
of certain persons from a role in ownership of the Mortgaged Property 
with respect to violations of the Regulatory Agreement related to 
felony criminal convictions or civil judgments concerning the operation 
or management of the Mortgaged Property.
    Section 45: HUD added a new provision to provide a measure of 
damages for failure to maintain the Mortgaged Property as required by 
the Regulatory Agreement.
    Article VIII--Miscellaneous.
    Sections 47, 48, 49, 51: These sections contain provisions 
substantially equivalent to provisions found in Regulatory Agreements 
currently in use. Clarification and improved wording is the primary 
purpose of any variation from prior instruments.
    Section 50: This provision, concerning the effect of section 
headings and titles, is not found in Regulatory Agreements currently in 
use. However, it is a standard contractual provision.
    Section 52: This provision for parties' addresses for purposes of 
providing notice is not found in Regulatory Agreements currently in 
use. However, it is a standard contractual provision.
    Section 53: This provision, pertaining to the Regulatory Agreement 
as a Uniform Commercial Code (UCC) security agreement, a fixture 
financing statement and the granting to HUD of a security interest, and 
related matters, is not contained in current Regulatory Agreements.
    Article IX--Section 8 Housing Assistance Payments Contracts. 
Currently HUD has a different form of Regulatory Agreement (HUD-92465) 
for developments with project-based Section 8 assistance. HUD includes 
Article IX in order to make a uniform Regulatory Agreement applicable 
to

[[Page 46219]]

insured projects with Section 8 rental assistance.
    In Sections 54(a), the definition of ``Section 8 units'' expands 
the current definition in Section 16(j) of HUD-92465 to clarify that 
``Section 8 units'' does not include Section 8 certificates, vouchers 
or housing choice vouchers. The other sections in Article IX were in 
HUD-92465. Section 54(b) corresponds to Section 16(k) of HUD-92465. 
Sections 55, 56, and 57 correspond to Sections 5(a), (b) and (c) of 
HUD-92465. Sections 58, 59 and 60 correspond to Sections 9(a), (b) and 
(c) of HUD-92465.
4. Regulatory Agreement for Health Care Facilities (92466M-HCF)
    HUD extensively modified the Regulatory Agreement formats that are 
currently in use. The main change is consolidation of all the various 
rental housing project and Health Care Facility (excluding hospitals) 
Regulatory Agreements currently in use into two new documents (one for 
rental projects [92466M] and one for health care facilities [92466M-
HCF]). Aside from containing numerous provisions pertaining exclusively 
to health care facilities insured under Section 232 of the National 
Housing Act and the elimination of provisions which apply exclusively 
to rental housing (mainly admission and occupancy, Section 8 
assistance, etc.), the 92466M-HCF is much the same as the 92466. The 
discussion of the 92466M includes a discussion of the provisions used 
in both documents.
    In virtually all instances the 92466M-HCF is consistent with 
current HUD policy. However, there is one area of current HUD policy 
that requires clarification and therefore, HUD is specifically bringing 
this clarification to the attention of the public. That policy is that 
health care lessees are regulated to the same extent that mortgagors 
are regulated in the Section 232 program. Clarification is needed 
because the existing lessee regulatory agreement (Form 2466-NHL) 
contains few regulatory requirements and, consequently has created 
numerous questions and conflicts with lessees or operators or both.
    In view of increasing conflicts and defaults in the Section 232 
program, HUD's Office of Inspector General undertook an investigation, 
which resulted in a report with recommendations that are incorporated 
in the Health Care Facility Regulatory Agreement. Attention is called 
to the formatting of 92466M-HCF. The initial formatting of the 92466M-
HCF on pages one and two differs from the ``rental project'' 92466M in 
that there are check boxes for the various types of facilities eligible 
under the Section 232 program, e.g. nursing homes, intermediate care 
facilities, board and care facilities, assisted living facilities and 
combinations. The 92466M-HCF also requires the insertion of data 
pertaining to the number of beds and/or units. In the opening 
paragraphs of the 92466M-NHL, HUD clarifies that the instrument covers 
Borrowers, Lessees and/or Operators. This terminology appears 
throughout the instrument.
    Article I--Definitions. The definitions are found in Article I at 
the beginning of the proposed 92466M-HCF. Definitions are found near 
the end of the current forms of Regulatory Agreement. Most of the 
definitions in the 92466M-HCF are precisely the same as the definitions 
in the rental housing Regulatory Agreement and the proposed Security 
Instrument. Many definitions are similar to definitions found in the 
Freddie Mac closing documents. However, a few definitions are unique to 
the 92466M-HCF. For example, please see in Section 1, b, c, d, i, j, l, 
q, s, u.(15), x, y, z, bb, dd, gg, and jj. Specifically, the definition 
of ``Leases,'' in the 92466-HCF, includes the Admission Agreement, 
which is a form of lease used between a resident and an ALF, B & C home 
or Nursing Home. The definitions of Operator and Lessee are 
particularly significant and the use of these terms in the 92466-HCF is 
important in understanding the expanded controls over Lessees and 
Operators. Some common definitions have been altered to fit the concept 
of a health care facility.
    Article II--Construction. See 92466M discussion of these 
provisions.
    Article III--Financial Management. See 92466M discussion of these 
provisions and, in addition, see Sections 12 pertaining to the Sinking 
Fund, 18 pertaining to books of management agents, Lessees, Operators, 
managers and Affiliates, and 19 pertaining to the Annual Financial 
Audit. These sections contain additional provisions related to the 
coverage of Lessees and Operators in health care facilities.
    Article IV Project Management. Some of the provisions of this 
Article are consistent with the 92466M. However see: Section 20. 
Equipment; Section 21. Licensure; Section 22. Bed Capacity; Section 
23.b. pertaining to coverage of Lessees and Operators; Section 24. 
Prohibition of Additional Fees (e.g. fees for life-care, etc.); Section 
25. Coverage; Section 26. Residency of ALF's; and Sections 28-34. 
pertaining to coverage of Lessees and Operators. One significant change 
is in Section 34, Compliance with Laws, which requires maintenance of 
the requisite level of professional liability insurance as determined 
by HUD.
    Article V--Lease of Health Care Facility. Section 35 is most 
explicit in describing additional regulatory controls applicable when a 
Health Care Facility is leased and in articulating fully the concept 
that a Lessee and Borrower together are generally subject to the same 
regulatory controls as a Borrower where no lease is involved. 
Significantly, Lessees are responsible for the same level of financial 
reporting, securitization of all Personalty, and agreeing that the 
Certificate of Need and license cannot be transferred from the Project.
    Article VI--Actions Requiring the Prior Written Approval of HUD, 
Article VII--Enforcement and Article VIII, Miscellaneous. These 
Articles are virtually the same as those in the 92466M. See the 
discussion there of the Sections in Articles VI, VII and VIII. In 
addition, please note that Section 46, pertaining to Notices, 
specifically covers Lessees and Operators.
5. Mortgagee's Certificate (HUD 92434M)
    The Mortgagee's Certificate is substantially the same as the 
current form. Several minor changes were made from the current form for 
clarity and ease of comprehension relating to organization and word 
choice. Also, in the interest of uniformity, the definition of any 
capitalized term used in the Mortgagee's Certificate can be found in 
the Regulatory Agreement and/or the Security Instrument. The following 
substantive changes were made:
    Paragraph 1: HUD added a provision stating that the Lender agrees 
to be bound by all directives of HUD. Although Lender cannot be 
adversely affected by changes in regulation, HUD should be able to 
freely interpret its statutes and regulations. It would be problematic 
to apply the mortgagee letters and handbooks exactly as they existed at 
firm commitment for each Project. In order to participate in the 
program, the Lender must agree to comply with current mortgagee letters 
and handbooks throughout the life of the mortgage loan so long as they 
do not conflict with the regulations from the time of the firm 
commitment.
    Paragraph 5: HUD changed the requirement for ``clear title'' to the 
language that mirrors the requirements for title at 24 CFR 
207.258(b)(2)(ii) and (iii).
    Paragraph 7: HUD removed the specific contractual provisions with 
respect to the creation and handling of the Working Capital Deposit and 
created

[[Page 46220]]

a separate Working Capital Escrow Agreement that will be referenced in 
and attached to the Mortgagee's Certificate.
    Paragraph 8: HUD removed the specific contractual provisions with 
respect to the creation and handling of the Sinking Fund and created a 
separate Sinking Fund Agreement that will be referenced in and attached 
to the Mortgagee's Certificate.
    Paragraph 13: HUD added the requirement that the Lender is 
responsible for timely filing of the appropriate Financing Statements 
under the UCC on behalf of HUD pursuant to HUD's rights under the 
Regulatory Agreement.
    Paragraph 19: HUD amended this provision to require that HUD be 
included as a named insured in hazard insurance policies for the 
Project consistent with the new form of mortgage.
    Paragraph 20: HUD amended the current Mortgagee's Certificate that 
previously included items which are to be paid (such as extension fees) 
in clauses (b), (c), (d) and (e) of paragraph (2) to include only items 
to be paid at or before initial closing. Deferred fees and charges of 
all kinds are now addressed only in paragraph 20(f). Further, the HUD 
added clause (g) of paragraph 20, which allows the Lender to collect 
servicing and administrative fees. HUD also added clauses (h) and (i) 
to paragraph 20 to advise HUD if the construction and/or permanent loan 
is being funded by GNMA mortgage-backed securities or participation 
certificates in order to address the concern that HUD offices are 
inconsistent with their requirements to disclose information regarding 
the underlying financing arrangements of the transaction.
    Paragraph 25: HUD included a certification that the Lender has no 
identity of interest with the Mortgagor.
    Paragraph 26: HUD included a certification that the Lender has no 
identity of interest with the Borrower's attorney to mirror the 
requirement from the Borrower's attorney opinion.
    Paragraph 29: HUD added a certification that all of the closing 
documents (indicated on the closing checklist and with the exception of 
the Opinion by Counsel to the Borrower) are in accord with the HUD 
format documents except as revised and approved by HUD Field Counsel. 
The Lender will draft a memorandum listing any and all changes to the 
HUD-approved forms. HUD's approval of the changes will occur by 
acceptance of the documents and the memorandum listing the changes at 
the closing. In order to clarify what documents were accepted at the 
closing, a list of all documents accepted at the closing will be signed 
by the HUD closing attorney, the Lender and the Borrower. HUD also 
added the following language ``[i]t is understood that changes and 
modifications do not include filling in blanks, attaching exhibits or 
riders, deleting inapplicable provisions or making changes authorized 
by applicable HUD regulation, handbooks and/or directives.''
    Paragraph 30: HUD added a requirement that the Lender immediately 
notify HUD in writing upon learning of any violation of the Regulatory 
Agreement.
    Paragraph 31: HUD added a requirement that the Lender promptly 
review any Borrower's request to transfer the Project and not 
unreasonably withhold approval of the transfer. If HUD approves the 
transfer, the Lender will execute a Release and Assumption Agreement or 
a Mortgage Modification Agreement incorporating the Regulatory 
Agreement in the Mortgage. HUD also prohibited the Lender from 
collecting any fee in connection with reviewing the transfer except for 
reimbursement of actual expenses incurred in connection with reviewing 
the transfer.
6. Building Loan Agreement (HUD-92441M)
    The Building Loan Agreement, HUD 92441 (5-84), remains largely 
unchanged. There were minor grammatical and style changes made to the 
text. The substantive changes were as follows:
    The first factual recital was revised to reflect all forms of 
approved mortgagors, including partnerships and limited liability 
companies.
    Paragraph 1 was revised to require submission of closing documents 
and completion of the initial closing before mortgage proceeds may be 
advanced.
    Paragraph 3 was revised to require approval of all construction 
changes by the lender and HUD. This reflects existing HUD policy and 
procedure.
    Paragraph 5 was revised to include the permanent loan fee, legal, 
organizational and audit in the itemized list of charges.
    Paragraph 12 was revised to remove the words ``upon completion,'' 
which would change the text to require the security agreement and 
financing statements to be submitted with all other documents at the 
time of the initial closing.
    Paragraph 14 was revised to follow the text of Section 212(a) of 
the National Housing Act.
    Paragraph 19 was added to acknowledge the personal liability of the 
borrower if mortgage advances are not applied in accord with the 
requisitions and the Building Loan Agreement. This is a clarification 
of HUD's policy and reflects HUD's interpretation of the form currently 
in use.
    Paragraph 20 was added to clarify that HUD is not a party to the 
Building Loan Agreement.
7. Supplement to Building Loan Agreement (HUD 92441M-SUPP)
    The Supplement to the Building Loan Agreement, form HUD 92441, is 
to be used when the Borrower acts as its own general contractor and 
there is no construction contract. This form is used infrequently. The 
revised Supplement does not have any substantive changes. Some 
editorial changes were made, and the references to forms have been 
updated to refer to the new form numbers.
8. Construction Contract (HUD 92442M)
    The existing HUD construction contracts, HUD Forms 92442-Lump Sum, 
and 92442-A-Cost Plus, were consolidated into a single HUD Construction 
Contract. The consolidation of the two contract formats was based upon 
a determination that the HUD construction contracts currently in use 
are more similar than different, and, the identical and distinct 
provisions of the construction contracts could efficiently be adapted 
to a consolidated format. HUD also determined that a separate form was 
not necessary to take advantage of the Incentive Payment for Early 
Completion. Note that the Incentive Payment Computation Form, page 2 of 
HUD-92443, has not been removed and it is referenced as a contract 
document in Article 2, Section A.7, of the consolidated construction 
contract.
    HUD gave consideration to including the full text of the Labor 
Requirements, currently set forth in the Form HUD-2554, within the body 
of the contract. HUD determined not to include those requirements, 
because to do so would unnecessarily lengthen the construction 
contract.
    HUD considered the possibility of adhering to a construction 
schedule culminating with payment upon Substantial Completion, rather 
than payment upon Final Completion. HUD's Office of Housing determined 
that the best interests of the Department are served by retaining the 
Final Completion requirement, to preserve rights attendant to warranty 
items and liquidated damages. The terms ``Final

[[Page 46221]]

Completion'' and ``Final Completion Deadline'' are clarified in Article 
3, Section A.
    Significant changes to the HUD consolidated construction contract 
include the following:
    a. The format, page one, provides for designation as either a Lump 
Sum or Cost Plus contract, insertion of the Project Number, and 
identification of the parties to the contract.
    b. The contract documents recited in Article 2. Section A expressly 
includes the project manual, the Incentive Payment Computation form (if 
applicable), and the Prevailing Wage Determination.
    c. The mandatory arbitration provisions contained in the AIA A201-
1997 General Conditions are expressly excepted from the HUD contract, 
in Article 2.A.2.
    d. The provisions for the payment of incentives for the early 
completion of construction have been set forth explicitly in the body 
of the contract, as explained in Article 3. F. For Cost Plus contracts, 
where there is no Identity of interest between the Owner and the 
Contractor, the incentive provision is stated in Article 4. D. Where 
there exists such an Identity of Interest, the incentive provision is 
stated in Article 4.E. For Lump Sum contracts, the incentive provision 
is stated in Article 4A. B. The contract language is based upon the 
provisions currently found in Form HUD-92443 (3/94) and in paragraph 1-
15. B. 2. of Handbook 4430.1.
    e. Payment Procedures found in Article 5 require the contractor to 
execute and submit all final advance documents required by HUD as a 
condition precedent to payment of final balance due to the contractor.
    f. The Contractor, pursuant to Article 6, is expressly authorized 
to withhold payment from the subcontractor(s) in an amount reflecting 
percentages actually retained from payments to the contractor on 
account of such subcontractor's portion of the work.
    g. References to ``HUD requirements'' in Article 7, Section E. 
include ``HUD Administrative Requirements'' with the intent of reaching 
all forms of relevant issuance such as Handbooks, Guidebooks, Program 
Notices, Mortgagee letters, and other written directives issued by HUD 
relating to the HUD Multifamily or Health Care Facility insurance 
programs under the National Housing Act, as amended, and any successive 
legislation.
    h. The relationship between state law considerations and lien 
waiver requirements is addressed in Article 9.B. Article 9.B. states: 
``In jurisdictions where permitted by law, the Owner may require the 
Contractor to execute a Waiver of Liens which shall be recorded prior 
to the commencement of construction.''
    i. A new Article 12 clarifies the roles of Lender and HUD, 
disclaiming imputed liability to HUD or the Lender as a result of 
action or inaction of the Owner, Contractor or any third parties.
    j. A new Article 14 provides for designation of the Owner and 
Contractor representatives responsible for communications involving the 
contract.
9. Supplementary Conditions of the Contract for Construction (HUD-
92554M)
    This revision to the form Supplementary Conditions of the Contract 
for Construction is substantially the same as the current Form HUD-
2554. However, this draft is designed explicitly for use in the FHA 
program and not for use in the Section 202, Section 811 or in other HUD 
programs. This draft form is subject to further internal review by HUD 
to adapt this form for use in transactions under Section 202 and 
Section 811. It was originally included within the body of the Merged 
Construction Contract posted on HUD's Web site on March 31, 2000, with 
other draft forms for use in multifamily project and facility closings. 
Upon further consideration and based on several comments received by 
this office, the decision was made to retain the form of the 
Supplementary Conditions for use as a separate instrument rather than 
include it within the body of the construction contract form.
    In the interest of clarity and ease of comprehension, several 
changes were made to current Form HUD-2554 including punctuation, 
citations and cross-references, and a few subsection numbers were 
changed. The following additional changes were also made to the form:
    a. The instructions contained at the beginning of Article I (the 
paragraph headed ``Instructions'') were removed, and appropriate 
language with respect to the applicability of paragraphs B, C and D 
(formerly A, B, and C) was added at the beginning of each appropriate 
paragraph itself. See the discussion for paragraphs 1.B, 1.C and 1.D 
that immediately follows.
    b. Paragraph 1.B (Minimum Wages) now opens with a statement 
describing projects exempt from the minimum wage provisions contained 
therein.
    c. Subparagraph 4 (i) of paragraph 1.B is updated to reference the 
current name for the office within the Department of Labor responsible 
for apprentice and trainee programs. The current name of the office is 
``Office of Apprenticeship Training, Employer and Labor Services'' 
which was formerly known as the ``Bureau of Apprenticeship and 
Training.''
    d. Subparagraph 6 of paragraph 1.B now refers to the clauses in 
subparagraphs 1 through 10 of paragraph B in lieu of referring to the 
comparable clauses of 29 CFR 5.5(a), in identifying minimum wage 
provisions to be inserted in subcontracts.
    e. Paragraph 1.C (Contract Work Hours and Safety Standards Act) now 
starts with a subparagraph numbered 1 that states: ``This paragraph C 
of Article 1 is applicable only if a direct form of federal assistance 
is involved, such as Section 8, Section 202/811 Capital Advance, grants 
etc., and is applicable only where the prime contract is in an amount 
greater than $100,000. As used in this paragraph C, the terms 
`laborers' and `mechanics' include watchmen and guards.''
    f. Subsection 1.D (Certification) now starts with the following 
phrase that identifies the scope of the certification: ``For projects 
with mortgages insured under the National Housing Act that are subject 
to paragraph B of this Article 1.''
    g. Article 2 (Equal Employment Opportunity) was revised to remove 
the language provided in the beginning of the Article that states that 
an obligation on the part of an ``applicant'' to incorporate certain 
provisions in construction contracts. HUD determined that language is 
not appropriate for inclusion within the body of the form, since the 
form itself is designed to be included in construction contracts (as an 
attachment) and not to be included in grant agreements or application 
forms.
    h. Article 2, subsections B and C (formerly A and B), were revised 
to include reference to persons with disabilities as a protected class.
    i. Article 2, subsections H, I and J, were removed because it was 
determined that these provisions relative to the agreements and 
obligations of ``the applicant'' were not appropriate for inclusion in 
this construction contract document. Rather, these provisions should be 
included in other, more appropriate instruments.
    j. Article 3 (Equal Opportunity for Businesses and Lower Income 
Persons Located Within the Project Area), commences with a revised 
statement (now labeled subsection A) that describes the applicability 
of Article 3 by simply referring to the regulation at 24 CFR part 135.

[[Page 46222]]

    k. Article 4 (Health and Safety) now starts with an 
``applicability'' paragraph (labeled paragraph A) that clarifies the 
scope of applicability of this article and states: ``This Article 4 is 
applicable only where the prime contract is in an amount greater than 
$100,000.'' This new language reflects the fact that Article 4 derives 
from the Contract Work Hours and Safety Standards Act, which contains 
such limitation.
10. Opinion by Counsel to the Borrower and Instructions and 
Certification (HUD 91725M)
    The guide format for the opinion required by HUD in multifamily 
rental project and health care facility closings was originally 
prepared in 1994 in response to changes in opinion practice as 
reflected by the ABA Accord and various State law bar reports on 
opinion letters. The proposed revision to the guide format reflects 
approximately seven years experience with the 1994 version and, as 
would be expected, contains numerous technical changes and corrections 
such as the striking of the requirement that HUD be shown in Financing 
Statements ``as its interest appears.'' The principal purpose of the 
guide format remains, which is to achieve a uniform format which can be 
utilized throughout the nation and which will be familiar to HUD 
counsel, Lenders and other parties to the mortgage insurance 
transactions in all jurisdictions. The major substantive changes being 
proposed are as follows:
    Instructions to the Guide Format on the Opinion by Counsel to the 
Borrower. The Instructions have been updated and contain numerous 
clarifications that should facilitate use of the guide format in 
preparing the Opinion by Counsel to the Borrower (Opinion). The 
Instructions describe and explain the rationale for the major changes 
to the guide format, e.g. the section pertaining to the UCC, reliance 
by successors and assigns of the Lender, certification as to the guide 
following the format provided by HUD, stronger certification/warning 
language in the Opinion and virtually all other closing documents being 
reviewed by Counsel to the Borrower, etc. Note specifically the 
discussion of acceptability of counsel, signatures, certification of 
the mortgagor, identity of interest, liens, certifications as to 
Regulatory Agreement and side-deals, reliance on other opinions and 
reliance by subsequent holders. Further, the Instructions contain 
considerably greater guidance and numerous clarifications as to when 
and how the guide format is to be utilized, e.g. as to which programs 
and which closings the guide form is applicable, as to how the guide 
format can or should be modified, etc.
    Section 13. This section and several related provisions pertaining 
to securitization of the Lender and HUD under the UCC have been revised 
to reflect the fact that the Lender now has to also prepare an 
appropriate Security Agreement and Financing Statements to securitize 
HUD as well as the lender. It is also likely that the Opinion will have 
to be updated at final endorsement to properly cover the UCC 
securitization, particularly for health care facilities where the 
proper documentation under the UCC cannot be prepared until completion 
of the project or facility.
    Certification by Mortgagor. See Section 8 related to identities of 
interest and side-deals.

C. Miscellaneous Documents

    1. Residual Receipts Notes (HUD-91710M and 91712M). Each proposed 
Residual Receipts Note format has been revised to incorporate directive 
requirements into the text of the notes.
    2. Escrow Agreement for Incomplete Construction (HUD-92456M). HUD 
revised the Escrow Agreement by adding `incomplete construction' to the 
title of the form. The recital provision has been changed with respect 
to statement that the Lender is to advance the entire amount of the 
loan provided for in the Building Loan Agreement. This statement is 
misleading since the amount of the loan can and often does change at 
final endorsement. The provision now reads: `to insure the Mortgage 
Loan in its maximum approved amount.' The form was corrected to remove 
the Labor Standards Procedures and substitute the Form HUD-92554M, 
Supplementary Conditions of the Contract for Construction, as the labor 
standards. Finally, the term `cash' was added to the deposit.
    3. Request for Final Endorsement of Credit Instrument (HUD 92023M). 
No substantive changes were made to this form.
    4. Leasehold Instructions with Lease Addendum (HUD 92070M). The 
revision made to this form clarifies that the instructions and addendum 
are to be used in connection with a ground lease. The procedures for 
leasehold termination by reason of tenant defaults and the right to 
cure defaults are revised to give greater protection to the insured 
mortgagee and to HUD. Upon premature termination of the leasehold by 
reason of tenant defaults, the revision specifically provides that the 
insured mortgage remains an encumbrance on the improvements.
    5. Surplus Cash Note (HUD-92223M). Each proposed Surplus Cash Note 
format has been revised to incorporate directive requirements into the 
text of the notes.
    6. Completion Assurance Agreement (HUD-92450M). There were no 
substantive changes made to this form.
    7. Payment Bond (HUD-92452M-A). This form includes several 
revisions. New provisions added to the form include a provision that 
amounts paid to the Owner without the written consent of the Lender do 
not reduce the Surety's liability. The cost of equipment was added as 
an additional item that may be claimed under the bond. An Additional 
Obligee Rider was attached for cases in which HUD approves an 
additional obligee on the bond. An Additional Surety Rider was attached 
for cases in which HUD allows more than one surety. The form was 
revised to reflect that the one-year time period to bring an action 
under the bond runs from the date the last labor or service was 
performed or last materials or equipment were furnished, rather than 
from the date the Contractor ceased work. Another revision provides 
that the Surety waives notice of any changes to the construction 
contract, including changes of time.
    8. Performance Bond-Dual Obligee (HUD 92452M). New provisions added 
to the form include a provision that amounts paid to the Owner without 
the written consent of the Lender do not reduce the Surety's liability. 
Also, the Surety must notify Obligees of its failure to make payments 
or perform obligations and provide time to cure before the Surety can 
assert Obligee's failure to perform as cause for Surety not to perform. 
An Additional Obligee Rider was attached for cases in which HUD 
approves an additional obligee on the bond. An Additional Surety Rider 
was attached for cases in which HUD allows more than one surety. The 
form was revised to reflect that the two-year time period to bring an 
action under the bond runs from the date the Owner declares the 
Contractor in default of the contract rather than from the date on 
which the final payment under the contract was due. Another revision 
provides that the Surety waives notice of any changes to the 
construction contract, including changes of time.
    9. Request for Endorsement of Credit Instrument Insurance Upon 
Completion (HUD-92455M). HUD made substantial revisions to the current 
version of this form that is dated February 1973. Many of the paragraph 
numbers of the current document have changed and the references that 
follow are to the paragraph numbers in the proposed

[[Page 46223]]

document unless otherwise indicated. A space has been provided for 
inspection fees in the third paragraph. In the Certificate of 
Mortgagee, paragraph 4 has been expanded to include Section 223 
projects. A statement has been added to paragraph 5 to cover Section 
223 delayed repairs and latent defect protection. Paragraph 6 has been 
revised so that it is no longer restricted to Section 232 projects. 
Paragraph 7 has been added to include the amount deposited into the 
Reserve for Replacements for Section 223 projects. In paragraph 8, the 
language has been updated by adding a statement regarding fees and 
charges. In paragraph 9.b., language has been added that requires 
Lenders to certify that, in addition to the initial service charge, the 
Lender receives a servicing fee, which is included in the mortgage 
rate, an administrative fee for investing the cash held in the Reserve 
for Replacements and any other interest-bearing escrows required by the 
Department. Paragraph 9.d has been amended to set out the dollar amount 
of the permanent placement fee collected by the Lender, in addition to 
the initial service charge. Paragraph 9.f has been added for bond-
financed projects, to disclose the amount collected to cover the cost 
of issuance. Also, a statement must be attached itemizing and 
explaining the necessity of each cost. Paragraph 10.g of the current 
form is obsolete. It has been rewritten and replaced with references to 
GNMA. Paragraph 10 has been added to cover the rights of HUD during the 
period of lockout or prepayment penalty. Paragraph 11 regarding the 
letter of credit has been rewritten to follow the current regulation at 
24 CFR 200.63. In the Certificate of Mortgagor, the current paragraph 4 
is obsolete, is addressed elsewhere in other forms and has been 
deleted. Paragraph 7.b in the Certificate of Mortgagor has been 
expanded to provide space for additional obligations. The Certificate 
of General Contractor (contractor) has been amended extensively. A 
signature block has been added for the contractor. In signing the 
document, contractor will be made a party to the document. Further, the 
contractor certifies that the contractor will pay the obligations and 
provide receipts except for unfinished work funded by an escrow.
    10. Surveyor's Report (HUD-92457M) and Survey Instructions and 
Report (HUD-92457A-M). The only change to the Surveyor's Report (HUD-
92457M) and Survey Instructions and Report (HUD-92457A-M) was to 
require surveyors to apply the Minimum Standard Detail Requirements and 
Classifications for ALTA/ACSM Land Title surveys that were adopted in 
1999, rather than the 1992 standards to which the March 1998 version of 
the form referred.
    11. Request for Approval of Advance of Escrow Funds (HUD 92464M). 
No substantive changes were made to this form.
    12. Escrow Agreement for Noncritical, Deferred Repairs (HUD-
92476.1M). The Department substantially revised this form. HUD deleted 
references to Capital Needs Assessments and 241(f) loans and refers in 
general to Section 223, since repairs can arise under the Section 
223(f) and 223 (a)(7) insured loans. As with other escrow forms, if the 
Depository is the Lender, the term Depository refers to the Lender. The 
form has been clarified to provide that deposits for the escrows are in 
cash for both the unpaid construction costs and for delayed repairs and 
has been made consistent with Housing Notice H99-33. Protective 
language was added to cover contingencies, such as, failure to complete 
the Section 223 repairs on time or in the event of default. In 
paragraph 8, the provisions of the regulation at 24 CFR 200.63 
governing the letter of credit were added.
    13. Agreement of Sponsors To Furnish Additional Funds (HUD 92476M). 
This form was revised slightly to clarify that the deposit to be made 
by a sponsor is to be pursuant to form HUD 92476aM.
    14. Escrow Agreement-Additional Contribution By Sponsors for 
Operating Deficit (HUD-92476aM). This form was revised slightly to 
clarify certain aspects of it. A reference to ``Operating Deficit'' was 
added to the title to assist the reader in determining at a glance 
whether it is the needed form. The reference to ``bearer bonds'' as an 
acceptable form of the deposit was eliminated as obsolete. Paragraph 4, 
regarding HUD's determination that the project has achieved sustaining 
occupancy and income, has been clarified to show that this 
determination is within HUD's sole discretion. At paragraph 5, the 
essence of the provisions of the regulation at 24 CFR 200.63 governing 
the letter of credit were added.
    15. Bond Guaranteeing Sponsor's Performance (HUD-92477M). There 
were no substantive changes made to this form.
    16. Mortgagor's Oath (HUD-92478M). This form was edited for 
clarification and to more fully comply with the relevant statutes. 
Specifically, HUD has made reference in each of the first two 
paragraphs to the section of the NHA upon which the respective 
requirements are based and, at the same time, has eliminated the 
recitation of the statutory provisions as unnecessary. In paragraph 
(1), reference to a prohibition on offering hotel services to tenants 
was removed. This prohibition is not included in the statute and leads 
to confusion as to whether a particular project is in compliance with 
the statute. In paragraph (2), reference was added to exceptions to 
occupancy requirements that are permitted by the statutes. The need for 
the document to be executed as an oath before a notary public has been 
highlighted, the notary block has been edited to accommodate varying 
types of entities as signatories, and a second notary block has been 
added for convenience.
    17. Off-Site Bond (HUD 92479M). An Additional Obligee Rider was 
attached for use in cases in which HUD approves an additional obligee 
on the bond. An Additional Surety Rider was attached for use in cases 
in which HUD allows more than one surety. As revised, the bond is a 
dual obligee bond, with the lender and owner as obligees. The cost of 
equipment was added as an additional item that may be claimed under the 
bond. Also, the two-year time period to bring an action under the bond 
was revised to run from date the Owner declared the Contractor in 
default, rather than date the off-site improvements were to be 
installed. Another change is that the Surety waives notice of any 
changes, including changes of time, to the construction contract.
    18. Escrow Agreement for Latent Defects (HUD-92414M). HUD 
acknowledges that there is no closing document that covers an escrow 
for latent defects even though current policy requires such an escrow. 
In most cases, closings are conducted in different offices with the 
lenders preparing different versions of escrow agreements for the 
borrower's signature. In order to be consistent HUD has developed the 
Escrow Agreement for Latent Defects, in which the Depository agrees to 
hold a fund in a separate account for a stated period of time. The form 
describes how the Lender shall maintain the fund and how the fund 
should be administered in the event of assignment or default by the 
Borrower.
    19. Escrow Agreement for Working Capital (HUD 92412M). HUD is 
proposing a new closing document in response to lenders' requests for a 
Department-approved form of Escrow Agreement for Working Capital. The 
new form of Escrow Agreement for Working Capital is between the 
Borrower and Depository and makes provision for the Lender to act as 
the Depository. Current HUD policy is to

[[Page 46224]]

reflect the working capital escrow in the Mortgagee's Certificate. The 
Mortgagee's Certificate is not legally adequate to establish a 
contractual relationship between the Borrower and the Lender since it 
is a certification from the Lender to HUD, and the Borrower is not a 
party. The new form recites the project name and location and refers to 
the terms and requirements of the firm commitment for the project.
    20. Sinking Fund Agreement (HUD 92413M). The Sinking Fund Agreement 
is a new document that requires the Borrower of certain Health Care 
Facilities (where depreciation is a component of the federal Medicaid 
reimbursement) to deposit, in a trust fund with the Lender, an amount 
representing the excess depreciation component of the capital 
reimbursement per a schedule prepared by the Lender. Currently, 
requirements for this Sinking Fund are found in the Mortgagee's 
Certificate. The Borrower is not a party to the Mortgagee's 
Certificate; therefore, the document is not legally adequate to 
establish a contractual relationship between the Borrower and the 
Lender. The current arrangement is cumbersome and is inaccurate in 
places. The proposed document overcomes the current deficiencies and 
identifies the rights and responsibilities of the parties more clearly 
and in a legally enforceable manner.
    21. Agreement and Certification (HUD-93305M). The most significant 
change made to this form was to consolidate the 3305 and 3306 forms as 
well as a third Agreement and Certification format which was developed 
during the document reform process for use in the Section 223(f) 
refinancing program. The proposed form, published with this notice, 
sets forth separate provisions, where necessary, for use in differing 
programs, and provides boxes that can be checked to indicate the 
applicability of a particular provision. Where a provision would apply 
in any program, no box is necessary. If the final decision of HUD is to 
consolidate the three forms, the consolidated form has been designated 
as the 93305; however, HUD can consider a different number if this 
creates confusion. Further, HUD revised the form to clarify the 
definition of identity of interest. The definition adds `business 
interests' to financial and family relationships and adds `partners and 
principals' to officers, directors and stockholders. The term 
Principals is capitalized for the remainder of the form and the 
expanded definition of identity of interest is added to the provisions 
regarding the 50%-75% Rule, Builders and Sponsors Profit And Risk 
Allowance (BSPRA) and Sponsors Profit and Risk Allowance (SPRA). The 
beginning of Paragraph 10 is revised to clarify that BSPRA is included 
when HUD processes the project loan application to include BSPRA, 
rather than providing that BSPRA is automatically included. 
Modifications to Paragraph 10(b) clarify that when the identity of 
interest between the borrower and the contractor is not maintained 
through final endorsement, the BSPRA identity is lost and the borrower 
will be allowed a SPRA instead of BSPRA. Paragraph 10(c) is rewritten 
in plain language to explain the 50-75% rule. Paragraph 11 is revised 
to clarify that if the 50-75% Rule is violated, both the profit and the 
overhead to the contractor are lost. This is consistent with HUD's 
mortgage credit guidelines. Paragraph 14 has been expanded to include 
collateral agreements or side-deals of any kind in connection with the 
project, not just the financing or borrowing arrangements that are in 
the current version of this form.
    22. HUD Amendment to Owner-Architect Agreement AIA B-181 (HUD-
92408M). This document formerly was required by HUD directives to be 
attached to the contract between the owner and the project architect, 
and was found as an appendix to a HUD Handbook. It has been updated in 
content, format and references to HUD's outstanding architectural 
instructions. HUD has clarified that the architect's drawings may be 
used by a substitute party who takes control of the project in order to 
complete the work, following failure of the owner to do so, by 
eliminating paragraph 6 in the prior version and adding a new paragraph 
4. HUD further added the element of timing to the requirement that the 
owner and architect inform HUD of identities of interest within five 
working days of the first knowledge thereof.
    As noted earlier in this preamble, HUD is proposing conforming 
changes to certain of its regulations to update these regulations where 
regulatory language was also identified as outdated and to maintain 
consistency with the new proposed closing documents that are published 
with this notice. HUD's related proposed rule is published elsewhere in 
today's Federal Register.

II. Findings and Certifications

Paperwork Reduction Act

    The proposed new information collection requirements contained in 
this notice have been submitted to the Office of Management and Budget 
(OMB) for review under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520). Under this Act, an agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless the collection displays a valid control number.
    The public reporting burden for this new collection of information 
is estimated to include the time for reviewing the instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. 
Information on the estimated public reporting burden is provided in the 
following table:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Number of     Frequency of    Responses per    Burden hour    Annual burden    Hourly cost
                  Forms                     respondents      response          annum       per  response       hours       per  response    Annual cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
HUD-91710M..............................            1200               1            1200            0.5              600             $26         $15,600
HUD-91712M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92023M..............................            1200               1            1200            1               1200              26          31,200
HUD-92070M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92223M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92408M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92412M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92413M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92414M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92450M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92452A-M............................            1200               1            1200            0.5              600              26          15,600
HUD-92452M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92455M..............................            1200               1            1200            1               1200              26          31,200
HUD-92456M..............................            1200               1            1200            0.5              600              26          15,600

[[Page 46225]]

 
HUD-92457A-M............................            1200               1            1200            0.5              600              26          15,600
HUD-92457M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92464M..............................            1200               1            1200            1               1200              26          31,200
HUD-92476.1M............................            1200               1            1200            0.5              600              26          15,600
HUD-92476A-M............................            1200               1            1200            0.5              600              26          15,600
HUD-92476M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92477M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92478M..............................            1200               1            1200            0.5              600              26          15,600
HUD-92479M..............................            1200               1            1200            0.5              600              26          15,600
HUD-91725M..............................            1200               1            1200            2               2400              26          62,400
HUD-91725M-CER..........................             N/A               1             N/A          N/A                N/A             N/A             N/A
HUD-91725M-INST.........................             N/A               1             N/A          N/A                N/A             N/A             N/A
HUD-92434M..............................            1200               1            1200            0.75             900              26          23,400
HUD-92441M-SUPP.........................            1200               1            1200            0.75             900              26          23,400
HUD-92441M..............................            1200               1            1200            1               1200              26          31,200
HUD-92442M..............................            1200               1            1200            1               1200              26          31,200
HUD-92466M..............................            1200               1            1200            0.75             900              26          23,400
HUD-92466M-HCFRA........................            1200               1            1200            0.75             900              26          23,400
HUD-92554M..............................            1200               1            1200            0.2              240              26           6,240
HUD-94000M..............................            1200               1            1200            0.75             900              26          23,400
HUD-94001M..............................            1200               1            1200            1               1200              26          31,200
HUD-93305M..............................            1200               1            1200            0.5              600              26          15,600
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning the 
proposed collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this proposal. Comments must be 
received by October 1, 2004. Comments must refer to the proposal by 
name and docket number (FR-4883-N-02) and must be sent to:

Mark Menchik, HUD Desk Officer, Office of Management and Budget, New 
Executive Office Building, Washington, DC 20503-0001, Fax number (202) 
395-6974, E-mail [email protected]
    and
Kathleen McDermott, Reports Liaison Officer, Office of the Assistant 
Secretary for Housing-Federal Housing, Commissioner, Room 9116, U.S. 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC 20410-8000.

III. Closing Documents

    The individual closing documents follow and HUD welcomes comment on 
these documents.

    Dated: June 29, 2004.
Sean Cassidy,
General Deputy, Assistant Secretary for Housing.

OMB Approval No. (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average .75 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Recording requested by:

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After recording return to:

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Multifamily/Health Care (Mortgage, Deed of Trust, or Other Designation 
as Appropriate in Jurisdiction) Assignment of Rents and Security 
Agreement

(State)

HUD Project Number:
Project Name:

Table of Contents

SECTION

1 Definitions
2 Uniform Commercial Code Security Agreement
3 Assignment of Rents; Appointment of Receiver; Lender in Possession
4 Assignment of Leases; Leases Affecting the Mortgaged Property
5 Payment of Indebtedness; Performance Under Loan Documents; 
Prepayment Premium
6 Exculpation
7 Deposits for Taxes, Insurance and Other Charges
8 Imposition Deposits
9 Collateral Agreements
10 Regulatory Agreement Default
11 Application of Payments
12 Compliance with Laws
13 Use of Property
14 Protection of Lender's Security
15 Inspection
16 Books and Records; Financial Reporting
17 Taxes; Operating Expenses
18 Liens; Encumbrances
19 Preservation, Management and Maintenance of Mortgaged Property
20 Management Contracts
21 Property and Liability Insurance
22 Condemnation

[[Page 46226]]

23 Transfers of the Mortgaged Property or Interests in Borrower
24 Events of Default
25 Remedies Cumulative
26 Forbearance
27 Loan Charges
28 Waiver of Statute of Limitations
29 Waiver of Marshalling
30 Further Assurances
31 Estoppel Certificate
32 Governing Law; Consent to Jurisdiction and Venue
33 Notice
34 Sale of Notice; Change in Servicer
35 Single Asset Borrower
36 Successors and Assigns Bound
37 Joint and Several Liability
38 Relationships of Parties; No Third Party Beneficiary
39 Severability; Amendments
40 Construction
41 Loan Servicing
42 Disclosure of Information
43 No Change in Facts or Circumstances
44 Estoppel
45 Acceleration; Remedies
46 Federal Remedies
47 Remedies for Waste
48 References
49 Termination
50 Construction Financing
51 Environmental Hazards
52 Insert provisions for State Law Requirements
Exhibit A Description of the Land A-1
Exhibit B Modification to the Security Agreement B-1

Multifamily/Health Care (Mortgage, Deed of Trust, or Other Designation 
as Appropriate in Jurisdiction) Assignment of Rents and Security 
Agreement

    THIS MULTIFAMILY/HEALTH CARE (MORTGAGE, DEED OF TRUST, OR OTHER 
DESIGNATION AS APPROPRIATE IN JURISDICTION) ASSIGNMENT OF RENTS AND 
SECURITY AGREEMENT (the ``Security Instrument'') is made as of this --
---- day of ------, ------, [among][between] --------, a -------- 
organized and existing under the laws of --------, whose address is --
------, as grantor, trustor, Borrower (``Borrower''), to --------, [as 
trustee (``Trustee''), for the benefit of --------, a -------- 
organized and existing under the laws of --------, whose address is --
------, as beneficiary or][and] Lender (``Lender''), a -------- 
organized and existing under the laws of --------, whose address is --
------.
    [Borrower, in consideration of the Indebtedness and the trust 
created by this Security Instrument, irrevocably grants, conveys and 
assigns to Trustee and Trustee's successors and assigns, in trust, with 
power of sale, the Mortgaged Property, including the Land located in --
------ County, State of -------- and described in Exhibit A attached to 
this Security Instrument, to have and to hold the Mortgaged Property 
unto Trustee and Trustee's successors and assigns. USE ALTERNATIVE 
APPROPRIATE GRANTING CLAUSE IF A MORTGAGE TRANSACTION.]
    To secure to Lender the repayment of the Indebtedness evidenced by 
Borrower's Note payable to Lender dated as of the date of this Security 
Instrument, and maturing on ------, ----, in the principal amount of 
$------, and all renewals, extensions and modifications of the 
Indebtedness, and the performance of the covenants and agreements of 
Borrower contained in this Security Instrument and the Note.
    Borrower represents and warrants that Borrower is lawfully seized 
of the Mortgaged Property and has the right, power and authority to 
mortgage, grant, convey and assign the Mortgaged Property, and that the 
Mortgaged Property is unencumbered. Borrower covenants that Borrower 
will warrant and defend generally the title to the Mortgaged Property 
against all claims and demands, subject to any easements and 
restrictions listed in a schedule of exceptions to coverage in any 
title insurance policy issued to Lender contemporaneously with the 
execution and recordation of this Security Instrument and insuring 
Lender's interest in the Mortgaged Property.
    Covenants. Borrower and Lender covenant and agree as follows:
    1. Definitions. The following terms, when used in this Security 
Instrument (including when used in the above recitals), shall have the 
following meanings:
    (a) ``Borrower'' means all persons or entities identified as 
``Borrower'' in the first paragraph of this Security Instrument, 
together with any successors and assigns. Whenever the term 
``Borrower'' is used herein, the same shall be deemed to include the 
Obligor of the debt secured by the Security Instrument and shall also 
be deemed to be the Mortgagor as defined by the National Housing Act, 
as amended, implementing regulations and Directives.
    (b) ``Building Loan Agreement'' means HUD-approved form of the 
agreement between the Borrower and Lender setting forth the terms and 
conditions for a construction loan.
    (c) ``Collateral Agreement'' means any separate agreement between 
Borrower and Lender for the purpose of establishing replacement 
reserves for the Mortgaged Property, establishing a fund to assure the 
completion of repairs or Improvements specified in that agreement, or 
any other agreement or agreements between Borrower and Lender which 
provide for the establishment of any other fund, reserve or account 
including but not limited to those reserves and escrows required by HUD 
in connection with construction activity, if any, and those reserves 
and escrows required by HUD in connection with Health Care Facilities. 
These include but are not limited to the Sinking Fund Agreement, which 
provides for a depreciation reimbursement account to pay future 
principal payments of the Mortgage, where Medicaid or third-party 
reimbursement is on a depreciation plus interest basis; the 
Depreciation Reserve Fund Agreement which provides for an escrow or 
trust account with an approved custodian or trustee established for 
replacing equipment and for funding of depreciation in accordance with 
a schedule approved by HUD, and the Mortgage Reserve Fund, which 
provides for an escrow or trust account with an approved custodian or 
trustee established for replacing equipment or protecting the Mortgaged 
Property or HUD.
    (d) ``Event of Default'' means the occurrence of any event listed 
in Section 23 or Section 24.
    (e) ``Fixtures'' means all property which is so attached to the 
Land or the Improvements as to constitute a fixture under applicable 
law, whether acquired now or in the future, including: machinery, 
equipment (including medical equipment and systems), engines, boilers, 
incinerators, installed building materials; systems and equipment for 
the purpose of supplying or distributing heating, cooling, electricity, 
gas, water, air, or light; antennas, cable, wiring and conduits used in 
connection with radio, television, computers, medical systems, 
security, fire prevention, or fire detection or otherwise used to carry 
electronic signals; telephone systems and equipment; elevators and 
related machinery and equipment; fire detection, prevention and 
extinguishing systems and apparatus; security and access control 
systems and apparatus; plumbing systems; water heaters, ranges, stoves, 
microwave ovens, refrigerators, dishwashers, garbage disposals, 
washers, dryers and other appliances; light fixtures, awnings, storm 
windows and storm doors; pictures, screens, blinds, shades, curtains 
and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall 
coverings; fences, trees and plants; swimming pools; playground and 
exercise equipment and classroom furnishings and equipment.

[[Page 46227]]

    (f) ``Governmental Authority'' means any board, commission, 
department or body of any municipal, county, state or federal 
governmental unit, or any subdivision of any of them, that has or 
acquires jurisdiction over the Mortgaged Property, including the use, 
operation or improvement of the Mortgaged Property.
    (g) ``Health Care Facilities'' means, but is not limited to, public 
or private nonprofit and proprietary hospitals, including major movable 
equipment, group practice medical facilities, skilled nursing home 
facilities, intermediate care facilities, board and care homes and 
assisted living facilities, and supplemental loans to finance 
Improvements, additions and equipment to these Health Care Facilities 
as authorized under the National Housing Act or other applicable 
federal law.
    (h) ``HUD'' means the United States Department of Housing and Urban 
Development acting by and through the Secretary in the capacity as 
insurer or holder of the loan secured hereby under the authority of the 
National Housing Act, as amended, the Department of Housing and Urban 
Development Act, as amended, or any other federal law or regulation 
pertaining to the loan (as evidenced by the Note) or the Mortgaged 
Property.
    (i) ``Impositions'' and ``Imposition Deposits'' are defined in 
Section 8(a).
    (j) ``Improvements'' means the buildings, structures, and 
alterations now constructed or at any time in the future constructed or 
placed upon the Land, including any future replacements and additions.
    (k) ``Indebtedness'' means the principal of, interest on, and all 
other amounts due at any time under the Note or this Security 
Instrument, including prepayment premiums, late charges, default 
interest, and advances as provided in Section 14 to protect the 
security of this Security Instrument.
    (l) ``Land'' means the estate in realty described in Exhibit A.
    (m) ``Leases'' means all present and future leases, subleases, 
licenses, concessions or grants or other possessory interests now or 
hereafter in force, whether oral or written, covering or affecting the 
Mortgaged Property, or any portion of the Mortgaged Property (including 
proprietary leases, non-residential leases or occupancy agreements if 
Borrower is a cooperative housing corporation), and all modifications, 
extensions or renewals. For Health Care Facilities, Lease also means, 
but is not limited to, the agreements between the Borrower/lessor and 
the operator/lessee of the facility by which the lessee agrees to 
operate and manage the facility, and/or portion thereof, and any 
agreement between the Health Care Facility and a lessee/provider of 
medical and related services proper and necessary for the care and 
treatment of persons who are acutely ill who require medical or health 
care customarily, or most effectively provided for by Health Care 
Facilities. (As used herein, operator/lessee, lessee and lessee/
provider shall cumulatively be referred to as ``Lessee.'')
    (n) ``Lender'' means the entity identified as ``Lender'' in the 
first paragraph of this Security Instrument, or any subsequent holder 
of the Note, and whenever the term ``Lender'' is used herein, the same 
shall be deemed to include the Obligee, or the Trustee(s) and the 
Beneficiary of the Security Instrument and shall also be deemed to be 
the Mortgagee as defined by the National Housing Act, as amended, 
implementing regulations and Directives.
    (o) ``Loan Documents'' means the Note, this Security Instrument, 
and the Regulatory Agreement, as such documents may be amended from 
time to time.
    (p) ``Loan Servicer'' means the entity that from time to time is 
designated by Lender to collect payments and deposits and receive 
Notice under the Note or this Security Instrument, and otherwise to 
service the loan evidenced by the Note for the benefit of Lender. 
Unless Borrower receives Notice to the contrary, the Loan Servicer is 
the entity identified as ``Lender'' in the first paragraph of this 
Security Instrument.
    (q) ``Mortgaged Property'' means all of Borrower's present and 
future right, title and interest in and to all of the following:
    (1) The Land;
    (2) The Improvements;
    (3) The Fixtures;
    (4) The Personalty;
    (5) All current and future rights, including air rights, 
development rights, zoning rights and other similar rights or 
interests, easements, tenements, rights-of-way, strips and gores of 
land, streets, alleys, roads, sewer rights, waters, watercourses, and 
appurtenances related to or benefiting the Land or the Improvements, or 
both, and all rights-of-way, streets, alleys and roads which may have 
been or may in the future be vacated;
    (6) All proceeds paid or to be paid by any insurer of the Land, the 
Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, whether or not Borrower obtained the insurance 
pursuant to Lender's requirement;
    (7) All awards, payments and other compensation made or to be made 
by any municipal, state or federal authority with respect to the Land, 
the Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, including any awards or settlements resulting from 
condemnation proceedings or the total or partial taking of the Land, 
the Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property under the power of eminent domain or otherwise and 
including any conveyance in lieu thereof;
    (8) All contracts, options and other agreements for the sale of the 
Land, the Improvements, the Fixtures, the Personalty or any other part 
of the Mortgaged Property entered into by Borrower now or in the 
future, including cash or securities deposited to secure performance by 
parties of their obligations;
    (9) All proceeds from the conversion, voluntary or involuntary, of 
any of the above into cash or liquidated claims, and the right to 
collect such proceeds;
    (10) All Rents and Leases;
    (11) All earnings, royalties, instruments, accounts, accounts 
receivable, supporting obligations, issues and profits from the Land, 
the Improvements or any other part of the Mortgaged Property, and all 
undisbursed proceeds of the loan secured by this Security Instrument 
and, if Borrower is a cooperative housing corporation, maintenance 
charges or assessments payable by shareholders or residents;
    (12) All Imposition Deposits;
    (13) All refunds or rebates of Impositions by any municipal, state 
or federal authority or insurance company (other than refunds 
applicable to periods before the real property tax year in which this 
Security Instrument is dated);
    (14) All tenant security deposits which have not been forfeited by 
any tenant under any Lease;
    (15) All names under or by which any of the above Mortgaged 
Property may be operated or known, and all trademarks, trade names, and 
goodwill relating to any of the Mortgaged Property; and
    (16) For Health Care Facilities, Mortgaged Property also includes, 
but is not limited to, any and all licenses, Bed Authority, and/or 
Certificates of Need required to operate the facility and receive the 
benefits and reimbursements under a provider agreement with Medicaid, 
Medicare, any state or local programs, health care insurers or other 
assistance providers relied upon by HUD to insure the Security 
Instrument,

[[Page 46228]]

to the extent allowed by law. Mortgaged Property also includes all 
receipts, revenues, income and other moneys received by or on behalf of 
the Health Care Facility, including all accounts receivable, all 
contributions, donations, gifts, grants, bequests, all revenues derived 
from the operation of the Health Care Facility and all rights to 
receive the same, whether in the form of accounts receivable, contract 
rights, chattel paper, instruments or other rights whether now owned or 
held or later acquired by the Health Care Facility.
    (r) ``Note'' means the Multifamily/Health Care Facility Note 
described on page 1 of this Security Instrument, including all 
schedules, riders, allonges and addenda, as such Multifamily/Health 
Care Facility Note may be amended from time to time.
    (s) ``Personalty'' means all furniture, furnishings, equipment, 
machinery, building materials, appliances, goods, supplies, tools, 
books, records (whether in written or electronic form), computer 
equipment (hardware and software) and other tangible or electronically 
stored personal property (other than Fixtures) which are owned or 
leased by the Borrower or the Lessee now or in the future in connection 
with the ownership, management or operation of the Land or the 
Improvements or are located on the Land or in the Improvements, and any 
operating agreements relating to the Land or the Improvements, and any 
surveys, plans and specifications and contracts for architectural, 
engineering and construction services relating to the Land or the 
Improvements, choses in action and all other intangible property and 
rights relating to the operation of, or used in connection with, the 
Land or the Improvements, including all governmental permits relating 
to any activities on the Land. For Health Care Facilities, Personalty 
also includes all tangible and intangible personal property used for 
health care (such as major movable equipment and systems), accounts, 
licenses, bed authorities, certificates of need required to operate the 
project and to receive benefits and reimbursements under provider 
agreements with Medicaid, Medicare, state and local programs, payments 
from health care insurers and any other assistance providers 
(``Receivables''); all permits, instruments, Rents, lease and contract 
rights, equipment leases relating to the use, operation, maintenance, 
repair and improvement of the Health Care Facility. Generally, 
intangibles shall also include all cash and cash escrow funds, such as 
but not limited to: sinking fund accounts, depreciation reserve fund 
accounts, mortgage reserve fund accounts, reserve for replacement 
accounts, bank accounts, residual receipt accounts, all contributions, 
donations, gifts, grants, bequests and endowment funds by donors and 
all other revenues and accounts receivable from whatever source paid or 
payable.
    (t) ``Principals'' are the following legal and natural persons 
having ownership interests in the Borrower: natural persons who are 
sole owners, joint venturers, joint tenants, tenants by the entirety, 
trustees or beneficiaries of trusts, and all general partners; in the 
case of limited partnerships, limited partners having a twenty-five 
(25) percent or more interest in the partnership; in the case of public 
or private corporations or governmental entities, the president, vice 
president, secretary, treasurer, and all other executive officers who 
are directly responsible to the board of directors, or any equivalent 
governing body, as well as all directors and each stockholder having a 
10 percent or more interest in the corporation; in the case of a 
Limited Liability Company (LLC) or a Limited Liability Partnership 
(LLP), all managing members or partners, all managers, and all members 
or partners with a 10 percent or greater governance interest or a 
twenty-five (25) percent or greater financial interest.
    (u) ``Property Jurisdiction'' is defined in Section 32(a).
    (v) ``Regulatory Agreement'' means the agreement between the 
Borrower or certain Lessees of the Borrower and HUD establishing the 
Borrower's or Lessees' obligations in the operation of the Mortgaged 
Property and the rights and powers of HUD.
    (w) ``Rents'' means all rents (whether from residential or non-
residential space), revenues, issues, profits, (including carrying 
charges, maintenance fees, and other cooperative revenues) and other 
income of the Land or the Improvements, including all revenues, gross 
receipts and receivables in connection with medical services and care, 
and all pledges, gifts, grants, bequests, contributions and endowments, 
parking fees, laundry and vending machine income and fees and charges 
for food, health care and other services provided at the Mortgaged 
Property, whether now due, past due, or to become due, and deposits 
forfeited by tenants.
    (x) ``Taxes'' means all taxes, assessments, vault rentals and other 
charges, if any, general, special or otherwise, including all 
assessments for schools, public betterments and general or local 
improvements, which are levied, assessed or imposed by any public 
authority or quasi-public authority, and which, if not paid, could 
become a lien on the Land or the Improvements.
    (y) ``Waste'' means a failure to keep the Mortgaged Property in 
decent, safe and sanitary condition and in good repair. Waste also 
means the failure to meet certain financial obligations regarding the 
payment of Taxes and the relinquishment of the possession of Rents. 
During any period in which HUD insures this loan or holds a security 
interest on the Mortgaged Property, Waste is committed when, without 
Lender's and HUD's express written consent, Borrower:
    (1) Physically changes the Mortgaged Property, whether negligently 
or intentionally, in a manner that reduces its value;
    (2) Fails to maintain and repair the Mortgaged Property;
    (3) Fails to pay before delinquency any Taxes secured by a lien 
having priority over the Security Instrument;
    (4) Fails to comply with covenants in the Note, this Security 
Instrument or the Regulatory Agreement respecting physical care, 
maintenance, construction, demolition, or insurance against casualty of 
the Mortgaged Property or fails to comply with HUD requirements 
regarding physical condition standards for HUD housing, including those 
codified at 24 CFR 5.703 and any subsequent amendments thereto; or
    (5) Retains possession of Rents to which the Lender or its assigns 
have the right of possession under the terms of the Loan Documents.
    2. Uniform Commercial Code Security Agreement. This Security 
Instrument is also a security agreement under the Uniform Commercial 
Code for any of the Mortgaged Property which, under applicable law, may 
be subject to a security interest under the Uniform Commercial Code, 
whether acquired now or in the future, and all products and cash 
proceeds and non-cash proceeds thereof (collectively, ``UCC 
Collateral''), and Borrower hereby grants to Lender a security interest 
in the UCC Collateral. Borrower shall execute and deliver to Lender, 
upon Lender's request, financing statements, continuation statements 
and amendments, in such form as Lender may require to perfect or 
continue the perfection of this security interest. Borrower shall pay 
all filing costs and all costs and expenses of any record searches for 
financing statements that Lender may require. Without the prior written 
consent of Lender and HUD, Borrower shall not create or permit to exist 
any other lien or security interest

[[Page 46229]]

in any of the UCC Collateral. If an Event of Default has occurred and 
is continuing, Lender shall have the remedies of a secured party under 
the Uniform Commercial Code, in addition to all remedies provided by 
this Security Instrument or existing under applicable law. In 
exercising any remedies, Lender may exercise its remedies against the 
UCC Collateral separately or together, and in any order, without in any 
way affecting the availability of Lender's other remedies. This 
Security Instrument constitutes a financing statement with respect to 
any part of the Mortgaged Property which is or may become a Fixture.
    3. Assignment of Rents; Appointment of Receiver; Lender in 
Possession. (a) As part of the consideration for the Indebtedness, 
Borrower absolutely and unconditionally assigns and transfers to Lender 
all Rents. It is the intention of Borrower to establish a present, 
absolute and irrevocable transfer and assignment to Lender of all Rents 
and to authorize and empower Lender to collect and receive all Rents 
without the necessity of further action on the part of Borrower. 
Promptly upon request by Lender, Borrower agrees to execute and deliver 
such further assignments as Lender may from time to time require. 
Borrower and Lender intend this assignment of Rents to be immediately 
effective and to constitute an absolute present assignment and not an 
assignment for additional security only. For purposes of giving effect 
to this absolute assignment of Rents, and for no other purpose, Rents 
shall not be deemed to be a part of the ``Mortgaged Property'' as that 
term is defined in Section 1(q). However, if this present, absolute and 
unconditional assignment of Rents is not enforceable by its terms under 
the laws of the Property Jurisdiction, then the Rents shall be included 
as a part of the Mortgaged Property and it is the intention of the 
Borrower that in this circumstance this Security Instrument create and 
perfect a lien on Rents in favor of Lender, which lien shall be 
effective as of the date of this Security Instrument.
    (b) After the occurrence of an Event of Default, Borrower 
authorizes Lender to collect, sue for and compromise Rents and directs 
each tenant and/or non-residential Lessee of the Mortgaged Property to 
pay all Rents to, or as directed by, Lender. However, until the 
occurrence of an Event of Default, Lender hereby grants to Borrower a 
revocable license to collect and receive all Rents for use in 
accordance with the provisions of the Regulatory Agreement, to hold all 
Rents in trust for the benefit of Lender and to apply all Rents to pay 
the installments of interest and principal then due and payable under 
the Note and the other amounts then due and payable under this Security 
Instrument, including Imposition Deposits, and to pay the current costs 
and expenses of managing, operating and maintaining the Mortgaged 
Property, including utilities, Taxes and insurance premiums (to the 
extent not included in Imposition Deposits), tenant improvements and 
other capital expenditures. So long as no Event of Default has occurred 
and is continuing, the Rents remaining after application pursuant to 
the preceding sentence may be retained by Borrower free and clear of, 
and released from, Lender's rights with respect to Rents under this 
Security Instrument, unless otherwise restricted by the terms of the 
Regulatory Agreement. From and after the occurrence of an Event of 
Default, and without the necessity of Lender entering upon and taking 
and maintaining control of the Mortgaged Property directly, or by a 
receiver, Borrower's license to collect Rents shall automatically 
terminate and Lender shall without Notice be entitled to all Rents as 
they become due and payable, including Rents then due and unpaid. 
Borrower shall pay to Lender upon demand all Rents to which Lender is 
entitled. At any time on or after the date of Lender's demand for 
Rents, Lender may give, and Borrower hereby irrevocably authorizes 
Lender to give, Notice to all tenants of the Mortgaged Property 
instructing them to pay all Rents to Lender. No tenant shall be 
obligated to inquire further as to the occurrence or continuance of an 
Event of Default, and no tenant shall be obligated to pay to Borrower 
any amounts which are actually paid to Lender in response to such a 
Notice. Any such Notice by Lender shall be delivered to each tenant 
personally, by mail or by delivering such demand to each rental unit. A 
copy of such Notice shall be provided promptly to HUD by Lender. 
Borrower shall not interfere with and shall cooperate with Lender's 
collection of such Rents.
    (c) Borrower represents and warrants to Lender that Borrower has 
not executed any prior assignment of Rents (other than an assignment of 
Rents to HUD pursuant to the Regulatory Agreement and an assignment of 
Rents securing indebtedness that will be paid off and discharged with 
the proceeds of the loan evidenced by the Note or assignments of Rents 
in connection with commercial or health care transactions as approved 
by HUD), that Borrower has not performed, and Borrower covenants and 
agrees that it will not perform, any acts and has not executed, and 
shall not execute, any instrument which would prevent Lender from 
exercising its rights under Section 3, and that at the time of 
execution of this Security Instrument there has been no anticipation or 
prepayment of any Rents for more than two months prior to the due dates 
of such Rents. Borrower shall not collect or accept payment of any 
Rents more than two months prior to the due dates of such Rents (other 
than collections in connection with commercial or health care 
transactions as approved by HUD).
    (d) If an Event of Default has occurred and is continuing, Lender 
may, regardless of the adequacy of Lender's security or the solvency of 
Borrower and even in the absence of Waste (but only with the prior 
written approval of HUD in the event of non-monetary defaults), enter 
upon and take and maintain full control of the Mortgaged Property in 
order to perform all acts that Lender in its discretion determines to 
be necessary or desirable for the operation and maintenance of the 
Mortgaged Property, including the execution, cancellation or 
modification of Leases, the collection of all Rents, the making of 
repairs to the Mortgaged Property and the execution or termination of 
contracts providing for the management, operation or maintenance of the 
Mortgaged Property, for the purposes of enforcing the assignment of 
Rents pursuant to Section 3(a), protecting the Mortgaged Property or 
the security of this Security Instrument, or for such other purposes as 
Lender in its discretion may deem necessary or desirable. 
Alternatively, if an Event of Default has occurred and is continuing, 
regardless of the adequacy of Lender's security, without regard to 
Borrower's solvency and without the necessity of giving prior Notice 
(oral or written) to Borrower, Lender may apply to any court having 
jurisdiction for the appointment of a receiver for the Mortgaged 
Property to take any or all of the actions set forth in the preceding 
sentence. A copy of such request shall be provided promptly to HUD by 
Lender. If Lender elects to seek the appointment of a receiver for the 
Mortgaged Property at any time after an Event of Default has occurred 
and is continuing, Borrower, by its execution of this Security 
Instrument, expressly consents to the appointment of such receiver, 
including the appointment of a receiver ex parte if permitted by 
applicable law. Lender or the receiver, as the case may be, shall be 
entitled to receive a reasonable fee for managing the Mortgaged 
Property. Immediately upon appointment of a receiver or

[[Page 46230]]

immediately upon the Lender's entering upon and taking possession and 
control of the Mortgaged Property, Borrower shall surrender possession 
of the Mortgaged Property to Lender or the receiver, as the case may 
be, and shall deliver to Lender or the receiver, as the case may be, 
all documents, records (including records on electronic or magnetic 
media), accounts, surveys, plans, and specifications relating to the 
Mortgaged Property and all security deposits and prepaid Rents. In the 
event Lender takes possession and control of the Mortgaged Property, 
Lender may exclude Borrower and its representatives from the Mortgaged 
Property. Borrower acknowledges and agrees that the exercise by Lender 
of any of the rights conferred under Section 3 shall not be construed 
to make Lender a Lender-in-possession of the Mortgaged Property so long 
as Lender, or authorized agent of Lender, has not entered into actual 
possession of the Land and Improvements.
    (e) If Lender enters the Mortgaged Property, Lender shall be liable 
to account only to Borrower and only for those Rents actually received. 
Lender shall not be liable to Borrower, anyone claiming under or 
through Borrower or anyone having an interest in the Mortgaged 
Property, by reason of any act or omission of Lender under Section 3, 
and Borrower hereby releases and discharges Lender from any such 
liability to the fullest extent permitted by law. However, nothing 
contained in this Security Instrument shall in any fashion discharge 
Lender from any obligations to HUD or any other party under the 
Regulatory Agreement, the Contract of Insurance (as set forth in 
applicable HUD regulations), or the HUD statutes and regulations.
    (f) If the Rents are not sufficient to meet the costs of taking 
control of and managing the Mortgaged Property and collecting the 
Rents, any funds expended by Lender for such purposes shall become an 
additional part of the principal of the Indebtedness as provided in 
Section 14.
    (g) Any entering upon and taking of control of the Mortgaged 
Property by Lender or the receiver, as the case may be, and any 
application of Rents as provided in this Security Instrument shall not 
cure or waive any Event of Default or invalidate any other right or 
remedy of Lender and/or HUD as its interests appear under applicable 
law or provided for in this Security Instrument.
    4. Assignment of Leases; Leases Affecting the Mortgaged Property. 
(a) As part of the consideration for the Indebtedness, Borrower 
absolutely and unconditionally assigns and transfers to Lender all of 
Borrower's right, title and interest in, to and under the Leases, 
including Borrower's right, power and authority to modify the terms of 
any such Lease, or extend or terminate any such Lease. It is the 
intention of Borrower to establish a present, absolute and irrevocable 
transfer and assignment to Lender of all of Borrower's right, title and 
interest in, to and under the Leases. Borrower and Lender intend this 
assignment of the Leases to be immediately effective and to constitute 
an absolute present assignment and not an assignment for additional 
security only. For purposes of giving effect to this absolute 
assignment of the Leases, and for no other purpose, the Leases shall 
not be deemed to be a part of the ``Mortgaged Property'' as that term 
is defined in Section 1(q). However, if this present, absolute and 
unconditional assignment of the Leases is not enforceable by its terms 
under the laws of the Property Jurisdiction, then the Leases shall be 
included as a part of the Mortgaged Property and it is the intention of 
Borrower that in this circumstance this Security Instrument create and 
perfect a lien on the Leases in favor of Lender, which lien shall be 
effective as of the date of this Security Instrument.
    (b) Until Lender gives Notice to Borrower of Lender's exercise of 
its rights under Section 4, Borrower shall have all rights, power and 
authority granted to Borrower under any Lease (except as otherwise 
limited by this Section or any other provision of this Security 
Instrument), including the right, power and authority to modify the 
terms of any Lease or extend or terminate any Lease. Upon the 
occurrence of an Event of Default, the permission given to Borrower 
pursuant to the preceding sentence to exercise all rights, power and 
authority under Leases shall automatically terminate. Borrower shall 
comply with and observe Borrower's obligations under all Leases, 
including Borrower's obligations pertaining to the maintenance and 
disposition of tenant security deposits.
    (c) Borrower acknowledges and agrees that the exercise by Lender, 
either directly or by a receiver, of any of the rights conferred under 
Section 4 shall not be construed to make Lender a Lender-in-possession 
of the Mortgaged Property so long as Lender, or an authorized agent of 
Lender, has not entered into actual possession of the Land and the 
Improvements. The acceptance by Lender of the assignment of the Leases 
pursuant to Section 4(a) shall not at any time or in any event obligate 
Lender to take any action under this Security Instrument or to expend 
any money or to incur any expenses. Lender shall not be liable in any 
way for any injury or damage to person or property sustained by any 
person or persons, firm or corporation in or about the Mortgaged 
Property unless Lender is a Lender-in-possession. Prior to Lender's 
actual entry into and taking possession of the Mortgaged Property, 
Lender shall not (1) be obligated to perform any of the terms, 
covenants and conditions contained in any Lease (or otherwise have any 
obligation with respect to any Lease); (2) be obligated to appear in or 
defend any action or proceeding relating to the Lease or the Mortgaged 
Property; or (3) be responsible for the operation, control, care, 
management or repair of the Mortgaged Property or any portion of the 
Mortgaged Property. The execution of this Security Instrument by 
Borrower shall constitute conclusive evidence that all responsibility 
for the operation, control, care, management and repair of the 
Mortgaged Property is and shall be that of Borrower, prior to such 
actual entry and taking of possession.
    (d) Upon delivery of Notice by Lender to Borrower of Lender's 
exercise of Lender's rights under Section 4 at any time after the 
occurrence of an Event of Default, and without the necessity of Lender 
entering upon and taking and maintaining control of the Mortgaged 
Property directly, by a receiver, or by any other manner or proceeding 
permitted by the laws of the Property Jurisdiction, Lender immediately 
shall have all rights, powers and authority granted to Borrower under 
any Lease, including the right, power and authority to modify the terms 
of any such Lease, or extend or terminate any such Lease.
    (e) Borrower shall, promptly upon Lender's request, deliver to 
Lender an executed copy of each residential Lease then in effect. All 
Leases for residential dwelling units shall be acceptable to the Lender 
and shall comply with HUD requirements.
    (f) Borrower shall not lease any portion of the Mortgaged Property 
for non-residential use except with the prior written consent of Lender 
and HUD, and Lender's and HUD's prior written approval of the Lease 
agreement. Borrower shall not modify the terms of, or extend or 
terminate, any Lease for non-residential use (including any Lease in 
existence on the date of this Security Instrument) without the prior 
written consent of Lender and HUD. Borrower shall, without request by 
Lender, deliver an executed copy of each non-residential Lease to 
Lender and HUD promptly after such Lease is signed. (1) All non-
residential Leases, including renewals or extensions of existing

[[Page 46231]]

Leases, shall specifically provide that (i) such Leases are subordinate 
to the lien of this Security Instrument; (ii) the tenant shall attorn 
to Lender and any purchaser at a foreclosure sale, such attornment to 
be self-executing and effective upon acquisition of title to the 
Mortgaged Property by any purchaser at a foreclosure sale or by Lender 
in any manner; (iii) the tenant agrees to execute such further 
evidences of attornment as Lender or any purchaser at a foreclosure 
sale may from time to time request; (iv) the Lease shall not be 
terminated by foreclosure or any other transfer of the Mortgaged 
Property; (v) after a foreclosure sale of the Mortgaged Property or 
after transfer of the Mortgaged Property to the Lender by a deed-in-
lieu of foreclosure, Lender or any purchaser at such foreclosure sale 
may, at Lender's or such purchaser's option, accept or terminate such 
Lease; and (vi) the tenant shall, upon receipt after the occurrence of 
an Event of Default of a written request from Lender, pay all Rents 
payable under the Lease to Lender. (2) In addition to the foregoing 
requirements, any Lease of the Mortgaged Property for 
telecommunications uses shall contain: (i) A comprehensive listing of 
the equipment to be installed; (ii) a legal description of the portion 
of the Mortgaged Property to be utilized; (iii) a comprehensive listing 
of any proposed Improvements to the Mortgaged Property; (iv) a 
provision which conditions the Lease on the tenant obtaining all 
variances, permits, licenses or approvals required by applicable law; 
(v) a provision precluding the assignment or sublet of the leased space 
without the prior written approval of the Lender and HUD, to be granted 
or withheld by each in its sole discretion; (vi) an acknowledgment by 
the tenant that it has performed its own investigation of the property 
and has determined its suitability for use; (vii) a provision granting 
the Borrower, its successors or assigns, the right to relocate any 
equipment, wiring or cabling; and (viii) a provision which permits the 
Borrower, its successors or assigns, the right to terminate the Lease 
should it be shown that the equipment constitutes a danger to health or 
safety.
    (g) Borrower shall not receive or accept Rent under any Lease 
(whether residential or non-residential) for more than two months in 
advance.
    5. Payment of Indebtedness; Performance Under Loan Documents; 
Prepayment Premium. Borrower shall pay the Indebtedness when due in 
accordance with the terms of the Note and this Security Instrument and 
shall perform, observe and comply with all other provisions of the Note 
and this Security Instrument. Borrower shall pay a prepayment premium 
in connection with certain prepayments of the Indebtedness, including a 
payment made after Lender's exercise of any right of acceleration of 
the Indebtedness, as provided in the Note.
    6. Exculpation. Borrower's personal liability for payment of the 
Indebtedness and for performance of the other obligations to be 
performed by it under this Security Instrument is limited in the 
manner, and to the extent, provided in the Note and attached 
Acknowledgment except as provided otherwise herein or limited or 
modified by the Regulatory Agreement and federal law.
    7. Deposits for Taxes, Insurance and Other Charges. (a) Borrower 
shall pay to and deposit with Lender, together with and in addition to 
the monthly payments of interest or of principal and interest payable 
under the terms of the Note secured hereby, on the first day of each 
month after the commencement of amortization under the Note, and 
continuing until the debt secured hereby is paid in full, the following 
sums:
    (1) An amount sufficient to provide Lender with funds to pay the 
next mortgage insurance premium if this Security Instrument and the 
Note secured hereby are insured or a monthly service charge, if they 
are held by HUD, as follows:
    (i) If and so long as the Note of even date is insured under the 
provisions of the National Housing Act, as amended, an amount 
sufficient to accumulate in the hands of Lender one month prior to its 
due date the annual mortgage insurance premium, in order to provide 
Lender with funds to pay such premium to HUD pursuant to the National 
Housing Act, as amended, and applicable Regulations thereunder, or;
    (ii) If and so long as the Note and this Security Instrument are 
held by HUD, a monthly service charge in an amount equal to one-twelfth 
of one-half (\1/12\ of \1/2\) percent of the average outstanding 
principal balance due on the Note computed for each successive year 
beginning with the first day of the month following the date of this 
Security Instrument, or the first day of the month following 
assignment, if the Note and this Security Instrument are assigned to 
HUD without taking into account delinquencies or prepayment;
    (2) A sum to the ground rents, if any, next due, plus the premiums 
that will next become due and payable on policies of fire and other 
property insurance covering the premises covered hereby, plus water 
rates, Taxes, municipal/government utility charges and special 
assessments next due on the premises covered hereby (all as estimated 
by Lender) less all sums already paid therefor divided by the number of 
months to the date when such ground rents, premiums, water rates, 
Taxes, municipal/utility charges and special assessments will become 
delinquent, such sums to be held by Lender in trust to pay said ground 
rents, premiums, water rates, Taxes, and special assessments; and
    (3) All payments and deposits mentioned in the two preceding 
subsections of this Section and all payments to be made under the Note 
shall be added together and the aggregate amount thereof shall be paid 
each month in a single payment or deposit to be applied by Lender to 
the following items in the order set forth:
    (i) Premium charges under the Contract of Insurance;
    (ii) Ground rents, Taxes, special assessments, water rates, 
municipal/government utility charges, fire and other property insurance 
premiums;
    (iii) Interest on the Note; and
    (iv) Amortization of the principal of Note.
    (b) Borrower shall pay to and deposit with Lender, at times 
specified and as required by HUD, all other escrows and deposits, 
including any reserve for replacements.
    8. Imposition Deposits. (a) In the event Borrower fails to pay any 
sums provided for in this Security Instrument, Lender, at its option, 
may pay the same. Any excess funds accumulated under Section 7(b) 
remaining after payment of the items therein mentioned, shall be 
credited to subsequent monthly payments of the same nature required 
thereunder; but if any such item shall exceed the estimate therefor, or 
if the Borrower shall fail to pay any other governmental or municipal 
charge, Borrower shall forthwith make good the deficiency or pay the 
charge before the same become delinquent or subject to interest or 
penalties and in default thereof Lender may pay the same. All sums paid 
by Lender and any sums which Lender may be required to advance to pay 
mortgage insurance premiums shall be added to the principal of the Note 
and shall bear interest from the date of payment at the rate specified 
in the Note and shall be due and payable on demand. In case of 
termination of the Contract of Insurance by prepayment of the 
Indebtedness in full, or otherwise (except as hereinafter provided) 
accumulations under Section 7(a) not required to meet payments due 
under the Contract of Insurance, shall be credited to Borrower. If the 
Mortgaged

[[Page 46232]]

Property is sold under foreclosure or is otherwise acquired by Lender 
after Default, any remaining balance of the accumulations under Section 
7(b) shall be credited to the principal under the Note as of the date 
of the commencement of foreclosure proceedings or as of the date the 
Mortgaged Property is otherwise acquired; and accumulations under (a) 
thereof shall be likewise credited unless required to pay sums due HUD 
under the Contract of Insurance. The amounts deposited under Section 7 
and Section 8 is collectively referred to in this Security Instrument 
as the ``Imposition Deposits''. The obligations of Borrower for which 
the Imposition Deposits are required are collectively referred to in 
this Security Instrument as ``Impositions''. The amount of the 
Imposition Deposits shall be sufficient to enable Lender to pay 
applicable Impositions before the last date upon which such payment may 
be made without any penalty or interest charge being added. Lender 
shall maintain records indicating how much of the monthly Imposition 
Deposits and how much of the aggregate Imposition Deposits held by 
Lender are held for the purpose of paying Taxes, insurance premiums and 
each other obligation of Borrower for which Imposition Deposits are 
required. Any waiver by Lender of the requirement that Borrower remit 
Imposition Deposits to Lender may be revoked by Lender, in Lender's 
discretion, at any time upon Notice to Borrower.
    (b) Imposition Deposits shall be held in an institution (which may 
be Lender, if Lender is such an institution, and/or if required by HUD 
under the Regulatory Agreement with respect to all or any portion of 
said Imposition Deposits) whose deposits or accounts are insured or 
guaranteed by a federal agency and which meets all applicable HUD 
requirements. Lender shall not be obligated to open additional accounts 
or deposit Imposition Deposits in additional institutions when the 
amount of the Imposition Deposits exceeds the maximum amount of the 
federal deposit insurance or guaranty. Lender shall apply the 
Imposition Deposits to pay Impositions so long as no Event of Default 
has occurred and is continuing. Unless applicable law requires, Lender 
shall not be required to pay Borrower any interest, earnings or profits 
on the Imposition Deposits. Borrower hereby pledges and grants to 
Lender a security interest in the Imposition Deposits as additional 
security for all of Borrower's obligations under this Security 
Instrument and the Note. Any amounts deposited with Lender under 
Section 8 shall not be trust funds, nor shall they operate to reduce 
the Indebtedness.
    (c) If Lender receives a bill or invoice for an Imposition, Lender 
shall pay the Imposition from the Imposition Deposits held by Lender. 
Lender shall have no obligation to pay any Imposition to the extent it 
exceeds Imposition Deposits then held by Lender. Lender may pay an 
Imposition according to any bill, statement or estimate from the 
appropriate public office or insurance company without inquiring into 
the accuracy of the bill, statement or estimate or into the validity of 
the Imposition.
    (d) If at any time the amount of the Imposition Deposits held by 
Lender for payment of a specific Imposition exceeds the amount 
reasonably deemed necessary by Lender plus one-sixth of such estimate, 
the excess shall be credited against future installments of Imposition 
Deposits. If at any time the amount of the Imposition Deposits held by 
Lender for payment of a specific Imposition is less than the amount 
reasonably estimated by Lender to be necessary plus one-sixth of such 
estimate, Borrower shall pay to Lender the amount of the deficiency 
within 15 days after Notice from Lender.
    9. Collateral Agreements. Borrower shall deposit with Lender such 
amounts as may be required by any Collateral Agreement and shall 
perform all other obligations of Borrower under each Collateral 
Agreement. Collateral Agreement deposits shall be held in an 
institution (which may be Lender, if Lender is such an institution) 
whose deposits or accounts are insured or guaranteed by a federal 
agency. Unless applicable law requires, Lender shall not be required to 
pay Borrower any interest, earnings or profits on the Imposition 
Deposits.
    10. Regulatory Agreement Default. Borrower and HUD have executed a 
Regulatory Agreement which is being recorded simultaneously with this 
Security Instrument and is incorporated in and made a part of this 
Security Instrument. Upon the direction of HUD, following a declaration 
of default by HUD under the Regulatory Agreement, the Lender shall 
declare the entire Indebtedness to be due and payable.
    11. Application of Payments. If at any time Lender receives, from 
Borrower or otherwise, any amount applicable to the Indebtedness which 
is less than all amounts due and payable at such time, then Lender must 
apply that payment to amounts then due and payable in the precise 
manner and in the precise order set forth in Section 7(a). Neither 
Lender's acceptance of an amount which is less than all amounts then 
due and payable nor Lender's application of such payment in the manner 
authorized shall constitute or be deemed to constitute either a waiver 
of the unpaid amounts or an accord and satisfaction. Notwithstanding 
the application of any such amount to the Indebtedness, Borrower's 
obligations under this Security Instrument and the Note shall remain 
unchanged.
    12. Compliance with Laws. Borrower shall comply with all 
applicable: laws; ordinances; regulations; requirements of any 
Governmental Authority; lawful covenants and agreements recorded 
against the Mortgaged Property; the National Housing Act; the 
Regulatory Agreement; regulations and Directives of HUD; including but 
not limited to those of the foregoing pertaining to: health and safety; 
construction of Improvements on the Mortgaged Property; fair housing; 
civil rights; zoning and land use; leases; lead-based paint maintenance 
requirements of 24 CFR Part 35, subpart F; and maintenance and 
disposition of tenant security deposits; and, with respect to all of 
the foregoing, all subsequent amendments, revisions, promulgations or 
enactments. Borrower shall at all times maintain records sufficient to 
demonstrate compliance with the provisions of Section 12. Borrower 
shall take appropriate measures to prevent, and shall not engage in or 
knowingly permit, any illegal activities at the Mortgaged Property that 
could endanger tenants or visitors, result in damage to the Mortgaged 
Property, result in forfeiture of the Mortgaged Property, or otherwise 
materially impair the lien created by this Security Instrument or 
Lender's interest in the Mortgaged Property. Borrower represents and 
warrants to Lender that no portion of the Mortgaged Property has been 
or will be purchased with the proceeds of any illegal activity.
    13. Use of Property. Unless required by applicable law and approved 
by Lender and HUD, Borrower shall not (a) allow changes in the use for 
which all or any part of the Mortgaged Property is being used at the 
time this Security Instrument was executed, (b) convert any individual 
dwelling units or common areas to commercial use, (c) initiate or 
acquiesce in a change in the zoning classification of the Mortgaged 
Property, (d) establish any condominium or cooperative regime with 
respect to the Mortgaged Property, (e) change any unit configurations 
or the number of units in the Mortgaged Property or (f) permit the 
Mortgaged Property to be used as transient housing or as a hotel in 
violation of Section 513

[[Page 46233]]

of the National Housing Act, as amended.
    14. Protection of Lender's Security. (a) If Borrower fails to 
perform any of its obligations under this Security Instrument, Note or 
Regulatory Agreement, or if any action or proceeding is commenced which 
purports to affect the Mortgaged Property, Lender's security or 
Lender's rights under this Security Instrument, including eminent 
domain, insolvency, Waste, code enforcement, civil or criminal 
forfeiture, enforcement of Hazardous Materials Laws, fraudulent 
conveyance or reorganizations or proceedings involving a bankrupt or 
decedent, then Lender at Lender's option may make such appearances, 
disburse such sums and take such actions as Lender reasonably deems 
necessary to perform such obligations of Borrower and to protect 
Lender's interest, including (1) payment of fees and out-of-pocket 
expenses of attorneys (including fees for litigation at all levels), 
accountants, inspectors and consultants, (2) entry upon the Mortgaged 
Property to make repairs or secure the Mortgaged Property, (3) 
procurement of the insurance required by Section 21, and (4) payment of 
amounts which Borrower has failed to pay under Section 17 and Section 
19.
    (b) Any amounts disbursed by Lender under Section 14, or under any 
other provision of this Security Instrument that treats such 
disbursement as being made under Section 14, shall be added to, and 
become part of the principal of the Indebtedness, shall be immediately 
due and payable and shall bear interest from the date of disbursement 
until paid at the rate specified by HUD.
    (c) Nothing in Section 14 shall require Lender to incur any expense 
or take any action, and Lender shall not incur any expense or take any 
action without the prior written approval of HUD.
    15. Inspection. Lender and/or HUD, their agents, representatives, 
and designees, may make or cause to be made entries upon and 
inspections of the Mortgaged Property (including the HUD-required 
annual inspection and any environmental inspections and tests) during 
normal business hours, or at any other reasonable time.
    16. Books and Records; Financial Reporting. (a) Borrower shall keep 
and maintain at all times at the Mortgaged Property or the management 
agent's offices, and upon Lender's or HUD's request shall make 
available at the Mortgaged Property, complete and accurate books of 
account and records (including copies of supporting bills and invoices) 
adequate to reflect correctly the operation of the Mortgaged Property, 
and copies of all written contracts, Leases, and other instruments 
which affect the Mortgaged Property. The books, records, contracts, 
Leases and other instruments shall be subject to examination and 
inspection at any reasonable time by Lender and/or HUD.
    (b) Borrower shall furnish to Lender all of the following:
    (1) Within 90 days after the end of each fiscal year of Borrower 
(or pursuant to HUD requirements, if different), a statement of income 
and expenses for Borrower's operation of the Mortgaged Property for 
that fiscal year, a statement of changes in financial position of 
Borrower relating to the Mortgaged Property for that fiscal year and, 
when requested by Lender or HUD, a balance sheet showing all assets and 
liabilities of Borrower relating to the Mortgaged Property as of the 
end of that fiscal year;
    (2) Within 120 days after the end of each fiscal year of Borrower 
(or pursuant to HUD requirements, if different), and at any other time 
upon Lender's or HUD's request, a rent schedule for the Mortgaged 
Property showing the name of each tenant, and for each tenant, the 
space occupied, the lease expiration date, the rent payable for the 
current month, the date through which rent has been paid, and any 
related information requested by Lender;
    (3) Within 120 days after the end of each fiscal year of Borrower 
(or pursuant to HUD requirements, if different), and at any other time 
upon Lender's or HUD's request, an accounting of all security deposits 
held pursuant to all Leases, including the name of the institution (if 
any) and the names and identification numbers of the accounts (if any) 
in which such security deposits are held and the name of the person to 
contact at such financial institution, along with any authority or 
release necessary for Lender to access information regarding such 
accounts;
    (4) Within 120 days after the end of each fiscal year of Borrower 
(or pursuant to HUD requirements, if different), and at any other time 
upon Lender's or HUD's request, a statement that identifies all owners 
with any interest in Borrower, directly or indirectly, or through one 
or more intermediaries, and the interest held by each. In addition, the 
Borrower must also submit a list of all officers and directors of any 
corporations, and all managers who are not members of any limited 
liability company, identified in this statement;
    (5) Upon Lender's or HUD's request at any time when an Event of 
Default has occurred and is continuing, monthly income and expense 
statements for the Mortgaged Property;
    (6) Upon Lender's or HUD's request, a monthly property management 
report for the Mortgaged Property, showing the number of inquiries made 
and rental applications received from tenants or prospective tenants 
and deposits received from tenants and any other information requested 
by Lender; and
    (7) Any other records or documents reasonably requested by Lender 
or HUD.
    (c) Each of the statements, schedules and reports required by 
Section 16(b) shall be certified to be complete and accurate by an 
individual having authority to bind Borrower, and shall be in such form 
and contain such detail as Lender and/or HUD may require. Lender or HUD 
also may require that any statements, schedules or reports be audited 
at Borrower's expense by independent certified public accountants 
acceptable to Lender or HUD.
    (d) If Borrower fails to provide in a timely manner the statements, 
schedules and reports required by Section 16(b), Lender or HUD shall 
have the right to have Borrower's books and records audited, at 
Borrower's expense, by independent certified public accountants 
selected by Lender in order to obtain such statements, schedules and 
reports, and all related costs and expenses of Lender shall become 
immediately due and payable and shall become an additional part of the 
Indebtedness as provided in Section 14.
    (e) If an Event of Default has occurred and is continuing, Borrower 
shall, at Borrower's expense, deliver to Lender or HUD upon written 
demand all books and records relating to the Mortgaged Property or its 
operation.
    (f) Borrower authorizes Lender or HUD to obtain a credit report on 
Borrower at any time.
    17. Taxes; Operating Expenses. (a) Subject to the provisions of 
Section 17(c) and Section 17(d), Borrower shall pay, or cause to be 
paid, all Taxes when due and before the addition of any interest, fine, 
penalty or cost for nonpayment.
    (b) Subject to the provisions of Section 17(c) and the HUD-approved 
operating budget, if any, Borrower shall pay the expenses of operating, 
managing, maintaining and repairing the Mortgaged Property (including 
insurance premiums, utilities, repairs and replacements) before the 
last date upon which each such payment may be made without any penalty 
or interest charge being added.
    (c) As long as no Event of Default exists and Borrower has timely 
delivered to Lender any bills or

[[Page 46234]]

premium Notice that it has received, Borrower shall not be obligated to 
pay Taxes, insurance premiums or any other individual Imposition to the 
extent that sufficient Imposition Deposits are held by Lender for the 
purpose of paying that specific Imposition. If an Event of Default 
exists and subject to outstanding HUD requirements pertaining to claims 
for mortgage insurance benefits, Lender may exercise any rights Lender 
may have with respect to Imposition Deposits without regard to whether 
Impositions are then due and payable. Lender shall have no liability to 
Borrower for failing to pay any Impositions to the extent that any 
Event of Default has occurred and is continuing, insufficient 
Imposition Deposits are held by Lender at the time an Imposition 
becomes due and payable or Borrower has failed to provide Lender with 
bills and premium Notice as provided above.
    (d) Borrower, at its own expense and with the approval of HUD, may 
contest by appropriate legal proceedings, conducted diligently and in 
good faith, the amount or validity of any Imposition other than 
insurance premiums, if (1) Borrower notifies Lender of the commencement 
or expected commencement of such proceedings, (2) the Mortgaged 
Property is not in danger of being sold or forfeited, (3) Borrower 
deposits with Lender reserves sufficient to pay the contested 
Imposition, if requested by Lender, and (4) Borrower furnishes whatever 
additional security is required in the proceedings or is reasonably 
requested by Lender, which may include the delivery to Lender of the 
reserves established by Borrower to pay the contested Imposition.
    (e) Borrower shall promptly deliver to Lender a copy of all Notices 
of, and invoices for, Impositions, and if Borrower pays any Imposition 
directly, Borrower shall promptly furnish to Lender receipts evidencing 
such payments.
    18. Liens; Encumbrances. Borrower acknowledges that the grant, 
creation or existence of any mortgage, deed of trust, deed to secure 
debt, security interest or other lien or encumbrance (a ``Lien'') on 
the Mortgaged Property (other than the lien of this Security 
Instrument, any tax liens which are imposed before payment is due, or 
any inferior liens which are approved by HUD and Lender), whether 
voluntary, involuntary or by operation of law, and whether or not such 
Lien has priority over the lien of this Security Instrument, is an 
Event of Default and subjects Borrower to personal liability under the 
Note.
    19. Preservation, Management and Maintenance of Mortgaged Property. 
Borrower (a) shall not commit Waste or permit impairment or 
deterioration of the Mortgaged Property, (b) shall not abandon the 
Mortgaged Property, (c) shall restore or repair promptly, in a good and 
workmanlike manner, any damaged part of the Mortgaged Property to the 
equivalent of its original condition, or such other condition as Lender 
may approve in writing, whether or not litigation or insurance proceeds 
or condemnation awards are available to cover any costs of such 
restoration or repair, (d) shall keep the Mortgaged Property in decent, 
safe, sanitary condition and good repair, including the replacement of 
Personalty and Fixtures with items of equal or better function and 
quality, all in accordance with applicable HUD requirements, (e) shall 
provide for qualified management of the Mortgaged Property by a 
residential rental property manager satisfactory to Lender and HUD 
under a contract approved by Lender in writing or for the operation of 
a Health Care Facility pursuant to any governmental requirements 
pertaining to operation and licensure, (f) shall give Notice to Lender 
and HUD of and, unless otherwise directed in writing by Lender and HUD, 
shall appear in and defend, any action or proceeding purporting to 
affect the Mortgaged Property, Lender's security or Lender's rights 
under this Security Instrument, (g) shall not (and shall not permit any 
tenant or other person to) remove, demolish or alter the Mortgaged 
Property or any part of the Mortgaged Property without the prior 
written approval of HUD except that the Borrower may, without the prior 
written approval of HUD, dispose of obsolete or deteriorated Fixtures 
or Personalty if the same are replaced with like items of the same or 
greater quality or value, and (h) shall not expend any project funds in 
connection with expenses incurred by or for the benefit of the 
ownership entity. All expenses incurred by Borrower in connection with 
the Mortgaged Property shall be reasonable and necessary, and incurred 
in compliance with HUD requirements.
    20. Management Contracts. Any management contract entered into by 
Borrower shall contain a provision that it shall be subject to 
termination without penalty and without cause upon written request of 
Lender and shall contain a provision which gives no more than a thirty 
day notice of termination. Upon such request, Borrower shall 
immediately arrange to terminate the contract, and the Borrower shall 
also make arrangements satisfactory to Lender for continuing acceptable 
management of the Mortgaged Property effective as of the termination 
date of the contract.
    21. Property and Liability Insurance. (a) Borrower shall keep the 
Improvements insured at all times against such hazards as Lender and 
HUD may from time to time require, which insurance shall include but 
not be limited to coverage against loss by fire and allied perils, 
general boiler and machinery coverage, builders all-risk and business 
income coverage. Lender's and HUD's insurance requirements may change 
from time to time throughout the term of the Indebtedness. If Lender or 
HUD so require, such insurance shall also include sinkhole insurance, 
mine subsidence insurance, earthquake insurance, and, if the Mortgaged 
Property does not conform to applicable zoning or land use laws, 
building ordinance or law coverage. If any of the Improvements is 
located in an area identified by the Federal Emergency Management 
Agency (or any successor to that agency) as an area having special 
flood hazards, and if flood insurance is available in that area, 
Borrower shall insure such Improvements against loss by flood. If 
Lender determines that flood insurance has not been obtained in the 
required amount, Lender must notify Borrower and HUD of Borrower's 
obligations to obtain the proper flood insurance. If Borrower does not 
obtain such insurance within 45 days of the date of this notification, 
Lender shall purchase such flood insurance on behalf of Borrower and 
may charge Borrower for the cost of premiums and fees incurred by 
Lender in purchasing the flood insurance.
    (b) All premiums on insurance policies required under Section 21(a) 
shall be paid in the manner provided in Section 7, unless Lender has 
designated in writing another method of payment. All such policies 
shall also be in a form approved by Lender. All policies of property 
damage insurance shall include a non-contributing, non-reporting 
mortgage clause in a form approved by Lender, and in favor of Lender 
and HUD, as their interests may appear. Lender shall have the right to 
hold the original policies or duplicate original policies of all 
insurance required by Section 21(a). Borrower shall promptly deliver to 
Lender a copy of all renewal and other Notices received by Borrower 
with respect to the policies and all receipts for paid premiums. At 
least 30 days prior to the expiration date of a policy, Borrower shall 
deliver to Lender the original (or a duplicate original) of a renewal 
policy in form satisfactory to Lender.
    (c) Borrower shall maintain at all times commercial general 
liability

[[Page 46235]]

insurance, workers' compensation insurance and such other liability, 
errors and omissions and fidelity insurance coverages as Lender and HUD 
may from time to time require, or shall require any appropriate party, 
including but not limited to the Operator or Lessee to maintain at all 
times commercial general liability insurance, workers' compensation 
insurance and such other liability, errors and omissions and fidelity 
insurance coverages as Lender and HUD may from time to time require.
    (d) All insurance policies and renewals of insurance policies 
required by Section 21 shall be in such amounts and for such periods as 
Lender and HUD may from time to time require, and shall be issued by 
insurance companies satisfactory to Lender. Lender shall have the right 
to effect insurance in the event Borrower fails to comply with this 
Section.
    (e) Borrower shall comply with all insurance requirements and shall 
not permit any condition to exist on the Mortgaged Property that would 
invalidate any part of any insurance coverage that this Security 
Instrument requires Borrower to maintain.
    (f) In the event of loss, Borrower shall give immediate written 
Notice to the insurance carrier and to Lender. Borrower hereby 
authorizes and appoints Lender as attorney-in-fact for Borrower to make 
proof of loss, to adjust and compromise any claims under policies of 
property damage insurance, to appear in and prosecute any action 
arising from such property damage insurance policies, to collect and 
receive the proceeds of property damage insurance, and to deduct from 
such proceeds Lender's expenses incurred in the collection of such 
proceeds. This power of attorney is coupled with an interest and 
therefore is irrevocable. However, nothing contained in Section 21 
shall require Lender to incur any expense or take any action. Lender 
may, at Lender's option and with the prior written approval of HUD, (1) 
hold the balance of such proceeds to be used to reimburse Borrower for 
the cost of restoring and repairing the Mortgaged Property to the 
equivalent of its original condition or to a condition approved by 
Lender (the ``Restoration''), or (2) apply the balance of such proceeds 
to the payment of the Indebtedness, whether or not then due. To the 
extent Lender determines to apply insurance proceeds to Restoration, 
Lender shall do so in accordance with Lender's then-current policies 
relating to the restoration of casualty damage on similar multifamily 
properties and in accordance with outstanding HUD policy and 
regulations.
    (g) Lender shall not exercise its option to apply insurance 
proceeds to the payment of the Indebtedness if all of the following 
conditions are met: (1) No Event of Default (or any event which, with 
the giving of Notice or the passage of time, or both, would constitute 
an Event of Default) has occurred and is continuing; (2) Lender 
determines, in its discretion, that there will be sufficient funds to 
complete the Restoration; (3) Lender determines, in its discretion, 
that the rental income from the Mortgaged Property after completion of 
the Restoration will be sufficient to meet all operating costs and 
other expenses, Imposition Deposits, deposits to reserves and loan 
repayment obligations relating to the Mortgaged Property; and (4) 
Lender determines, in its discretion, that the Restoration will be 
completed before the earlier of (A) one year before the maturity date 
of the Note or (B) one year after the date of the loss or casualty. 
Further, Lender may not exercise its option to apply insurance proceeds 
to the payment of the Indebtedness without the prior written approval 
of HUD. If HUD fails to give its approval to the use or application of 
such funds within 60 days after the written request by the Lender, the 
Lender may use or apply such funds for any of the purposes specified 
herein without the approval of HUD.
    (h) If the Mortgaged Property is sold at a foreclosure sale or 
Lender or HUD acquire title to the Mortgaged Property, Lender and HUD, 
as their interests may appear, shall automatically succeed to all 
rights of Borrower in and to any insurance policies and unearned 
insurance premiums and in and to the proceeds of property damage 
insurance resulting from any damage to the Mortgaged Property prior to 
such sale or acquisition.
    22. Condemnation. (a) Borrower shall promptly notify Lender and HUD 
of any action or proceeding relating to any condemnation or other 
taking, or conveyance in lieu thereof, of all or any part of the 
Mortgaged Property, whether direct or indirect (a ``Condemnation''). 
Borrower shall appear in and prosecute or defend any action or 
proceeding relating to any Condemnation unless otherwise directed by 
Lender in writing. Borrower authorizes and appoints Lender as attorney-
in-fact for Borrower to commence, appear in and prosecute, in Lender's 
or Borrower's name, any action or proceeding relating to any 
Condemnation and to settle or compromise any claim in connection with 
any Condemnation. This power of attorney is coupled with an interest 
and therefore is irrevocable. However, nothing contained in Section 22 
shall require Lender to incur any expense or take any action. Borrower 
hereby transfers and assigns to Lender all right, title and interest of 
Borrower in and to any award or payment with respect to (1) any 
Condemnation, or any conveyance in lieu of Condemnation, and (2) any 
damage to the Mortgaged Property caused by governmental action that 
does not result in a Condemnation.
    (b) All awards of compensation in connection with condemnation for 
public use of or a taking of any of the Mortgaged Property, shall be 
paid to Lender to be applied to the amount due under the Note secured 
hereby in (1) amounts equal to the next maturing installment or 
installments of principal and (2) with any balance to be credited to 
the next payment due under the Note. All awards of damages in 
connection with any condemnation for public use of or damage to the 
Mortgaged Property, shall be paid to Lender to be applied to a fund 
held for and on behalf of Borrower which fund shall, at the option of 
Lender, and with the prior written approval of HUD, either be applied 
to the amount due under the Note as specified in the preceding 
sentence, or be disbursed for the restoration or repair of the 
Mortgaged Property. No amount applied to the reduction of the principal 
amount due in accordance with Section 22(b)(1) shall be considered an 
optional prepayment as the term is used in this Security Instrument and 
the Note secured hereby, nor relieve Borrower from making regular 
monthly payments commencing in the first day of the first month 
following the date of receipt of the award. Lender is hereby authorized 
in the name of Borrower to execute and deliver necessary releases or 
approvals or to appeal from such awards.
    23. Transfers of the Mortgaged Property or Interests in Borrower. 
The Borrower shall not convey, assign, transfer, pledge, hypothecate, 
encumber or otherwise dispose of the Mortgaged Property or any interest 
therein or permit the conveyance, assignment or transfer of any 
interest in the Borrower (if the effect of such conveyance, assignment 
or transfer is the creation or elimination of a Principal) without the 
prior written approval of HUD. The Borrower does not need to obtain the 
prior written approval of HUD for: (a) A conveyance of the Mortgaged 
Property at a judicial or non-judicial foreclosure sale under this 
Security Instrument, (b) the Mortgaged Property becoming part of a 
bankruptcy estate by operation of law under the United States 
Bankruptcy Code, or (c) an interest acquired by inheritance or by Court 
decree.

[[Page 46236]]

    24. Events of Default. The occurrence of any one or more of the 
following shall constitute either a Class A Event of Default or a Class 
B Event of Default under this Security Instrument:
    (a) Class A Event of Default: Any failure by Borrower to pay or 
deposit when due any amount required by the Note or Section 7(a) or (b) 
of this Security Instrument for a period of thirty (30) days after the 
due date thereof.
    (b) Class B Events of Default:
    (1) Fraud or material misrepresentation or material omission by 
Borrower, any of its officers, directors, trustees, general partners, 
members or managers or any guarantor in connection with (i) the 
application for or creation of the Indebtedness, (ii) any financial 
statement, rent roll, or other report or information provided to Lender 
during the term of the Indebtedness, or (iii) any request for Lender's 
consent to any proposed action under this Security Instrument or the 
Note;
    (2) The commencement of a forfeiture action or proceeding, whether 
civil or criminal, which, in Lender's reasonable judgment, could result 
in a forfeiture of the Mortgaged Property or otherwise materially 
impair the lien created by this Security Instrument or Lender's 
interest in the Mortgaged Property;
    (3) Any failure by Borrower to perform any of its obligations under 
this Security Instrument (other than those specified in Section 24(a) 
and Section 24(b)(1) and (b)(2)), as and when required, which continues 
for a period of 30 days after Notice of such failure by Lender to 
Borrower. However, no such Notice or grace period shall apply in the 
case of any such failure which could, in Lender's judgment, absent 
immediate exercise by Lender of a right or remedy under this Security 
Instrument, result in harm to Lender or impairment of the Note or this 
Security Instrument;
    (4) Any failure by Borrower to perform any of its obligations as 
and when required under the Regulatory Agreement which continue beyond 
the applicable cure period, if any, specified in the Regulatory 
Agreement; however, violations under the terms of the Regulatory 
Agreement may only be treated as a default hereunder in cases where HUD 
requires Lender to do so; and
    (5) Borrower voluntarily files for bankruptcy protection under the 
United States Bankruptcy Code or voluntarily becomes subject to any 
reorganization, receivership, insolvency proceeding or other similar 
proceeding pursuant to any other federal or state law affecting debtor 
and creditor rights, or an involuntary case is commenced against 
Borrower by any creditor (other than Lender) of Borrower pursuant to 
the United States Bankruptcy Code or other federal or state law 
affecting debtor and creditor rights and is not dismissed or discharged 
within 60 days after filing.
    25. Remedies Cumulative. Each right and remedy provided in this 
Security Instrument is distinct from all other rights or remedies under 
this Security Instrument, the Note or the Regulatory Agreement or 
afforded by applicable law, and each shall be cumulative and may be 
exercised concurrently, independently, or successively, in any order.
    26. Forbearance. (a) So long as the obligation secured hereby is 
insured by HUD, Lender shall not without obtaining the prior written 
consent of HUD, take any of the following actions: extend the time for 
payment of all or any part of the Indebtedness; reduce the payments due 
under this Security Instrument or the Note; release anyone liable for 
the payment of any amounts under this Security Instrument or the Note; 
accept a renewal of the Note; modify the terms and time of payment of 
the Indebtedness; join in any extension or subordination agreement; 
release any Mortgaged Property; take or release other or additional 
security; modify the rate of interest or period of amortization of the 
Note or change the amount of the monthly installments payable under the 
Note; and otherwise modify this Security Instrument, the Note, or the 
Regulatory Agreement. However, if the Contract of Insurance has been 
terminated, Lender may (but shall not be obligated to) agree with 
Borrower to any of the aforementioned actions in this Section and 
Lender shall not have to give Notice to or obtain the consent of any 
guarantor or third-party obligor.
    (b) Any forbearance by Lender (or HUD as its interests appear) in 
exercising any right or remedy under the Note, this Security 
Instrument, or the Regulatory Agreement or otherwise afforded by 
applicable law, shall not be a waiver of or preclude the exercise of 
any right or remedy. The acceptance by Lender of payment of all or any 
part of the Indebtedness after the due date of such payment, or in an 
amount which is less than the required payment, shall not be a waiver 
of Lender's right to require prompt payment when due of all other 
payments on account of the Indebtedness or to exercise any remedies for 
any failure to make prompt payment. Enforcement by Lender of any 
security for the Indebtedness shall not constitute an election by 
Lender of remedies so as to preclude the exercise of any other right 
available to Lender. Lender's receipt of any awards or proceeds under 
Section 21 and Section 22 shall not operate to cure or waive any Event 
of Default.
    27. Loan Charges. If any applicable law limiting the amount of 
interest or other charges permitted to be collected from Borrower is 
interpreted so that any charge provided for in this Security Instrument 
or the Note, whether considered separately or together with other 
charges levied in connection with this Security Instrument or the Note, 
violates that law, and Borrower is entitled to the benefit of that law, 
that charge is hereby reduced to the extent necessary to eliminate that 
violation. The amounts, if any, previously paid to Lender in excess of 
the permitted amounts shall be applied by Lender to reduce the 
principal of the Indebtedness. For the purpose of determining whether 
any applicable law limiting the amount of interest or other charges 
permitted to be collected from Borrower has been violated, all 
Indebtedness which constitutes interest, as well as all other charges 
levied in connection with the Indebtedness which constitute interest, 
shall be deemed to be allocated and spread over the stated term of the 
Note. Unless otherwise required by applicable law, such allocation and 
spreading shall be effected in such a manner that the rate of interest 
so computed is uniform throughout the stated term of the Note.
    28. Waiver of Statute of Limitations. To the extent permitted by 
law, Borrower hereby waives the right to assert any statute of 
limitations as a bar to the enforcement of the lien of this Security 
Instrument or to any action brought to enforce this Security Instrument 
or the Note.
    29. Waiver of Marshalling. Notwithstanding the existence of any 
other security interests in the Mortgaged Property held by Lender or by 
any other party and subject to the rights and requirements of HUD 
particularly under but not limited to the Regulatory Agreement, Lender 
shall have the right to determine the order in which any or all of the 
Mortgaged Property shall be subjected to the remedies provided in this 
Security Instrument and the Note or applicable law. Lender shall have 
the right to determine the order in which any or all portions of the 
Indebtedness are satisfied from the proceeds realized upon the exercise 
of such remedies. Borrower and any party who now or in the future 
acquires a security interest in the Mortgaged Property and who has 
actual or constructive notice of this Security Instrument waives any 
and all

[[Page 46237]]

right to require the marshalling of assets or to require that any of 
the Mortgaged Property be sold in the inverse order of alienation or 
that any of the Mortgaged Property be sold in parcels or as an entirety 
in connection with the exercise of any of the remedies permitted by 
applicable law or provided in this Security Instrument.
    30. Further Assurances. Borrower shall execute, acknowledge, and 
deliver, at its sole cost and expense, all further acts, deeds, 
conveyances, assignments, estoppel certificates, financing statements, 
transfers and assurances as Lender may require from time to time in 
order to better assure, grant, and convey to Lender the rights intended 
to be granted, now or in the future, to Lender under this Security 
Instrument and the Note.
    31. Estoppel Certificate. Within 10 days after a request from 
Lender, Borrower shall deliver to Lender a written statement, signed 
and acknowledged by Borrower, certifying to Lender or any person 
designated by Lender, as of the date of such statement, (a) that the 
Note, the Regulatory Agreement and this Security Instrument are 
unmodified and in full force and effect (or, if there have been 
modifications, that the Note, the Regulatory Agreement and this 
Security Instrument are in full force and effect as modified and 
setting forth such modifications); (b) the unpaid principal balance of 
the Note; (c) the date to which interest under the Note has been paid; 
(d) that Borrower is not in default in paying the Indebtedness or in 
performing or observing any of the covenants or agreements contained in 
this Security Instrument, the Note and the Regulatory Agreement (or, if 
Borrower is in default, describing such default in reasonable detail); 
(e) whether or not there are then existing any setoffs or defenses 
known to Borrower against the enforcement of any right or remedy of 
Lender under the Note, the Regulatory Agreement and this Security 
Instrument; and (f) any additional facts requested by Lender.
    32. Governing Law; Consent to Jurisdiction and Venue. (a) This 
Security Instrument and the Note which does not itself expressly 
identify the law that is to apply to it, shall be governed by the laws 
of the jurisdiction in which the Land is located (the ``Property 
Jurisdiction'') except as such local law may be preempted by federal 
law.
    (b) Borrower agrees that any controversy arising under or in 
relation to the Note or this Security Instrument shall be litigated 
exclusively in the Property Jurisdiction except as federal jurisdiction 
may be appropriate pursuant to any federal requirements. The state and 
federal courts and authorities with jurisdiction in the Property 
Jurisdiction shall have exclusive jurisdiction over all controversies 
which shall arise under or in relation to the Note, any security for 
the Indebtedness, or this Security Instrument. Borrower irrevocably 
consents to service, jurisdiction, and venue of such courts for any 
such litigation and waives any other venue to which it might be 
entitled by virtue of domicile, habitual residence or otherwise.
    33. Notice. (a) All notices, demands and other communications 
(``Notice'') under or concerning this Security Instrument shall be in 
writing. Each Notice shall be addressed to the intended recipient at 
its address set forth in this Security Instrument (and notices to HUD 
shall be addressed to the appropriate HUD field office responsible for 
servicing the Mortgaged Property), and shall be deemed given on the 
earliest to occur of (1) the date when the Notice is received by the 
addressee; (2) the first Business Day after the Notice is delivered to 
a recognized overnight courier service, with arrangements made for 
payment of charges for next Business Day delivery; or (3) the third 
Business Day after the Notice is deposited in the United States mail 
with postage prepaid, certified mail, return receipt requested. As used 
in this Section 33, the term ``Business Day'' means any day other than 
a Saturday, a Sunday or any other day on which Lender or HUD is not 
open for business.
    (b) Any party to this Security Instrument may change the address to 
which Notices intended for it are to be directed by means of Notice 
given to the other party in accordance with Section 33. Each party 
agrees that it will not refuse or reject delivery of any Notice given 
in accordance with Section 33, that it will acknowledge, in writing, 
the receipt of any Notice upon request by the other party and that any 
Notice rejected or refused by it shall be deemed for purposes of 
Section 33 to have been received by the rejecting party on the date so 
refused or rejected, as conclusively established by the records of the 
U.S. Postal Service or the courier service.
    (c) Any Notice under the Note which does not specify how Notice is 
to be given shall be given in accordance with Section 33.
    34. Sale of Note; Change in Servicer. The Note or a partial 
interest in the Note (together with this Security Instrument) may be 
sold one or more times without prior Notice to Borrower. A sale may 
result in a change of the Loan Servicer. There also may be one or more 
changes of the Loan Servicer unrelated to a sale of the Note. If there 
is a sale or transfer of all or a partial interest in the Note or a 
change of the Loan Servicer, Borrower will be given Notice of the sale, 
transfer and/or change.
    35. Single Asset Borrower. Until the Indebtedness is paid in full 
or unless otherwise approved in writing by HUD, (a) Borrower is either 
a single asset entity or a natural person and shall maintain the assets 
of the Mortgaged Property in segregated accounts and (b) Borrower, if 
not a natural person, (1) shall not acquire any real or personal 
property other than the Mortgaged Property and personal property 
related to the operation and maintenance of the Mortgaged Property 
except pursuant to the rules and regulations of HUD and with the prior 
written approval of HUD and (2) shall not own or operate any business 
other than the management and operation of the Mortgaged Property 
except pursuant to the rules and regulations of HUD and with the prior 
written approval of HUD.
    36. Successors and Assigns Bound. This Security Instrument shall 
bind, and the rights granted by this Security Instrument shall inure 
to, the respective successors and assigns of Lender and Borrower.
    37. Joint and Several Liability. If more than one person or entity 
signs this Security Instrument as Borrower, the obligations of such 
persons and entities shall be joint and several.
    38. Relationship of Parties; No Third Party Beneficiary. (a) The 
relationship between Lender and Borrower shall be solely that of 
creditor and debtor, respectively, and nothing contained in this 
Security Instrument shall create any other relationship between Lender 
and Borrower.
    (b) No creditor of any party to this Security Instrument and no 
other person shall be a third party beneficiary of this Security 
Instrument, the Note or the Regulatory Agreement. Without limiting the 
generality of the preceding sentence, (1) any arrangement (a 
``Servicing Arrangement'') between the Lender and any Loan Servicer for 
loss sharing or interim advancement of funds shall constitute a 
contractual obligation of such Loan Servicer that is independent of the 
obligation of Borrower for the payment of the Indebtedness, (2) 
Borrower shall not be a third party beneficiary of any Servicing 
Arrangement, and (3) no payment by the Loan Servicer under any 
Servicing Arrangement will reduce the amount of the Indebtedness.
    39. Severability; Amendments. The invalidity or unenforceability of 
any

[[Page 46238]]

provision of this Security Instrument shall not affect the validity or 
enforceability of any other provision, and all other provisions shall 
remain in full force and effect. This Security Instrument contains the 
entire agreement among the parties as to the rights granted and the 
obligations assumed in this Security Instrument. This Security 
Instrument may not be amended or modified except by a writing signed by 
the party against whom enforcement is sought.
    40. Construction. The captions and headings of the sections of this 
Security Instrument are for convenience only and shall be disregarded 
in construing this Security Instrument. Any reference in this Security 
Instrument to an ``Exhibit'' or a ``Section'' shall, unless otherwise 
explicitly provided, be construed as referring, respectively, to an 
Exhibit attached to this Security Instrument or to a Section of this 
Security Instrument. All Exhibits attached to or referred to in this 
Security Instrument are incorporated by reference into this Security 
Instrument. Any reference in this Security Instrument to a statute or 
regulation shall be construed as referring to that statute or 
regulation as amended from time to time except as to certain HUD 
regulations and procedures in connection with the Contract of Insurance 
which initially establish the rights of the Lender and the Borrower. 
Use of the singular in this Agreement includes the plural and use of 
the plural includes the singular. As used in this Security Instrument, 
the term ``including'' means ``including, but not limited to.''
    41. Loan Servicing. All actions regarding the servicing of the 
Note, including the collection of payments, the giving and receipt of 
Notice, inspections of the Mortgaged Property, inspections of books and 
records, and the granting of consents and approvals, may be taken by 
the Loan Servicer unless Borrower receives Notice to the contrary. If 
Borrower receives conflicting Notice regarding the identity of the Loan 
Servicer or any other subject, any such Notice from Lender shall govern 
unless there is a Notice from HUD and, in all cases, any Notice from 
HUD governs notwithstanding any Notice from any other party.
    42. Disclosure of Information. To the extent permitted by law, 
Lender may furnish information regarding Borrower or the Mortgaged 
Property to third parties with an existing or prospective interest in 
the servicing, enforcement, evaluation, performance, purchase or 
securitization of the Indebtedness, including but not limited to 
trustees, master servicers, special servicers, rating agencies, and 
organizations maintaining databases on the underwriting and performance 
of multifamily mortgage loans. Borrower irrevocably waives any and all 
rights it may have under applicable law to prohibit such disclosure, 
including but not limited to any right of privacy.
    43. No Change In Facts or Circumstances. Borrower certifies that 
all information in the application for the loan submitted to Lender 
(the ``Loan Application'') and in all financial statements, rent rolls, 
reports, certificates and other documents submitted in connection with 
the Loan Application are complete and accurate in all material respects 
and that there has been no material adverse change in any fact or 
circumstance that would make any such information incomplete or 
inaccurate. The submission of false or incomplete information shall be 
a Class B Event of Default.
    44. Estoppel. The Lender is not the agent of HUD. Any action by the 
Lender in exercising any right or remedy under this Security Instrument 
shall not be a waiver or preclude the exercise by HUD of any right or 
remedy which HUD might have under the Regulatory Agreement or other HUD 
requirements.
    45. Acceleration; Remedies. At any time during the existence of a 
Class A Event of Default, Lender, at Lender's option, may declare the 
Indebtedness to be immediately due and payable without further demand, 
and may invoke the power of sale and any other remedies permitted by 
applicable law or provided in this Security Instrument or in the Note. 
At any time during the existence of a Class B Event of Default, Lender, 
at Lender's option, but only after receipt of the prior written 
approval of HUD, may declare the Indebtedness to be immediately due and 
payable without further demand, and may invoke the power of sale and 
any other remedies permitted by applicable law or provided in this 
Security Instrument or in the Note. Notwithstanding any language in 
Section 45 to the contrary, upon direction of HUD, following a 
declaration of default by HUD under the Regulatory Agreement, Lender 
shall declare the entire Indebtedness to be due and payable. Borrower 
acknowledges that the power of sale granted in this Security Instrument 
may be exercised by Lender without prior judicial hearing. Borrower has 
the right to bring an action to assert the non-existence of a Class A 
or Class B Event of Default or any other defense of Borrower to 
acceleration and sale; however, applicable Federal law may limit 
certain rights of the Borrower. Lender shall be entitled to collect all 
costs and expenses incurred in pursuing such remedies, including 
reasonable attorneys' fees (including but not limited to appellate 
litigation), costs of documentary evidence, abstracts and title 
reports.
[Insert Provisions Pertaining to Sale as Appropriate Under State Law]
    46. Federal Remedies. In addition to any rights and remedies set 
forth in the Regulatory Agreement, HUD has rights and remedies under 
federal law, including but not limited to the right to foreclose 
pursuant to the Multifamily Mortgage Foreclosure Act of 1981, 12 U.S.C. 
3701 et seq. when HUD is the holder of the Note.
    47. Remedies for Waste. In addition to any other rights and 
remedies set forth in the Note and this Security Instrument or those 
available under applicable law, including exemplary damages where 
permitted, the following remedies for Waste by Borrower are available 
to Lender as necessary to give complete redress:
    (a) the exercise of the remedies available to Lender during the 
existence of a Class B default, as set forth in Section 45 of this 
Security Instrument;
    (b) an injunction prohibiting future Waste or requiring correction 
of Waste already committed, but only to the extent that the Waste has 
impaired or threatens to impair Lender's security; and
    (c) recovery of damages, limited by the amount of the Waste, to the 
extent that the Waste has impaired Lender's security. Any recovery of 
damages by Lender or HUD for Waste shall be applied, at the sole 
discretion of HUD, (1) to remedy the Waste of the Mortgaged Property, 
(2) to the Indebtedness or (3) for any other purpose designated by HUD.
    If the mortgage or deed of trust relationship has ended at the time 
Lender claims Waste has been committed against the Mortgaged Property, 
an impairment of security exists if the value of the Mortgaged Property 
is less that the sum of the debt obligation under the Note and this 
Security Instrument, and the obligations secured by any liens senior to 
this Security Instrument. If the mortgage or deed of trust relationship 
continues to exist at the time Lender claims Waste has been committed 
against the Mortgaged Property, an impairment of security exists if the 
ratio of the mortgage or deed of trust obligation to the value of the 
Mortgaged Property is above its scheduled level.
    48. References. All references to rental housing income and rental 
payments

[[Page 46239]]

shall, in the case of Health Care Facilities be construed to mean all 
income from whatever source derived from the operation of the facility, 
so far as the context permits.
    49. Termination. At such time as HUD no longer insures this loan or 
holds this Security Instrument, (a) all rights and responsibilities of 
HUD shall conclude, all mortgage insurance and references to mortgage 
insurance premiums shall cease and all obligations of the Secretary and 
HUD shall terminate; (b) all obligations and responsibilities of 
Borrower to HUD shall likewise terminate provided Borrower is in 
compliance with the Regulatory Agreement and (c) all obligations and 
responsibilities of Lender to HUD shall likewise terminate provided 
Lender is in compliance with the Contract of Insurance.
    50. Construction Financing. The Indebtedness represents funds to be 
used in the construction of certain Improvements on the Land, in 
accordance with the Building Loan Agreement which is incorporated 
herein by reference to the same extent and effect as if fully set forth 
and made herein (provided, however, that if and to the extent that the 
Building Loan Agreement is inconsistent herewith, this Security 
Instrument shall govern). If the construction of the Improvements to be 
made pursuant to the Building Loan Agreement shall not be carried on 
with reasonable diligence, or shall be discontinued at any time for any 
reason other than strikes or lock-outs, the Lender, after due Notice to 
the Borrower, or any subsequent owner, is hereby vested with full and 
complete authority to enter upon the Land to employ watchmen to protect 
such Improvements from depredation or injury and to preserve and 
protect the Personalty therein, to continue any and all outstanding 
contracts for the erection and completion of said Improvements, to make 
and enter into any contracts and obligations wherever necessary, either 
in its own name or in the name of the Borrower, or other owner, and to 
pay and discharge all debts, obligations, and liabilities incurred 
thereby. All such sums so advanced by the Lender (exclusive of advances 
of the principal of the Indebtedness) shall be added to the principal 
of the Indebtedness secured hereby and all shall be secured by this 
Security Instrument and shall be due and payable on demand with 
interest at the rate provided in the Note, but no such advances shall 
be insured unless same are specifically approved by HUD prior to the 
making thereof. The Indebtedness shall, at the option of the Lender or 
holder of this Security Instrument and the Note become due and payable 
on the failure of the Borrower, or other owner, to keep and perform any 
of the covenants, conditions and agreements of the Building Loan 
Agreement. This covenant shall be terminated upon the completion of the 
Improvements to the satisfaction of the Lender and the making of the 
final advance as provided in the Building Loan Agreement.
    51. Environmental Hazards (a) Definitions:
    (1) ``Hazardous Materials'' means petroleum and petroleum products 
and compounds containing them, including gasoline, diesel fuel and oil; 
explosives; flammable materials; radioactive materials; polychlorinated 
biphenyls (``PCBs'') and compounds containing them; lead and lead-based 
paint; asbestos or asbestos-containing materials in any form that is or 
could become friable; underground or above-ground storage tanks, 
whether empty or containing any substance; any substance the presence 
of which on the Mortgaged Property is prohibited by any federal, state 
or local authority; any substance that requires special handling; and 
any other material or substance now or in the future defined as a 
``hazardous substance,'' ``hazardous material,'' ``hazardous waste,'' 
``toxic substance,'' ``toxic pollutant,'' ``contaminant,'' or 
``pollutant'' within the meaning of any Hazardous Materials Law.
    (2) ``Hazardous Materials Laws'' means all federal, state, and 
local laws, ordinances and regulations and standards, rules, policies 
and other governmental requirements, administrative rulings and court 
judgments and decrees in effect now or in the future and including all 
amendments, that relate to Hazardous Materials and apply to Borrower or 
to the Mortgaged Property. Hazardous Materials Laws include, but are 
not limited to, the Comprehensive Environmental Response, Compensation 
and Liability Act, 42 U.S.C. 9601, et seq., the Resource Conservation 
and Recovery Act, 42 U.S.C. 6901, et seq., the Toxic Substance Control 
Act, 15 U.S.C. 2601, et seq., the Clean Water Act, 33 U.S.C. 1251, et 
seq., and the Hazardous Materials Transportation Act, 49 U.S.C. 5101, 
et seq., and their state analogs.
    (3) ``Environmental Permit'' means any permit, license, or other 
authorization issued under any Hazardous Materials Law with respect to 
any activities or businesses conducted on or in relation to the 
Mortgaged Property.
    (b) Except for (1) matters covered by a written program of 
operations and maintenance approved in writing by Lender (an ``O&M 
Program''), (2) matters described in paragraph (c) of this Section 51; 
or (3) (for so long as the loan secured hereby is insured by HUD) 
matters covered by outstanding HUD requirements which may differ from 
this Section 51, with respect to lead based paint requirements, for 
example, Borrower shall not cause or permit any of the following:
    (i) The presence, use, generation, release, treatment, processing, 
storage (including storage in above ground and underground storage 
tanks), handling, or disposal of any Hazardous Materials on or under 
the Mortgaged Property or any other property of Borrower that is 
adjacent to the Mortgaged Property;
    (ii) The transportation of any Hazardous Materials to, from, or 
across the Mortgaged Property;
    (iii) Any occurrence or condition on the Mortgaged Property or any 
other property of Borrower that is adjacent to the Mortgaged Property, 
which occurrence or condition is or may be in violation of Hazardous 
Materials Laws; or
    (iv) Any violation of or noncompliance with the terms of any 
Environmental Permit with respect to the Mortgaged Property or any 
property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (i) through (iv) above are referred to 
collectively in this Section 51 as ``Prohibited Activities or 
Conditions''.
    (c) Prohibited Activities and Conditions shall not include the safe 
and lawful use and storage of quantities of (1) pre-packaged supplies, 
cleaning materials and petroleum products customarily used in the 
operation and maintenance of comparable multifamily properties, (2) 
cleaning materials, personal grooming items and other items sold in 
pre-packaged containers for consumer use and used by tenants and 
occupants of residential dwelling units in the Mortgaged Property; and 
(3) petroleum products used in the operation and maintenance of motor 
vehicles from time to time located on the Mortgaged Property's parking 
areas, so long as all of the foregoing are used, stored, handled, 
transported and disposed of in compliance with Hazardous Materials 
Laws.
    (d) Borrower shall take all commercially reasonable actions 
(including the inclusion of appropriate provisions in any Leases 
executed after the date of this Security Instrument) to prevent its 
employees, agents, and contractors, and all tenants and other occupants 
from causing or permitting

[[Page 46240]]

any Prohibited Activities or Conditions. Borrower shall not lease or 
allow the sublease or use of all or any portion of the Mortgaged 
Property to any tenant or subtenant for nonresidential use by any user 
that, in the ordinary course of its business, would cause or permit any 
Prohibited Activity or Condition.
    (e) If an O&M Program has been established with respect to 
Hazardous Materials, Borrower shall comply in a timely manner with, and 
cause all employees, agents, and contractors of Borrower and any other 
persons present on the Mortgaged Property to comply with the O&M 
Program. All costs of performance of Borrower's obligations under any 
O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs 
incurred in connection with the monitoring and review of the O&M 
Program and Borrower's performance shall be paid by Borrower upon 
demand by Lender. Any such out-of-pocket costs of Lender which Borrower 
fails to pay promptly shall become an additional part of the 
Indebtedness as provided in Section 14.
    (f) Borrower represents and warrants to Lender that, except as 
previously disclosed by Borrower to Lender in writing:
    (1) Borrower has not at any time engaged in, caused or permitted 
any Prohibited Activities or Conditions;
    (2) To the best of Borrower's knowledge after reasonable and 
diligent inquiry, no Prohibited Activities or Conditions exist or have 
existed;
    (3) Except to the extent previously disclosed by Borrower to Lender 
in writing, the Mortgaged Property does not now contain any underground 
storage tanks, and, to the best of Borrower's knowledge after 
reasonable and diligent inquiry, the Mortgaged Property has not 
contained any underground storage tanks in the past. If there is an 
underground storage tank located on the Property which has been 
previously disclosed by Borrower to Lender in writing, that tank 
complies with all requirements of Hazardous Materials Laws;
    (4) Borrower has complied with all Hazardous Materials Laws, 
including all requirements for notification regarding releases of 
Hazardous Materials. Without limiting the generality of the foregoing, 
Borrower has obtained all Environmental Permits required for the 
operation of the Mortgaged Property in accordance with Hazardous 
Materials Laws now in effect and all such Environmental Permits are in 
full force and effect;
    (5) No event has occurred with respect to the Mortgaged Property 
that constitutes, or with the passing of time or the giving of Notice 
would constitute, noncompliance with the terms of any Environmental 
Permit;
    (6) There are no actions, suits, claims or proceedings pending or, 
to the best of Borrower's knowledge after reasonable and diligent 
inquiry, threatened that involve the Mortgaged Property and allege, 
arise out of, or relate to any Prohibited Activity or Condition; and
    (7) Borrower has not received any complaint, order, Notice of 
violation or other communication from any Governmental Authority with 
regard to air emissions, water discharges, noise emissions or Hazardous 
Materials, or any other environmental, health or safety matters 
affecting the Mortgaged Property or any other property of Borrower that 
is adjacent to the Mortgaged Property.

The representations and warranties in this Section 51 shall be 
continuing representations and warranties that shall be deemed to be 
made by Borrower throughout the term of the loan evidenced by the Note, 
until the Indebtedness has been paid in full.
    (g) Borrower shall promptly notify Lender in writing upon the 
occurrence of any of the following events:
    (1) Borrower's discovery of any Prohibited Activity or Condition;
    (2) Borrower's receipt of or knowledge of any complaint, order, 
Notice of violation or other communication from any Governmental 
Authority or other person with regard to present or future alleged 
Prohibited Activities or Conditions or any other environmental, health 
or safety matters affecting the Mortgaged Property or any other 
property of Borrower that is adjacent to the Mortgaged Property; and
    (3) any representation or warranty in this Section 51 becomes 
untrue after the date of this Agreement.

Any such Notice given by Borrower shall not relieve Borrower of, or 
result in a waiver of, any obligation under this Security Instrument, 
the Note, or any other Loan Document.
    (h) Borrower shall pay promptly the costs of any environmental 
inspections, tests or audits (``Environmental Inspections'') required 
by Lender in connection with any foreclosure or deed in lieu of 
foreclosure, or as a condition of Lender's consent to any Transfer 
under Section 23, or required by Lender following a reasonable 
determination by Lender that Prohibited Activities or Conditions may 
exist. Any such costs incurred by Lender (including the fees and out-
of-pocket costs of attorneys and technical consultants whether incurred 
in connection with any judicial, appellate or otherwise, or 
administrative process or otherwise) which Borrower fails to pay 
promptly shall become an additional part of the Indebtedness as 
provided in Section 14. The results of all Environmental Inspections 
made by Lender shall at all times remain the property of Lender and 
Lender shall have no obligation to disclose or otherwise make available 
to any party other than Borrower and HUD such results or any other 
information obtained by Lender in connection with its Environmental 
Inspections. Lender hereby reserves the right, and Borrower hereby 
expressly authorizes Lender, to make available to any party, including 
any prospective bidder at a foreclosure sale of the Mortgaged Property, 
the results of any Environmental Inspections made by Lender with 
respect to the Mortgaged Property. Borrower consents to Lender 
notifying any party (either as part of a notice of sale or otherwise) 
of the results of any of Lender's Environmental Inspections. Borrower 
acknowledges that Lender cannot control or otherwise assure the 
truthfulness or accuracy of the results of any of its Environmental 
Inspections and that the release of such results to prospective bidders 
at a foreclosure sale of the Mortgaged Property may have a material and 
adverse effect upon the amount which a party may bid at such sale. 
Borrower agrees that Lender shall have no liability whatsoever as a 
result of delivering the results of any of its Environmental 
Inspections to any third party, and Borrower hereby releases and 
forever discharges Lender from any and all claims, damages, or causes 
of action, arising out of, connected with or incidental to the results 
of, the delivery of any of Lender's Environmental Inspections.
    (i) If any investigation, site monitoring, containment, clean-up, 
restoration or other remedial work (``Remedial Work'') is necessary to 
comply with any Hazardous Materials Law or order of any Governmental 
Authority that has or acquires jurisdiction over the Mortgaged Property 
or the use, operation or improvement of the Mortgaged Property under 
any Hazardous Materials Law, Borrower shall, by the earlier of (1) the 
applicable deadline required by Hazardous Materials Law or (2) 30 days 
after Notice from Lender demanding such action, begin performing the 
Remedial Work, and thereafter diligently prosecute it to completion, 
and shall in any event complete the work by the time required by 
applicable Hazardous Materials Law. If Borrower fails to begin on a 
timely basis or diligently prosecute any required Remedial Work, Lender 
may, at

[[Page 46241]]

its option, cause the Remedial Work to be completed, in which case 
Borrower shall reimburse Lender on demand for the cost of doing so. Any 
reimbursement due from Borrower to Lender shall become part of the 
Indebtedness as provided in Section 14.
    (j) Borrower shall cooperate with any inquiry by any Governmental 
Authority and shall comply with any governmental or judicial order 
which arises from any alleged Prohibited Activity or Condition.
    (k) Borrower shall indemnify, hold harmless and defend (1) Lender, 
(2) any prior owner or holder of the Note, (3) the Loan Servicer, (4) 
any prior Loan Servicer, (5) the officers, directors, shareholders, 
partners, employees and trustees of any of the foregoing, and (vi) the 
heirs, legal representatives, successors and assigns of each of the 
foregoing (collectively, the ``Indemnitees'') from and against all 
proceedings, claims, damages, penalties and costs (whether initiated or 
sought by Governmental Authorities or private parties), including fees 
and out of pocket expenses of attorneys and expert witnesses, 
investigatory fees, and remediation costs, whether incurred in 
connection with any judicial (including appellate) or administrative 
process or otherwise, arising directly or indirectly from any of the 
following:
    (i) Any breach of any representation or warranty of Borrower in 
this Section 51;
    (ii) Any failure by Borrower to perform any of its obligations 
under this Section 51;
    (iii) The existence or alleged existence of any Prohibited Activity 
or Condition;
    (iv) The presence or alleged presence of Hazardous Materials on or 
under the Mortgaged Property or any property of Borrower that is 
adjacent to the Mortgaged Property; and
    (v) The actual or alleged violation of any Hazardous Materials Law.
    (l) Counsel selected by Borrower to defend Indemnitees shall be 
subject to the approval of those Indemnitees. However, any Indemnitee 
may elect to defend any claim or legal or administrative proceeding at 
the Borrower's expense.
    (m) Borrower shall not, without the prior written consent of those 
Indemnitees who are named as parties to a claim or legal or 
administrative proceeding (a ``Claim''), settle or compromise the Claim 
if the settlement (1) results in the entry of any judgment that does 
not include as an unconditional term the delivery by the claimant or 
plaintiff to Lender of a written release of those Indemnitees, 
satisfactory in form and substance to Lender; or (2) may materially and 
adversely affect Lender, as determined by Lender in its discretion.
    (n) Borrower's obligation to indemnify the Indemnitees shall not be 
limited or impaired by any of the following, or by any failure of 
Borrower or any guarantor to receive Notice of or consideration for any 
of the following:
    (1) Any amendment or modification of any Loan Document;
    (2) Any extensions of time for performance required by any Loan 
Document;
    (3) Any provision in any of the Loan Documents limiting Lender's 
recourse to property securing the Indebtedness, or limiting the 
personal liability of Borrower or any other party for payment of all or 
any part of the Indebtedness;
    (4) The accuracy or inaccuracy of any representations and 
warranties made by Borrower under this Security Instrument or any other 
Loan Document;
    (5) The release of Borrower or any other person, by Lender or by 
operation of law, from performance of any obligation under any Loan 
Document;
    (6) The release or substitution in whole or in part of any security 
for the Indebtedness; and
    (7) Lender's failure to properly perfect any lien or security 
interest given as security for the Indebtedness.
    (o) Borrower shall, at its own cost and expense, do all of the 
following:
    (1) Pay or satisfy any judgment or decree that may be entered 
against any Indemnitee or Indemnitees in any legal or administrative 
proceeding incident to any matters against which Indemnitees are 
entitled to be indemnified under this Section 51;
    (2) Reimburse Indemnitees for any expenses paid or incurred in 
connection with any matters against which Indemnitees are entitled to 
be indemnified under this Section 51; and
    (3) Reimburse Indemnitees for any and all expenses, including fees 
and out-of-pocket expenses of attorneys and expert witnesses, paid or 
incurred in connection with the enforcement by Indemnitees of their 
rights under this Section 51, or in monitoring and participating in any 
legal (including appellate) or administrative proceeding.
    (p) In any circumstances in which the indemnity under this Section 
51 applies, Lender may employ its own legal counsel and consultants to 
prosecute, defend or negotiate any claim or legal or administrative 
proceeding and Lender, with the prior written consent of Borrower 
(which shall not be unreasonably withheld, delayed or conditioned) may 
settle or compromise any action or legal or administrative proceeding. 
Borrower shall reimburse Lender upon demand for all costs and expenses 
incurred by Lender, including all costs of settlements entered into in 
good faith, and the fees and out of pocket expenses of such attorneys 
(including but not limited to appellate litigation) and consultants.
    (q) The provisions of this Section 51 shall be in addition to any 
and all other obligations and liabilities that Borrower may have under 
applicable law or under other Loan Documents, and each Indemnitee shall 
be entitled to indemnification under this Section 51 without regard to 
whether Lender or that Indemnitee has exercised any rights against the 
Mortgaged Property or any other security, pursued any rights against 
any guarantor, or pursued any other rights available under the Loan 
Documents or applicable law. If Borrower consists of more than one 
person or entity, the obligation of those persons or entities to 
indemnify the Indemnitees under this Section 51 shall be joint and 
several. The obligation of Borrower to indemnify the Indemnitees under 
this Section 51 shall survive any repayment or discharge of the 
Indebtedness, any foreclosure proceeding, any foreclosure sale, any 
delivery of any deed in lieu of foreclosure, and any release of record 
of the lien of this Security Instrument.
    (r) All references to Lender in this Section 51 shall also be 
construed to refer to HUD as its interests appear (solely as determined 
by HUD) and all notifications to Lender must also be made to HUD and 
all Lender approvals and exercises of discretion by Lender under this 
Section 51 must first have the prior written approval of HUD all so 
long as the loan secured by this Security Instrument is insured by HUD, 
provided, that the reference to Lender as an Indemnitee shall be 
construed to refer to HUD, and Borrower's obligations to indemnify HUD 
as an Indemnitee shall remain in effect in accordance with this Section 
51, notwithstanding the termination or expiration of insurance of the 
secured loan by HUD.
    (s) To the extent any HUD environmental requirements or standards 
are inconsistent or conflict with the provisions of this Section 51, 
the HUD requirements or standards shall control so long as the loan 
secured by this Security Instrument is insured or held by HUD.
    52. [Add state requirements for future advances, credit line or 
open end mortgages]
    ATTACHED EXHIBITS. The following Exhibits are attached to this 
Security Instrument:

[[Page 46242]]

    X Exhibit A Description of the Land (required).
    Exhibit B Modifications to Security Instrument

IN WITNESS WHEREOF, Borrower has signed and delivered this Security 
Instrument or has caused this Security Instrument to be signed and 
delivered by its duly authorized representative, as a sealed 
instrument.
[Signatures and Acknowledgments]

Exhibit A--[Description of the Land]

A-1

Exhibit B--Modifications to Security Instrument

    The following modifications are made to the text of the Security 
Instrument that precedes this Exhibit:

B-1

OMB No. (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 1 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Multifamily/Health Care Facility Note--(Multistate)

Project 

Project Name:

US $ ---------- --------, ----

    FOR VALUE RECEIVED, the undersigned (``Borrower'') jointly and 
severally (if more than one) promises to pay to the order of ----------
, a ----------, the principal sum of ---------- Dollars (US $--------), 
with interest on the unpaid principal balance at the annual rate of --
------ percent (----%).
    1. Defined Terms. As used in this Note, (a) the term ``Lender'' 
means the holder of this Note, and (b) the term ``Indebtedness'' means 
the principal of, interest on, or any other amounts due at any time 
under, this Note, the Security Instrument or any other Loan Document, 
including prepayment premiums, late charges, default interest, and 
advances to protect the security of the Security Instrument under 
Section 14 of the Security Instrument. ``Event of Default'' and other 
capitalized terms used but not defined in this Note shall have the 
meanings given to such terms in the Security Instrument. Key Principal 
shall have the meaning set forth in the attached Acknowledgment and 
Agreement of Key Principal to Personal Liability for Exceptions to Non-
Recourse Liability.
    2. Address for Payment. All payments due under this Note shall be 
payable at ----------, or such other place as may be designated by 
written notice to Borrower from or on behalf of Lender.
    3. Payment of Principal and Interest. Principal and interest shall 
be paid as follows:
    (a) Unless disbursement of principal is made by Lender to Borrower 
on the first day of the month, interest for the period beginning on the 
date of disbursement and ending on and including the last day of the 
month in which such disbursement is made shall be payable 
simultaneously with the execution of this Note.
    (b) Interest only at --% per annum on such amount of principal as 
may be advanced from time to time, computed from the date of such 
advance, shall be payable monthly commencing on the first day of ------
---- [month following closing] and on the first day of each month 
thereafter up to and including the first day of ---------- [month 
before first amortized payment]. Consecutive monthly installments of 
principal and interest, each in the amount of ---------- Dollars (US 
$--------), shall be payable on the first day of each month beginning 
on ------, ---- until the entire unpaid principal balance evidenced by 
this Note is fully paid. Any remaining principal and interest shall be 
due and payable on ---------- or on any earlier date on which the 
unpaid principal balance of this Note becomes due and payable, by 
acceleration or otherwise (the ``Maturity Date'').
    (c) Any regularly scheduled monthly installment of principal and 
interest that is received by Lender before the date it is due shall be 
deemed to have been received on the due date solely for the purpose of 
calculating interest due.
    4. Security. The Indebtedness is secured, among other things, by a 
multifamily or health care facility mortgage, deed to secure debt or 
deed of trust dated as of the date of this Note (the ``Security 
Instrument''), and reference is made to the Security Instrument for 
other rights of Lender as to collateral for the Indebtedness.
    5. Application of Payments. If at any time Lender receives, from 
Borrower or otherwise, any amount applicable to the Indebtedness which 
is less than all amounts due and payable at such time, Lender shall 
apply that payment to amounts then due and payable in the manner and in 
the order set forth in Section 11 of the Security Instrument. Borrower 
agrees that neither Lender's acceptance of a payment from Borrower in 
an amount that is less than all amounts then due and payable nor 
Lender's application of such payment shall constitute or be deemed to 
constitute either a waiver of the unpaid amounts or an accord and 
satisfaction.
    6. Acceleration. If a Class A Event of Default (as defined in the 
Security Instrument) has occurred and is continuing, the entire unpaid 
principal balance, any accrued interest, the prepayment premium payable 
under Section 9, if any, and all other amounts payable to Lender under 
this Note and any other Loan Document shall at once become due and 
payable, at the option of Lender, without any prior notice to Borrower. 
If a Class B Event of Default (as defined in the Security Instrument) 
occurs and the Indebtedness is accelerated as set forth in the Security 
Instrument, the entire unpaid principal balance, any accrued interest, 
the prepayment premium payable under Section 9, if any, and all other 
amounts payable to Lender under this Note and any other Loan Document 
shall at once become due and payable. Lender may exercise this option 
to accelerate regardless of any prior forbearance.
    7. Late Charge. If any monthly amount payable under this Note or 
under the Security Instrument or any other Loan Document is not 
received by Lender within ---- days after the amount is due, Borrower 
shall pay to Lender, immediately and without demand by Lender, a late 
charge equal to -- percent of such amount. Borrower acknowledges that 
its failure to make timely payments will cause Lender to incur 
additional expenses in servicing and processing the loan evidenced by 
this Note (the ``Loan''), and that it is extremely difficult and 
impractical to determine those additional expenses. Borrower agrees 
that the late charge payable pursuant to this Section represents a fair 
and reasonable estimate, taking into account all circumstances existing 
on the date of this Note, of the additional expenses Lender will incur 
by reason of such late payment.
    8. Limits on Personal Liability. (a) Except as otherwise provided 
in this Section 8, Section 6 of the Security Instrument, Section 19 of 
the Building Loan Agreement and in Section 46 of the Regulatory 
Agreement respectively between Borrower and HUD, Borrower and 
Principals shall have no personal

[[Page 46243]]

liability under this Note, the Security Instrument or any other Loan 
Document for the repayment of the Indebtedness or for the performance 
of any other obligations of Borrower under the Loan Documents, and 
Lender's only recourse for the satisfaction of the Indebtedness and the 
performance of such obligations shall be Lender's exercise of its 
rights and remedies with respect to the Mortgaged Property and any 
other collateral held by Lender as security for the Indebtedness.
    (b) Borrower and Principals shall be personally liable to Lender 
for the repayment of a portion of the Indebtedness equal to any loss or 
damage suffered by Lender as a result of (1) failure of Borrower to pay 
to Lender upon demand after an Event of Default all Rents to which 
Lender is entitled under Section 3(a) of the Security Instrument and 
the amount of all security deposits collected from tenants then in 
residence; (2) failure of Borrower to apply all insurance proceeds and 
condemnation proceeds as required by the Security Instrument; or (3) 
failure of Borrower to comply with Section 16 of the Security 
Instrument relating to the delivery of books and records, statements, 
schedules and reports.
    (c) Borrower and Principals shall be personally liable to Lender 
for the repayment of all of the Indebtedness upon the occurrence of any 
of the following Events of Default: (1) Borrower's acquisition of any 
property or operation of any business not permitted by Section 35 of 
the Security Instrument; (2) a transfer or the granting of a lien or 
encumbrance that is an Event of Default under Sections 18 and 23 of the 
Security Instrument, other than a transfer consisting solely of the 
involuntary removal or involuntary withdrawal of a general partner in a 
limited partnership or a manager in a limited liability company; or (3) 
fraud or written material misrepresentation by Borrower or any officer, 
director, partner, member or employee of Borrower in connection with 
the application for or creation of the Indebtedness or any request for 
any action or consent by Lender.
    9. Voluntary and Involuntary Prepayments. (a) A prepayment premium 
shall be payable in connection with any prepayment made under this Note 
as provided below:
    (1) Privilege is reserved to pay the debt in whole or part in an 
amount equal to one or more monthly payments on principal due, on the 
first [or last] day of any month prior to maturity upon at least thirty 
(30) days prior written notice to the holder. If this debt is paid in 
full while insured under the provisions of the National Housing Act, as 
amended, all parties liable for payment thereof agree to be jointly and 
severally bound to pay to the holder hereof such adjusted mortgage 
insurance premium as may be required by the applicable Regulations. 
Notwithstanding any provision herein for prepayment charge, such charge 
shall be applicable only to the amount of prepayment in any one 
calendar year, which is in excess of fifteen per centum (15%) of the 
original principal sum of this Note. No default shall exist by reason 
of nonpayment of any required installment of principal so long as the 
amount of optional additional prepayments of principal already made 
pursuant to the privilege of prepayment set forth in this Note equals 
or exceeds the amount of such required installment of principal.
    (2) Upon Lender's exercise of any right of acceleration under this 
Note, Borrower shall pay to Lender, in addition to the entire unpaid 
principal balance of this Note outstanding at the time of the 
acceleration, (i) all accrued interest and all other sums due Lender, 
and (ii) the prepayment premium calculated pursuant to (1) above.
    (3) Any application by Lender of any collateral or other security 
to the repayment of any portion of the unpaid principal balance of this 
Note prior to the Maturity Date and in the absence of acceleration 
shall be deemed to be a partial prepayment by Borrower, requiring the 
payment to Lender by Borrower of a prepayment premium. The amount of 
any such partial prepayment shall be computed so as to provide to 
Lender a prepayment premium computed pursuant to Schedule A without 
Borrower having to pay out-of-pocket any additional amounts.
    (b) Notwithstanding the provisions of subsection (a) above, no 
prepayment premium shall be payable with respect to (1) any prepayment 
made no more than -- days before the Maturity Date, or (2) any 
prepayment occurring as a result of the application of any insurance 
proceeds or condemnation award under the Security Instrument.
    (c) Any permitted or required prepayment of less than the unpaid 
principal balance of this Note shall not extend or postpone the due 
date of any subsequent monthly installments or change the amount of 
such installments, unless Lender agrees otherwise in writing.
    (d) Borrower further acknowledges that the prepayment premium 
provisions of this Note are a material part of the consideration for 
the Loan, and acknowledges that the terms of this Note are in other 
respects more favorable to Borrower as a result of the Borrower's 
voluntary agreement to the prepayment premium provisions.
    10. Costs and Expenses. Borrower shall pay all expenses and costs, 
including fees and out-of-pocket expenses of attorneys and expert 
witnesses and costs of investigation and litigation (including 
appellate), incurred by Lender as a result of any default under this 
Note or in connection with efforts to collect any amount due under this 
Note, or to enforce the provisions of any of the other Loan Documents, 
including those incurred in post-judgment collection efforts and in any 
bankruptcy proceeding (including any action for relief from the 
automatic stay of any bankruptcy proceeding) or judicial or non-
judicial foreclosure proceeding.
    11. Forbearance. Any forbearance by Lender in exercising any right 
or remedy under this Note, the Security Instrument, or any other Loan 
Document or otherwise afforded by applicable law, shall not be a waiver 
of or preclude the exercise of that or any other right or remedy. The 
acceptance by Lender of any payment after the due date of such payment, 
or in an amount which is less than the required payment, shall not be a 
waiver of Lender's right to require prompt payment when due of all 
other payments or to exercise any right or remedy with respect to any 
failure to make prompt payment. Enforcement by Lender of any security 
for Borrower's obligations under this Note shall not constitute an 
election by Lender of remedies so as to preclude the exercise of any 
other right or remedy available to Lender.
    12. Waivers. Presentment, demand, notice of dishonor, protest, 
notice of acceleration, notice of intent to demand or accelerate 
payment or maturity, presentment for payment, notice of nonpayment, 
grace, and diligence in collecting the Indebtedness are waived by 
Borrower.
    13. Loan Charges. If any applicable law limiting the amount of 
interest or other charges permitted to be collected from Borrower in 
connection with the Loan is interpreted so that any interest or other 
charge provided for in any Loan Document, whether considered separately 
or together with other charges provided for in any other Loan Document, 
violates that law, and Borrower is entitled to the benefit of that law, 
that interest or charge is hereby reduced to the extent necessary to 
eliminate that violation. The amounts, if any, previously paid to

[[Page 46244]]

Lender in excess of the permitted amounts shall be applied by Lender to 
reduce the unpaid principal balance of this Note. For the purpose of 
determining whether any applicable law limiting the amount of interest 
or other charges permitted to be collected from Borrower has been 
violated, all Indebtedness that constitutes interest, as well as all 
other charges made in connection with the Indebtedness that constitute 
interest, shall be deemed to be allocated and spread ratably over the 
stated term of the Note. Unless otherwise required by applicable law, 
such allocation and spreading shall be effected in such a manner that 
the rate of interest so computed is uniform throughout the stated term 
of this Note.
    14. Commercial Purpose. Borrower represents that the Indebtedness 
is being incurred by Borrower solely for the purpose of carrying on a 
business or commercial enterprise, and not for personal, family or 
household purposes.
    15. Counting of Days. Except where otherwise specifically provided, 
any reference in this Note to a period of ``days'' means calendar days, 
not Business Days.
    16. Governing Law. This Note shall be governed by the law of the 
Property Jurisdiction, except as such local law may be preempted by 
federal law.
    17. Captions. The captions of the Sections of this Note are for 
convenience only and shall be disregarded in construing this Note.
    18. Notices. All notices, demands and other communications required 
or permitted to be given by Lender to Borrower pursuant to this Note 
shall be given in accordance with Section 33 of the Security 
Instrument.
    19. Consent to Jurisdiction and Venue. Borrower agrees that any 
controversy arising under or in relation to this Note shall be 
litigated exclusively in the Property Jurisdiction. The state and 
federal courts and authorities with jurisdiction in the Property 
Jurisdiction shall have exclusive jurisdiction over all controversies, 
which shall arise under or in relation to this Note. Borrower 
irrevocably consents to service, jurisdiction, and venue of such courts 
for any such litigation and waives any other venue to which it might be 
entitled by virtue of domicile, habitual residence or otherwise. In 
addition to any rights and remedies set forth in the Regulatory 
Agreement, HUD has rights and remedies under federal law, including but 
not limited to the right to foreclose pursuant to the Multifamily 
Mortgage Foreclosure Act of 1981, as amended, 12 U.S.C. Sec.  3701 et 
seq. when HUD is the holder of the Note.

[INSERT THE FOLLOWING IF APPROPRIATE AND ANY OTHER APPROPRIATE 
PROVISIONS FOR THE JURISDICTION]
    20. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (a) AGREES 
NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF 
THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND 
BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (b) WAIVES ANY RIGHT TO 
TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH 
RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY 
JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH 
THE BENEFIT OF COMPETENT LEGAL COUNSEL.

[IN THE EVENT THERE ARE MODIFICATIONS TO THE NOTE, INDICATE HERE THAT 
THERE IS AN ATTACHED RIDER CONTAINING SUCH MODIFICATIONS]

    IN WITNESS WHEREOF, Borrower has signed and delivered this Note or 
has caused this Note to be signed and delivered by its duly authorized 
representative.

[SIGNATURES]
[Borrower name]
 By:-------------------------------------------------------------------
[Name & capacity of signatory]

-----------------------------------------------------------------------
Borrower's Social Security/Employer ID Number.

State [Commonwealth] of --------
Deed of Trust [Mortgage] Note
 To:-------------------------------------------------------------------
     [Borrower]
-----------------------------------------------------------------------
     [Lender]
Project No.:-----------------
    Insured under Sec.  ------ of the National Housing Act as amended 
and Regulations published thereunder in effect on ------, 20----. To 
the extent of advances approved by the Secretary of Housing and Urban 
Development acting by and through the Assistant Secretary for Housing-
Federal Housing Commissioner.

 By:-------------------------------------------------------------------
 [Title]
 Date: ----------, 20--------------------------------------------------

    A total sum of $----.---- has been approved for insurance hereunder 
by the Secretary of Housing and Urban Development acting by and through 
the Assistant Secretary for Housing-Federal Housing Commissioner.

 By:-------------------------------------------------------------------
 [Title]
 Date: ----------, 20--------------------------------------------------

Acknowledgment and Agreement of Key Principal to Personal Liability for 
Exceptions to Non-Recourse Liability

    Key Principal, who has an economic interest in Borrower or who will 
otherwise obtain a material financial benefit from the Loan, hereby 
absolutely, unconditionally and irrevocably agrees to pay to Lender, or 
its assigns, on demand, all amounts for which Borrower is personally 
liable under Section 8 of the Multifamily Note to which this 
Acknowledgment is attached (the ``Note''). The obligations of Key 
Principal shall survive any foreclosure proceeding, any foreclosure 
sale, any delivery of any deed in lieu of foreclosure, and any release 
of record of the Security Instrument. Lender may pursue its remedies 
against Key Principal without first exhausting its remedies against the 
Borrower or the Mortgaged Property. All capitalized terms used but not 
defined in this Acknowledgment shall have the meanings given to such 
terms in the Security Instrument. As used in this Acknowledgment, the 
term ``Key Principal'' (each if more than one) shall mean only those 
individuals or entities that execute this Acknowledgment.
    The obligations of Key Principal shall be performed without demand 
by Lender and shall be unconditional irrespective of the genuineness, 
validity, or enforceability of the Note, or any other Loan Document, 
and without regard to any other circumstance, which might otherwise 
constitute a legal or equitable discharge of a surety or a guarantor. 
Key Principal hereby waives the benefit of all principles or provisions 
of law, which are or might be in conflict with the terms of this 
Acknowledgment, and agrees that Key Principal's obligations shall not 
be affected by any circumstances, which might otherwise constitute a 
legal or equitable discharge of a surety or a guarantor. Key Principal 
hereby waives the benefits of any right of discharge and all other 
rights under any and all statutes or other laws relating to guarantors 
or sureties, to the fullest extent permitted by law, diligence in 
collecting the Indebtedness, presentment, demand for payment, protest, 
all notices with respect to the Note including this Acknowledgment, 
which may be required by statute, rule of law or otherwise to preserve 
Lender's rights against Key Principal under this Acknowledgment, 
including notice of acceptance, notice of any amendment of the Loan 
Documents, notice of the

[[Page 46245]]

occurrence of any default or Event of Default, notice of intent to 
accelerate, notice of acceleration, notice of dishonor, notice of 
foreclosure, notice of protest, notice of the incurring by Borrower of 
any obligation or indebtedness and all rights to require Lender to (a) 
proceed against Borrower, (b) proceed against any general partner or 
manager of Borrower, (c) proceed against or exhaust any collateral held 
by Lender to secure the repayment of the Indebtedness, or (d) if 
Borrower is a partnership or limited liability company, pursue any 
other remedy it may have against Borrower, or any general partner or 
any member-manager or manager of Borrower.
    At any time without notice to Key Principal, and without affecting 
the liability of Key Principal hereunder, (a) the time for payment of 
the principal of or interest on the Indebtedness may be extended or the 
Indebtedness may be renewed in whole or in part; (b) the time for 
Borrower's performance of or compliance with any covenant or agreement 
contained in the Note, or any other Loan Document, whether presently 
existing or hereinafter entered into, may be extended or such 
performance or compliance may be waived; (c) the maturity of the 
Indebtedness may be accelerated as provided in the Note or any other 
Loan Document; (d) the Note or any other Loan Document may be modified 
or amended by Lender and Borrower in any respect, including an increase 
in the principal amount; and (e) any security for the Indebtedness may 
be modified, exchanged, surrendered or otherwise dealt with or 
additional security may be pledged or mortgaged for the Indebtedness.
    Key Principal acknowledges that Key Principal has received a copy 
of the Note and all other Loan Documents. Neither this Acknowledgment 
nor any of its provisions may be waived, modified, amended, discharged, 
or terminated except by an agreement in writing signed by the party 
against which the enforcement of the waiver, modification, amendment, 
discharge, or termination is sought, and then only to the extent set 
forth in that agreement. Key Principal agrees to notify Lender (in the 
manner for giving notices provided in Section 33 of the Security 
Instrument) of any change of Key Principal's address within 10 Business 
Days after such change of address occurs. Any notices to Key Principal 
shall be given in the manner provided in Section 33 of the Security 
Instrument. Key Principal agrees to be bound by Sections 19 and 20 of 
the Note.
    IN WITNESS WHEREOF, Key Principal has signed and delivered this 
Acknowledgment under seal or has caused this Guaranty to be signed and 
delivered under seal by its duly authorized representative. Key 
Principal intends that this Acknowledgment shall be deemed to be signed 
and delivered as a sealed instrument.
KEY PRINCIPAL(S)
 Name:-----------------------------------------------------------------
 Address:--------------------------------------------------------------
 Social Security/Employer ID No.:--------------------------------------

 Name:-----------------------------------------------------------------
 Address:--------------------------------------------------------------
 Social Security/Employer ID No.:--------------------------------------

 Name:-----------------------------------------------------------------
 Address:--------------------------------------------------------------
 Social Security/Employer ID No.:--------------------------------------

 Name:-----------------------------------------------------------------
 Address:--------------------------------------------------------------
 Social Security/Employer ID No.:--------------------------------------

 Name:-----------------------------------------------------------------
 Address:--------------------------------------------------------------
 Social Security/Employer ID No.:--------------------------------------


OMB Approval No. 0000-0000

(Exp. 00/00/00)
    Public Reporting Burden for this collection of information is 
estimated to average .75 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Recording Requested by:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

After Recording return to:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

U.S. Department of Housing and Urban Development Regulatory Agreement 
for Multifamily Projects Under Sections 207, 220, 221(d)(3), 221(d)(4), 
223(a)(7), 223(f) and 231 of the National Housing Act, as Amended

Replaces Form HUD-92465, 92466, FHA-1730, and 1733

HUD Project No.:----
Elderly----Non-Elderly ----

Lender----:
Processed under:---- [ ]MAP [ ]TAP

Original Principal Amount of Multifamily Note:
Date of Note:
Originally endorsed for insurance under Section .

Security Instrument Recorded:
State
County
Date

Book/Volume
Page
Instrument/Document Number

Borrower:
Profit-Motivated------
Limited Dividend------
Public Body------
Non-Profit------

(Failure to check the appropriate space shall not affect the 
enforceability or application of this Agreement.)
    This Agreement is entered into this---- day of --------, 20----, 
between----------, a---------- organized and existing under the laws 
of----------, whose address is----------, its successors, heirs, and 
assigns (jointly and severally) (Borrower) and the Secretary of Housing 
and Urban Development, his or her successors, assigns or designates 
(HUD).
    In consideration of, and in exchange for an action by HUD, HUD and 
the Borrower agree to the terms of this Agreement. The HUD action may 
be one of the following: the endorsement for insurance by HUD of the 
Note, the consent of HUD to the transfer of the Mortgaged Property, the 
sale and conveyance of the Mortgaged Property by HUD, or the consent of 
HUD for other actions related to the Borrower or to the Mortgaged 
Property.
    Further, the Borrower and HUD execute this Agreement in order to 
comply with the requirements of the National Housing Act, any related 
legislation, regulations, and administrative requirements adopted by 
HUD. This Agreement shall continue during such period of time as HUD 
shall be the owner, holder, or insurer of the Note, or is obligated to 
protect rights of tenants of the Mortgaged Property.
    Violation of this Agreement or of the regulations and Directives of 
HUD may subject the Borrower and related parties to adverse actions. 
Refer to Article VII below.
    Agreements: The Borrower and HUD covenant and agree as follows:

I. Definitions

    1. Definitions. The following terms, when used in this Agreement 
(including

[[Page 46246]]

when used in the above recitals), shall have the following meanings, 
whether capitalized or not and whether singular or plural, unless, in 
the context, an incongruity results:
    a. ``Affiliate'' Persons and entities are affiliates of each other 
if, directly or indirectly, either one controls or has the power to 
control the other, or, a third person controls or has the power to 
control both. Indicia of control include, but are not limited to: 
interlocking management or ownership, identity of interests among 
family members, shared facilities and equipment, common use of 
employees, or a business entity organized following the suspension or 
debarment of a person or entity which has the same or similar 
management, ownership, or principal employees as the suspended, 
debarred, ineligible, or voluntarily excluded person or entity.
    b. ``Borrower'' means all persons or entities identified as 
``Borrower'' in the first paragraph of the Security Instrument, 
together with any successors and assignees. Borrower shall include any 
person or entity taking title to the Mortgaged Property whether or not 
such person or entity assumes the Note. Whenever the term ``Borrower'' 
is used herein, the same shall be deemed to include the Obligor of the 
debt secured by the Security Instrument and shall also be deemed to be 
the Mortgagor as defined by the National Housing Act, as amended, 
implementing regulations and Directives.
    c. ``Displaced Persons or Families'' means a family or families, or 
a person, displaced from an urban renewal area, or as a result of 
government action, or as a result of a major disaster determined by the 
President pursuant to the Disaster Relief and Emergency Assistance Act.
    d. ``Directives (of HUD)'' includes written guidance issued by HUD, 
at the time of origination and subsequently, relating to HUD's 
multifamily insurance programs under the National Housing Act, as 
amended, and any successive legislation. Directives include handbooks, 
guidebooks, Notices, Mortgagee Letters and other written directives 
issued by HUD whether or not published in the Federal Register.
    e. ``Distribution'' means any disbursal, conveyance or transfer of 
cash, any asset of the Borrower, or any portion of the Mortgaged 
Property, including the segregation of cash or assets for subsequent 
withdrawal as Surplus Cash, other than in payment of expenses that are 
determined by HUD to be reasonable and necessary.
    f. ``Elderly project or Elderly portion of project'' means a 
Project or portion of a Project which is designed for occupancy by 
persons, married or single, who are 62 years of age or older.
    g. ``Fixtures'' means all property which is so attached to the Land 
or the Improvements as to constitute a fixture under applicable law, 
whether acquired now or in the future, including: machinery, equipment, 
engines, boilers, incinerators, installed building materials; systems 
and equipment for the purpose of supplying or distributing heating, 
cooling, electricity, gas, water, air, or light; antennas, cable, 
wiring and conduits used in connection with radio, television, 
computers, security, fire prevention, or fire detection or otherwise 
used to carry electronic signals; telephone systems and equipment; 
elevators and related machinery and equipment; fire detection, 
prevention and extinguishing systems and apparatus; security and access 
control systems and apparatus; plumbing systems; water heaters, ranges, 
stoves, microwave ovens, refrigerators, dishwashers, garbage disposals, 
washers, dryers and other appliances; light fixtures, awnings, storm 
windows and storm doors; pictures, screens, blinds, shades, curtains 
and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall 
coverings; fences, trees and plants; swimming pools; playground and 
exercise equipment and classroom furnishings and equipment.
    h. ``HUD'' means the United States Department of Housing and Urban 
Development acting by and through the Secretary in the capacity as 
insurer or holder of the loan secured by the Security Instrument under 
the authority of the National Housing Act, as amended, the Department 
of Housing and Urban Development Act, as amended, or any other federal 
law or regulation pertaining to the loan (as evidenced by the Note) or 
the Mortgaged Property.
    i. ``Impositions'' and ``Imposition Deposits'' are defined in the 
Security Instrument.
    j. ``Improvements'' means the buildings, structures, and 
alterations now constructed or at any time in the future constructed or 
placed upon the Land, including any future replacements and additions.
    k. ``Indebtedness'' means the principal of, interest on, and all 
other amounts due at any time under the Note or the Security 
Instrument, including prepayment premiums, late charges, default 
interest, and advances to protect the security as provided in the 
Security Instrument.
    l. ``Land'' means the estate in realty described in Exhibit A.
    m. ``Leases'' means all present and future leases, subleases, 
licenses, concessions or grants or other possessory interests now or 
hereafter in force, whether oral or written, covering or affecting the 
Mortgaged Property, or any portion of the Mortgaged Property (including 
proprietary leases, non-residential leases or occupancy agreements if 
Borrower is a cooperative housing corporation), and all modifications, 
extensions or renewals.
    n. ``Lender'' means the entity identified as ``Lender'' in the 
first paragraph of the Security Instrument, or any subsequent holder of 
the Note, and whenever the term ``Lender'' is used herein, the same 
shall be deemed to include the Obligee, or the Trustee(s) and the 
Beneficiary of the Security Instrument and shall also be deemed to be 
the Mortgagee as defined by the National Housing Act, as amended, 
implementing regulations and Directives.
    o. ``Limited Dividend Borrower'' means a limited dividend 
corporation or other limited dividend entity which is restricted by 
Federal or State law or by HUD as to rate of return and other aspects 
of its operation.
    p. ``Mortgaged Property'' means all of the Borrower's present and 
future right, title and interest in and to all of the following:
    (1) The Land;
    (2) The Improvements;
    (3) The Fixtures;
    (4) The Personalty;
    (5) All current and future rights, including air rights, 
development rights, zoning rights and other similar rights or 
interests, easements, tenements, rights-of-way, strips and gores of 
land, streets, alleys, roads, sewer rights, waters, watercourses, and 
appurtenances related to or benefiting the Land or the Improvements, or 
both, and all rights-of-way, streets, alleys and roads which may have 
been or may in the future be vacated;
    (6) All proceeds paid or to be paid by any insurer of the Land, the 
Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, whether or not Borrower obtained the insurance 
pursuant to Lender's requirement;
    (7) All awards, payments and other compensation made or to be made 
by any municipal, State or Federal authority with respect to the Land, 
the Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, including any awards or settlements resulting from 
condemnation proceedings or the total or partial taking of the Land, 
the Improvements, the Fixtures, the

[[Page 46247]]

Personalty or any other part of the Mortgaged Property under the power 
of eminent domain or otherwise and including any conveyance in lieu 
thereof;
    (8) All contracts, options and other agreements for the sale of the 
Land, the Improvements, the Fixtures, the Personalty or any other part 
of the Mortgaged Property entered into by Borrower now or in the 
future, including cash or securities deposited to secure performance by 
parties of their obligations;
    (9) All proceeds from the conversion, voluntary or involuntary, of 
any of the above into cash or liquidated claims, and the right to 
collect such proceeds;
    (10) All Rents and Leases;
    (11) All earnings, royalties, instruments, accounts, accounts 
receivable, supporting obligations, issues and profits from the Land, 
the Improvements or any other part of the Mortgaged Property, and all 
undisbursed proceeds of the loan secured by the Security Instrument 
and, if Borrower is a cooperative housing corporation, maintenance 
charges or assessments payable by shareholders or residents;
    (12) All Imposition Deposits;
    (13) All refunds or rebates of Impositions by any municipal, State 
or Federal authority or insurance company (other than refunds 
applicable to periods before the real property tax year in which the 
Security Instrument is dated);
    (14) All tenant security deposits which have not been forfeited by 
any tenant under any Lease; and
    (15) all names under or by which any of the above Mortgaged 
Property may be operated or known, and all trademarks, trade names, and 
goodwill relating to any of the Mortgaged Property.
    q. ``Non-Profit Borrower'' means a Borrower which is a corporation 
or association organized for purposes other than profit or gain for 
itself or persons identified therewith and which HUD finds is in no way 
controlled by or under the direction of persons or firms seeking to 
derive profit or gain therefrom. Minimally, the entity may not make 
Distributions to any individual member or shareholder.
    r. ``Note'' means the Multifamily/Health Care Facility Note 
described in the Security Instrument, including all schedules, riders, 
allonges and addenda, as such Multifamily/Health Care Facility Note may 
be amended from time to time.
    s. ``Personalty'' means all furniture, furnishings, equipment, 
machinery, building materials, appliances, goods, supplies, tools, 
books, records (whether in written or electronic form), computer 
equipment (hardware and software) and other tangible or electronically 
stored personal property (other than Fixtures) which are owned or 
leased by the Borrower now or in the future in connection with the 
ownership, management or operation of the Land or the Improvements or 
are located on the Land or in the Improvements, and any operating 
agreements relating to the Land or the Improvements, and any surveys, 
plans and specifications and contracts for architectural, engineering 
and construction services relating to the Land or the Improvements, 
choses in action and all other intangible property and rights relating 
to the operation of, or used in connection with, the Land or the 
Improvements, including all governmental permits relating to any 
activities on the Land.
    t. ``Principals'' are the following legal and natural persons 
having ownership interests in the Borrower: natural persons who are 
sole owners, joint venturers, joint tenants, tenants by the entirety, 
trustees or beneficiaries of trusts, and all general partners; in the 
case of limited partnerships, limited partners having a twenty-five 
(25%) percent or more interest in the partnership; in the case of 
public or private corporations or governmental entities, the president, 
vice president, secretary, treasurer, and all other executive officers 
who are directly responsible to the board of directors, or any 
equivalent governing body, as well as all directors and each 
stockholder having a ten (10%) percent or more interest in the 
corporation; in the case of a Limited Liability Company (LLC) or a 
Limited Liability Partnership (LLP), all managing members or partners, 
all managers, and all members or partners with a ten (10%) percent or 
greater governance interest or a twenty-five (25%) percent or greater 
financial interest.
    u. ``Project'' means the Mortgaged Property and all other assets of 
whatever nature or wherever located, used in, owned by or leased by the 
Borrower in conducting the business on the Mortgaged Property, which 
business is providing housing facilities and other related activities.
    v. ``Property Jurisdiction'' is (are) the jurisdiction(s) in which 
the Land is located.
    w. ``Public Body Borrower'' means a Federal instrumentality, a 
State or political subdivision thereof, or an instrumentality of a 
State or a political subdivision thereof, which certifies that it is 
not receiving financial assistance from the United States exclusively 
pursuant to the United States Housing Act of 1937 (with the exception 
of projects assisted or to be assisted pursuant to Section 8 of such 
Act) and which is acceptable to HUD.
    x. ``Reasonable operating expenses'' means an expense which arises 
from the everyday operation and maintenance of the Project and which 
primarily benefits the Project as opposed to the Borrower.
    y. ``Rents'' means all rents (whether from residential or non-
residential space), revenues, issues, profits, (including carrying 
charges, maintenance fees, and other cooperative revenues) and other 
income of the Land or the Improvements, including all revenues, gross 
receipts and all pledges, gifts, grants, bequests, contributions and 
endowments, parking fees, laundry and vending machine income and fees 
and charges for food and other services provided at the Mortgaged 
Property, whether now due, past due, or to become due, and deposits 
forfeited by tenants.
    z. ``Residual Receipts'' is a term which applies to certain funds 
held by Non-Profit, Public Body and Limited Dividend Borrowers whose 
Notes are insured or held by HUD pursuant to Section 220, Section 
221(d)(3) and 231 of the National Housing Act. Residual Receipts are 
calculated by determining an amount of Surplus Cash (defined below).
    After the calculation of Surplus Cash, as described below, the 
Borrower may make any Distributions permitted by this Agreement, HUD 
regulations and Directives. ``Residual Receipts'' will be the 
restrictive cash held by Section 220, Section 221(d)(3) and 231 Non-
Profit, Public Body, and Limited Dividend Borrowers remaining after any 
allowable Distributions. The use of these Residual Receipts is 
restricted under this Agreement.
    aa. ``Security Instrument'' means the Multifamily/Health Care 
Mortgage, Deed of Trust Form HUD-94000, or other designation as 
appropriate by Property Jurisdiction, Assignment of Rents and Security 
Agreement, and any other security for the Indebtedness, and shall be 
deemed to be the mortgage as defined by the National Housing Act, as 
amended, implementing regulations and Directives.
    bb. ``Surplus Cash'' means any cash plus amounts receivable on 
tenant subsidy payments (earned in the applicable fiscal period) 
remaining after:
    (1) The payment of: (i) All sums immediately due or currently 
required to be paid under the terms of the Note, the Security 
Instrument and this Agreement due on the first day of the month 
following the end of the fiscal period; including without limitation, 
all

[[Page 46248]]

amounts required to be deposited in the Reserve for Replacement or 
other reserves as may be required by HUD; and (ii) all other 
obligations of the Project (accounts payable and accrued, unescrowed 
expenses) unless funds for payment are set aside or deferment of 
payment has been approved by HUD, and
    (2) The segregation and recording of: (i) An amount equal to the 
aggregate of all special funds required to be maintained by the 
Borrower; (ii) the greater of the Borrower's total liability or the 
amount held by the Borrower for tenant security deposits; and (iii) all 
accounts and accrued items payable within thirty (30) days after the 
end of the fiscal period.
    cc. ``State'' includes the several States and Puerto Rico, the 
District of Columbia, Guam, the Trust Territory of the Pacific Islands, 
American Samoa, and the Virgin Islands.
    dd. ``Taxes'' means all taxes, assessments, vault rentals and other 
charges, if any, general, special or otherwise, including all 
assessments for schools, public betterments and general or local 
improvements, which are levied, assessed or imposed by any public 
authority or quasi-public authority, and which, if not paid, could 
become a lien on the Land or the Improvements.

II. Construction

    2. Construction Funds. The Borrower shall keep construction funds 
of the Mortgaged Property separate and apart from operating funds of 
the Mortgaged Property.
    3. Unpaid Obligations. Upon final endorsement of the Note, Borrower 
shall have no unpaid obligations in connection with the purchase of the 
Mortgaged Property, the construction of the Mortgaged Property, or with 
respect to the Security Instrument insured by HUD except such unpaid 
obligations, as have the written approval of HUD as to terms, form and 
amount.
    4. Mortgagee's Certificate. The Borrower shall be bound by the 
terms of the Mortgagee's Certificate insofar as it establishes or 
reflects obligations of the Borrower and the Borrower agrees that the 
fees and expenses enumerated in that Certificate have been fully paid 
or payment has been provided for in the Certificate and that all funds 
deposited with the Lender will be used for the purposes set forth in 
the Certificate.
    5. Construction Commencement. The Borrower shall not commence, and 
has not commenced, construction of the Mortgaged Property prior to HUD 
endorsement of the Note, except that this Section 5 is not applicable 
if HUD has given prior written approval to an early start of 
construction, or if this Project is an Insurance Upon Completion or a 
refinance.
    6. Drawings and Specifications. The Mortgaged Property shall be 
constructed in accordance with the terms of the Construction Contract, 
if any, and with the ``Drawings and Specifications.''
    7. Required Permits. The Borrower shall obtain all necessary 
building and other permits and the Mortgaged Property shall not be 
occupied by any tenant without the prior written approval of HUD and 
from all other legal authorities having jurisdiction of the Mortgaged 
Property.
    8. Outstanding Obligations. The Borrower shall have no obligations 
as of the date of this Agreement except those approved by HUD and, 
except for those approved obligations, the Land has been paid for in 
full and is free from any liens or purchase money obligations.
    9. Accounting Requirements. The Borrower shall submit an accounting 
to HUD for all receipts and disbursements during the period starting 
with the date of first occupancy of the Mortgaged Property and ending, 
at the option of the Borrower, either on (a) the last day of the month 
in which the Mortgaged Property is determined by HUD to be acceptably 
completed; or (b) sixty days from the date the Mortgaged Property is 
determined by HUD to be acceptably completed. The excess of project 
income over property disbursements, as determined by HUD, shall be 
treated as a recovery of construction cost.

III. Financial Management

    10. Payments. The Borrower shall make promptly all payments due 
under the Note and Security Instrument.
    11. Reserve for Replacement Fund. The Borrower shall establish and 
maintain a Reserve for Replacement account for defraying certain costs 
for replacing major structural elements and mechanical equipment of the 
Project or for any other purpose.
    a. The Reserve for Replacement shall be held by the Lender or by a 
safe and responsible depository designated by the Lender pursuant to 
the requirements of the contract for mortgage insurance. Such funds 
shall at all times remain under the control of the Lender, whether in 
the form of a cash deposit or invested in obligations of, or fully 
guaranteed as to principal by, the United States of America or in such 
other investments as may be allowed by HUD.
    b. The Borrower shall deposit at endorsement of the Note an initial 
amount of $--------, if applicable, and the Borrower shall deposit a 
monthly amount of $--------, concurrently with the beginning of 
payments towards amortization of the Note unless a different date or 
amount is established by HUD. At least every ten years, starting from 
the date of endorsement, and more frequently at HUD's discretion, the 
Borrower shall submit a written analysis of its use of the Reserve for 
Replacement during the prior ten years and the projected use of the 
Reserve for Replacement funds during the coming ten years to HUD. The 
amount of the monthly deposit may be increased or decreased from time 
to time at the written direction of HUD without a recorded amendment to 
this Agreement.
    c. The Borrower shall carry the balance in this fund on the 
financial records as a restricted asset. The Reserve for Replacement 
shall be invested in interest bearing accounts or investments, and any 
interest earned on the investment shall be deposited in the Reserve for 
Replacement for use by the Project in accordance with this Section 11.
    d. Disbursements from such fund shall only be made after consent, 
in writing, of HUD. In the event of a Declaration of Default under the 
terms of the Security Instrument, pursuant to which the Indebtedness 
has been accelerated, a written notification by HUD to the Borrower of 
a violation of this Agreement or at such other times as determined 
solely by HUD, HUD may direct the application of the balance in such 
fund to the amount due on the Indebtedness as accelerated or for such 
other purposes as may be determined solely by HUD.
    e. Where the Project is already subject to a Security Instrument 
insured or held by HUD as of the date hereof and this Agreement is now 
being executed by the Borrower as of the date hereof, the Reserve for 
Replacement now to be established shall be equal to the amount due to 
be in such fund under existing Agreements or charter provisions, and 
payments hereunder shall begin with the first payment due on the 
Security Instrument after acquisition, unless some other method of 
establishing and maintaining the fund is approved in writing by HUD.
    12. Residual Receipts. Section 221(d)(3) and 231 Non-Profit, Public 
Body, and Limited Dividend Borrowers shall establish and maintain, in 
addition to the Reserve for Replacement, a Residual Receipts Fund by 
depositing thereto, with the Lender, the Residual Receipts, as defined 
herein, within ninety (90) days after the end of the semiannual or 
annual fiscal period within which such receipts are realized.

[[Page 46249]]

Such fund shall be held by the Lender or by a safe and responsible 
depository designated by the Lender in an interest bearing account. The 
Residual Receipts shall be under the control of HUD, and shall be 
disbursed only on the direction of HUD, who shall have the power and 
authority to direct that the Residual Receipts, or any part thereof, be 
used for such purpose as it may determine.
    13. Project Property and Operation; Encumbrances. (a) The Borrower 
shall deposit all Rents and other receipts of the Project and all Rents 
and other receipts of the Project in connection with the financing of 
the Project, including equity or capital contributions, in the name of 
the Project in a federally insured depository or depositories and in 
accordance with Directives. Such funds shall be withdrawn only in 
accordance with the provisions of this Agreement for reasonable and 
necessary expenses of the Project or for distribution of Surplus Cash 
or as reimbursement of advances as permitted by Sections 15 and 16 
below. Any person or entity receiving Mortgaged Property other than for 
payment of reasonable and necessary expenses or repairs or authorized 
Distributions of Surplus Cash shall immediately deliver such Mortgaged 
Property to the Project and failing so to do shall hold such Mortgaged 
Property in trust. (b) The Borrower, except for natural person 
Borrowers, shall not engage in any business or activity, including the 
operation of any other Project, or incur any liability or obligation 
not in connection with the Project, nor acquire an Affiliate. (c) The 
Borrower shall satisfy or obtain a release of any mechanic's lien, 
attachment, judgment lien, or any other lien which attaches to any real 
or personal property of the Project or is used in its operation.
    14. Security Deposits. Any funds collected as security deposits 
shall be kept (a) separate and apart from all other funds of the 
Project; (b) in interest bearing trust accounts, to the extent required 
by State or local law, and (c) the amount of which shall at all times 
equal or exceed the aggregate of all outstanding obligations under said 
account. Security deposit account interest shall be paid on a pro rata 
basis to tenants or applied to sums due under their leases upon the 
termination of their tenancy in the Project. The use of tenant security 
deposits for Project operations is prohibited unless the tenant has 
forfeited the deposit. The Borrower acknowledges that the unauthorized 
use of tenant security deposits for Project operations may constitute 
an improper taking or theft, and such acts may be prosecutable under 
criminal statutes.
    15. Distributions. The Borrower shall not make, or receive and 
retain, nor allow any Affiliate to receive or retain any Distribution 
of assets or any income of any kind of the Project, except from Surplus 
Cash. Distributions are governed by the following conditions:
    a. No Distribution shall be made from borrowed funds. Distributions 
shall not be taken prior to the completion of the Project. 
Distributions shall not be taken after HUD has given notice to the 
Borrower of a violation under this Agreement or a default has been 
declared under the Note or Security Instrument. Distributions shall not 
be taken when a Project is under a forbearance agreement.
    b. No Distribution shall be made when either (i) necessary services 
(utilities, trash removal, security, lawn service or any other services 
which the Borrower is required to provide) have not been provided, 
which failure the Borrower should have known about in the exercise of 
due care; (ii) notices of physical repairs or deficiencies (including 
but not limited to building code violations) by other Federal, State or 
local governing bodies and/or by HUD have been issued and remain 
unresolved to the satisfaction of the issuing public body or (iii) the 
Borrower has been notified by HUD, the Lender or other Federal, State 
or local governing body that physical repairs and/or deficiencies exist 
and the Borrower has not corrected or cured the identified items to 
HUD's satisfaction. HUD may permit Distributions when there are minor 
or contested local code violations on a case-by-case basis.
    c. Any Distribution of any funds of the Project, which the party 
receiving such funds is not entitled to retain hereunder, shall be 
returned to the Project account immediately.
    d. All allowable Distributions shall be made only after the end of 
a semiannual or annual fiscal period, and only as permitted by the law 
of the applicable jurisdiction. All such Distributions to Section 220 
(if so regulated), Section 221(d)(3) and 231 Limited Distribution 
Borrowers in any one fiscal year shall be limited to 6 percent on the 
initial equity investment, as determined by HUD, or to such other 
amounts as may be specified in Directives and the right to such 
Distributions shall be cumulative. No Distributions may be taken in the 
case of Section 220 (if so regulated), Section 221(d)(3) and 231 Public 
Body or Nonprofit Borrowers unless permitted by regulation or 
Directives. Distributions must be taken out of all Project accounts by 
all other Borrowers within the accounting period immediately following 
the computation of Surplus Cash and, if not taken within the identified 
period, these funds may only be used for reasonable and necessary 
Project operating expenses and repairs. The computation of Surplus Cash 
must be prepared at the end of the semiannual or annual fiscal period.
    e. Equity or capital contributions shall not be reimbursed from 
project accounts without the prior written approval of HUD.
    16. Reimbursement of Advances. Any advances made by the Borrower, 
on behalf of the Borrower, or for the Borrower must be deposited into 
the Project account. The Borrower or any entity which advances funds on 
behalf of the Borrower or for the Borrower for reasonable and necessary 
operating expenses or repairs may be reimbursed from Surplus Cash at 
the end of the annual or semiannual period. Such repayment is not 
considered a Distribution. Monthly reimbursement of the Borrower or any 
entity that advances funds on behalf of the Borrower or for the 
Borrower may be allowed with prior written approval by HUD.
    17. Identity of Interest. If the Project's application for mortgage 
loan insurance was processed pursuant to HUD's Multifamily Accelerated 
Processing (``MAP'') procedures, the Borrower's Principals shall not 
have an identity of interest, as defined by HUD in MAP Directives, 
between the Borrower and the Lender.
    18. Financial Accounting. The Borrower shall keep the books and 
accounts of the operation of the Mortgaged Property in accordance with 
the requirements of Generally Accepted Accounting Principles (GAAP) and 
of HUD. The books and accounts must be complete, accurate and current 
at all times. Posting must be made at least monthly to the ledger 
accounts, and year-end adjusting entries must be posted promptly in 
accordance with sound accounting principles. Any undocumented 
Distribution or expense shall be an ineligible project expense, unless 
otherwise determined by HUD. Books, accounts and records shall be open 
and available for inspection by HUD, after reasonable prior notice, 
during normal office hours, at the Project or other mutually agreeable 
location.
    19. Books of Management Agents. The books and records of management 
agents and Affiliates, as they pertain to the operations of the 
Project, shall be maintained in accordance with GAAP and shall be open 
and available to inspection by HUD, after reasonable prior notice, 
during normal office hours,

[[Page 46250]]

at the Project or other mutually agreeable location. Every contract 
executed on behalf of the Project with any management agent or 
Affiliate shall include the provision that the books and records of 
such entities shall be properly maintained and open to inspection 
during normal business hours by HUD at the Project or other mutually 
agreeable location.
    20. Annual Financial Audit. Within ninety (90) days, or such longer 
or shorter period established in writing by HUD, following the end of 
each fiscal year, the Borrower shall furnish HUD and the Lender with a 
complete annual financial report based upon an examination of the books 
and records of the Borrower prepared in accordance with GAAP, audited 
in accordance with Generally Accepted Auditing Standards (GAAS) and 
Government Auditing Standards (GAS) and any additional requirements of 
HUD unless the report is waived in writing by HUD. If the Borrower 
fails to submit the annual financial report within ninety (90) days of 
said due date, HUD may thereafter hire a Certified Public Accountant to 
prepare the report at the expense of the Borrower. The report shall 
include a certification in content and form prescribed by HUD and 
certified by the Borrower. The report shall be prepared and certified 
by a Certified Public Accountant who is licensed or certified by a 
regulatory authority of a State or other political subdivision of the 
United States, which authority makes the Certified Public Accountant 
subject to regulations, disciplinary measures, or codes of ethics 
prescribed by law. The Certified Public Accountant must have no 
business relationship with the Borrower except for the performance of 
the audit and tax preparation unless HUD expressly authorizes other 
relationships. Auditing costs and tax preparation costs may be charged 
as an authorized expense to the Mortgaged Property only to the extent 
they are required of the Borrower itself by State law, the Internal 
Revenue Service (IRS), the Securities and Exchange Commission, or HUD. 
Neither IRS audit costs nor costs of tax preparation for the Borrower's 
partners, members, shareholders, or other persons receiving 
Distributions from the Borrower may be charged to the Mortgaged 
Property as a Project expense. Non-profit Borrowers are to follow audit 
requirements specified in OMB Circular A-133, as revised.

IV. Project Management

    21. Preservation, Management and Maintenance of The Mortgaged 
Property. The Borrower (a) shall not commit Waste under the Security 
Instrument nor permit impairment or deterioration of the Mortgaged 
Property, (b) shall not abandon the Mortgaged Property, (c) shall 
restore or repair promptly, in a good and workmanlike manner, any 
damaged part of the Mortgaged Property to the equivalent of its 
original condition, or such other condition as HUD may approve in 
writing, whether or not litigation or insurance proceeds or 
condemnation awards are available to cover any costs of such 
restoration or repair, and (d) shall keep the Mortgaged Property in 
decent, safe, sanitary condition and good repair, including the 
replacement of Personalty and Fixtures with items of equal or better 
function and quality. Obligations (a) through (d) of this Section 21 
are absolute and unconditional and are not limited by any conditions 
precedent and are not contingent on the availability of financial 
assistance from HUD or on HUD's performance of any administrative or 
contractual obligations. The Mortgaged Property, equipment, buildings, 
plans, offices, apparatus, devices, books, contracts, records, 
documents, and other papers and instruments must also be maintained in 
reasonable condition for proper audit and subject to examination by HUD 
at the Project or other mutually agreeable location. In the event all 
or any of the buildings covered by the Security Instrument shall be 
destroyed or damaged by fire, by an exercise of the power of eminent 
domain, by failure of warranty, or other casualty, the money derived 
from any settlement, judgment, or insurance on the Mortgaged Property 
shall be applied in accordance with the terms of the Security 
Instrument or as otherwise may be directed in writing by HUD.
    22. Flood Hazards. If the Improvements are located in a special 
flood hazard area, the Borrower shall maintain flood insurance covering 
the Improvements in an amount at least equal to its development or 
project cost (less estimated land cost) or to the maximum limit of 
coverage made available with respect to the particular type of property 
under the National Flood Insurance Act of 1968, as amended, or its 
successor legislation, whichever is less, provided that the amount of 
flood insurance need not exceed the outstanding principal balance of 
the Note, and flood insurance need not be maintained beyond the term of 
the Note.
    23. Management Agreement. The Borrower shall execute a management 
agreement or other document outlining procedures for operating the 
Mortgaged Property. Such agreement or document must be acceptable to 
HUD. The Borrower and the management agent shall submit and maintain a 
current Management Certification meeting standards established by HUD.
    24. Acceptability of Management of the Mortgaged Property. The 
Borrower shall provide management of the Mortgaged Property in a manner 
deemed to be acceptable by HUD. At HUD's discretion, HUD may require 
replacement of the management or require the Borrower to conform the 
Project to HUD's overall management policies.
    25. Termination of Contracts. Any management contract entered into 
by the Borrower or any other third-party vendor contract pertaining to 
the Mortgaged Property shall contain a provision that the contract 
shall be subject to termination without penalty and without cause upon 
written request by HUD and shall contain a provision which gives no 
more than a thirty day notice of termination. Upon such request, the 
Borrower shall immediately arrange to terminate the contract, and the 
Borrower shall also make arrangements satisfactory to HUD for 
continuing acceptable management of the Mortgaged Property effective as 
of the termination date of the contract.
    26. Contracts for Goods and Services. The Borrower shall obtain 
contracts for goods, materials, supplies, and services (hereinafter 
referred to as ``goods and services'') at the lowest possible cost 
(including contracts for laundry services where laundry services are 
provided), considering quality, durability, and scope of work, and on 
terms most advantageous to the Mortgaged Property. Such expenses may 
not exceed amounts customarily paid in the vicinity of the Land for the 
goods and services received. Reasonable and necessary expenses do not 
include amounts paid for betterments or Improvements unless determined 
by HUD to be prudent and appropriate. When acquiring goods and services 
whose usual costs are expected to exceed the greater of $10,000 or 5 
percent of the gross annual revenue of the Mortgaged Property, the 
Borrower shall solicit written cost estimates to ensure that prices 
paid by the Borrower for goods and services, including the preparation 
of the annual audit, are competitive with prices paid in the area for 
goods and services of similar quality. All contracts, including but not 
limited to, contracts for goods and services purchased from individuals 
or companies affiliated with the Borrower or its management agent shall 
be at costs not in excess of those that would be

[[Page 46251]]

incurred in making arms-length purchases on the open market. The 
Borrower shall keep copies of all written contracts or other 
instruments which affect the Mortgaged Property, all or any of which 
may be subject to inspection and examination by HUD at the Project or 
other mutually agreeable location.
    27. Responsiveness to Inquiries. At the request of HUD, the 
Borrower shall promptly furnish operating budgets and occupancy, 
accounting and other reports and give specific answers to questions 
upon which information is desired relative to income, assets, 
liabilities, contracts, operation, and conditions of the Mortgaged 
Property and the status of the Security Instrument.
    28. Tenant Organizations. If the Project is subject to 24 CFR 245 
Subpart B or any successor HUD regulation covering the rights of 
tenants to organize, the Borrower shall comply with this Section 28. 
The Borrower shall not (a) impede the reasonable efforts of resident 
tenant organizations to represent their members or the reasonable 
efforts of tenants to organize, or (b) unreasonably withhold the use of 
any community room or other available space appropriate for meetings 
which is part of the Mortgaged Property when requested by: (i) a 
resident tenant organization in connection with the representational 
purposes of the organization; or (ii) tenants seeking to organize or to 
consider collectively any matter pertaining to their living 
environment, which includes the terms and conditions of their tenancy 
as well as activities related to housing and community development. The 
Borrower may charge for the use of the Mortgaged Property any fees or 
costs approved by HUD as may normally be imposed for the use of such 
facilities or may waive any such fees or costs.
    The intention of the signatories to this Agreement is that the 
tenants are third party beneficiaries of this Section 28, but not to 
other provisions of this Agreement, which are strictly between HUD and 
the Borrower, and do not create such third party rights. Further, the 
signatories intend that an aggrieved tenant may commence a civil action 
against the Borrower in a court of appropriate jurisdiction to enforce 
the provisions of this Section 28 or to obtain remedy for its breach, 
but that such third party beneficiary status is not intended to permit, 
nor shall it permit a suit against HUD under Section 28. The Borrower 
agrees that if sued by the tenants under this Section, it shall not 
have any right to join HUD, nor shall it seek to join HUD, to such 
suit.
    29. Compliance With Laws. a. The Borrower shall comply with all 
applicable: laws; ordinances; regulations; requirements of any 
governmental authority; lawful covenants and agreements (including the 
Security Instrument) recorded against the Mortgaged Property; the 
National Housing Act; regulations and Directives of HUD; including but 
not limited to those of the foregoing pertaining to: health and safety; 
construction of improvements on the Mortgaged Property; fair housing; 
civil rights; zoning and land use; leases; lead-based paint maintenance 
requirements of 24 CFR Part 35 and maintenance and disposition of 
tenant security deposits; and, with respect to all of the foregoing, 
all subsequent amendments, revisions, promulgations or enactments. The 
Borrower shall at all times maintain records sufficient to demonstrate 
compliance with the provisions of this Section 29. The Borrower shall 
take appropriate measures to prevent, and shall not engage in or 
knowingly permit, any illegal activities at the Mortgaged Property that 
could endanger tenants or visitors, result in damage to the Mortgaged 
Property, result in forfeiture of the Mortgaged Property, or otherwise 
impair the lien created by the Security Instrument or the Lender's 
interest in the Mortgaged Property. The Borrower represents and 
warrants to HUD that no portion of the Mortgaged Property has been or 
will be purchased with the proceeds of any illegal activity.
    b. HUD shall be entitled to invoke any remedies available by law to 
redress any breach or to compel compliance by the Borrower with these 
requirements, including any remedies available hereunder.

V. Admissions and Occupancy

    30. Dwelling Accomodations and Services. If the Project is subject 
to regulation of rent by HUD, the Borrower shall make dwelling 
accommodations and services of the Project available to eligible 
tenants at charges not exceeding those established in accordance with a 
rental schedule approved in writing by HUD.
    31. Lease Term. Residential accommodations shall not be rented for 
a period of less than thirty (30) days or for more than 3 years and 
shall not be used for transient or hotel purposes. Rental for transient 
or hotel purposes shall mean: (a) Rental for a period of less than 30 
days or (b) any rental, if the occupants of the housing accommodations 
are provided customary hotel services such as room service for food and 
beverages, maid service, furnishings or laundering of linens, and 
bellboy service. Residential units in projects with Security 
Instruments initially endorsed for insurance pursuant to Section 231 of 
the National Housing Act may be rented for a period of more than 3 
years.
    32. Commercial (Non-Residential) Leases. No portion of the 
Mortgaged Property shall be leased for any commercial purpose or use 
without receiving HUD's prior written approval as to terms, form and 
amount.
    33. Subleases. All leases of residential units by the Borrower to 
tenants must prohibit tenants from entering into any subleases which do 
not run for at least thirty (30) days and must require that all 
subleases be approved in advance in writing by the Borrower. All leases 
of residential units by the Borrower to tenants must also prohibit 
assignment of the leasehold interest by the tenant without the prior 
written approval of the Borrower. Leases of residential units must 
prohibit the tenant from granting the right to occupy the premises for 
a period of less than thirty (30) days or from furnishing hotel 
services. Assignment and subleasing of units by other than the tenant 
thereof without the prior written approval of the Borrower shall be 
prohibited in the lease. Upon discovery of any unapproved assignment, 
sublease or occupancy, the Borrower shall immediately demand 
cancellation and/or vacation of the premises, as appropriate, and 
notify HUD thereof.
    34. Elderly Projects. For Elderly projects or Elderly portions of 
projects, the Borrower shall restrict occupancy for elderly units to 
families where the head of household or spouse is 62 years or older. A 
single person 62 years of age or older shall constitute a family for 
the purposes of this Section 34.
    35. Section 231 Projects. If the Security Instrument is originally 
endorsed for insurance under Section 231 of the National Housing Act, 
the Borrower in selecting tenants shall comply with all applicable HUD 
regulations and Directives.
    36. Families With Children. The Borrower shall not, in selecting 
tenants, discriminate against any person or persons by reason of the 
fact that there are children (individuals who have not attained 18 
years of age) in the family. For Elderly projects or Elderly portions 
of projects, the Borrower shall not discriminate against otherwise 
eligible applicants for admission to the elderly unit by reason of the 
fact that there are children in the family.
    37. Displaced Persons or Families. If the Security Instrument is 
originally endorsed for insurance under Section 221 of the National 
Housing Act, the

[[Page 46252]]

Borrower, in selecting tenants, shall give to Displaced Persons or 
Families who are eligible applicants an absolute preference or priority 
of occupancy at initial occupancy and, on a continuing basis, such 
preferred applicants shall be given preference over non-preferred 
applicants in their placement on a waiting list to be maintained by the 
Borrower and through such further provisions agreed to in writing by 
the Borrower and HUD.
    38. Rents. If the Project is subject to regulation of rent by HUD, 
HUD will at any time entertain a written request for a rent increase 
that is properly supported by substantiating evidence and HUD shall, 
within a reasonable time: (a) approve a rental schedule that is 
necessary to compensate for any net increase, occurring since the last 
approved rental schedule, in taxes (other than income taxes) and 
operating and maintenance costs over which the Borrower has no 
effective control; or (b) deny the increase and state the reasons for 
its decision.
    39. Charges for Services and Facilities. If the Project is subject 
to regulation of rent by HUD, the Borrower shall only charge to and 
receive from any tenant such amounts as have the prior written approval 
of HUD and are mutually agreed upon between the Borrower and the tenant 
for any facilities and/or services not included in the HUD approved 
rent schedule which may be furnished by, or on behalf of, the Borrower 
to such tenant upon request.
    40. Prohibition of Additional Fees. The Borrower shall not charge 
any Project tenant or prospective Project tenant an admission fee, 
founders fee, continuing care retirement community fee, life-care fee 
or similar payment pursuant to any agreement to furnish Project 
accommodations or services to persons making such payments.
    41. Security Deposits. The Borrower shall not require as a 
condition of occupancy or leasing of any unit in the Project, any 
consideration or deposit other than the prepayment of the first month's 
rent plus a security deposit in an amount not in excess of one month's 
rent to guarantee the performance of the lease terms.

VI. Actions Requiring the Prior Written Approval of HUD

    42. The Borrower shall not without the prior written approval of 
HUD:
    a. Convey, assign, transfer, pledge, hypothecate, encumber, or 
otherwise dispose of any of the Mortgaged Property or any interest 
therein, or permit such conveyance, assignment, transfer, pledging, 
hypothecation, or encumbrance or disposition, or take any action which 
gives rights in another to establish or maintain a lien or encumbrance 
against the Mortgaged Property or any interest therein; provided, 
however, the Borrower may, and this provision shall not operate to 
require the Borrower to obtain prior written approval of HUD to, 
dispose of obsolete or deteriorated items of Fixtures or Personalty if 
the same are replaced with like items of same or greater quality or 
value and provided further, that this provision shall not operate to 
require the Borrower to obtain the prior written approval of HUD for 
(i) a conveyance of the Mortgaged Property at a judicial or non-
judicial foreclosure sale under the Security Instrument, (ii) the 
Mortgaged Property becoming part of a bankruptcy estate by operation of 
law under the United States Bankruptcy Code and (iii) an interest 
acquired by inheritance or by Court decree.
    b. Enter into any contract, agreement or arrangement to borrow 
funds or finance any purchase or incur any liability, direct or 
contingent, other than for current, reasonable and necessary operating 
expenses and repairs.
    c. Pay out any funds except from Surplus Cash, except for 
reasonable operating expenses and necessary repairs.
    d. Pay any compensation, including wages or salaries, or incur any 
obligation to do so, to any officer, director, stockholder, trustee, 
beneficiary, partner, member, or Principal of the Borrower, or to any 
nominee thereof.
    e. Enter into, change, or agree to the assignment of, any contract, 
agreement or arrangement for supervisory or managerial services or 
leases for operation of the Project in whole or in part.
    f. Convey, assign, or transfer, or permit the conveyance, 
assignment or transfer of any interest in the Borrower, if the effect 
of that conveyance, assignment, or transfer is the creation or 
elimination of a Principal; nor convey, assign or transfer any right to 
receive the Rents of the Mortgaged Property; provided, however, that 
this provision shall not operate to require the Borrower to obtain the 
prior written approval of HUD for (i) a conveyance of any interest in 
the Borrower at a judicial or non-judicial foreclosure sale under the 
Security Instrument, (ii) any interest in the Borrower becoming part of 
a bankruptcy estate by operation of law under the United States 
Bankruptcy Code and (iii) an interest in the Borrower acquired by 
inheritance or by Court decree.
    g. Remodel, add to, construct, reconstruct or demolish any part of 
the Mortgaged Property or subtract from any Land, Fixtures, 
Improvements or Personalty of the Mortgaged Property.
    h. Permit the use of the Mortgaged Property for any other purpose 
except the use for which it was originally intended, or permit 
commercial use greater than that originally approved by HUD.
    i. Receive any endowment which is not pledged as security for its 
obligations to HUD or the Lender unless the endowment by its terms is 
restricted to a specific purpose or purposes which do not permit such a 
pledge.
    j. Amend, revise or cancel any provision or portion of the 
organizational documents of the Borrower, except for amendments or 
revisions simply to effect changes in interest in the Borrower which 
are not governed by Section 42f.
    k. Institute litigation seeking the recovery of a sum in excess of 
$25,000, nor settle or compromise any action for specific performance, 
damages, or other equitable relief, in excess of $25,000, nor dispose 
of or distribute the proceeds thereof.
    l. Reimburse any party for payment of expenses or costs of the 
Project or for any purpose.
    m. Receive any fee or payment of any kind from any managing agent, 
employee of the Project or of the managing agent, or other provider of 
goods or services of the Project.

VII. Enforcement

    43. Violation of Agreement. The occurrence of any one or more of 
the following shall constitute a Violation under this Agreement:
    a. Any failure by the Borrower to comply with any of the provisions 
of this Agreement;
    b. Any fraud or material misrepresentation or material omission by 
the Borrower, any of its officers, directors, trustees, general 
partners, members, managers or managing agent in connection with (1) 
any financial statement, rent roll or other report or information 
provided to HUD during the term of this Agreement or (2) any request 
for HUD's consent to any proposed action, including a request for 
disbursement of funds from any restricted account for which HUD's prior 
written approval is required; and
    c. The commencement of a forfeiture action or proceeding, whether 
civil or criminal, which, in HUD's reasonable judgment, could result in 
a forfeiture of the Mortgaged Property or otherwise materially impair 
HUD's interest in the Mortgaged Property.

[[Page 46253]]

    44. Declaration of Default. At any time during the existence of a 
violation, HUD may give written notice of the violation to the 
Borrower, by registered or certified mail, addressed to the addresses 
stated in this Agreement, or such other addresses as may subsequently, 
upon appropriate written notice to HUD, be designated by the Borrower 
as its legal business address. If, after receiving written notice of a 
violation, that violation is not corrected to the satisfaction of HUD 
either within thirty (30) days after the date such notice is mailed, or 
within such shorter or longer time set forth in said notice, HUD may 
declare a default under this Agreement without further notice. 
Alternatively, in order to protect the health and safety of the 
tenants, HUD may declare a default at any time during the existence of 
a violation without providing prior written notice of the violation. 
Upon any declaration of default HUD may:
    a. If HUD holds the Note, declare the whole of said Indebtedness 
immediately due and payable and then proceed with the foreclosure of 
the Security Instrument;
    b. If said Note is not held by HUD, notify the holder of the Note 
of such default and require the holder to declare a default under the 
Note and Security Instrument, and the holder after receiving such 
notice and demand, shall declare the whole Indebtedness due and payable 
and thereupon proceed with foreclosure of the Security Instrument or 
assignment of the Note and Security Instrument to HUD as provided in 
HUD regulations and Directives. Upon assignment of the Note and 
Security Instrument to HUD, HUD may then proceed with the foreclosure 
of the Security Instrument;
    c. Collect all Rents and charges in connection with the operation 
of the Project and use such collections to pay the Borrower's 
obligations under this Agreement and under the Note and Security 
Instrument and the necessary expenses of preserving and operating the 
Mortgaged Property;
    d. Take possession of the Mortgaged Property, bring any action 
necessary to enforce any rights of the Borrower growing out of the 
Mortgaged Property's operation, and maintain the Mortgaged Property in 
decent, safe, sanitary condition and good repair;
    e. Apply to any court, State or Federal, for specific performance 
of this Agreement, for an injunction against any violations of the 
Agreement, for the appointment of a receiver to take over and operate 
the Project in accordance with the terms of the Agreement, or for such 
other relief as may be appropriate, since the injury to HUD arising 
from a default under any of the terms of this Agreement would be 
irreparable and the amount of damage would be difficult to ascertain;
    f. Collect reasonable attorney fees related to enforcing the 
Borrower's compliance with this Agreement, and
    g. With respect to Violations related to felony criminal 
convictions or civil judgments concerning the operation or management 
of the Mortgaged Property, direct the Borrower to replace any general 
partner, limited liability company member or non-member manager, 
limited liability limited partnership member, officer or director of 
the Borrower corporation, trustee, beneficiary of a trust, joint 
venturer, joint tenant or tenant in common with a natural person or 
entity acceptable to HUD pursuant to HUD's Participation and Compliance 
regulations and Directives.
    45. Measure of Damages. The damage to HUD as a result of the 
Borrower's breach of duties and obligations under this Agreement shall 
be, in the case of failure to maintain the Mortgaged Property as 
required by this Agreement, the cost of the repairs required to return 
the Project to decent, safe and sanitary condition and good repair. 
This contractual provision shall not abrogate or limit any other remedy 
or measure of damages available to HUD under any civil, criminal or 
common law.
    46. Nonrecourse Debt. Except as provided in Section 8 of the Note 
and Section 6 of the Security Instrument, no person or entity is liable 
for payments due under the Note and Security Instrument, or for 
payments to the Reserve for Replacement or for matters not under their 
control, except, notwithstanding any provision of State law to the 
contrary, any person or entity is liable:
    a. For funds or property of the Project coming into its possession 
which, by the provisions hereof, the person or entity is not entitled 
to retain;
    b. For its own acts and deeds or acts and deeds of others which it 
has authorized in violation of the provisions hereof; and
    c. As otherwise provided by law.

VIII. Miscellaneous

    47. Binding Effect. This instrument shall bind, and the benefits 
shall inure to, the respective Borrower, its heirs, legal 
representative, executors, administrators, successors in office or 
interest, and assigns, and to HUD and HUD's successors, so long as the 
contract of mortgage insurance continues in effect, and during such 
further time as HUD shall be the Lender, holder, coinsurer, or 
reinsurer of the Security Instrument, or obligated to reinsure the 
Security Instrument, or protect the tenants of the Project.
    48. Paramount Rights and Obligations. The Borrower warrants that it 
has not, and will not, execute any other agreement with provisions 
contradictory of, or in opposition to, the provisions hereof, and that, 
in any event, the requirements of this Agreement are paramount and 
controlling as to the rights and obligations set forth and supersede 
any other requirements in conflict therewith.
    49. Severability. The invalidity of any clause, part, or provision 
of this Agreement shall not affect the validity or the remaining 
portions thereof.
    50. Headings and Titles. Any heading or title of a section, 
paragraph or part of this Agreement is intended for convenience only, 
and is not intended, and shall not be construed, to enlarge, restrict, 
limit or affect in any way the construction, meaning or application of 
the covenants or provisions thereunder or under any other heading or 
title.
    51. Present Assignment. The Borrower irrevocably and 
unconditionally assigns, pledges, mortgages and transfers to HUD its 
rights to the Rents, charges, fees, carrying charges, Project accounts, 
security deposits, and other revenues and receipts of whatsoever sort 
which it may receive or be entitled to receive from the operation of 
the Mortgaged Property, subject to the assignment of Rents in the 
Security Instrument. Until a default is declared under this Agreement, 
revocable license is granted to the Borrower to collect and retain such 
Rents, charges, fees, carrying charges, Project accounts, security 
deposits, and other revenues and receipts, but upon a Declaration of 
Default under this Agreement or under the Security Instrument, this 
revocable license is automatically terminated.
    52. Notices. Any notice or other communication given or made 
pursuant to this Agreement to the Borrower, if applicable, shall be 
made to the following addresses:
Borrower
    The Borrower may, at any time, by written notice to HUD, designate 
a different address to which such communications shall thereafter be 
directed. Said notice, and any other written notice to HUD pursuant to 
this Agreement, shall be delivered to the HUD field office which has 
jurisdiction over the Project.
    53. Uniform Commercial Code Security Agreement. This Regulatory 
Agreement is also a security agreement

[[Page 46254]]

under the Uniform Commercial Code for any of the Mortgaged Property 
which, under applicable law, may be subject to a security interest 
under the Uniform Commercial Code, whether acquired now or in the 
future, and all products and cash proceeds and non-cash proceeds 
thereof (collectively, ``UCC Collateral''), and Borrower hereby grants 
to HUD a security interest in the UCC Collateral. Borrower shall 
execute and deliver to HUD (or the Lender acting on behalf of HUD), 
upon the request of HUD or the Lender, financing statements, 
continuation statements and amendments, in such form as HUD may require 
to perfect or continue the perfection of this security interest. 
Borrower shall pay all filing costs and all costs and expenses of any 
record searches for financing statements that HUD may require. Without 
the prior written consent of HUD, Borrower shall not create or permit 
to exist any other lien or security interest in any of the UCC 
Collateral except for the first lien and security interest in favor of 
the Lender. If an Event of Default has occurred and is continuing, HUD 
shall have the remedies of a secured party under the Uniform Commercial 
Code, in addition to all remedies provided by this Regulatory Agreement 
or existing under applicable law. In exercising any remedies, HUD may 
exercise its remedies against the UCC Collateral separately or 
together, and in any order, without in any way affecting the 
availability of HUD's other remedies. This Regulatory Agreement 
constitutes a financing statement with respect to any part of the 
Mortgaged Property which is or may become a Fixture.

IX. Section 8 Housing Assistance Payments Contracts

    The following additional provisions are applicable to Projects for 
which the Borrower has entered into a Section 8 Housing Assistance 
Payments Contract:
    54. Definitions. The following additional definitions are 
applicable to Projects for which the Borrower has entered into a 
Section 8 Housing Assistance Payments Contract:
    a. ``Section 8 units'' refers to units assisted under Section 8 of 
the United States Housing Act of 1937, as amended, pursuant to a 
Housing Assistance Payments Contract. For purposes of this Agreement, 
Section 8 units include project-based Section 8 units, but does not 
include Section 8 certificates, vouchers or housing choice vouchers.
    b. ``Housing Assistance Payments Contract'' refers to a written 
contract between the Borrower and HUD, or the Borrower and a Public 
Housing Agency, or the Borrower and a Housing Finance Agency for the 
purpose of providing project-based housing assistance payments to the 
Borrower on behalf of eligible families under Section 8 of the United 
States Housing Act of 1937.
    55. Admission. The criteria governing eligibility of tenants for 
admission to Section 8 units and the conditions of continued occupancy 
shall be in accordance with the Housing Assistance Payments Contract.
    56. Rents. The maximum rent for each Section 8 unit is stated in 
the Housing Assistance Payments Contract and adjustments in such rents 
shall be made in accordance with the terms of the Housing Assistance 
Payments Contract.
    57. Contractual Obligations. Nothing contained herein shall be 
construed to relieve the Borrower of any obligations under the Housing 
Assistance Payments Contract.
    58. Incorporation by Reference. The terms of the Housing Assistance 
Payments Contract are incorporated by reference into this Agreement. In 
the case of a conflict between this Agreement and the Housing 
Assistance Payments Contract, the Housing Assistance Payments Contract 
shall be controlling.
    59. Violation of Housing Assistance Payments Contract. A violation 
of the terms of the Housing Assistance Payments Contract may be 
construed to constitute a violation hereunder in the sole discretion of 
HUD.
    60. Expiration and Termination of the Housing Assistance Payments 
Contract. In the event said Housing Assistance Payments Contract 
expires or terminates before the expiration or termination of this 
Agreement, the provisions of this Agreement that pertain to the Housing 
Assistance Payments Contract shall automatically terminate and shall no 
longer be effective as of the date of the expiration or termination of 
the Housing Assistance Payments Contract.
    IN WITNESS WHEREOF, the parties hereto have set their hands and 
seals on the date first herein above written.
Borrower
(insert name)

 By:-------------------------------------------------------------------
Authorized Agent
Title

-----------------------------------------------------------------------
Principal
Title
U.S. Department of Housing and Urban Development

 By:-------------------------------------------------------------------
Authorized Agent

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

-----------------------------------------------------------------------
Name of Entity:

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------
[Add Additional Lines if More Than Two Signatories]
Warning
    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
12 U.S.C. 1715z-19, 1715z-4a and 1735f-15 and 31 U.S.C. 3729; and (iii) 
administrative sanctions, claims, and penalties under 24 CFR parts 24, 
28 and 30.

    Notice: This Document Must Have a Legal Description Attached and Be 
Executed With All Formalities Required for Recording a Deed to Real 
Estate (i.e., Notary/Acknowledgement, Seal, Witness or Other 
Appropriate Formalities).

OMB Approval No. 0000-0000

(Exp. 00/00/00)
    Public Reporting Burden for this collection of information is 
estimated to average .75 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.


[[Page 46255]]


Recording Requested by:

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After Recording return to:

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REGULATORY AGREEMENT 
FOR HEALTH CARE FACILITIES UNDER SECTION 232 OF THE NATIONAL HOUSING 
ACT, AS AMENDED

    Replaces HUD 92466, 92466-NHL, 2466-e,

HUD Project No.:
Lender:
Original Principal Amount of Multifamily/Health Care Facility Note:
Date of Note:
Security Instrument Recorded:
State
County
Date
Book/Volume
Page
Instrument/Document Number
Borrower:
Profit-Motivated----
Limited Dividend----
Public Body----
Non-Profit----
    Type of Facility: The Borrower and Lessee, if applicable, shall 
suitably equip and operate the Project as a (check applicable 
provision.):

[ ] Nursing Home
[ ] Intermediate Care Facility
[ ] Board and Care Facility [ ] Assisted Living Facility
[ ] Combination of above (Specify per commitment)------

    Processed under:

[ ] MAP
[ ] TAP

(Failure to check the appropriate spaces shall not affect the 
enforceability of this Agreement or its application to the appropriate 
type of Health Care Facility, as determined by reference to the HUD 
firm commitment for the Project.)

    Indicate number of beds and/or units and deviation in such number 
from the Certificate of Need or other operating authority, if any:----
----

    This Agreement is entered into this--------day of--------, 20----, 
between or among--------, a--------organized and existing under the 
laws of------, whose address is----------, its successors, heirs, and 
assigns (jointly and severally) (Borrower),--------, a--------organized 
and existing under the laws of------, whose address is------------, its 
successors, heirs, and assigns (jointly and severally)[Lessee and/or 
Operator of a Health Care Facility, if applicable], and the Secretary 
of Housing and Urban Development, his or her successors, assigns or 
designees (HUD).
    In consideration of, and in exchange for an action by HUD, HUD, the 
Borrower and the Lessee and/or Operator of a Health Care Facility, if 
applicable, agree to the terms of this Agreement. The HUD action may be 
one of the following: the endorsement for insurance by HUD of the Note, 
the consent of HUD to the transfer of the Mortgaged Property, the sale 
and conveyance of the Mortgaged Property by HUD, or the consent of HUD 
for other actions related to the Borrower and Lessee, and/or Operator 
or to the Mortgaged Property.
    Further, the Borrower, HUD and the Lessee and/or Operator, if 
applicable, execute this Agreement in order to comply with the 
requirements of the National Housing Act, any related legislation, 
regulations, and administrative requirements adopted by HUD. This 
Agreement shall continue during such period of time as HUD shall be the 
owner, holder, or insurer of the Note, or is obligated to protect 
rights of residents of the Mortgaged Property.
    Violation of this Agreement or of the regulations and Directives of 
HUD may subject the Borrower, {and the Lessee and/or Operator,{time}  
if applicable, and related parties to adverse actions. See Article VII 
below.
    Agreements: The Borrower, HUD {and the Lessee and/or 
Operator{time}  covenant and agree as follows:

I. Definitions

    1. Definitions. The following terms, when used in this Agreement 
(including when used in the above recitals), shall have the following 
meanings, whether capitalized or not and whether singular or plural, 
unless, in the context, an incongruity results:
    a. ``Affiliate'' Persons and entities are affiliates of each other 
if, directly or indirectly, either one controls or has the power to 
control the other or a third person controls or has the power to 
control both. Indicia of control include, but are not limited to: 
interlocking management or ownership, identity of interests among 
family members, shared facilities and equipment, common use of 
employees, or a business entity organized following the suspension or 
debarment of a person or entity which has the same or similar 
management, ownership, or principal employees as the suspended, 
debarred, ineligible, or voluntarily excluded person or entity.
    b. ``Assisted Living Facility (ALF)'' means a public facility, 
proprietary facility, or facility of a private non-profit corporation 
that is licensed and regulated by the State, municipality or other 
political subdivision where the Project is located. The Borrower must 
make available to the residents supportive services necessary to carry 
out activities of daily living, provide separate dwelling units for the 
residents and provide facilities appropriate for the provision of 
supportive services. Residency in an ALF is restricted to persons 62 
years of age and older and having a need for assistance in three or 
more activities of daily living.
    c. ``Bed Authority'' means any and all rights and documentation 
pertaining to the maximum number of beds allowed, including 
certificates of need (CoN) where issued, required by and granted or to 
be granted by the State of jurisdiction and its political subdivisions 
for operation of the project.
    d. ``Board and Care Home'' means a proprietary residential facility 
or a residential facility owned by a private nonprofit corporation or 
association that provides room, board and continuous protective 
oversight and which facility is regulated by a State in accordance with 
Section 1616(e) of the Social Security Act.
    e. ``Borrower'' means all persons or entities identified as 
``Borrower'' in the first paragraph of the Security Instrument, 
together with any successors and assignees. Borrower shall include any 
person or entity taking title to the Mortgaged Property whether or not 
such person or entity assumes the Note. Whenever the term ``Borrower'' 
is used herein, the same shall be deemed to include the Obligor of the 
debt secured by the Security Instrument and shall also be deemed to be 
the Mortgagor as defined by the National Housing Act, as amended, 
implementing regulations and Directives.
    f. ``Directives (of HUD)'' includes written guidance issued by HUD, 
at the time of origination and subsequently, relating to HUD's Health 
Care Facility insurance programs under the National Housing Act, as 
amended, and any successive legislation. Directives include handbooks, 
guidebooks, Notices, Mortgagee Letters and other written directives 
issued by HUD whether or not published in the Federal Register.
    g. ``Distribution'' means any disbursal, conveyance or transfer of 
cash, any asset of the Borrower, or any portion of the Mortgaged 
Property, including the

[[Page 46256]]

segregation of cash or assets for subsequent withdrawal as Surplus 
Cash, other than in payment of expenses that are determined by HUD to 
be reasonable and necessary.
    h. ``Fixtures'' means all property which is so attached to the Land 
or the Improvements as to constitute a fixture under applicable law, 
whether acquired now or in the future, including: machinery, equipment 
(including medical equipment and systems), engines, boilers, 
incinerators, installed building materials; systems and equipment for 
the purpose of supplying or distributing heating, cooling, electricity, 
gas, water, air, or light; antennas, cable, wiring and conduits used in 
connection with radio, television, computers, medical systems, 
security, fire prevention, or fire detection or otherwise used to carry 
electronic signals; telephone systems and equipment; elevators and 
related machinery and equipment; fire detection, prevention and 
extinguishing systems and apparatus; security and access control 
systems and apparatus; plumbing systems; water heaters, ranges, stoves, 
microwave ovens, refrigerators, dishwashers, garbage disposals, 
washers, dryers and other appliances; light fixtures, awnings, storm 
windows and storm doors; pictures, screens, blinds, shades, curtains 
and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall 
coverings; fences, trees and plants.
    i. ``Governmental Approval'' means any license, permit or 
certificate of need or other approval, necessary and required by the 
State or the municipality or other political subdivision in which the 
facility is located in order to operate the Project and to receive 
benefits under a provider agreement with Medicaid, Medicare or other 
assistance required by HUD's commitment to insure the Security 
Instrument.
    j. ``Health Care Facility'' means, but is not limited to, a skilled 
nursing home facility, intermediate care facility, board and care home 
and assisted living facility and supplemental loans to finance 
improvements, additions and equipment to these Health Care Facilities 
as authorized under the National Housing Act or other applicable 
federal law.
    k. ``HUD'' means the United States Department of Housing and Urban 
Development acting by and through the Secretary in the capacity as 
insurer or holder of the loan secured by the Security Instrument under 
the authority of the National Housing Act, as amended, the Department 
of Housing and Urban Development Act, as amended, or any other federal 
law or regulation pertaining to the loan (as evidenced by the Note) or 
the Mortgaged Property.
    l. ``Intermediate Care Facility'' means a proprietary facility or a 
facility of a private nonprofit corporation or association licensed or 
regulated by the State, municipality or political subdivision where the 
facility is located. The facility must provide for the accommodation of 
persons who, because of incapacitating infirmities, require minimum, 
but continuous care, and are not in need of continuous medical or 
nursing services. In addition the term Intermediate Care Facility may 
include such additional facilities as may be authorized by HUD for the 
nonresidential care of elderly individuals and others who are able to 
live independently, but who require care during the day.
    m. ``Impositions'' and ``Imposition Deposits'' are defined in the 
Security Instrument.
    n. ``Improvements'' means the buildings, structures, and 
alterations now constructed or at any time in the future constructed or 
placed upon the Land, including any future replacements and additions.
    o. ``Indebtedness'' means the principal of, interest on, and all 
other amounts due at any time under the Note or the Security 
Instrument, including prepayment premiums, late charges, default 
interest, and advances to protect the security as provided in the 
Security Instrument.
    p. ``Land'' means the estate in realty described in Exhibit A.
    q. ``Lease(s)'' means all present and future leases, licenses, 
concessions or grants or other possessory interests now or hereafter in 
force, whether oral or written, covering or affecting the Mortgaged 
Property, or any portion of the Mortgaged Property (including 
proprietary leases and non-residential leases), and all modifications, 
extensions or renewals. In particular, Lease may also mean, but is not 
limited to, (1) the agreements between the Borrower/Lessor and the 
operator/Lessee of the facility by which the Lessee agrees to operate 
and manage the facility, and/or portion thereof; (2) any agreement 
between the Health Care Facility and a Lessee/provider of medical and 
related services proper and necessary for the care and treatment of 
persons who are acutely ill who require medical or health care 
customarily, or most effectively, provided for by Health Care 
Facilities; and (3) an `Admission Agreement,' which is a resident's 
lease arrangement with a Nursing Home, Board and Care Home, or ALF.
    r. ``Lender'' means the entity identified as ``Lender'' in the 
first paragraph of the Security Instrument, or any subsequent holder of 
the Note, and whenever the term ``Lender'' is used herein, the same 
shall be deemed to include the Obligee, or the Trustee(s) and the 
Beneficiary of the Security Instrument and shall also be deemed to be 
the Mortgagee as defined by the National Housing Act, as amended, 
implementing regulations and Directives.
    s. ``Lessee of a Health Care Facility'', or ``Lessee'' means an 
entity which has a lease or other agreement with the Borrower to 
operate and manage a Health Care Facility to provide housing, medical 
and related services that are proper and necessary for the care and 
treatment of the residents.
    t. ``Limited Dividend Borrower'' means a limited dividend 
corporation or other limited dividend entity which is restricted by 
Federal or State law or by HUD as to rate of return and other aspects 
of its operation.
    u. ``Mortgaged Property'' means all of the Borrower's present and 
future right, title and interest in and to all of the following:
    (1) The Land;
    (2) The Improvements;
    (3) The Fixtures;
    (4) The Personalty;
    (5) All current and future rights, including air rights, 
development rights, zoning rights and other similar rights or 
interests, easements, tenements, rights-of-way, strips and gores of 
land, streets, alleys, roads, sewer rights, waters, watercourses, and 
appurtenances related to or benefiting the Land or the Improvements, or 
both, and all rights-of-way, streets, alleys and roads which may have 
been or may in the future be vacated;
    (6) All proceeds paid or to be paid by any insurer of the Land, the 
Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, whether or not Borrower obtained the insurance 
pursuant to Lender's requirement;
    (7) All awards, payments and other compensation made or to be made 
by any municipal, State or Federal authority with respect to the Land, 
the Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property, including any awards or settlements resulting from 
condemnation proceedings or the total or partial taking of the Land, 
the Improvements, the Fixtures, the Personalty or any other part of the 
Mortgaged Property under the power of eminent domain or otherwise and

[[Page 46257]]

including any conveyance in lieu thereof;
    (8) All contracts, options and other agreements for the sale of the 
Land, the Improvements, the Fixtures, the Personalty or any other part 
of the Mortgaged Property entered into by Borrower now or in the 
future, including cash or securities deposited to secure performance by 
parties of their obligations;
    (9) All proceeds from the conversion, voluntary or involuntary, of 
any of the above into cash or liquidated claims, and the right to 
collect such proceeds;
    (10) All Receivables and Leases;
    (11) All earnings, royalties, instruments, accounts, accounts 
receivable, supporting obligations, issues and profits from the Land, 
the Improvements or any other part of the Mortgaged Property, and all 
undisbursed proceeds of the loan secured by the Security Instrument;
    (12) All Imposition Deposits;
    (13) All refunds or rebates of Impositions by any municipal, State 
or Federal authority or insurance company (other than refunds 
applicable to periods before the real property tax year in which the 
Security Instrument is dated);
    (14) All names under or by which any of the above Mortgaged 
Property may be operated or known, and all trademarks, trade names, and 
goodwill relating to any of the Mortgaged Property; and
    (15) Mortgaged Property also includes, but is not limited to, any 
and all licenses, Bed Authority, and/or Certificates of Need required 
to operate the facility and receive the benefits and reimbursements 
under a provider agreement with Medicaid, Medicare, any State or local 
program, health care insurers or other assistance providers relied upon 
by HUD to insure the Security Instrument, to the extent allowed by law 
and regardless of whether such rights and contracts are held by the 
Borrower, Lessee or an Operator. Mortgaged Property also includes all 
receipts, revenues, income and other moneys received by or on behalf of 
the Health Care Facility, including all accounts receivable, all 
contributions, donations, gifts, grants, bequests, all revenues derived 
from the operation of the Health Care Facility and all rights to 
receive the same, whether in the form of accounts receivable, contract 
rights, chattel paper, instruments or other rights whether now owned or 
held or later acquired by the Health Care Facility.
    v. ``Non-Profit Borrower'' means a Borrower which is a corporation 
or association organized for purposes other than profit or gain for 
itself or persons identified therewith and which HUD finds is in no way 
controlled by or under the direction of persons or firms seeking to 
derive profit or gain therefrom. Minimally, the entity may not make 
Distributions to any individual member or shareholder.
    w. ``Note'' means the Multifamily/Health Care Facility Note 
described in the Security Instrument, including all schedules, riders, 
allonges and addenda, as such Multifamily/Health Care Facility Note may 
be amended from time to time.
    x. ``Nursing Home'' means a public facility, proprietary facility 
or a facility owned by a private nonprofit corporation or association 
licensed or regulated by the State, municipality or political 
subdivision where the facility is located, for the accommodation of 
convalescents or other persons who are not acutely ill and not in need 
of hospital care but who require skilled nursing and related medical 
services which are prescribed by or under the direction of persons 
licensed by the laws of the State where the facility is located. In 
addition the term Nursing Home may include such additional facilities 
as may be authorized by HUD for the nonresidential care of elderly 
individuals and others who are able to live independently, but who 
require care during the day.
    y. ``Operator'' means any party who operates or manages the Health 
Care Facility under a management agreement, operating agreement or 
similar contract with either the Borrower or Lessee.
    z. ``Personalty'' means all furniture, furnishings, equipment, 
machinery, building materials, appliances, goods, supplies, tools, 
books, records (whether in written or electronic form), computer 
equipment (hardware and software) and other tangible or electronically 
stored personal property (other than Fixtures) which are owned or 
leased by the Borrower or the Lessee now or in the future in connection 
with the ownership, management or operation of the Land or the 
Improvements or are located on the Land or in the Improvements, and any 
operating agreements relating to the Land or the Improvements, and any 
surveys, plans and specifications and contracts for architectural, 
engineering and construction services relating to the Land or the 
Improvements, choses in action and all other intangible property and 
rights relating to the operation of, or used in connection with, the 
Land or the Improvements, including all governmental permits relating 
to any activities on the Land. Personalty also includes all tangible 
and intangible personal property used for health care (such as major 
movable equipment and systems), accounts, licenses, bed authorities, 
certificates of need required to operate the project and to receive 
benefits and reimbursements under provider agreements with Medicaid, 
Medicare, State and local programs, payments from health care insurers 
and any other assistance providers (``Receivables''); all permits, 
instruments, rents, lease and contract rights, equipment leases 
relating to the use, operation, maintenance, repair and improvement of 
the Health Care Facility. Generally, intangibles shall also include all 
cash and cash escrow funds, such as but not limited to: sinking fund 
accounts, depreciation reserve fund accounts, mortgage reserve fund 
accounts, reserve for replacement accounts, bank accounts, residual 
receipt accounts, all contributions, donations, gifts, grants, bequests 
and endowment funds by donors and all other revenues and accounts 
receivable from whatever source paid or payable.
    aa. ``Principals'' are the following legal and natural persons 
having ownership interests in the Borrower: natural persons who are 
sole owners, joint venturers, joint tenants, tenants by the entirety, 
trustees or beneficiaries of trusts, and all general partners; in the 
case of limited partnerships, limited partners having a twenty-five 
(25%) percent or more interest in the partnership; in the case of 
public or private corporations or governmental entities, the president, 
vice president, secretary, treasurer, and all other executive officers 
who are directly responsible to the board of directors, or any 
equivalent governing body, as well as all directors and each 
stockholder having a ten (10%) percent or more interest in the 
corporation; in the case of a Limited Liability Company (LLC) or a 
Limited Liability Partnership (LLP), all managing members or partners, 
all managers, and all members or partners with a ten (10%) percent or 
greater governance interest or a twenty-five (25%) percent or greater 
financial interest.
    bb. ``Project'' means the Mortgaged Property and all other assets 
of whatever nature or wherever located, used in, owned by or leased by 
the Borrower or the Lessee in conducting the business on the Mortgaged 
Property, which business is providing health care facilities and other 
related activities.
    cc. ``Property Jurisdiction'' is (are) the jurisdiction(s) in which 
the Land is located.
    dd. ``Project Revenue'' means all income derived from private pay, 
benefits and reimbursements under provider agreements with Medicaid,

[[Page 46258]]

Medicare, State and local programs, payments from health care insurers 
and any other assistance providers, all rents, charges and fees 
received from leasing space on the Mortgaged Property, all 
contributions, donations, gifts, grants, bequests and endowment funds 
by donors and all other revenues received from any source paid or 
unpaid, including but not limited to all accounts receivable, 
undisbursed funds in Surplus Cash, Residual Receipts, escrow accounts 
and other assistance available for Project operation.
    ee. ``Public Body Borrower'' means a Federal instrumentality, a 
State or political subdivision thereof, or an instrumentality of a 
State or a political subdivision thereof, which certifies that it is 
not receiving financial assistance from the United States exclusively 
pursuant to the United States Housing Act of 1937 (with the exception 
of projects assisted or to be assisted pursuant to Section 8 of such 
Act) and which is acceptable to HUD.
    ff. ``Reasonable operating expense'' means an expense which arises 
from the everyday operation and maintenance of the Project and which 
primarily benefits the Project as opposed to the Borrower.
    gg. ``Receivables'' means all receivables (whether from residential 
or non-residential space), revenues, issues, profits, and other income 
of the Land or the Improvements, including all revenues, gross receipts 
and receivables in connection with medical services and care, and all 
pledges, gifts, grants, bequests, contributions and endowments, parking 
fees, laundry and vending machine income and fees and charges for food, 
health care and other services provided at the Mortgaged Property, 
whether now due, past due, or to become due.
    hh. ``Residual Receipts'' is a term that applies to certain funds 
held by Non-Profit, Public Body and Limited Dividend Mortgagors whose 
Notes are insured or held by HUD pursuant to Section 232 of the 
National Housing Act. Residual Receipts are calculated by determining 
an amount of Surplus Cash (defined below).
    After the calculation of Surplus Cash, as described below, the 
Borrower may make any Distributions permitted by this Agreement, HUD 
regulations and Directives. ``Residual Receipts'' will be the 
restrictive cash held by Section 232 Non-Profit, Public Body, and 
Limited Dividend Mortgagors remaining after any allowable 
Distributions. The use of these Residual Receipts is restricted under 
this Agreement.
    ii. ``Security Instrument'' means the Multifamily/Health Care 
Mortgage, Deed of Trust Form HUD-94000M, or other designation as 
appropriate by Property Jurisdiction, Security Agreement, and any other 
security for the Indebtedness and shall be deemed to be the mortgage as 
defined by the National Housing Act, as amended, implementing 
regulations and Directives.
    jj. ``Sinking Fund Agreement'' or ``Depreciation Reserve Fund'' 
means an agreement between the Borrower and Lessee, if applicable and 
the Lender, in which deposits are made into a separate depreciation 
reimbursement account to pay future principle payments on the Note, 
where Medicaid or other third-party reimbursement is on a depreciation 
plus interest basis.
    kk. ``Surplus Cash'' means any cash plus amounts receivable (earned 
in the applicable fiscal period) remaining after:
    (1) The payment of: (i) all sums immediately due or currently 
required to be paid under the terms of the Note, the Security 
Instrument and this Agreement due on the first day of the month 
following the end of the fiscal period; including without limitation, 
all amounts required to be deposited in the Reserve for Replacement, 
sinking fund or other reserves as may be required by HUD; and (ii) all 
other obligations of the Project (accounts payable and accrued, 
unescrowed expenses) unless funds for payment are set aside or 
deferment of payment has been approved by HUD, and
    (2) The segregation and recording of: (i) an amount equal to the 
aggregate of all special funds required to be maintained by the 
Borrower; (ii) the greater of the Borrower's total liability or the 
amount held by the Borrower for tenant security deposits; and (iii) all 
accounts and accrued items payable within thirty (30) days after the 
end of the fiscal period.
    ll. ``State'' includes the several States and Puerto Rico, the 
District of Columbia, Guam, the Trust Territory of the Pacific Islands, 
American Samoa, and the Virgin Islands.
    mm. ``Taxes'' means all taxes, assessments, vault rentals and other 
charges, if any, general, special or otherwise, including all 
assessments for schools, public betterments and general or local 
improvements, which are levied, assessed or imposed by any public 
authority or quasi-public authority, and which, if not paid, could 
become a lien on the Land or the Improvements.

II. Construction

    2. Construction Funds. The Borrower shall keep construction funds 
of the Mortgaged Property separate and apart from operating funds of 
the Mortgaged Property.
    3. Unpaid Obligations. Upon final endorsement of the Note, Borrower 
shall have no unpaid obligations in connection with the purchase of the 
Mortgaged Property, the construction of the Mortgaged Property, or with 
respect to the Security Instrument insured by HUD except such unpaid 
obligations, as have the written approval of HUD as to terms, form and 
amount.
    4. Mortgagee's Certificate. The Borrower shall be bound by the 
terms of the Mortgagee's Certificate insofar as it establishes or 
reflects obligations of the Borrower and the Borrower agrees that the 
fees and expenses enumerated in that Certificate have been fully paid 
or payment has been provided for in the Certificate and that all funds 
deposited with the Lender will be used for the purposes set forth in 
the Certificate.
    5. Construction Commencement. The Borrower shall not commence, and 
has not commenced, construction of the Mortgaged Property prior to HUD 
endorsement of the Note, except that this Section 5 is not applicable 
if HUD has given prior written approval to an early start of 
construction, or if this Project is an Insurance Upon Completion or a 
refinance.
    6. Drawings And Specifications. The Mortgaged Property shall be 
constructed in accordance with the terms of the Construction Contract, 
if any, and with the ``Drawings and Specifications.''
    7. Required Permits. The Borrower shall obtain all necessary 
building and other permits and the Mortgaged Property shall not be 
occupied or used by any resident or user without the prior written 
approval of HUD and from all other legal authorities having 
jurisdiction of the Mortgaged Property.
    8. Outstanding Obligations. The Borrower shall have no obligations 
as of the date of this Agreement except those approved by HUD and, 
except for those approved obligations, the Land has been paid for in 
full and is free from any liens or purchase money obligations.
    9. Accounting Requirements. The Borrower shall submit an accounting 
to HUD for all receipts and disbursements during the period starting 
with the date of first occupancy of the Mortgaged Property and ending, 
at the option of the Borrower, either on (a) the last day of the month 
in which the Mortgaged Property is determined by HUD to be acceptably 
completed; or (b) sixty days from the date the Mortgaged Property is 
determined by HUD to be acceptably completed. The excess of project 
income over property disbursements, as determined by HUD, shall be 
treated as a recovery of construction cost.

[[Page 46259]]

III. Financial Management

    10. Payments. The Borrower shall make promptly all payments due 
under the Note and Security Instrument and, if a lease of the Project 
is involved, in addition, Lessee shall make all payments required under 
the Lease consistent with the terms of the Lease.
    11. Reserve for Replacement Fund. The Borrower shall establish and 
maintain a Reserve for Replacement account for defraying certain costs 
for replacing major structural elements and mechanical equipment of the 
Project or for any other purpose. The Reserve for Replacement shall be 
bifurcated, as set forth in the Commitment, to cover (1) the costs 
associated with the replacement of major moveable equipment and (2) the 
costs associated with major repairs to the physical structure of the 
Project. The use of a bifurcated fund will ensure that the monies in 
the Reserve for Replacement are sufficient to pay for the costs 
associated with not only the replacement of major moveable equipment 
but also for major repairs to the physical structure of the Project. 
Separate sub-accounts shall be maintained within the Reserve for 
Replacement and monies in these two accounts shall not be commingled. 
Lender shall ensure that amounts are withdrawn from a particular sub-
account only for use consistent with that particular sub-account as 
approved by HUD.
    a. The Reserve for Replacement shall be held by the Lender or by a 
safe and responsible depository designated by the Lender pursuant to 
the requirements of the contract of mortgage insurance. Such funds 
shall at all times remain under the control of the Lender, whether in 
the form of a cash deposit or invested in obligations of, or fully 
guaranteed as to principal by, the United States of America or in such 
other investments as may be allowed by HUD.
    b. The Borrower shall deposit at endorsement of the Note, if 
applicable, (1) an initial amount of $---- in the sub-account 
designated to cover the costs associated with the replacement of major 
moveable equipment, and (2) an initial amount of $---- in the sub-
account designated to cover the costs associated with major repairs to 
the physical structure of the Project; and the Borrower shall deposit 
(1) a monthly amount of $---- to cover the costs associated with the 
replacement of major moveable equipment, and (2) a monthly amount of 
$---- to cover the costs associated with major repairs to the physical 
structure of the Project, concurrently with the beginning of payments 
towards amortization of the Note unless a different date or amount is 
established by HUD. At least every ten years, starting from the date of 
endorsement, and more frequently at HUD's discretion, the Borrower 
shall submit a written analysis of its use of the Reserve for 
Replacement during the prior ten years and the projected use of the 
Reserve for Replacement funds during the coming ten years to HUD. The 
amount of the monthly deposit may be increased or decreased from time 
to time at the written direction of HUD without a recorded amendment to 
this Agreement.
    c. The Borrower shall carry the balance in this fund on the 
financial records as a restricted asset. The Reserve For Replacement 
shall be invested in interest bearing accounts or investments, and any 
interest earned on the investment shall be deposited in the Reserve for 
Replacement for use by the Project in accordance with this Section 11.
    d. Disbursements from such fund shall only be made after consent, 
in writing, of HUD. In the event of a Declaration of Default under the 
terms of the Security Instrument, pursuant to which the Indebtedness 
has been accelerated, a written notification by HUD to the Borrower of 
a violation of this Agreement or at such other times as determined 
solely by HUD, HUD may direct the application of the balance in such 
fund to the amount due on the Indebtedness as accelerated or for such 
other purposes as may be determined solely by HUD.
    e. Where the Project is already subject to a Security Instrument 
insured or held by HUD as of the date hereof and this Agreement is now 
being executed by the Borrower as of the date hereof, the Reserve for 
Replacement now to be established shall be equal to the amount due to 
be in such fund under existing Agreements or charter provisions, and 
payments hereunder shall begin with the first payment due on the 
Security Instrument after acquisition, unless some other method of 
establishing and maintaining the fund is approved in writing by HUD.
    12. Sinking Fund. Where Medicaid or other third-party reimbursement 
is on a depreciation plus interest basis, the Borrower and Lessee, if 
applicable, shall make deposits to the Lender or a depository 
satisfactory to the Lender under the terms of a Sinking Fund Agreement. 
The Borrower and Lessee, if applicable, shall comply with the HUD 
requirements pertaining to the Sinking Fund Agreement as set forth in 
the Mortgagee's Certificate. Monies in the Sinking Fund will be used to 
make payments of principal on the Note in later years to the extent 
that such principal payment exceeds the amount of depreciation 
reimbursement available for payment to principal at that time.
    a. The Sinking Fund Agreement shall provide that in the event of a 
default under the Security Instrument pursuant to which the Note has 
been accelerated, HUD may apply or authorize the application of the 
balance of such fund to the amount due on the Note as accelerated.
    b. The Borrower and Lessee, if applicable, shall prepare and file 
with the Lender by October 1 of each year, a depreciation schedule 
reviewed by the Borrower's Independent Public Accountant showing the 
total projected reimbursement for depreciation and amount payable for 
principal payments coming due in each fiscal year including the current 
fiscal year.
    c. The Mortgagee's Certificate requires the Lender to prepare and 
file with the Borrower by January 1 of each year, a funding schedule 
reflecting the amount required to be deposited in the Sinking Fund 
Account in each project fiscal year, and the cumulative balance in the 
account at the end of each such project fiscal year. Sums shall be 
deposited monthly into the account within fifteen (15) days of the 
close of each month, and shall commence upon the earlier of the 
commencement of amortization, as established in the commitment issued 
by HUD, or the initial receipt by the Borrower and the Lessee, if 
applicable, of depreciation reimbursement from any third-party payer. 
Such fund must at all times be held by or under the control of the 
Lender, and must be invested in a manner that conforms to the same 
standards established by HUD for the investment of reserve for 
replacement funds.
    d. In the event of any conflict or inconsistency between the 
Sinking Fund Agreement and the Security Instrument, Note, Regulatory 
Agreement, applicable regulations and Directives, the said Security 
Instrument, Note, Regulatory Agreement, regulations and Directives will 
control.
    e. Nothing in this Agreement shall impair or prejudice any right 
that HUD may have with respect to the Sinking Fund, particularly 
relating to the duty of the Lender to hold such funds for and on behalf 
of the Borrower.
    f. Any Lease must contain provisions consistent with these 
requirements and all Leases and Operating Agreements must be reviewed 
and approved in writing by HUD.
    g. In the event of any financial default by the Borrower, HUD is 
authorized

[[Page 46260]]

hereby to direct the Lender to cure such default with monies from the 
Sinking Fund.
    h. If the State changes the reimbursement system and the Project is 
negatively affected, HUD may authorize an amended amortization schedule 
with respect to contributions to the Sinking Fund.
    13. Residual Receipts. Section 232 Non-Profit, Public Body, and 
Limited Dividend Mortgagors shall establish and maintain, in addition 
to the Reserve for Replacement, a Residual Receipts Fund by depositing 
thereto, with the Lender, the Residual Receipts, as defined herein, 
within ninety (90) days after the end of the semiannual or annual 
fiscal period within which such receipts are realized. Such fund shall 
be held by the Lender or by a safe and responsible depository 
designated by the Lender in an interest bearing account. The Residual 
Receipts shall be under the control of HUD, and shall be disbursed only 
on the direction of HUD, who shall have the power and authority to 
direct that the Residual Receipts, or any part thereof, be used for 
such purpose as it may determine. Any Lease must contain payment 
provisions covering these deposits as part of the Lease payments.
    14. Project Property And Operation; Encumbrances. (a) The Borrower 
shall deposit all receivables and other receipts of the Project and all 
receivables and other receipts of the Project in connection with the 
financing of the Project, including equity or capital contributions, in 
the name of the Project in a federally insured depository or 
depositories and in accordance with Directives. Such funds shall be 
withdrawn only in accordance with the provisions of this Agreement for 
reasonable and necessary expenses of the Project or for distribution of 
Surplus Cash or as reimbursement of advances as permitted by Sections 
15 and 16 below. Any person or entity receiving Mortgaged Property 
other than for payment of reasonable and necessary expenses or repairs 
or authorized Distributions of Surplus Cash shall immediately deliver 
such Mortgaged Property to the Project and failing so to do shall hold 
such Mortgaged Property in trust. (b) The Borrower, except for natural 
person Mortgagors, shall not engage in any business or activity, 
including the operation of any other Project, or incur any liability or 
obligation not in connection with the Project, nor acquire or contract 
to enter into any affiliation with any party. (c) The Borrower shall 
satisfy or obtain a release of any mechanic's lien, attachment, 
judgment lien, or any other lien which attaches to any real or personal 
property of the Project or is used in its operation. (d) Delinquent tax 
penalties shall not be charged to the Project.
    15. Distributions. The Borrower shall not make, or receive and 
retain, nor allow any Affiliate to receive or retain any Distribution 
of assets or any income of any kind of the Project, except from Surplus 
Cash. Distributions are governed by the following conditions:
    a. No Distribution shall be made from borrowed funds. Distributions 
shall not be taken prior to the completion of the Project. 
Distributions shall not be taken after HUD has given notice to the 
Borrower of a violation under this Agreement or a default has been 
declared under the Note or Security Instrument. Distributions shall not 
be taken when a Project is under a forbearance agreement.
    b. No Distribution shall be made when either (i) necessary services 
(utilities, trash removal, security, lawn service or any other services 
which the Borrower is required to provide) have not been provided, 
which failure the Borrower should have known about in the exercise of 
due care; (ii) notices of physical repairs or deficiencies (including 
but not limited to building code violations) by other Federal, State or 
local governing bodies and/or by HUD have been issued and remain 
unresolved to the satisfaction of the issuing public body or (iii) the 
Borrower has been notified by HUD, the Lender or other Federal, State 
or local governing body that physical repairs and/or deficiencies exist 
and the Borrower has not corrected or cured the identified items to 
HUD's satisfaction. HUD may permit Distributions when there are minor 
or contested local code violations on a case-by-case basis.
    c. Any Distribution of any funds of the Project, which the party 
receiving such funds is not entitled to retain hereunder, shall be 
returned to the Project account immediately.
    d. All allowable Distributions shall be made only after the end of 
a semiannual or annual fiscal period, and only as permitted by the law 
of the applicable jurisdiction. All such Distributions to Section 232 
Limited Distribution Mortgagors in any one fiscal year shall be limited 
to 6 percent on the initial equity investment, as determined by HUD, or 
to such other amounts as may be specified in Directives and the right 
to such Distributions shall be cumulative. No Distributions may be 
taken in the case of Section 232 Public Body or Nonprofit Mortgagors 
unless permitted by regulation or Directives. Distributions must be 
taken out of all Project accounts by all other Borrowers within the 
accounting period immediately following the computation of Surplus Cash 
and, if not taken within the identified period, these funds may only be 
used for reasonable and necessary Project operating expenses and 
repairs. The computation of Surplus Cash must be prepared at the end of 
the semiannual or annual fiscal period.
    e. Equity or capital contributions shall not be reimbursed from 
project accounts without the prior written approval of HUD.
    16. Reimbursement of Advances. Any advances made by the Borrower, 
on behalf of the Borrower, or for the Borrower must be deposited into 
the Project account. The Borrower or any entity which advances funds on 
behalf of the Borrower or for the Borrower for reasonable and necessary 
operating expenses or repairs may be reimbursed from Surplus Cash at 
the end of the annual or semiannual period. Such repayment is not 
considered a Distribution. Monthly reimbursement of the Borrower or any 
entity that advances funds on behalf of the Borrower or for the 
Borrower may be allowed with prior written approval by HUD.
    17. Financial Accounting. The Borrower shall keep the books and 
accounts of the operation of the Mortgaged Property in accordance with 
the requirements of Generally Accepted Accounting Principles (GAAP) and 
of HUD. The books and accounts must be complete, accurate and current 
at all times. Posting must be made at least monthly to the ledger 
accounts, and year-end adjusting entries must be posted promptly in 
accordance with sound accounting principles. Any undocumented 
Distribution or expense shall be an ineligible project expense, unless 
otherwise determined by HUD. Books, accounts and records shall be open 
and available for inspection by HUD, after reasonable prior notice, 
during normal office hours, at the Project or other mutually agreeable 
location.
    18. Books of Management Agents. The books and records of management 
agents, Lessees, Operators, managers and Affiliates, as they pertain to 
the operations of the Project, shall be maintained in accordance with 
GAAP and shall be open and available to inspection by HUD, after 
reasonable prior notice, during normal office hours, at the Project or 
other mutually agreeable location. Every contract executed on behalf of 
the Project with any of the aforesaid parties shall include the 
provision that the books and records of such entities shall be properly 
maintained and open to inspection during normal business hours by HUD

[[Page 46261]]

at the Project or other mutually agreeable location.
    19. Annual Financial Audit. Within ninety (90) days, or such longer 
or shorter period established in writing by HUD, following the end of 
each fiscal year, the Borrower shall furnish HUD and the Lender with a 
complete annual financial report based upon an examination of the books 
and records of the Borrower prepared in accordance with GAAP, audited 
in accordance with Generally Accepted Auditing Standards (GAAS) and 
Government Auditing Standards (GAS) and any additional requirements of 
HUD unless the report is waived in writing by HUD. If the Borrower 
fails to submit the annual financial report within ninety (90) days of 
said due date, HUD may thereafter hire a Certified Public Accountant to 
prepare the report at the expense of the Borrower. The report shall 
include a certification in content and form prescribed by HUD and 
certified by the Borrower. The report shall be prepared and certified 
by a Certified Public Accountant who is licensed or certified by a 
regulatory authority of a State or other political subdivision of the 
United States, which authority makes the Certified Public Accountant 
subject to regulations, disciplinary measures, or codes of ethics 
prescribed by law. The Certified Public Accountant must have no 
business relationship with the Borrower except for the performance of 
the audit and tax preparation unless HUD expressly authorizes other 
relationships. Auditing costs and tax preparation costs may be charged 
as an authorized expense to the Mortgaged Property only to the extent 
they are required of the Borrower itself by State law, the Internal 
Revenue Service (IRS), the Securities and Exchange Commission, or HUD. 
Neither IRS audit costs nor costs of tax preparation for the Borrower's 
partners, members, shareholders, or other persons receiving 
Distributions from the Borrower may be charged to the Mortgaged 
Property as a Project expense. Non-profit Mortgagors are to follow 
audit requirements specified in OMB Circular A-133, as revised.

IV. Project Management

    20. Equipment. The Borrower and Lessee, if applicable, shall, 
pursuant to HUD regulations, and State and local law, suitably equip 
the Project as a Nursing Home, Intermediate Care Facility, Board and 
Care Home and/or Assisted Living Facility, as designated in the 
commitment. The Borrower and Lessee, if applicable, shall perform all 
obligations of any chattel mortgage, conditional sale, lease or lease-
purchase agreement, or other type of financing arrangement designed to 
acquire equipment for the Project. Any plan for the acquisition of 
equipment (other than outright purchase) must be approved in writing by 
the Lender and HUD and shall contain appropriate provision(s) extending 
to the Lender and its successors or assigns, the option to assume such 
financing (or leasing) obligation of the Borrower upon default. 
Further, such financing (or leasing) arrangement shall require the 
vendor-lessor to furnish written notice of default to the Lender and 
HUD before exercising any rights or remedies otherwise available to the 
vendor-lessor. The Borrower shall execute and record a security 
agreement, chattel mortgage or other appropriate security arrangement 
(as determined by the Lender and HUD) in favor of the Lender covering 
the Borrower's interest in all equipment and other Personalty unique to 
a Health Care Facility except for such equipment and Personalty as HUD 
may exempt from such coverage, in writing. The security instrument for 
such Personalty shall provide that a default in the terms of the Note 
and Security Instrument upon the Land shall also constitute a default 
thereunder.
    21. Licensure. Any necessary license, Bed Authority or other 
Governmental Approval required to operate the Project and to receive 
benefits under a provider agreement with Medicaid, Medicare or other 
assistance provider relied upon by HUD in insuring the Note, shall be 
maintained in full force by the Borrower, and the Borrower shall 
maintain such provider agreements, except where such licenses, Bed 
Authority, Governmental Approval or provider agreements are provided 
and maintained by Lessee or any other party under specific provisions 
of the Lease or any other agreement. The Lender and HUD shall be 
provided with the results of any and all licensing inspections. Any 
problems or violations of State or local requirements must immediately 
be brought to the attention of the Lender and HUD in writing. All 
parties hereto recognize and agree that all necessary licenses, Bed 
Authority and Governmental Approvals are tied to the Project and cannot 
be separated from the Project without the prior written approval of 
both the Lender and HUD.
    22. Bed Capacity. Project bed capacity and Bed Authority shall not 
be reduced or expanded, nor shall the Borrower and the Lessee, if 
applicable, cause or allow such capacity or Bed Authority to be reduced 
or expanded, or converted to any use not originally authorized by HUD 
at endorsement of the Note for mortgage insurance, without prior HUD 
approval.
    23. Mortgaged Property and Revenue. The Mortgaged Property shall 
not be pledged, assigned, transferred, conveyed, sold or otherwise 
obligated without HUD's prior written approval regardless of any 
approval by the Lender. In addition, in the event HUD declares a 
default under terms of this Agreement or the Lender declares a default 
under the Security Instrument:
    a. HUD may direct the Lender to take immediate possession and use 
of such Mortgaged Property upon HUD's Declaration of Default and 
notification of the Borrower or HUD may, with the approval of the 
Lender or after an assignment of the Security Instrument to HUD, take 
immediate possession and use of such Mortgaged Property and expend or 
dispose of such Mortgaged Property at the discretion of HUD. Such 
assignment shall be made without compensation from HUD or any other 
party, and shall include the following collateral:
    i. Project Revenue, as that term is defined herein, and
    ii. Government Approvals (as that term is defined herein) except as 
the jurisdiction may prohibit such assignment; and
    b. These requirements also apply to any operating agreement, 
management agent contract, managing agreement or contract or Lease for 
operation of the Project.
    24. Prohibition of Additional Fees. The Borrower shall not charge 
any Health Care Facility resident or prospective Health Care Facility 
resident an admission fee, founders fee, continuing care retirement 
community fee, life-care fee or similar payment pursuant to any 
agreement to furnish Project accommodations or services to persons 
making such payments.
    25. Notification. The Borrower, and/or the Lessee, and/or the 
Operator, as applicable, shall immediately notify in writing the Lender 
and HUD of any suspension or termination of funding under a provider 
agreement with Medicaid, Medicare, or any other assistance from any 
source whatsoever within 7 days of Borrower's notification or knowledge 
of such suspension or termination. Likewise, Borrower and/or Lessee 
and/or Operator, as applicable, shall notify the Lender and HUD in 
writing of any violation of any State or federal requirement pertaining 
to the operation of the Health Care Facility. Further, Borrower, and/or 
Lessee, and/or Operator, as applicable, shall notify HUD of any 
suspension or revocation of the license or of any moratorium on 
admissions or of any State-imposed

[[Page 46262]]

delays in payment. In all cases full documentation must be furnished 
which includes all correspondence with such federal and State 
authorities.
    26. Preservation, Management and Maintenance of the Mortgaged 
Property. The Borrower (a) shall not commit Waste under the Security 
Instrument nor permit impairment or deterioration of the Mortgaged 
Property, (b) shall not abandon the Mortgaged Property, (c) shall 
restore or repair promptly, in a good and workmanlike manner, any 
damaged part of the Mortgaged Property to the equivalent of its 
original condition, or such other condition as HUD may approve in 
writing, whether or not litigation or insurance proceeds or 
condemnation awards are available to cover any costs of such 
restoration or repair, and (d) shall keep the Mortgaged Property in 
decent, safe, sanitary condition and good repair, including the 
replacement of Personalty and Fixtures with items of equal or better 
function and quality. Obligations (a) through (d) of this Section 24 
are absolute and unconditional and are not limited by any conditions 
precedent and are not contingent on the availability of financial 
assistance from HUD or on HUD's performance of any administrative or 
contractual obligations. The Mortgaged Property, equipment, buildings, 
plans, offices, apparatus, devices, books, contracts, records, 
documents, and other papers and instruments must also be maintained in 
reasonable condition for proper audit and subject to examination by HUD 
at the Project or other mutually agreeable location. Full documentation 
shall be maintained to demonstrate that residency of an ALF is 
restricted as set forth in the definition above. In the event all or 
any of the buildings covered by the Security Instrument shall be 
destroyed or damaged by fire, by an exercise of the power of eminent 
domain, by failure of warranty, or other casualty, the money derived 
from any settlement, judgment, or insurance on the Mortgaged Property 
shall be applied in accordance with the terms of the Security 
Instrument or as otherwise may be directed in writing by HUD.
    27. Flood Hazards. If the Improvements are located in a special 
flood hazard area, the Borrower shall maintain flood insurance covering 
the Improvements in an amount at least equal to its development or 
project cost (less estimated land cost) or to the maximum limit of 
coverage made available with respect to the particular type of property 
under the National Flood Insurance Act of 1968, as amended, or its 
successor legislation, whichever is less, provided that the amount of 
flood insurance need not exceed the outstanding principal balance of 
the Note, and flood insurance need not be maintained beyond the term of 
the Note.
    28. Management Agreement. The Borrower and/or the Lessee, as 
applicable, may, with the prior written approval of HUD, execute a 
management contract, management agent agreement or operating agreement 
or other document outlining procedures for managing or operating the 
Mortgaged Property. Such agreement or document must be acceptable to 
HUD and approved in writing by HUD. The requirements of these 
provisions will be applicable to any party to a management contract or 
operating agreement or management agent or operator contract executed 
in connection with the Project. All Operators shall execute this 
instrument; however, failure to so execute shall in no way impair or 
prejudice the powers and rights of HUD with respect to the 
applicability and enforceability against such parties who fail to 
execute this instrument. Management agents normally will not be 
required to execute this instrument.
    29. Acceptability of Management or Operation of the Mortgaged 
Property. The Borrower shall provide management or operation of the 
Mortgaged Property in a manner deemed to be acceptable by HUD. At HUD's 
discretion, HUD may require replacement of the management or operation 
or require the Borrower to conform the Project to HUD's overall 
management and/or operation policies.
    30. Termination of Contracts. Any management contract, management 
agent agreement or operating agreement entered into by the Borrower, 
Lessee or any other third-party vendor contract pertaining to the 
Mortgaged Property shall contain a provision that the contract shall be 
subject to termination without penalty and without cause upon written 
request by HUD and shall contain a provision which gives no more than a 
thirty day notice of termination. Upon such request, the Borrower shall 
immediately arrange to terminate the contract, and the Borrower shall 
also make arrangements satisfactory to HUD for continuing acceptable 
management of the Mortgaged Property effective as of the termination 
date of the contract.
    31. Contracts for Goods and Services. The Borrower and/or Lessee 
and/or Operator, as applicable, shall obtain contracts for goods, 
materials, supplies, and services (hereinafter referred to as ``goods 
and services'') at the lowest possible cost (including contracts for 
laundry services where laundry services are provided), considering 
quality, durability, and scope of work, and on terms most advantageous 
to the Mortgaged Property. Such expenses may not exceed amounts 
customarily paid in the vicinity of the Land for the goods and services 
received. Reasonable and necessary expenses do not include amounts paid 
for betterments or Improvements unless determined by HUD to be prudent 
and appropriate. When acquiring goods and services whose usual costs 
are expected to exceed the greater of $10,000 or 5 percent of the gross 
annual revenue of the Mortgaged Property, the Borrower and/or Lessee 
and/or Operator, as applicable, shall solicit written cost estimates to 
ensure that prices paid by the Borrower and/or Lessee and/or Operator, 
as applicable, for goods and services, including the preparation of the 
annual audit, are competitive with prices paid in the area for goods 
and services of similar quality. All contracts, including but not 
limited to, contracts for goods and services purchased from individuals 
or companies affiliated with the Borrower and/or Lessee and/or 
Operator, as applicable, shall be at costs not in excess of those that 
would be incurred in making arms-length purchases on the open market. 
The Borrower and/or Lessee and/or Operator, as applicable, shall keep 
copies of all written contracts or other instruments that affect the 
Mortgaged Property, all or any of which may be subject to inspection 
and examination by HUD at the Project or other mutually agreeable 
location.
    32. Commercial (Non-Residential) Leases. No portion of the 
Mortgaged Property shall be leased for any commercial purpose or use 
without receiving HUD's review of all lease instruments and HUD's prior 
written approval.
    33. Responsiveness to Inquiries. At the request of HUD, the 
Borrower and/or Lessee and/or Operator, as applicable, shall promptly 
furnish operating budgets and bed use occupancy, accounting and other 
reports and give specific answers to questions upon which information 
is desired relative to income, assets, liabilities, contracts, 
operation, and conditions of the Mortgaged Property and the status of 
the Security Instrument.
    34. Compliance With Laws.
    a. The Borrower and/or Lessee and/or Operator, as applicable, shall 
comply with all applicable: Laws; ordinances; regulations; requirements 
of any governmental authority; lawful covenants and agreements 
(including the Security Instrument) recorded

[[Page 46263]]

against the Mortgaged Property; the National Housing Act; regulations 
and Directives of HUD; including but not limited to those of the 
foregoing pertaining to: health and safety; maintenance of the 
requisite level of professional liability insurance as determined by 
HUD from time to time; construction of improvements on the Mortgaged 
Property; fair housing; civil rights; zoning and land use; leases; 
lead-based paint maintenance requirements of 24 CFR Part 35 and, with 
respect to all of the foregoing, all subsequent amendments, revisions, 
promulgations or enactments. The Borrower and/or Lessee and/or 
Operator, as applicable, and/or Lessee and/or Operator, as applicable, 
shall at all times maintain records sufficient to demonstrate 
compliance with the provisions of this Section 34. The Borrower and/or 
Lessee and/or Operator, as applicable, shall take appropriate measures 
to prevent, and shall not engage in or knowingly permit, any illegal 
activities at the Mortgaged Property that could endanger the residents 
or visitors, result in damage to the Mortgaged Property, result in 
forfeiture of the Mortgaged Property, or otherwise impair the lien 
created by the Security Instrument or Lender's interest in the 
Mortgaged Property. The Borrower and/or Lessee and/or Operator, as 
applicable, represents and warrants to HUD that no portion of the 
Mortgaged Property has been or will be purchased with the proceeds of 
any illegal activity.
    b. HUD and/or Lessee and/or Operator, as applicable, shall be 
entitled to invoke any remedies available by law to redress any breach 
or to compel compliance by the Borrower with these requirements, 
including any remedies available hereunder.

V. Lease of Health Care Facility

    35. Lease of Facility. In cases where a Health Care Facility is 
leased to any entity (Lessee), the following additional requirements 
are applicable:
    a. Wherever necessary in order to regulate both the Lessee and the 
Borrower in the same fashion as the Borrower is obligated where there 
is no lease, the Lessee and the Borrower are herein regulated where, by 
virtue of the lease, the Lessee holds rights, powers or authorities to 
act which are contemplated to be held by the Borrower in the absence of 
a lease. In instances where such powers are held by the Lessee, the 
term Borrower shall be read to also include Lessee herein. The intent 
is, and the construction of this subsection shall be, to obligate both 
the Lessee and the Borrower under this instrument to the extent of 
their rights, powers or authorities to act under the Lease and to make 
any Lease consistent with the requirements of this instrument.
    b. Within ninety (90) days, or such longer or shorter period 
established in writing by HUD, following the end of each fiscal year, 
the Lessee shall furnish HUD and the Borrower with a complete annual 
financial report based upon an examination of the books and records of 
the Lessee prepared in accordance with GAAP, audited in accordance with 
Generally Accepted Auditing Standards (GAAS) and Government Auditing 
Standard (GAS) and any additional requirements of HUD unless the report 
is waived in writing by HUD. If the Lessee fails to submit the annual 
financial report within ninety (90) days of said due date, the Borrower 
may thereafter hire a Certified Public Accountant to prepare the report 
at the expense of the Lessee or the Borrower. The report shall include 
a certification in content and form prescribed by HUD and certified by 
the Lessee. The report shall be prepared and certified by a Certified 
Public Accountant who is licensed or certified by a regulatory 
authority of a State or other political subdivision of the United 
States, which authority make the Certified Public Accountant subject to 
regulations, disciplinary measures, or codes of ethics prescribed by 
law. The Certified Public Accountant may have no business relationship 
with the Lessee except for the performance of the audit and tax 
preparation unless HUD expressly authorizes other relationships. Both 
for profit and non-profit Lessees are to follow audit requirements 
specified in the HUD Consolidated Audit Guide for Audits of HUD 
Programs prescribed by HUD.
    c. The Lessee, any successors, assigns and subsequent Lessees must 
sign this Agreement; however, any failure to so sign or formally 
acknowledge this Agreement shall in no way be a bar to this Agreement 
being fully binding upon and enforceable against the Lessee, any 
successors, assigns and subsequent Lessees.
    d. The lease and any and all extensions, modifications and renewals 
thereof, and all of the Lessee's rights and interest thereunder, are 
hereby subjected and subordinated to the Security Instrument securing 
the Note and to this Agreement between the Lessee of the Project and 
HUD, and, in the event of a conflict between the Lease and the Security 
Instrument, Note or Regulatory Agreement, the Security Instrument, Note 
or Regulatory Agreement shall control.
    e. The Lessee shall be the sole user and/or operator of the 
improvements and equipment that is stipulated in the lease. The Lessee 
shall not be an Affiliate of, or have any other Identity of Interest 
(as defined by HUD) with, the Borrower, Lender or any other party to 
the Security Instrument transaction except with the prior written 
approval of HUD. Where there is an affiliation between the Borrower and 
the Lessee, the Lessee shall, at the time of cost certification, submit 
an audited operating statement in accordance with current requirements 
and instructions.
    f. Any license, Bed Authority or other Governmental Approval 
required to operate the Project and to receive benefits under a 
provider agreement with Medicaid, Medicare or other assistance relied 
upon by HUD to insure the Security Instrument, and such provider 
agreements, shall be secured and maintained in full force by the 
Lessee, except to the extent to which the Borrower is specifically made 
responsible for such license, Bed Authority, Governmental Approval or 
provider agreements and their maintenance. See Section 25 above with 
respect to notification to Lender and HUD which shall be read in 
connection with this provision.
    g. Consistent with, and in addition to, the requirements of Section 
19, the Lessee shall, within sixty (60) days following the end of each 
fiscal year, furnish to the Borrower a complete annual audited 
financial report on the operation of the Health Care Facility, prepared 
in accordance with GAAP and based upon examinations of the books and 
records the Lessee has established and maintained for the operation of 
the facility. The Lessee acknowledges and understands that this annual 
audited financial report is a part of the consolidated report that the 
Borrower must submit to HUD. If the Lessee fails to provide the 
Borrower with the report, Lessee understands that the Borrower may 
retain a certified public accountant to prepare the report at the 
expense of the Lessee and Borrower, Lender or HUD may terminate the 
Lease for continued non-compliance.
    h. As security to HUD for approving the lease, the Lessee shall 
assign to Borrower, the Lender or HUD, as directed by HUD, any 
Mortgaged Property in which the Lessee has any interest under the lease 
or otherwise all in accordance with and in addition to the requirements 
of Section 232. This includes (but is not limited to) major and minor 
moveables, the CoN, the license, any and all rights to receivables and 
other income, and other personalty

[[Page 46264]]

necessary to the continued operation and value of the Health Care 
Facility.
    i. Lease payments to the Borrower shall be renegotiated within 
ninety (90) days of HUD's written request at a sufficiently higher 
amount to permit the Borrower to make all payments due under the Note, 
including escrow deposits for taxes, insurance, and special 
assessments; deposits to the Sinking Fund Account, if applicable; 
deposits to the reserve for replacement fund; and the Residual Receipts 
Fund, if applicable, and to perform maintenance required by terms of 
the Security Instrument and this Agreement for which the Lessee is not 
obligated to perform under terms of the Lease, if at the end of any the 
Borrower's annual operating period, where the payments under the Lease 
have not be sufficient for such purposes.
    j. Payments under terms of the lease shall be made when due.
    k. Any transfer or change in ownership of the Lessee entity 
exceeding twenty-five (25) percent financial or governance interest and 
any transfer or change of the management, operation or control of the 
Project shall have prior written HUD approval.
    l. All payments to Borrower by the Lessee shall be made to HUD upon 
the Lender's Declaration of Default under the terms of the Security 
Instrument or upon a Declaration of Default by HUD under the terms of 
this Agreement and at HUD's written request.
    m. The lease shall be canceled without penalty after 30 days from 
HUD's notification to Lessee and Borrower of any violation under this 
Agreement, if such violation is not corrected to HUD's satisfaction 
within such 30 day period.
    n. A Lessee shall not sublease a Health Care Facility in its 
entirety under any circumstances, nor can Lessee sublease commercial 
space to any sublessee without prior written approval by HUD.
    o. A nonprofit Borrower may only lease a Health Care Facility to a 
nonprofit Lessee and may only use a nonprofit Operator.
    p. The CoN, license and receivables and any and all other 
Personalty shall not be transferred, pledged, hypothecated, mortgaged 
or securitized other than with respect to the securitization running to 
the Lender and HUD under the terms of the Security Instrument, the UCC 
Security Agreement and this instrument. The CoN, license and 
receivables and other Personalty necessary to the operation and value 
of the Project must remain tied to the Project and the HUD insured loan 
for the duration of HUD insurance of the loan. Lessee grants Lender and 
HUD a power of attorney under the Lease and all related contractual 
documents to enforce this requirement in the event of default 
hereunder.

VI. Actions Requiring the Prior Written Approval of HUD

    36. The Borrower, Lessee and/or Operator, if applicable, shall not 
without the prior written approval of HUD:
    a. Convey, assign, transfer, pledge, hypothecate, encumber, or 
otherwise dispose of any of the Mortgaged Property or any interest 
therein, or permit such conveyance, assignment, transfer, pledging, 
hypothecation, or encumbrance or disposition, or take any action which 
gives rights in another to establish or maintain a lien or encumbrance 
against the Mortgaged Property or any interest therein; provided, 
however, the Borrower may, and this provision shall not operate to 
require the Borrower to obtain prior written approval of HUD to, 
dispose of obsolete or deteriorated items of Fixtures or Personalty if 
the same are replaced with like items of same or greater quality or 
value and provided further, that this provision shall not operate to 
require the Borrower to obtain the prior written approval of HUD for 
(i) a conveyance of the Mortgaged Property at a judicial or non-
judicial foreclosure sale under the Security Instrument, (ii) the 
Mortgaged Property becoming part of a bankruptcy estate by operation of 
law under the United States Bankruptcy Code and (iii) an interest 
acquired by inheritance or by Court decree.
    b. Enter into any contract, agreement or arrangement to borrow 
funds, pledge receivables to obtain lines of credit, finance any 
purchase or incur any liability, direct or contingent, other than for 
current, reasonable and necessary operating expenses and repairs.
    c. Pay out any funds except from Surplus Cash, except for 
reasonable operating expenses and necessary repairs.
    d. Pay any compensation, including wages or salaries, or incur any 
obligation to do so, to any officer, director, stockholder, trustee, 
beneficiary, partner, member, or Principal, or to any nominee thereof.
    e. Enter into, change, or agree to the assignment of, any contract, 
agreement or arrangement for supervisory or managerial services or 
leases for operation of the Project in whole or in part.
    f. Convey, assign, or transfer, or permit the conveyance, 
assignment or transfer of any interest in the Borrower, if the effect 
of that conveyance, assignment, or transfer is the creation or 
elimination of a Principal; nor convey, assign or transfer any right to 
receive the Receivables of the Mortgaged Property; provided, however, 
that this provision shall not operate to require the Borrower to obtain 
the prior written approval of HUD for (i) a conveyance of any interest 
in the Borrower at a judicial or non-judicial foreclosure sale under 
the Security Instrument, (ii) any interest in the Borrower becoming 
part of a bankruptcy estate by operation of law under the United States 
Bankruptcy Code and (iii) an interest in the Borrower acquired by 
inheritance or by Court decree.
    g. Remodel, add to, construct, reconstruct or demolish any part of 
the Mortgaged Property or subtract from any Land, Fixtures, 
Improvements or Personalty of the Mortgaged Property.
    h. Permit the use of the Mortgaged Property for any other purpose 
except the use for which it was originally intended, or permit 
commercial use greater than that originally approved by HUD.
    i. Receive any endowment which is not pledged as security for its 
obligations to HUD or the Lender unless the endowment by its terms is 
restricted to a specific purpose or purposes which do not permit such a 
pledge.
    j. Amend, revise or cancel any provision or portion of the 
organizational documents of the Borrower, except for amendments or 
revisions simply to effect changes in interest in the Borrower which 
are not governed by Section 36.f.
    k. Institute litigation seeking the recovery of a sum in excess of 
$25,000, nor settle or compromise any action for specific performance, 
damages, or other equitable relief, in excess of $25,000, nor dispose 
of or distribute the proceeds thereof.
    l. Reimburse any party for payment of expenses or costs of the 
Project or for any purpose.
    m. Receive any fee or payment of any kind from any managing agent, 
employee of the Project or of the managing agent, or other provider of 
goods or services of the Project.

VII. Enforcement

    37. Violation of Agreement. The occurrence of any one or more of 
the following shall constitute a Violation under this Agreement:
    a. Any failure by the Borrower to comply with any of the provisions 
of this Agreement;
    b. Any fraud or material misrepresentation or material omission by 
the Borrower, any of its officers,

[[Page 46265]]

directors, trustees, general partners, members, managers or managing 
agent in connection with (1) any financial statement or other report or 
information provided to HUD during the term of this Agreement or (2) 
any request for HUD's consent to any proposed action, including a 
request for disbursement of funds from any restricted account for which 
HUD's prior written approval is required; and
    c. The commencement of a forfeiture action or proceeding, whether 
civil or criminal, which, in HUD's reasonable judgment, could result in 
a forfeiture of the Mortgaged Property or otherwise materially impair 
HUD's interest in the Mortgaged Property.
    38. Declaration of Default. At any time during the existence of a 
violation, HUD may give written notice of the violation to the 
Borrower, the Lessee and/or Operator, if applicable, by registered or 
certified mail, addressed to the addresses stated in this Agreement, or 
such other addresses as may subsequently, upon appropriate written 
notice to HUD, be designated by the Borrower as its legal business 
address. If, after receiving written notice of a violation, that 
Violation is not corrected to the satisfaction of HUD either within 
thirty (30) days after the date such notice is mailed, or within such 
shorter or longer period of time set forth in said notice, HUD may 
declare a default under this Agreement without further notice. Upon 
such Declaration of Default, HUD may:
    a. If HUD holds the Note, declare the whole of said Indebtedness 
immediately due and payable and then proceed with the foreclosure of 
the Security Instrument;
    b. If said Note is not held by HUD, notify the holder of the Note 
of such default and require the holder to declare a default under the 
Note and Security Instrument, and the holder after receiving such 
notice and demand, shall declare the whole Indebtedness due and payable 
and thereupon proceed with foreclosure of the Security Instrument or 
assignment of the Note and Security Instrument to HUD as provided in 
HUD regulations and Directives. Upon assignment of the Note and 
Security Instrument to HUD, HUD may then proceed with the foreclosure 
of the Security Instrument;
    c. Collect all Receivables and charges in connection with the 
operation of the Project and use such collections to pay the Borrower's 
obligations under this Agreement and under the Note and Security 
Instrument and the necessary expenses of preserving and operating the 
Mortgaged Property;
    d. Take possession of the Mortgaged Property, bring any action 
necessary to enforce any rights of the Borrower growing out of the 
Mortgaged Property's operation, and maintain the Mortgaged Property in 
decent, safe, sanitary condition and good repair;
    e. Apply to any court, State or Federal, for specific performance 
of this Agreement, for an injunction against any violations of the 
Agreement, for the appointment of a receiver to take over and operate 
the Project in accordance with the terms of the Agreement, or for such 
other relief as may be appropriate, since the injury to HUD arising 
from a default under any of the terms of this Agreement would be 
irreparable and the amount of damage would be difficult to ascertain;
    f. Collect reasonable attorney fees related to enforcing the 
Borrower's compliance with this Agreement, and
    g. With respect to Violations related to felony criminal 
convictions or civil judgments concerning the operation or management 
of the Mortgaged Property, direct the Borrower to replace any general 
partner, limited liability company member or non-member manager, 
limited liability limited partnership member, officer or director of 
the Borrower corporation, trustee, beneficiary of a trust, joint 
venturer, joint tenant or tenant in common with a natural person or 
entity acceptable to HUD pursuant to HUD's Participation and Compliance 
regulations and Directives.
    39. Measure of Damages. The damage to HUD as a result of the 
Borrower's breach of duties and obligations under this Agreement shall 
be, in the case of failure to maintain the Mortgaged Property as 
required by this Agreement, the cost of the repairs required to return 
the Project to decent, safe and sanitary condition and good repair. 
This contractual provision shall not abrogate or limit any other remedy 
or measure of damages available to HUD under any civil, criminal or 
common law.
    40. Nonrecourse Debt. Except as provided in Section 8 of the Note 
and Section 6 of the Security Instrument, no person or entity is liable 
for payments due under the Note and Security Instrument, or for 
payments to the Reserve for Replacement or for matters not under their 
control, except, notwithstanding any provision of State law to the 
contrary, any person or entity is liable:
    a. For funds or property of the Project coming into its possession 
which, by the provisions hereof, the person or entity is not entitled 
to retain;
    b. For its own acts and deeds or acts and deeds of others which it 
has authorized in violation of the provisions hereof; and
    c. As otherwise provided by law.

VIII. Miscellaneous

    41. Binding Effect. This instrument shall bind, and the benefits 
shall inure to, the respective Borrower and/or Lessee, if applicable, 
its heirs, legal representative, executors, administrators, successors 
in office or interest, and assigns, and to HUD and HUD's successors, so 
long as the contract of mortgage insurance continues in effect, and 
during such further time as HUD shall be the Lender, holder, coinsurer, 
or reinsurer of the Security Instrument, or obligated to reinsure the 
Security Instrument, or protect the residents of the Project.
    42. Paramount Rights and Obligations. The Borrower and the Lessee 
and/or Operator, if applicable warrant(s) that it (they) has (have) 
not, and will not, execute any other agreement with provisions 
contradictory of, or in opposition to, the provisions hereof, and that, 
in any event, the requirements of this Agreement are paramount and 
controlling as to the rights and obligations set forth and supersede 
any other requirements in conflict therewith.
    43. Severability. The invalidity of any clause, part, or provision 
of this Agreement shall not affect the validity or the remaining 
portions thereof.
    44. Headings and Titles. Any heading or title of a section, 
paragraph or part of this Agreement is intended for convenience only, 
and is not intended, and shall not be construed, to enlarge, restrict, 
limit or affect in any way the construction, meaning or application of 
the covenants or provisions thereunder or under any other heading or 
title.
    45. Present Assignment. The Borrower and/or Lessee, if applicable 
irrevocably and unconditionally assigns, pledges, mortgages and 
transfers to HUD its rights to the Receivables, charges, fees, carrying 
charges, Project accounts and other revenues and receipts of whatsoever 
sort which it may receive or be entitled to receive from the operation 
of the Mortgaged Property. Until a default is declared under this 
Agreement, revocable license is granted to the Borrower and Lessee, if 
applicable to collect and retain such Receivables, charges, fees, 
carrying charges, Project accounts and other revenues and receipts, but 
upon a Declaration of Default under this Agreement or under the 
Security Instrument, this revocable license is automatically 
terminated.
    46. Notices. Any notice or other communication given or made 
pursuant

[[Page 46266]]

to this Agreement to the Borrower, Lessee, or Operator, if applicable, 
shall be made to the following addresses:

Borrower:

Lessee (if applicable):

Operator (if applicable):

    The Borrower or Lessee may, at any time, by written notice to HUD, 
designate a different address to which such communications shall 
thereafter be directed. Said notice, and any other written notice to 
HUD pursuant to this Agreement, shall be delivered to the HUD field 
office which has jurisdiction over the Project.
    47. Uniform Commercial Code Security Agreement. This Regulatory 
Agreement is also a security agreement under the Uniform Commercial 
Code for any of the Mortgaged Property (including all Personalty) 
which, under applicable law, may be subject to a security interest 
under the Uniform Commercial Code, whether acquired now or in the 
future, and all products and cash proceeds and non-cash proceeds 
thereof (collectively, ``UCC Collateral''), and Borrower hereby grants 
to HUD a security interest in the UCC Collateral. Borrower, and Lessee 
(if applicable) shall execute and deliver to HUD (or the Lender acting 
on behalf of HUD), upon the request of HUD or the Lender, financing 
statements, continuation statements and amendments, in such form as HUD 
may require to perfect or continue the perfection of this security 
interest. Borrower and/or Lessee shall pay all filing costs and all 
costs and expenses of any record searches for financing statements that 
HUD may require. Without the prior written consent of HUD, Borrower 
and/or Lessee shall not create or permit to exist any other lien or 
security interest in any of the UCC Collateral except for the first 
lien and security interest in favor of the Lender and HUD. If an Event 
of Default has occurred and is continuing, HUD shall have the remedies 
of a secured party under the Uniform Commercial Code, in addition to 
all remedies provided by this Regulatory Agreement or existing under 
applicable law. In exercising any remedies, HUD may exercise its 
remedies against the UCC Collateral separately or together, and in any 
order, without in any way affecting the availability of HUD's other 
remedies. This Regulatory Agreement constitutes a financing statement 
with respect to any part of the Mortgaged Property which is or may 
become a Fixture.
    48. Identity of Interest. If the Project's application for mortgage 
loan insurance was processed pursuant to HUD's Multifamily Accelerated 
Processing (``MAP'') procedures, the Borrower's Principals shall not 
have an identity of interest, as defined by HUD in MAP Directives, 
between the Borrower and the Lender.
    49. Applicability. Notwithstanding any other provision in this 
Agreement, depending on the type of facility, there may be specific 
rental housing provisions (some of which may be found in the Regulatory 
Agreement for Multifamily Projects) that are applicable to either an 
Assisted Living Facility or a Board and Care Home. Additionally, other 
State-imposed laws may be required where the State mandates further 
regulation over admission, occupancy or any other aspect of the 
facility. In the event such HUD and/or State mandated provisions need 
to be added hereto, such provisions shall be placed in an Article IX 
which shall be headed, ``Assisted Living Facility,'' or ``Board and 
Care Home,'' as appropriate.
    IN WITNESS WHEREOF, the parties hereto have set their hands and 
seals on the date first herein above written.
Borrower
(insert name)

 By:-------------------------------------------------------------------
Name and title

-----------------------------------------------------------------------
Principal
Name and title

-----------------------------------------------------------------------
Principal
Name and Title

Lessee

 By--------------------------------------------------------------------
Authorized Agent
Name and Title

U.S. Department of Housing and Urban Development
 By--------------------------------------------------------------------
Authorized Agent
Each signatory hereby certifies that the statements and representations 
contained in this instrument and all supporting documentation thereto 
are true, accurate, and complete. This instrument has been made, 
presented, and delivered for the purpose of influencing an official 
action of HUD (acting by and through the FHA Commissioner) in insuring 
a multifamily rental or health care facility mortgage loan, and may be 
relied upon by HUD and the Commissioner as a true statement of the 
facts contained therein.
 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

[Add Additional Lines if More Than Two Signatories]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.
NOTICE: THIS DOCUMENT MUST HAVE A LEGAL DESCRIPTION ATTACHED AND BE 
EXECUTED WITH ALL FORMALITIES REQUIRED FOR RECORDING A DEED TO REAL 
ESTATE (i.e., NOTARY/ACKNOWLEDGEMENT, SEAL, WITNESS OR OTHER 
APPROPRIATE FORMALITIES).

Mortgagee's Certificate

U.S. Department of Housing and Urban Development

Office of Housing

(Execute Original plus two copies)

OMB Approval No. (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.75 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (OMB Approval No.), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Project Name:
Project Number:
Lender:
Borrower:
[ballot] Multifamily Accelerated Processing (MAP)
[ballot] Traditional Application Processing (TAP)

[[Page 46267]]

To the U.S. Department of Housing and Urban Development (HUD):

General
    1. The entity executing this Certificate is the Lender under that 
certain Security Instrument, --------, (the Mortgage) dated --------, 
20----, executed by --------, the Borrower, securing a Note evidencing 
a loan by the Lender to the Borrower in the principal sum of $------ 
which the Lender has agreed to make on condition that it be insured by 
HUD pursuant to the Contract of Insurance comprised of Section ---- of 
the National Housing Act and its implementing regulations. The Lender 
understands that the Mortgage, the Note, this Certificate, and any 
documents submitted with this Certificate are considered to be 
consistent with and shall be interpreted consistently with HUD's 
regulations as they pertain to the Contract of Insurance. The Lender 
agrees to be bound by such regulations and by all Directives of HUD.
    2. The Lender submits separately a check for $---- covering the 
first mortgage insurance premium, together with the other items called 
for in the HUD commitment dated --------, 20----, and in any extensions 
or amendments thereof (the Commitment).
    The Lender certifies that all conditions of the Commitment have 
been fulfilled to date.
Construction Loans
    3. For all cases involving construction advances, the agreement 
providing for the advancement of said loan is set forth in a Building 
Loan Agreement dated --------, 20----, of which a duplicate original 
and two copies are submitted separately.
    4. The Lender submits separately a certified survey of the 
Mortgaged Property and title evidence as specified in the applicable 
Directives of HUD together with evidence that the Mortgaged Property is 
not zoned or restricted so as to prevent the construction of the 
Improvements.
    5. Applications for insurance of advances of mortgage proceeds will 
be submitted to HUD as required under the applicable Directives of HUD 
at least five days prior to the date the Lender desires to disburse 
such advance. Applications for advances will be accompanied by all 
documentation required by HUD. The Lender agrees that the amount 
approved for disbursement by HUD will not be released unless the 
current extension of the title policy evidences that (a) the Mortgage 
is prior to all liens and encumbrances which may have attached or 
defects which may have arisen subsequent to the recording of the 
Mortgage, except such liens or other matters as have been approved by 
HUD and (b) the Mortgage is prior to all mechanics' and materialmen's 
liens filed of record subsequent to the recording of the Mortgage, 
regardless of whether such liens attached prior to the recording date.
Fees and Charges
    6. The charges enumerated below are included in mortgage proceeds 
and will be disbursed by the Lender at such time as is approved by HUD:
    (a) HUD application and commitment fee $----
    (b) Initial service charge, if any $---- (not exceeding 2%)
    (c) Title and recording expense $---- (including cost of surveys, 
recording fees, mortgage and stamp taxes, etc. associated with initial 
endorsement)
    (d) HUD inspection fee $----
    (e) Ground rent during construction $---- (may collect only one 
year's rent at initial endorsement)
    (f) Third party contractor fees $---- (applies only to MAP)
Escrows and Deposits
    7. The Lender has received from the Borrower a working capital 
deposit in the form of (cash or letter of credit) ------ in the sum of 
$---- which the Lender agrees to maintain and control. Funds in this 
deposit may be released or allocated for the purposes indicated in the 
attached Working Capital Escrow Deposit Agreement and for no other 
purpose unless the Lender obtains the prior written approval of HUD.
    8. The Borrower has deposited with the Lender, or subject to the 
control and order of the Lender in a depository satisfactory to the 
Lender, the following sums required by the Commitment: (Check and 
complete applicable paragraphs.)
    [ballot] Cash required, if any, over the proceeds of the Mortgage, 
to complete the project in the amount of $----. The Lender understands 
that these funds must be used before any Mortgage proceeds are 
advanced, except when, with the prior written approval of HUD, the 
funds will be disbursed on the following pro-rata basis ------.
    [ballot] Cash required, if any, over the proceeds of the Mortgage, 
for costs to complete the project in the amount of $---- will be 
represented by a grant/loan from ------, a nongovernmental source. The 
Lender understands that these funds must be used before any Mortgage 
proceeds are advanced.
    [ballot] The amount required, if any, over the proceeds of the 
Mortgage, for costs to complete the project, is $----, and will be 
represented by a grant/loan from ------, a governmental source.
    a. This amount is in the form of ------ (cash or letter of credit). 
The Lender understands that these funds must be used before any 
Mortgage proceeds are advanced, except when, with the prior written 
approval of HUD, the funds will be disbursed on the following pro-rata 
basis ------; or
    b. The Lender has collected an escrow in the amount of $----. This 
amount represents 10 percent of the grant/loan proceeds being provided 
from this source. This escrow is in the form of ------ (cash or letter 
of credit). The agreement providing for the advancement of grant/loan 
proceeds executed/to be executed among the Lender, HUD, and the 
governmental agency or instrumentality is attached.
    [ballot] Escrow deposit guaranteeing payment for off-site utilities 
and streets in the amount of $----. This deposit is in the form of ----
-- (cash or letter of credit).
    [ballot] Interest rate differential escrow in the amount of $---- 
which represents the dollar difference between the interest rate in 
effect after cut-off for cost certification and the permanent interest 
rate upon which the mortgage debt service is calculated. The escrow is 
in the form of -------- (cash or letter of credit).
    [ballot] [For certain transactions involving a loan for a Health 
Care Facility insured under Section 232] The Lender shall require that 
the Borrower establish and maintain with the Lender, or in a depository 
satisfactory to the Lender, a Sinking Fund in accordance with the 
Regulatory Agreement executed by the Borrower (and Lessee, if 
applicable) and HUD for those Section 232 cases where Medicaid 
reimbursement is on a depreciation plus interest basis rather than a 
pass-through of principal and interest on the Mortgage. (Said Sinking 
Fund will be required in addition to the Reserve for Replacements.) The 
Lender agrees to administer the Sinking Fund in accordance with the 
attached Sinking Fund Agreement.
    9. The Lender submits separately: (Check applicable paragraphs.)
    [ballot] Off-site bond in the amount of $----.
    [ballot] Evidence to the effect that required off-site utilities 
and streets will be provided by the public authorities having 
jurisdiction or by public utility companies serving the Project.
    10. The Lender submits separately a duplicate copy of the following 
assurance for the completion of the project: (Check applicable 
paragraph.)

[[Page 46268]]

    [ballot] Performance bond and payment bond of a HUD-approved Surety 
in the penal sum of $---- for each bond.
    [ballot] Assurance of Completion Agreement reflecting the deposit 
with -------- of a fund in the amount of $---- in the form of -------- 
(cash or letter of credit) which fund has been deposited and is subject 
to the Lender's order and will be disbursed with the written approval 
of HUD in the manner and for the purposes provided for in said 
agreement.
    [ballot] Personal undertaking in the amount of $----. It is 
understood that HUD reserves the right to decide the acceptability of 
the principals in the personal undertaking.
    11. Attached is the sponsor's guarantee to meet an initial 
operating deficit as required by the Commitment: (if required, check 
and complete the applicable paragraph.)
    [ballot] Agreement of Sponsors to Furnish Additional Funds in the 
amount of $---- and Bond Guaranteeing Sponsor's Performance.
    [ballot] Escrow Agreement evidencing a (U.S. bearer bonds with a 
market value of at least 115 percent of the required escrow amount, 
cash, or letter of credit) -------- deposit in the amount of $----.
    12. Attached is the sponsor's guarantee to meet the 12-month debt 
service reserve escrow as required by the Commitment: (Applicable only 
to certain Section 232 projects. If required, check and complete the 
applicable paragraph.)
    [ballot] The Lender has accepted a personal note from the Borrower 
for $---- which the Lender will hold until final completion along with 
Bond Guaranteeing Sponsor's Performance. Upon final completion, the 
note will be converted to cash or a letter of credit. The Lender agrees 
that HUD will treat the Borrower's note as a cash item and reduce the 
insurance benefits by the amount of the Borrower's note if there is a 
Mortgage default and the Lender makes a claim for insurance benefits 
before the Borrower's note is converted to cash.
    [ballot] An escrow deposit in the amount of $----. This deposit is 
in the form of -------- (cash or letter of credit).
    13. The Lender submits separately the appropriate security 
agreement(s) executed by the Borrower (or Lessee, if appropriate, in 
the case of Health Care Facilities) covering all of the Personalty 
which, under applicable law, may be subject to a security interest 
under the Uniform Commercial Code (UCC), whether acquired now or in the 
future, and all products and cash proceeds and non-cash proceeds (UCC 
Collateral). The Lender will file timely appropriate Financing 
Statements under the UCC. The Lender agrees to file timely the 
appropriate Financing Statements under the UCC on behalf of HUD 
pursuant to HUD's rights under the Regulatory Agreement.
    14. Beginning with the date on which the first payment toward 
amortization is required to be made by the terms of the insured 
Mortgage or at such later date as may be agreed to by HUD in writing, 
the Lender shall require a monthly deposit with the Lender or in a 
depository satisfactory to the Lender of one-twelfth (\1/12\) of the 
sum set forth in the Commitment constituting a Reserve for Replacements 
Fund, which fund will be subject to the Lender's order and from which 
fund withdrawals may be made only upon the receipt of HUD's written 
permission. For transactions involving mortgages insured under Section 
232 of the National Housing Act, the Reserve for Replacement shall be 
bifurcated, as set forth in the Commitment and in the Regulatory 
Agreement for Health Care Facilities, to cover (1) the costs associated 
with the replacement of major moveable equipment and (2) the costs 
associated with major repairs to the physical structure of the Project. 
The use of a bifurcated fund will ensure that the monies in the Reserve 
for Replacement are sufficient to pay for the costs associated with not 
only the replacement of major moveable equipment but also for major 
repairs to the physical structure of the Project. Separate sub-accounts 
shall be maintained within the Reserve for Replacement and monies in 
these two accounts shall not be commingled. Lender shall ensure that 
amounts are withdrawn from a particular sub-account only for use 
consistent with that particular sub-account as approved by HUD. The 
amount of the monthly deposit may be increased or decreased from time 
to time at the direction of HUD. These funds will be deposited with the 
Lender by the Borrower in cash or in the form of obligations of, or 
guaranteed as to principal by, the United States of America. The Lender 
will, upon appropriate request by the Borrower, permit the conversion 
of the whole or a substantial part of such cash deposits into the form 
of obligations of, or fully guaranteed as to principal by, the United 
States of America. Notice of any failure to receive the required 
deposits will be forwarded to HUD within 60 days of the date such 
deposits are due.
    15. In cases where a Residual Receipts Fund is required under the 
Regulatory Agreement, the Lender shall deposit or place in a depository 
satisfactory to the Lender all funds received from the Borrower after 
the end of each semi-annual or annual fiscal period, and will notify 
HUD if such funds are not received within 90 days of the end of such 
fiscal period. The Residual Receipts Fund will be subject to the 
control of the Lender and from which fund withdrawals may be made only 
upon the receipt of HUD's written permission except for permitted 
distributions pursuant to the terms of the Regulatory Agreement. These 
funds will be deposited with the Lender by Borrower in cash or in the 
form of obligations of or guaranteed as to principal by the United 
States of America. The Lender will, upon appropriate request by the 
Borrower, permit the conversion of the whole or a substantial part of 
such cash deposits into the form of obligations of, or fully guaranteed 
as to principal by, the United States of America. The Lender agrees to 
notify HUD in writing of any irregularity with respect to such Residual 
Receipts Fund immediately upon such irregularity coming to the 
attention of the Lender.
    16. The Lender agrees to furnish HUD with a complete report of the 
results of any inspection of the Mortgaged Property that the Lender is 
required to perform under the applicable regulations or Directives of 
HUD.
    17. The Lender certifies that if the Borrower defaults in its 
obligation to complete construction of the Improvements on the 
Mortgaged Property, the Lender has the right, transferable to HUD, to 
complete the Improvements as provided in the Building Loan Agreement. 
In the event completion of the Improvements is undertaken by either the 
Lender or by HUD, the undisbursed balance of the Mortgage may be 
advanced for this purpose and to discharge any valid liens or claims 
against the Mortgaged Property. Such advances will be considered as 
made for the account of the Borrower and will be covered by the terms 
of the Mortgage and the Contract of Insurance.
    18. So long as the Contractor or the Borrower, or, upon default, 
the Contractor's surety or any other person authorized to act on behalf 
of or in substitution for them shall be willing and able to complete 
construction of the Improvements, the Lender, upon HUD's request will 
advance up to the undisbursed balance of the Mortgage and will 
authorize release of any grant or loan proceeds or other funds 
available under Paragraph 8 above for that purpose. The term 
``Contractor'' as used above, means any person, corporation or other 
entity contracting directly with the Borrower for the

[[Page 46269]]

construction of all or any portion of the Improvements.
    19. The Lender certifies that all insurance policies on the Project 
required by the terms of the insured Mortgage will have attached 
thereto a standard mortgagee clause making the loss payable to the 
Lender and the Secretary, Department of Housing and Urban Development, 
as their interests may appear.
    20. The Lender certifies and agrees that: (Check and complete the 
following applicable subparagraphs)
    [ballot] (a) The Lender has not imposed and will not impose a 
financing charge of any kind directly or indirectly, other than the 
initial service charge as set forth above.
    [ballot] (b) In addition to the initial service charge, the Lender 
has collected in the form of (cash or letter of credit) -------- for 
the amount of $---- as a discount or financing charge for the 
construction loan. Also, an amount of $---- has been collected in the 
form of (cash or letter of credit) -------- to cover construction loan 
extension fees. In an attached addendum, the Lender has identified the 
time frames in which the extension fees must be paid.
    [ballot] (c) The Lender intends to retain the permanent loan and 
has collected a permanent placement fee of $----. In addition to the 
initial service charge and permanent placement fee, the Lender has 
collected in the form of (cash or letter of credit) -------- the amount 
of $---- as a discount or financing charge for the permanent loan.
    [ballot] (d) The Lender has a firm commitment from ------ to 
purchase the loan when fully disbursed and fully insured at a financing 
charge or discount of ------ percent and the Lender has collected in 
the form of (cash or letter of credit) ------ the amount of $---- to 
cover said charge or discount.
    [ballot] (e) This project will be financed with (tax-exempt or 
taxable) ------ bonds. Therefore, the Lender has collected in the form 
of (cash or letter of credit) ------ the amount of $------ to cover the 
costs of issuance. A statement is attached itemizing these costs with 
an explanation of the necessity of each cost.
    [ballot] (f) Additional financing charges or discount of $---- are 
to be collected under the attachment hereto for the purpose shown in 
(b), (c), (d), (e). (Strike inapplicable letters.) The arrangement for 
the collection of additional financing charges or discount must follow 
forms and procedures prescribed by HUD.
    [ballot] (g) A servicing fee that is included in the Mortgage rate 
and an administrative fee for investing the cash held in the Reserve 
Fund for Replacements and any other interest-bearing escrows required 
by HUD.
    [ballot] (h) The Mortgage Loan to be made to the Borrower will be 
financed through funds being provided by a third-party investor through 
the issuance to the investor of construction and permanent 
participation certificates pursuant to a participation agreement 
between the Lender and the investor, with respect to which agreement 
the Lender has agreed to repay the investor at a stated interest rate 
according to a fixed payment schedule.
    [ballot] (i) The Mortgage Loan to be made to the Borrower will be 
financed through funds being provided by a third-party investor through 
the issuance to the investor of construction and permanent fully 
modified, pass-through, mortgage-backed securities, guaranteed as to 
principal and interest by the Government National Mortgage Association.
    No financing charges other than charges disclosed herein have been 
or will be made. Until final endorsement for insurance by HUD, all 
funds collected pursuant to items (c), (d), or (e) above and not paid 
over to the permanent lender, plus any funds returned by the permanent 
lender, shall be held for the account of the Borrower and shall be 
subject to HUD's control and direction in the event of a claim under 
the Contract of Insurance.
    21. Except for Mortgage advances approved by HUD or notes executed 
pursuant to section (20)(f) above, the Lender does not have outstanding 
and will not make loans or advances to the Borrower, any of the 
sponsors, the general contractor, or the architect for any purpose 
connected directly or indirectly with this project without prior 
written approval of HUD. The Lender has not made or offered, and will 
not make or offer, any guarantees, pledges, reservations of sums to 
become due or other inducements to any entity or person to make loans 
or advances which the Lender would be prohibited from making under the 
terms of this paragraph.
Certifications
    22. The Lender certifies that the Lender has not made and will not 
make payment of any kickback or fee or other consideration, directly or 
indirectly, to any person who has received payment or other 
consideration from any other person in connection with this Mortgage 
transaction, including the purchase or sale of the Mortgaged Property, 
except for compensation paid or to be paid, if any, for the actual 
performance of services and approved by HUD.
    23. The Lender certifies that in any case where a letter of credit 
has been accepted instead of cash, (a) such unconditional and 
irrevocable letter of credit has been issued by (1) another banking 
institution; (2) the Lender, subject to receiving HUD's written 
permission prior to initial endorsement; (b) if demand under the letter 
of credit is not immediately met, the Lender will forthwith provide 
cash equivalent to the undrawn balance thereunder without recourse to 
the Borrower, any sponsor, the general contractor or the architect; (c) 
the Lender has not made and will not make any inducements as described 
in Section 21 above to procure issuance of letters of credit; and (d) 
the Lender has made every reasonable effort to satisfy itself that both 
the Borrower and the institution which issued the letter of credit are 
aware that demands may be made for cash under the terms of the letter 
of credit and that no possibility exists that Mortgage proceeds will be 
available to reimburse the issuing bank for such cash pay-outs.
    24. For mortgages funded with the proceeds of State or local bonds, 
GNMA mortgage-backed securities, other bond obligations as defined by 
HUD, any of which contain a lock-out and/or penalty provision, the 
Lender agrees, in the event of a default during the term of the 
prepayment lock-out and/or penalty (i.e., prior to the date on which 
prepayments may be made with a penalty of one percent or less), to:
    (a) Request a three-month extension of the deadline prescribed by 
24 CFR Section 207.258 for filing a notice of the Lender's intention to 
file an insurance claim and the Lender's election to assign the 
Mortgage;
    (b) assist the Borrower in arranging a refinancing to cure the 
default and avert an insurance claim , if HUD grants the requested (or 
a shorter) extension of notice filing deadline;
    (c) report to HUD at least monthly on any progress in arranging a 
refinancing;
    (d) otherwise cooperate with HUD in taking reasonable steps in 
accordance with prudent business practices to avoid an insurance claim;
    (e) require any successors or assigns to certify in writing that 
they agree to be bound by these conditions for the remainder of the 
term of the prepayment lock-out and/or penalty;
    (f) after completion of the Improvements, notify HUD of the 
delinquency when a payment is not received by the 16th day of the month 
in which it is due.
    25. The Lender certifies to HUD that the following are the only 
identities of interest, as defined by HUD in MAP Directives, between 
the Lender and the

[[Page 46270]]

Borrower, any Principal of the Borrower, the Contractor, any 
subcontractor, or the seller of the land:

-----------------------------------------------------------------------
(must indicate ``none'' for MAP transactions).

    26. The Lender certifies to HUD that no identity of interest, as 
defined by HUD in MAP Directives, exists between the Lender and the 
counsel to the Borrower.
    27. The Lender certifies to HUD that all funds, escrows, and 
deposits specified in this Certificate and any and all other funds held 
in connection with the Mortgage transaction covered by this Certificate 
shall be funds held for or on behalf of the Borrower pursuant to the 
Contract of Insurance.
    28. For any case involving components stored off-site, the Lender 
agrees to:
    (a) File Financing Statements (UCC-1), in the proper jurisdiction 
with the proper office;
    (b) Make whatever additional filings are necessary to maintain a 
first lien on the components until they are incorporated into the 
building(s);
    (c) Release the Financing Statement filings as appropriate;
    (d) Unconditionally certify by letter to HUD with each disbursement 
request that the Security Instrument(s) is (are) a ``first lien'' on 
the building components covered by the Instrument(s). This 
certification will be supported by an opinion from the Lender's legal 
counsel;
    (e) In the event of default under the Mortgage, either assign the 
Lender's security interest to HUD or acquire title through foreclosure 
to the components intended for use or incorporation into the 
building(s) and convey title to HUD;
    (f) Require a performance bond and payment bond each in an amount 
equal to 100 percent of the construction contract be used to satisfy 
the assurance of completion requirements.
    29. The Lender certifies that all HUD form closing documents 
submitted to HUD in connection with this transaction (with the 
exception of the Opinion by Counsel to the Borrower and the 
accompanying Certification by the Borrower) conform to those documents 
the Lender obtained from HUD on ---- and such documents have not been 
changed or modified in any manner except as suitably identified and 
specifically approved by HUD field counsel as evidenced by the attached 
memorandum. It is understood that changes and modifications do not 
include filling in blanks, attaching exhibits or riders, deleting 
inapplicable provisions or making changes authorized by applicable HUD 
regulations and/or Directives. The Lender further certifies that all 
closing documents submitted to and accepted by HUD in connection with 
this transaction are listed in the attached memorandum.
    30. The Lender agrees to notify HUD in writing immediately upon 
learning of any violation of the Regulatory Agreement by the Borrower, 
the Lessee and/or the Operator, as applicable, in certain transactions 
involving the lease of the Project.
    31. The Lender agrees to promptly review any Borrower's request to 
transfer the Project and not unreasonably withhold the Lender's 
approval of the transfer. If HUD approves the transfer, the Lender 
agrees to execute a Release and Assumption Agreement or a Mortgage 
Modification Agreement incorporating the Regulatory Agreement in the 
Mortgage. It is understood that the Lender's consent to the transfer 
will in no way prejudice the Lender's rights under the Contract of 
Insurance with HUD. The Lender shall not collect any fee in connection 
with reviewing the transfer except the Borrower may reimburse the 
Lender for actual expenses incurred by the Lender in connection with 
reviewing the transfer.
    32. The definition of any capitalized term or word used herein can 
be found in this Mortgagee's Certificate, the Regulatory Agreement 
between the Borrower and HUD, and/or the Security Instrument by the 
Borrower. The term ``financing charge(s),'' as used herein shall mean 
any charge, direct or indirect, for supplying the loan to or servicing 
the loan for the Borrower. Whenever used, the singular number shall 
include the plural, the plural the singular and the use of any gender 
shall be applicable to all genders.
    Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

-----------------------------------------------------------------------
Date

-----------------------------------------------------------------------
Lender

-----------------------------------------------------------------------
By

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24, 28 and 30.

(Exp. 00/00/00)

OMB No.
    Public Reporting Burden for this collection of information is 
estimated to average 1 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Building Loan Agreement

U.S. Department of Housing Development

Office of Housing
Project 
Project Name:

    THIS AGREEMENT, made the ---- day of -------- 20 ----, by and 
between --------, a -------- organized and existing under the laws of 
------ with an office and place of business in, ------ County of ------ 
and State of -------- (hereinafter called the ``Borrower'' which shall 
mean ''Mortgagor'' as that term is used in the National Housing Act), 
and -------- a -------- organized and existing under the laws of ------
--, having an office and place of business at -------- [City] [County] 
of -------- and State of -------- (hereinafter called the ``Lender'', 
which shall mean ``Mortgagee'' as that term is used in the National 
Housing Act).
    WHEREAS, the Borrower, as the owner in fee simple of, or the owner 
of the leasehold estate in the property (hereinafter called the 
``Property'') described in Exhibit ``A'' attached to the Deed of Trust, 
Mortgage or other security instrument (hereinafter called

[[Page 46271]]

the ``Mortgage''), which Exhibit ``A'' is attached hereto and 
incorporated herein by reference, has obtained a commitment from the 
Lender for a Mortgage Loan of ---------- Dollars ($----.00) to aid the 
Borrower in the construction or rehabilitation on said property of a 
Project identified as Project No.---- (hereinafter in accordance with 
Drawings and Specifications hereinafter referred to, and
    WHEREAS, the Borrower understands that the Lender has received a 
commitment from the U.S. Department of Housing and Urban Development 
(hereinafter called ``HUD'') for insurance of said Mortgage Loan under 
the provisions of the National Housing Act as amended and intends upon 
execution of the hereinafter mentioned Note and Mortgage to have the 
Note endorsed for insurance by HUD. HUD is not making the Mortgage 
Loan.
    NOW, THEREFORE, in consideration of the mutual promises hereinafter 
set out and of other valuable consideration, the receipt of which is 
hereby acknowledged, the undersigned agree as follows:
    (1) The Lender shall make and the Borrower shall take a Mortgage 
Loan in the principal sum of -------- Dollars ($----.00), to be 
advanced as hereinafter provided, and to bear interest from the date of 
each advance at the rate of -------- percent (----%) per annum. The 
Mortgage Loan shall be evidenced by a credit instrument (hereinafter 
called the ``Note'') dated -------- 20----, shall be payable in monthly 
installments, and shall have a maturity date of --------, 20----. The 
Note shall be executed by the Lender and payable to the Lender, or 
order, and shall be secured by Mortgage, of even date, on the property 
described in the Mortgage. The Mortgage shall constitute a valid first 
lien on said property and the improvements to be erected thereon, and 
the only lien thereon except for liens for taxes and assessments not 
yet payable and other liens acceptable to the Lender and HUD. The 
Lender shall not advance any Mortgage Loan funds until the Borrower and 
Lender have submitted to HUD documents required by this Agreement and 
the HUD Commitment to Insure Advances, and have completed the initial 
loan closing.
    (2) The Borrower shall complete on the Property, by -------- 20 --
--, a Project in accordance with Drawings and Specifications filed with 
HUD and designated HUD Project No. ----, dated --------, last revised 
--------. Such Drawings and Specifications, which include General 
Conditions of the Contract for Construction, AIA Document A201-1997 and 
the Supplementary Conditions of the Contract for Construction, form HUD 
92554,have been initialed by the Borrower, the Design Architect, the 
Architect administering the Construction Contract (hereinafter called 
the ``Architect''), the Contractor and, if applicable, the Contractor's 
Surety.
    (3) Changes in the Drawings and Specifications, or changes by 
altering or adding to the work contemplated, or orders for extra work 
must have the prior written approval of the Architect. In addition, any 
such change or order may be effected only with the prior written 
approval of the Lender and HUD and under such conditions as either the 
Lender or HUD may establish.
    (4) (a) The Borrower shall make monthly applications on Form HUD 
No. 92403 for advances of mortgage proceeds from the Lender. 
Applications for advances with respect to construction items shall be 
for amounts equal to (i) the total value of classes of the work 
acceptably completed; plus (ii) the value of materials and equipment 
not incorporated in the work, but delivered to and suitably stored at 
the site; less (iii) 10 percent (holdback) and less prior advances. The 
``values'' of both (i) and (ii) shall be computed in accordance with 
the amounts assigned to classes of the work in the ``Contractor's and/
or Mortgagor's Cost Breakdown'', attached to the Construction Contract 
and made a part hereof. Each application shall be filed at least 15 
days before the date the advance is desired, and the Borrower shall be 
entitled thereon only to such amount as may be approved by the Lender 
and HUD.
    (b) Upon completion of the improvements, including all landscape 
requirements and off-site utilities and streets, the Borrower shall 
furnish to the Lender and HUD satisfactory evidence that all work 
requiring inspection by municipal or other governmental authorities 
having jurisdiction has been duly inspected and approved by such 
authorities and by the rating or inspection organization, bureau, 
association or office having jurisdiction; and that all requisite 
certificates of occupancy and other approvals to own and operate the 
Project have been issued. The balance due the Borrower hereunder shall 
be payable at such time after completion as HUD authorizes the release 
of the holdback. However, the Lender may withhold final payment until 
after the expiration of any period which mechanics and materialmen may 
have for filing liens.
    (c) The Borrower agrees that funds in the amount of $---- required 
for the completion of the Project over and above the proceeds of the 
Mortgage Loan, which have been deposited with the Lender for that 
purpose, shall be advanced by the Lender prior to the advance of any 
proceeds of the Mortgage Loan. In the alternative, Borrower agrees that 
said funds shall be advanced by the Lender as set forth in the 
disbursement agreement dated --------, 20----, approved by the Lender 
and HUD, to accommodate the pro rata disbursement from multiple 
governmental funding sources or from low income tax credits [or 
historic tax credits] identified therein.
    (d) The Borrower covenants that it will hold in trust each advance 
hereunder for application to the items for which such advance was 
requested and approved.
    (e) The Borrower agrees that the Mortgage Loan shall at all times 
remain in balance. The Lender shall, in accordance with the provisions 
of this Agreement, continue to advance to the Borrower funds out of the 
proceeds of the Mortgage Loan upon insurance thereof by HUD, as long as 
the Mortgage Loan remains in balance and the Borrower is not in default 
hereunder or under the Note or Mortgage. The Mortgage Loan shall be 
deemed to be in balance only when the undistributed proceeds of the 
Mortgage Loan (after provision for reserves, fees, expenses and other 
deposits required by the Lender or HUD) equal or exceed the amount 
necessary (based on HUD's estimate of the cost of construction) to pay 
for all work completed and all materials delivered, for which payment 
has not been made, and the cost of completing construction of the 
Project in accordance with the Drawings and Specifications.
    (5) The Lender shall advance to the Borrower out of the funds 
referred to in (4)(c) above, or out of the proceeds of the Mortgage 
Loan, amounts for application to the charges or items enumerated below, 
but only to the extent that such charges have accrued, or that the 
Borrower is otherwise entitled to payment on account of such items.


(a) Interest during construction...........................      $------
(b) Real estate taxes during construction..................       ------
(c) Insurance during construction..........................       ------
(d) FHA mortgage insurance premium.........................       ------
(e) FHA examination fee....................................       ------
(f) Initial service charge.................................       ------

[[Page 46272]]

 
(g) Title and recording expense............................       ------
(h) Inspection fee.........................................       ------
(i) Legal..................................................       ------
(j) Organizational and audit...............................       ------
(k) Permanent Loan Fee.....................................       ------
 


    Total Maximum Advance (Line 45 of HUD-2283 Financial Requirements 
for Closing) $------.
    (6) The Borrower shall cause either this instrument, waiver of 
liens or the construction contract under which the improvements are to 
be erected to be filed in the public records, if the effect thereof 
will be to relieve the mortgaged property from mechanics' and 
materialmen's liens. Before any advance hereunder, the Lender may 
require the Borrower to obtain from the contractor and all 
subcontractors and materialmen dealing directly with the principal 
contractor acknowledgments of payment and releases of lien down to the 
date covered by the last advance, and concurrently with the final 
payment for the entire Project. Such acknowledgments and releases shall 
be in the form required by local lien laws and shall cover all work 
done, labor performed and materials (including equipment and fixtures) 
furnished for the Project.
    (7) The Borrower shall, as a condition precedent to the first 
advance hereunder, furnish the Lender with a signed, sealed and 
certified, current survey of the mortgaged property and a Lender's 
title policy (or other evidence of title) in form, substance and amount 
satisfactory to the Lender and HUD. Said policy (or other title 
evidence) shall be extended so as to cover each and every advance of 
said Mortgage Loan at the time of payment thereof and shall show no 
mechanics' or materialmen's liens against the mortgaged property. The 
Borrower shall furnish duplicate originals of said survey and title 
policy (or title evidence) to HUD.
    (8) The Borrower agrees that said Project shall be constructed 
strictly in accordance with all applicable ordinances and statutes, and 
in accordance with the requirements of all regulatory authorities, and 
any rating or inspection organization, bureau, association or office 
having jurisdiction. The Borrower further agrees that said Project 
shall be constructed entirely on the aforesaid property and will not 
encroach upon any easement or right-of-way, or the land of others; and 
that the buildings when erected shall be wholly within the building 
restriction lines however established, and will not violate applicable 
use or other restrictions contained in prior conveyances, zoning 
ordinances or regulations. The Borrower shall furnish from time to time 
such evidence with respect thereto as may be required by the Lender or 
HUD and, upon completion of construction, shall furnish a survey, 
signed, sealed and certified by a registered surveyor, which shows the 
Project to be entirely on said property and to be free from any such 
violations.
    (9) If the Borrower at any time prior to the completion of the 
Project abandons the same or ceases work thereon for a period of more 
than 20 days, or fails to complete the erection of the Project 
substantially in accordance with the Drawings and Specifications, or 
makes changes in the Drawings and Specifications without first securing 
the written approval required by paragraph 3 hereof, or otherwise fails 
to comply with the terms hereof, any such failure shall be a default 
hereunder, and the Lender, at its option, may terminate this Agreement. 
If the Lender so elects to terminate this Agreement, it may use and 
apply any funds deposited with it by the Borrower, regardless of the 
purpose for which such funds were deposited, in such manner and for 
such purposes as HUD may prescribe. If the Lender elects not to 
terminate this Agreement, it may enter into possession of the premises 
and perform any and all work and labor necessary to complete the 
improvements substantially according to the Drawings and 
Specifications, and employ watchmen to protect the premises from 
injury. All sums so expended by the Lender shall be deemed to have been 
paid to the Borrower and secured by the Mortgage. For this purpose the 
Borrower hereby constitutes and appoints the Lender its true and lawful 
attorney-in-fact, with full power of substitution in the premises, to 
complete the Project in the name of the Borrower. The Borrower hereby 
empowers said attorney as follows: (a) To use any funds of the 
Borrower, including any balance which may be held in escrow and any 
funds which may remain unadvanced hereunder for the purpose of 
completing the Project in the manner called for by the Drawings and 
Specifications; (b) to make such additions, changes and corrections in 
the Drawings and Specifications as shall be necessary or desirable to 
complete the Project in substantially the manner contemplated by the 
Drawings and Specifications; (c) to employ such contractors, 
subcontractors, agents, architects and inspectors as shall be required 
for said purposes; (d) to pay, settle or compromise all existing bills 
and claims which may be liens against the mortgaged property, or as may 
be necessary or desirable for the completion of the Project, or for 
clearance of title; (e) to execute all applications and certificates in 
the name of the Borrower which may be required by any of the contract 
documents; (f) to prosecute and defend all actions or proceedings in 
connection with the mortgaged premises or the construction of the 
Project and to take such action and require such performance as it 
deems necessary under the accepted guaranty of completion; and (g) to 
do any and every act which the Borrower might do in its own behalf. It 
is further understood and agreed that this power of attorney, which 
shall be deemed to be a power coupled with an interest, cannot be 
revoked. The Borrower hereby assigns and quitclaims to the Lender all 
sums unadvanced under the Mortgage and all sums held by the Lender in 
escrow conditioned upon the use of said sums for the completion of the 
Project, such assignment to become effective only in case of a default 
by the Borrower.
    (10) The Borrower shall provide or cause to be provided workers 
compensation insurance and public liability and other insurance 
required by applicable law or by the general conditions included in the 
Specifications. The Borrower further agrees to purchase and maintain 
fire insurance and extended coverage on the mortgaged property. All 
such policies shall be issued by companies approved by the Lender and 
shall be in form and amounts satisfactory to the Lender and HUD. Such 
policies shall be endorsed with standard mortgagee clauses making loss 
payable to the Lender or its assigns; and may be endorsed to make loss 
during construction payable to the Contractor, as interest may appear. 
The originals of such policies shall be deposited with the Lender.
    (11) The Lender and its agents and HUD and its agents shall, at all 
times during construction, have the right of entry and free access to 
the Project and the right to inspect all work done, and materials, 
equipment, building components and fixtures furnished, installed or 
stored either on or off the Project property, and to inspect all books, 
subcontracts and records of the Borrower.
    (12) The Borrower shall execute and deliver to the Lender, a 
security agreement and financing statements, or other similar 
instrument, covering all property of any kind whatsoever purchased with 
mortgage proceeds and concerning which there may be any doubt as to 
such property's being

[[Page 46273]]

subject to the lien of the Mortgage under the laws of the state in 
which the Project is situated.
    (13) The Borrower shall furnish to the Lender assurance of 
completion of the Project in the form specified by the Secretary. Such 
assurance of completion shall run to the Lender as obligee and shall 
contain a provision granting to the Lender the authority to assign all 
rights thereunder to HUD.
    (14) (a) The Borrower understands that the wages to be paid 
laborers and mechanics employed in the construction of the Project are 
required by the provisions of Section 212(a) of the National Housing 
Act, as amended, to be not less than the wages prevailing in the 
locality in which the work will be performed for corresponding classes 
of laborers and mechanics employed on construction of a similar 
character, as determined by the Secretary of Labor pursuant to the 
Davis-Bacon Act and as published in the applicable prevailing wage 
determination. The Borrower hereby states that it has read the 
determination by the Secretary of Labor and is fully familiar with the 
same.
    (b) The Borrower shall, as a condition precedent to any advance 
hereunder, submit to the Lender (i) with each application for advance 
prior to the final application, certifications, in form approved by 
HUD, that all laborers and mechanics employed in the construction of 
the Project whose work is covered by that or any previous application 
and who have been paid in whole or in part on account of said 
employment, have been paid at rates not less those contained in the 
applicable prevailing wage determination; and (ii) with the final 
application for advance, certifications in form satisfactory to HUD, 
that the Project has been fully constructed in accordance with the 
provisions of this Agreement and that all laborers and mechanics 
employed in the construction of the Project have been paid not less 
than the said prevailing wage rates. The applicable prevailing wage 
determination shall be construed to include every amendment to or 
modification of the determination which may be published prior to the 
beginning of construction or date the Mortgage is initially endorsed 
for insurance, whichever occurs first; provided, that if construction 
has not begun within 90 days after initial endorsement, the applicable 
prevailing determination shall include any modification of the 
determination which may be published prior to the beginning of 
construction.
    (c) The Borrower agrees that should any advances hereunder be 
ineligible for insurance under the National Housing Act by reason of 
(i) the nonpayment of the said prevailing wage rates, or (ii) violation 
of any of the applicable labor standards provisions of the Regulations 
of the Secretary of Labor, the Lender may withhold from the Borrower 
all payments or advances payable to the Borrower hereunder until the 
Borrower establishes to the satisfaction of HUD that all laborers and 
mechanics or other persons employed in the construction of the Project 
have been paid said prevailing wage rates and that such violation of 
the said Labor Standards provisions no longer exists. The written 
statement of any officer of HUD or authorized agent of HUD declining to 
insure any advance of funds hereunder by reason of such nonpayment or 
violation shall be deemed conclusive proof that such advances are 
ineligible for mortgage insurance.
    (d) In accordance with Article 1 of the Supplementary Conditions of 
the Contract for Construction, the Borrower shall insert the labor 
standards provisions thereof in any contract made for the construction 
of the Project, or any part thereof, and shall require the Contractor 
to insert similar provisions in each subcontract relating to the 
construction of the Project.
    (15) The Lender and the Borrower agree that the Mortgage Loan shall 
be reduced by any amount required by the Agreement and Certification 
(form HUD No. 93305) between the parties hereto and HUD, which 
Agreement and Certification is incorporated herein by reference to the 
same extent as if set forth herein at length.
    (16) The Borrower shall furnish such records, papers and documents 
relating to the Project as the Lender or HUD may reasonably require 
from time to time.
    (17) The Borrower shall not transfer, assign or pledge any right or 
interest in, or title to, any funds deposited by the Borrower with the 
Lender, or reserved by the Lender for the Borrower, without the prior 
written approval of the Lender and HUD.
    (18) As used in this instrument, the term ``Lender'' shall be 
deemed to include any person to whom the Note and Mortgage referred to 
above shall be assigned with the knowledge and consent of HUD. This 
instrument shall be binding upon the parties hereto and their 
respective successors and assigns.
    (19) The Borrower and each of its principals, --------, shall be 
personally liable to the Lender and or HUD for any advances that are 
not applied or used in accordance with this Agreement.
    (20) HUD is not a party to this Agreement and has no obligation to 
the Borrower or Lender pursuant to this Agreement. HUD, pursuant to the 
mortgage insurance contract, has reserved in this Agreement the right 
to approve or disapprove certain actions to protect the mortgage 
insurance fund.

[Borrower's Name]
[seal & witness signature if required by law or practice]

-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
[title & capacity]

[Lender's Name]
[seal & witness signature if required by law or practice]

-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
[title & capacity]

Attachment: Exhibit A

Supplement to Building Loan Agreement (Add to Building Loan Agreement 
When Borrower Acts as Its Own General Contractor)

U.S. Department of Housing, and Urban Development, Office of Housing
OMB Approval No. 0000-0000 (Exp. 00/00/00)
    Public Reporting Burden for this collection of information is 
estimated to average 0.75 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

    This Supplement To Building Loan Agreement shall be attached to and 
incorporated into that certain Building Loan Agreement, form HUD 92441, 
for HUD Project No. --------.
    (21) In consideration of HUD consenting to authorize Borrower to 
act as its own General Contractor, the parties agree to the following:
    (a) All references herein (and in any other documents except the 
Payment Bond, relating to the construction of the project) to 
``Contractor'' or ``General Contractor'' shall mean the Borrower 
identified above. All references to subcontractors shall mean all 
persons who contract with the Borrower or others in connection with the 
construction of the project.
    (b) All references to ``Contract'' or ``Construction Contract'' 
shall be interpreted to refer to this Building Loan

[[Page 46274]]

Agreement and the Drawings and Specifications identified above, which 
Specifications include the General Conditions of the Contract for 
Construction (AIA Document A201 (1997), and the Supplementary 
Conditions of the Contract for Construction (HUD Form-92554). The 
provisions of this Supplement to Building Loan Agreement and the HUD 
Supplementary Conditions take precedence over any inconsistent 
provisions in the AIA A201 General Conditions.
    (c) The Borrower shall execute all agreements and certifications 
required by HUD to be executed by the General Contractor.
    (d) The work, which is to be done in accordance with the Drawings 
and Specifications, shall be commenced within 30 days from the date of 
this Agreement.
    (e) The borrower shall, at all times during construction, keep 
posted in a conspicuous place on the project site a legible copy of the 
applicable wage determination published by the Secretary of Labor with 
respect to this project. In addition, the Borrower shall incorporate 
into each subcontract a copy of the Supplementary Conditions of the 
Contract for Construction (HUD-92554) and the applicable wage 
determination. Any such contract (i) shall include the agreement of the 
subcontractor to pay no less than the wages contained in the applicable 
wage determination; (ii) shall authorize periodic inspections by the 
Lender and HUD of the subcontractor's books, payroll, and accounts with 
respect to the contract so that it may be determined whether or not 
prevailing wages are being paid by such contractor, and (iii) shall 
require that all tiers of subcontractors subscribe to the same 
provisions with respect to work to be performed on the project.
    (f) Upon request the Borrower shall disclose to the Lender and HUD 
the names of all persons with whom the Borrower contracted or intends 
to contract or subsequently contracts with respect to work to be 
performed or materials to be furnished for construction of the project.
    (g) The Borrower shall give all required notices and shall comply 
with all applicable codes, laws, ordinances, rules and regulations, 
protective covenants, and with the current regulations of the National 
Board of Fire Underwriters, wherever applicable. The Borrower shall 
comply with provisions of the ``Manual of Accident Prevention in 
Construction'' of the Association of General Contractors of America. 
The Borrower shall immediately notify the Lender and HUD of the 
delivery of all permits, licenses, certificates of inspection, 
certificates of occupancy, and any other certificates and/or 
instruments required by law, regardless of to whom issued, and shall 
display same to the Lender or HUD upon request.
    (h) HUD and the Lender may inspect work done, materials, equipment 
and fixtures furnished, installed or stored in and around the project. 
The Borrower shall furnish an enclosed working space acceptable to the 
Lender and/or HUD as to location, size, accommodations and furnishings.
    (i) HUD shall have the right to interpret the Contract Documents 
and determine compliance therewith.
    (j) The Borrower shall correct any defects due to faulty materials 
or workmanship which appear within a period of one year from the date 
of Final Completion. For the purpose of this subparagraph (j), the date 
of Final Completion shall be the date of the final HUD Representative's 
Trip Report, provided that the trip report is subsequently endorsed as 
required by HUD. Final Completion includes all construction 
requirements, including but not limited to completion of all punch list 
items, submission of the executed HUD Form 92485, Permission to 
Occupy--Property Mortgages, As-Built Survey and Surveyor's Report, As-
Built Plans and Specifications, warranties, and execution and 
acceptance of all change orders.

 Date------------------------------------------------------------------

 Borrower--------------------------------------------------------------

 By:-------------------------------------------------------------------
OMB No. (Exp. 00/00/00)
    Public Reporting Burden for this collection of information is 
estimated to average 1 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Construction Contract

 Project Name:---------------------------------------------------------

 HUD Project No.:------------------------------------------------------
U.S. Department of Housing and Urban Development
 Cost Plus Contract----------------------------------------------------

 Lump Sum Contract-----------------------------------------------------

THIS AGREEMENT, made this ---- day of ----, 20, -- between -------- 
(hereinafter called the ``Contractor'') and -------- (hereinafter 
called the ``Owner'').

    The Contractor and the Owner agree as follows:

Article 1: Scope of Contract

    A. The Contract between the parties is set forth in the ``Contract 
Documents,'' which consist of this Agreement and the other documents 
identified in Article 2 below. Together, these form the entire Contract 
between the Owner and Contractor, and by this reference these Contract 
Documents are fully incorporated herein. Any previously existing 
contract or understanding concerning the work contemplated by the 
Contract Documents is hereby revoked.
    B. Except to the extent specifically indicated in the Contract 
Documents to be the responsibility of others, the Contractor shall 
furnish all of the materials and perform all of the work, within the 
property lines, shown on, and in accordance with, the Drawings and 
Specifications.

Article 2: Identification of Contract Documents

    A. The Contract Documents are identified as follows:
    (1) This Agreement. If designated above as Cost Plus Contract, 
Articles 4 and 13 are applicable to this Agreement. If designated above 
as Lump Sum Contract, Articles 4A and 13A are applicable to this 
Agreement.
    (2) The General Conditions set forth in the General Conditions of 
the Contract for Construction, AIA Document A201-1997, expressly 
excepting those provisions mandating binding arbitration. The 
provisions of this Agreement take precedence over any inconsistent 
provisions in the General Conditions.
    (3) The Supplementary Conditions of the Contract for Construction, 
Form HUD-92554.
    (4) The HUD Special Conditions are set forth in the Project Manual 
dated ------, 20, ---- identified as follows:

Document Title Pages

    (5) The Specifications are those contained in the Project Manual 
dated --------, as in subparagraph 4, and are as follows:

Section Title Pages


[[Page 46275]]


    (6) The Drawings are as follows, and are dated as shown below:

Number Title Pages Date

    (7) The Contractor's and/or Mortgagor's Cost Breakdown, Form HUD-
2328, approved by HUD on the date of ------, 20 --, attached hereto as 
Exhibit ----.
    (8) If this is designated a Cost Plus Contract and there is no 
Identity of Interest between the Contractor and the Owner, the 
Incentive Payment Computation form, page 2 of Form HUD-92443, and 
attached hereto as Exhibit ----.
    (9) The Prevailing Wage Determination No. ------, dated ------, 20 
--.
    (10) Completed and fully-executed Appendix 8 of Handbook 4430.1, 
identifying Identities of Interest among Owner, Contractor, 
Subcontractors, Architect.
    B. The Drawings and the Specifications were prepared by -------- 
(hereinafter called the ``Design Architect''). The architect 
administering the Construction Contract work is -------- (hereinafter 
called the ``Supervisory Architect.'').
    C. A master set of the Drawings and of the Project Manual, 
identified by the signatures of the Owner, the Contractor, the Design 
Architect, the Supervisory Architect, and the Contractor's Surety or 
Guarantor, have been placed on file with HUD, and shall govern in all 
matters that arise with respect to the Contract Documents.
    D. Changes in the Drawings, Specifications, or any terms of the 
Contract Documents, including orders for extra work, changes by 
altering or adding to the work, orders which will change the design 
concept, or orders extending the Final Completion Deadline (defined in 
Article 3) may be effected only with the prior written approval of the 
Owner's Lender (more particularly identified in paragraph D of Article 
11 below, and hereinafter referred to as the ``Lender'') and HUD, and 
under such conditions as either the Lender or HUD may establish.

Article 3: Time

    A. The Contractor shall commence the work to be performed under 
this Contract within ------ days of this Agreement and shall bring the 
work to Final Completion by ------, 20 -- (hereinafter called the 
``Final Completion Deadline'').
    B. The Date of Final Completion shall be the date of the final HUD 
Representative's Trip Report, provided that the trip report is 
subsequently endorsed as required by HUD. Final Completion includes all 
construction requirements, including but not limited to completion of 
all punch list items, executed HUD Form 92485, Permission to Occupy--
Property Mortgages, As-Built Survey and Surveyor's Report, As-Built 
Plans and Specifications, warranties, and execution and acceptance of 
all change orders.
    C. The Final Completion Deadline may be extended in accordance with 
the terms of the said AIA General Conditions only with the prior 
written approval of HUD.
    D. The Contractor shall correct any defects due to faulty materials 
or workmanship which appear within one year from the Date of Final 
Completion.
    E. If the work is not brought to Final Completion in accordance 
with the Drawings and Specifications, including any authorized changes, 
by the Final Completion Deadline, or by such date to which the Final 
Completion Deadline may be mutually extended by approved change order, 
the maximum sum stated in Article 4 or 4A below shall be reduced by $--
--, as liquidated damages, for each day of delay until the actual Date 
of Final Completion. When the Owner submits to HUD its Cost 
Certification, the actual cost of interest, taxes, insurance, mortgage 
insurance premiums, and construction and permanent loan extension fees, 
as approved by HUD, for the period from the Final Completion Deadline 
through the Date of Final Completion, shall be determined. The lesser 
of the liquidated or actual damages shall be applied. The applicable 
amount shall be reduced by the project's net operating income, as 
determined by HUD, for the delay period.
    F. The parties have completed the appropriate blank spaces in 
Articles 4 or 4A below with respect to ``Incentive Payment,'' providing 
for the payment of an additional sum to the Contractor as an incentive 
for completing the project earlier than the Final Completion Deadline, 
or by such date to which the Final Completion Deadline may be extended 
by approved change order. If the work is brought to Final Completion 
before the Final Completion Deadline, the contract sums stated in 
Articles 4 and 4A below shall be increased, as indicated, by an 
incentive payment calculated in accordance with HUD requirements. In 
cases requiring cost certification by the Contractor, the Contractor 
will not be entitled to any incentive payment resulting from early 
completion if HUD determines that the Contractor's cost certification 
is fraudulent or materially misrepresents the Contractor's Actual Cost 
of Construction.

Article 4: Contract Sum--Cost Plus Contract

    A. Subject to the provisions hereinafter set out, the Owner shall 
pay to the Contractor for the performance of this Contract the 
following items in cash:
    (1) The Actual Cost of Construction as defined in Article 13 below; 
plus
    (2) Builder's Profit of $------.

In no event, however, shall the total cash payable pursuant to this 
paragraph A exceed $------.
    B. In addition to any cash fee provided for in paragraph A, the 
Owner shall pay to the Contractor by means other than cash, the 
following:
    (1) A promissory note in the form prescribed by HUD in the amount 
of $------. (2) ------
    C. If, upon completion, the Contractor shall have received cash 
payments in excess of (a) the Actual Cost of Construction, plus (b) the 
Builder's Profit, plus any additional amount to be paid under the 
provisions of paragraph B, all such excess shall be refunded to the 
Owner.
    D. Incentive Payment, where there is no Identity of Interest 
between Owner and Contractor:
    (1) If there is no Identity of Interest between the Owner and the 
Contractor and the work is completed prior to the Final Completion 
Deadline, the Owner shall make an incentive payment to the Contractor. 
The amount of the payment shall be determined according to Exhibit --, 
attached hereto, consisting of page 2 of Form HUD-92443, entitled 
Incentive Payment Computation. Step 3(b) thereof contains a blank that 
is to be filled in at the time this Construction Contract is executed.
    (2) If, upon completion, the Contractor shall have received cash 
payments in excess of (a) the Actual Cost of Construction, plus (b) the 
Builder's Profit, plus any additional amount to be paid under the 
provisions of paragraph B, plus the incentive payment under the 
provisions of paragraph 1 above, all such excess shall be refunded to 
the owner.
    (3) No incentive payment will be allowed on savings in costs 
disallowed by HUD or if the Contractor's cost certification is found by 
HUD to be either fraudulent or to materially misrepresent the Actual 
Cost of Construction.
    E. Incentive Payment, where there is an Identity of Interest 
between Owner and Contractor:
    (1) If there is any Identity of Interest between the Owner and the 
Contractor, the cash upset figure set forth at the end of paragraph A, 
immediately above, is

[[Page 46276]]

hereby increased by the amount by which $------ (the estimated sum of 
mortgage interest, taxes, and property insurance and mortgage insurance 
premiums applicable to the construction period for this project) 
exceeds the mortgagor's certified actual cost for these items through 
the Date of Final Completion, as approved by HUD, provided that 
construction is completed prior to the Final Completion Deadline, as 
amended by approved change order, and, further, that in no event shall 
the total cash payable exceed the actual cost of construction as 
approved by HUD.
    (2) If the aggregate interest rate during the construction period 
is determined at the time of cost certification to be less than that 
upon which the mortgage note was endorsed, the estimated amount for 
interest, line 53 of form HUD-92264, shall be adjusted accordingly and 
the dollar amount set forth in paragraph E(1) shall be reduced.

Article 4A: Contract Sum--Lump Sum Contract

    A. The Owner shall pay the Contractor for the performance of the 
contract, hereinafter provided, the sum of $------ (------ and ------/
100 dollars).
    B. Incentive Payment: If the work is completed prior to the Final 
Completion Deadline, the Owner shall pay to the Contractor, in addition 
to the contract sum stated in paragraph A, an amount equal to --% (not 
to exceed 50%) of the amount by which the sum of the Owner's certified 
cost of interest, real estate taxes, insurance premiums and Mortgage 
Insurance premium during construction, as approved by HUD through the 
Date of Final Completion, is exceeded by HUD's estimates of these same 
items, which estimate is $----. (Insert that portion of the sum of 
interest, taxes, insurance, and Mortgage Insurance premium that appears 
in Section G of Form HUD-92264 attributable to the construction period. 
If there has been a change in the interest rate charged for the 
construction period, the dollar amount included in Section G of HUD-
92264 must be adjusted. The adjusted amount must be reflected in the 
savings computation). No incentive payment will be allowed on savings 
in costs disallowed by HUD or if the Contractor's cost certification is 
found by HUD to be either fraudulent or to materially misrepresent the 
Actual Cost of Construction.

Article 5: Requisition and Payment Procedures

    A. Each month after the commencement of work hereunder, the 
Contractor shall make a monthly request on Form HUD-92448 for payment 
by the Owner for work done during the preceding month. Each request for 
payment shall be filed at least 15 days before the date payment is 
desired. Subject to the approval of the Lender and HUD, the Contractor 
shall be entitled to payment thereon in an amount equal to (1) the 
total value of classes of the work acceptably completed; plus (2) the 
value of materials and equipment not incorporated in the work, but 
delivered to and suitably stored at the site; plus (3) the value of 
components stored off-site in compliance with applicable HUD 
requirements; less (4) 10 percent holdback and less prior payments. The 
``values'' of (1), (2) and (3) shall be computed in accordance with the 
amounts assigned to classes of work in the ``Contractor's and/or 
Mortgagor's Cost Breakdown,'' attached hereto as Exhibit ``A''.
    B. With its final application for payment by the Owner, the 
Contractor shall disclose, on a form prescribed by HUD, all unpaid 
obligations contracted in connection with the work performed under this 
Contract. The Contractor agrees that within 15 days following receipt 
of final payment, it will pay such obligations in cash and furnish 
satisfactory evidence of such payment to the Owner.
    C. The balance due the Contractor hereunder shall be payable upon 
the expiration of 30 days after the work hereunder is fully completed, 
provided the following have occurred: (1) All work hereunder requiring 
inspection by municipal or other governmental authorities having 
jurisdiction has been inspected and approved by such authorities and by 
the rating or inspection organization, bureau, association or office 
having jurisdiction; (2) All certificates of occupancy, or other 
approvals, with respect to all units of the project have been issued by 
State or local governmental authorities having jurisdiction; and (3) 
Permission(s) to Occupy (Form HUD-92485) for all units of the project 
have been issued by HUD; (4) all executed final advance documents 
required by HUD have been submitted.

Article 6: Receipts, Releases of Liens & Payments for Materials & 
Equipment

    A. The Contractor agrees that within 15 days following receipt of 
each monthly payment, it will pay in full and in cash all obligations 
for work done and materials, equipment and fixtures furnished through 
the date covered by such monthly payment. The Contractor may withhold 
retainage from the payment due each subcontractor, corresponding to, 
but not exceeding, the 10 percent holdback specified in item (4) of 
Article 5, paragraph A.
    B. The Owner may require the Contractor to attach to each request 
for payment its acknowledgment of payment and all subcontractors' and 
material suppliers' acknowledgments of payment for work done and 
materials, equipment and fixtures furnished through the date covered by 
the previous payment.
    C. The Contractor agrees that no materials or equipment required by 
the Specifications will be purchased under a conditional sale contract 
or with the use of any security agreement or other vendor's title or 
lien retention instrument.
    D. Concurrently with the final payment, the Contractor shall 
execute a waiver or release of lien for all work performed and 
materials furnished hereunder, and the Owner may require the Contractor 
to obtain similar waivers or releases from all subcontractors and 
material suppliers.

Article 7: Obligations of Contractor

    A. The Contractor shall furnish, at its own expense, all building 
and other permits, licenses, tools, equipment and temporary structures 
necessary for the construction of the project. The Contractor shall 
give all required notices and shall comply with all applicable codes, 
laws, ordinances, rules and regulations, and protective covenants, and 
with the current regulations of the National Board of Fire 
Underwriters, wherever applicable. The Contractor shall comply with the 
provisions of the Occupational Safety and Health Act of 1970. The 
Contractor shall immediately notify the Owner, the Lender and HUD of 
the delivery of all permits, licenses, certificates of inspection, 
certificates of occupancy, and any other such certificates and 
instruments required by law, regardless of to whom issued, and shall 
cause them to be displayed to the Owner, the Lender and HUD upon 
request.
    B. If the Contractor observes that the Drawings and Specifications 
are at variance with any applicable codes, laws, ordinances, rules or 
regulations, or protective covenants, it shall promptly notify the 
Supervisory Architect in writing, and any necessary changes shall be 
made as provided in this Contract for changes in the Drawings and 
Specifications. If the Contractor performs any work knowing it to be 
contrary to such codes, laws, ordinances, rules or regulations, or 
protective covenants, without giving such notice to the Supervisory

[[Page 46277]]

Architect, it shall bear all costs arising therefrom.
    C. Upon completion of construction, the Contractor shall furnish to 
the Owner a topographic land survey map showing the location on the 
site of all improvements constructed thereon, and showing the location 
of all water, sewer, gas and electric lines and mains, and of all 
existing utility easements. Such survey map shall be prepared by a 
licensed surveyor who shall certify that the work is installed and 
erected entirely upon the land covered by the mortgage and within any 
building restriction lines on said land, and does not overhang or 
otherwise encroach upon any easement or right-of-way of others. Such 
survey shall be accompanied by a Surveyor's Report in the form required 
by HUD. In addition, the Contractor shall furnish additional surveys 
when required by the Owner for any improvements, including structures 
and utilities, not heretofore located on a survey. The Contractor shall 
furnish copies of such survey required hereunder for the Lender and 
HUD. The Contractor shall provide progress survey maps from time to 
time that show the improvements to be entirely within the property and 
set-back boundaries, and not encroaching upon any easements, as part of 
applications for payment. The Contractor shall provide updated final 
survey maps and Reports for Final Closing, in accordance with HUD 
requirements, including but not limited to Federal regulations, 
handbooks, and relevant HUD administrative guidance.
    D. The Contractor shall assume full responsibility for the 
maintenance of all landscaping which may be required by the Drawings 
and Specifications until such time as both parties to this Contract 
shall receive written notice from HUD that such landscaping has been 
finally completed. The Owner hereby agrees to make available to the 
Contractor, for such purpose, without cost to the latter, such 
facilities as water, hose and sprinkler.
    E. The Contractor shall establish an escrow in an amount 
satisfactory to the Lender and HUD for any work items that are 
incomplete at the time of Final Closing.

Article 8: Assurance of Completion

    The Contractor shall furnish to the Owner assurance of completion 
of the work in the form of (specify) ---------- . Such assurance of 
completion shall run to the Owner and the Lender as obligees and shall 
contain a provision whereby the surety agrees that any claim or right 
of action that either the Owner or the Lender might have thereunder may 
be assigned to HUD.

Article 9: Waiver of Lien or Claim

    A. The Contractor shall not file a mechanic's or materialman's lien 
or maintain any claim against the Owner's real estate or improvements 
for or on account of any work done, labor performed or materials 
furnished under this Contract, and shall include in each subcontract a 
clause which shall impose this requirement on the subcontractor.
    B. In jurisdictions where permitted by law, the Owner may require 
the Contractor to execute a Waiver of Liens that shall be recorded 
prior to the commencement of construction. The Contractor for itself, 
subcontractors, suppliers, materialmen, and all persons acting through 
or under it, shall agree not to file or maintain mechanics' lien or 
claim against the property described herein, on account of work done, 
labor performed or materials provided by them.

Article 10: Right of Entry and Interpretation of Contract Documents

    A. At all times during construction, HUD, the Lender, and their 
agents or assigns shall have the right of entry and free access to the 
project and the right to inspect all work done and materials, equipment 
and fixtures furnished, installed or stored in and about the project. 
For such purpose, the Contractor shall furnish such enclosed working 
space as the Lender or HUD may require and find acceptable as to 
location, size, accommodations and furnishings.
    B. HUD shall have the right to interpret the Contract Documents and 
to determine compliance therewith.

Article 11: Assignments, Subcontracts and Termination

    A. This Contract shall not be assigned by either party without the 
prior written consent of the other party, the Lender and HUD, except 
that the Owner may assign the Contract, or any rights hereunder, to the 
Lender or HUD.
    B. The Contractor shall not subcontract all of the work to be 
performed hereunder without the prior written consent of the Owner, the 
Lender and HUD.
    C. Upon request by the Owner, the Lender or HUD, the Contractor 
shall disclose the names of all persons with whom it has contracted or 
will contract with respect to work to be done and materials and 
equipment to be furnished hereunder.
    D. The Contractor understands that the work under this contract is 
to be financed by a building loan to be secured by a mortgage and 
insured by HUD, and that the terms of said loan are set forth in a 
Building Loan Agreement between the Owner as Borrower and ------ as 
Lender.
    E. The Contractor further understands that said Building Loan 
Agreement provides that, in the event of the failure of the Owner to 
perform its obligations to the Lender thereunder, the Lender may, as 
attorney-in-fact for the Owner, undertake the completion of the project 
in accordance with this Contract. In the event the Lender elects not to 
undertake such completion, the Contractor's obligations under this 
contract shall terminate.

Article 12: Roles of HUD and Lender

    HUD is the insurer of the Lender's loan made to finance the 
construction identified herein, pursuant to the Building Loan Agreement 
referenced above in Article 11. Nothing provided herein, no action or 
inaction of the parties to this contract, or actions or inaction by any 
third parties, shall impute to HUD or the Lender status as a party to 
this Agreement.

Article 13: Certification of Actual Cost--Cost Plus Contract

    A. The ``Actual Cost of Construction'' shall include all items of 
cost and expense incurred by the Contractor in the performance of this 
Contract and shall include an allowance for general overhead in the 
amount set forth in the Contractor's and/or Mortgagor's Cost Breakdown. 
Allowable items of cost and expense incurred by the Contractor in the 
performance of this Contract shall include costs and expenses of labor, 
materials for construction, equipment and fixtures, field engineering, 
sales taxes, workmen's compensation insurance, social security, public 
liability insurance, general requirements and all other expenses 
directly connected with construction. The value of any kickbacks, 
rebates or discounts received or receivable in connection with the 
construction of the project shall be subtracted from all items of cost 
and expense. Any cost or expense attributable to maintaining the 
Contractor's working capital is not to be included within the ``Actual 
Cost of Construction.''
    B. The Contractor shall keep accurate records of account of the 
said Actual Cost of Construction, and shall, upon demand, make such 
records and invoices, receipts, subcontracts and other information 
pertaining to the construction of the project available for inspection 
by the Owner, Lender and HUD.

[[Page 46278]]

    C. With its final application for payment, the Contractor shall 
furnish to the Owner a completed ``Contractor's Certificate of Actual 
Cost,'' which shall be accompanied and supported by an independent 
public accountant's certificate as to actual cost in form acceptable to 
HUD.
    D. The Contractor shall include in all subcontracts, equipment 
leases and purchase orders a provision requiring the subcontractor, 
equipment lessor or supplier to certify its costs incurred in 
connection with the project, in the event HUD determines there is an 
Identity of Interest between either the Owner or the Contractor and any 
such subcontractor, equipment lessor or supplier.

Article 13A: Cost Certification--Lump Sum Contract

    In the event HUD determines that there is an Identity of Interest 
between the Contractor and the Owner, the Contractor shall certify, on 
a form prescribed by HUD, its cost incurred in the performance of the 
work under this contract.

Article 14: Designation of Representatives

    A. The Owner hereby designates -------- as its representative for 
all communications involving work performed pursuant to this Agreement.
    B. The Contractor hereby designates -------- as its representative 
for all communications involving work to be performed pursuant to this 
Agreement.

Article 15: Headings and Titles

    Any heading, section title, paragraph or part of this Agreement is 
intended for convenience only, and is not intended, and shall not be 
construed, to enlarge, restrict, limit or effect in any way the 
construction, meaning, or application of the provisions thereunder, or 
under any other heading or title.

Article 16: Severability

    The invalidity of any provision of this Contract shall not affect 
the validity of any other provision, and all other provisions shall 
remain in full force and effect.
    IN WITNESS WHEREOF, the parties to these presents have executed 
this contract in six (6) counterparts, each of which shall be deemed an 
original, as of the year and day first above mentioned.

(Seal) Attest: Owner

(Seal) Attest: Contractor

    Note: If Contractor or Owner is a corporation, Secretary should 
attest.

OMB No. (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.2 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

SUPPLEMENTARY CONDITIONS OF THE CONTRACT FOR CONSTRUCTION

U.S. Department of Housing and Urban development

Article 1: Labor Standards

    A. Applicability. The Project or Program to which the construction 
work covered by this contract pertains is being assisted or insured by 
the United States of America, and the following Federal Labor Standards 
Provisions are included in this Contract or related instrument pursuant 
to the provisions applicable to such Federal assistance or insurance.
    B. Minimum Wages. Pursuant to section 212 of the National Housing 
Act, 12 U.S.C. 1715c, the minimum wage provisions contained in this 
paragraph B do not apply to those projects with mortgages insured under 
section 221(h)(1) designed for less than 9 families and they do not 
apply to those projects with mortgages insured under either section 220 
or 233 designed for less than 12 families.
    1. (i) All laborers and mechanics employed or working upon the site 
of the work (or under the United States Housing Act of 1937 or under 
the Housing Act of 1949 in the construction or development of the 
project) will be paid unconditionally and not less often than once a 
week, and without subsequent deduction or rebate on any account (except 
such payroll deductions as are permitted by regulations issued by the 
Secretary of Labor under the Copeland Act (29 CFR Part 3)), the full 
amount of wages and bona fide fringe benefits (or cash equivalents 
thereof) due at time of payment computed at rates not less than those 
contained in the wage determination of the Secretary of Labor which is 
attached hereto and made a part hereof, regardless of any contractual 
relationship which may be alleged to exist between the contractor and 
such laborers and mechanics. Contributions made or costs reasonably 
anticipated for bona fide fringe benefits under Section 1(b)(2) of the 
Davis-Bacon Act on behalf of laborers or mechanics are considered wages 
paid to such laborers or mechanics, subject to the provisions of 29 CFR 
5.5(a)(1)(iv); also, regular contributions made or costs incurred for 
more than a weekly period (but not less often than quarterly) under 
plans, funds, or programs, which cover the particular weekly period, 
are deemed to be constructively made or incurred during such weekly 
period. Such laborers and mechanics shall be paid the appropriate wage 
rate and fringe benefits on the wage determination for the 
classification of work actually performed, without regard to skill, 
except as provided in 29 CFR 5.5(a)(4). Laborers or mechanics 
performing work in more than one classification may be compensated at 
the rate specified for each classification for the time actually worked 
therein: Provided, that the employer's payroll records accurately set 
forth the time spent in each classification in which work is performed. 
The wage determination (including any additional classification and 
wage rates conformed under 29 CFR 5.5(a)(1)(ii)) and the Davis-Bacon 
poster (WH-1321) shall be posted at all times by the contractor and its 
subcontractors at the site of the work in a prominent and accessible 
place where it can be easily seen by the workers.
    (ii) (a) Any class of laborers or mechanics which is not listed in 
the wage determination and which is to be employed under the contract 
shall be classified in conformance with the wage determination. HUD 
shall approve an additional classification and wage rate and fringe 
benefits therefor only when the following criteria have been met:
    (1) The work to be performed by the classification requested is not 
performed by a classification in the wage determination; and
    (2) The classification is utilized in the area by the construction 
industry; and
    (3) The proposed wage rate, including any bona fide fringe 
benefits, bears a reasonable relationship to the wage rates contained 
in the wage determination.
    (b) If the contractor and the laborers and mechanics to be employed 
in the classification (if known), or their representatives, and HUD or 
its designee agree on the classification and wage rate (including the 
amount designated for fringe benefits where appropriate), a report of 
the action taken shall be sent by HUD or its designee to the 
Administrator of the Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor, Washington, DC 20210. The

[[Page 46279]]

Administrator, or an authorized representative, will approve, modify, 
or disapprove every additional classification action within 30 days of 
receipt and so advise HUD or its designee or will notify HUD or its 
designee within the 30-day period that additional time is necessary. 
(Approved by the Office of Management and Budget under OMB control 
number 1215-0140.)
    (c) In the event the contractor, the laborers or mechanics to be 
employed in the classification or their representatives, and HUD or its 
designee do not agree on the proposed classification and wage rate 
(including the amount designated for fringe benefits, where 
appropriate), HUD or its designee shall refer the questions, including 
the views of all interested parties and the recommendation of HUD or 
its designee, to the Administrator for determination. The 
Administrator, or an authorized representative, will issue a 
determination within 30 days of receipt and so advise HUD or its 
designee or will notify HUD or its designee within the 30-day period 
that additional time is necessary. (Approved by the Office of 
Management and Budget under OMB Control Number 1215-0140.)
    (d) The wage rate (including fringe benefits where appropriate) 
determined pursuant to subparagraphs B.1.(ii)(b) or (c) of this 
Article, shall be paid to all workers performing work in the 
classification under this contract from the first day on which work is 
performed in the classification.
    (iii) Whenever the minimum wage rate prescribed in the contract for 
a class of laborers or mechanics includes a fringe benefit which is not 
expressed as an hourly rate, the contractor shall either pay the 
benefit as stated in the wage determination or shall pay another bona 
fide fringe benefit or an hourly cash equivalent thereof.
    (iv) If the contractor does not make payments to a trustee or other 
third person, the contractor may consider as part of the wages of any 
laborer or mechanic the amount of any costs reasonably anticipated in 
providing bona fide fringe benefits under a plan or program, Provided, 
That the Secretary of Labor has found, upon the written request of the 
contractor, that the applicable standards of the Davis-Bacon Act have 
been met. The Secretary of Labor may require the contractor to set 
aside in a separate account assets for the meeting of obligations under 
the plan or program. (Approved by the Office of Management and Budget 
under OMB Control Number 1215-0140.)
    2. Withholding. HUD or its designee shall upon its own action or 
upon written request of an authorized representative of the Department 
of Labor withhold or cause to be withheld from the contractor under 
this contract or any other Federal contract with the same prime 
contractor, or any other Federally-assisted contract subject to Davis-
Bacon prevailing wage requirements, which is held by the same prime 
contractor, so much of the accrued payments or advances as may be 
considered necessary to pay laborers and mechanics, including 
apprentices, trainees and helpers, employed by the contractor or any 
subcontractor the full amount of wages required by the contract. In the 
event of failure to pay any laborer or mechanic, including any 
apprentice, trainee or helper, employed or working on the site of the 
work (or under the United States Housing Act of 1937 or under the 
Housing Act of 1949 in the construction or development of the project), 
all or part of the wages required by the contract, HUD or its designee 
may, after written notice to the contractor, sponsor, applicant, or 
owner, take such action as may be necessary to cause the suspension of 
any further payment, advance, or guarantee of funds until such 
violations have ceased. HUD or its designee may, after written notice 
to the contractor, disburse such amounts withheld for and on account of 
the contractor or subcontractor to the respective employees to whom 
they are due. The Comptroller General shall make such disbursements in 
the case of direct Davis-Bacon Act contracts.
    3. Payrolls, records, and certifications.
    (i) Payrolls and basic records relating thereto shall be maintained 
by the contractor during the course of the work and preserved for a 
period of three years thereafter for all laborers and mechanics working 
at the site of the work (or under the United States Housing Act of 
1937, or under the Housing Act of 1949, in the construction or 
development of the project). Such records shall contain the name, 
address, and social security number of each such worker, his or her 
correct classification, hourly rates of wages paid (including rates of 
contributions or costs anticipated for bona fide fringe benefits or 
cash equivalents thereof of the types described in Section 1 (b)(2)(B) 
of the Davis-Bacon Act), daily and weekly number of hours worked, 
deductions made and actual wages paid. Whenever the Secretary of Labor 
has found under 29 CFR 5.5(a)(1)(iv) that the wages of any laborer or 
mechanic include the amount of any costs reasonably anticipated in 
providing benefits under a plan or program described in Section 1 
(b)(2)(B) of the Davis-Bacon Act, the contractor shall maintain records 
which show that the commitment to provide such benefits is enforceable, 
that the plan or program is financially responsible, and that the plan 
or program has been communicated in writing to the laborers or 
mechanics affected, and records which show the costs anticipated or the 
actual cost incurred in providing such benefits. Contractors employing 
apprentices or trainees under approved programs shall maintain written 
evidence of the registration of apprenticeship programs and 
certification of trainee programs, the registration of the apprentices 
and trainees, and the ratios and wage rates prescribed in the 
applicable programs. (Approved by the Office of Management and Budget 
under OMB Control Numbers 1215-0140 and 1215-0017.)
    (ii)(a) The contractor shall submit weekly for each week in which 
any contract work is performed a copy of all payrolls to HUD or its 
designee if the agency is a party to the contract, but if the agency is 
not such a party, the contractor will submit the payrolls to the 
applicant, sponsor, or owner, as the case may be, for transmission to 
HUD or its designee. The payrolls submitted shall set out accurately 
and completely all of the information required to be maintained under 
29 CFR 5.5(a)(3)(i). This information may be submitted in any form 
desired. Optional Form WH-347 is available for this purpose and may be 
purchased from the Superintendent of Documents (Federal Stock Number 
029-005-00014-1), U.S. Government Printing Office, Washington, D.C. 
20402. The prime contractor is responsible for the submission of copies 
of payrolls by all subcontractors. (Approved by the Office of 
Management and Budget under OMB Control Number 1215-0149.)
    (b) Each payroll submitted shall be accompanied by a ``Statement of 
Compliance,'' signed by the contractor or subcontractor or his or her 
agent who pays or supervises the payment of the persons employed under 
the contract and shall certify the following:
    (1) That the payroll for the payroll period contains the 
information required to be maintained under 29 CFR 5.5(a)(3)(i) and 
that such information is correct and complete;
    (2) That each laborer or mechanic (including each helper, 
apprentice, and trainee) employed on the contract during the payroll 
period has been paid the full weekly wages earned, without rebate, 
either directly or indirectly, and that no deductions have been made 
either directly or indirectly from the full wages earned, other than 
permissible deductions as set forth in 29 CFR part 3;

[[Page 46280]]

    (3) That each laborer or mechanic has been paid not less than the 
applicable wage rates and fringe benefits or cash equivalents for the 
classification of work performed, as specified in the applicable wage 
determination incorporated into the contract.
    (c) The weekly submission of a properly executed certification set 
forth on the reverse side of Optional Form WH-347 shall satisfy the 
requirement for submission of the ``Statement of Compliance'' required 
by subparagraph B.3.(ii)(b) of this Article.
    (d) The falsification of any of the above certifications may 
subject the contractor or subcontractor to civil or criminal 
prosecution under Section 1001 of Title 18 and Section 231 of Title 31 
of the United States Code.
    (iii) The contractor or subcontractor shall make the records 
required under subparagraph B.3.(i) of this Article available for 
inspection, copying, or transcription by authorized representatives of 
HUD or its designee or the Department of Labor, and shall permit such 
representatives to interview employees during working hours on the job. 
If the contractor or subcontractor fails to submit the required records 
or to make them available, HUD or its designee may, after written 
notice to the contractor, sponsor, applicant, or owner, take such 
action as may be necessary to cause the suspension of any further 
payment, advance, or guarantee of funds. Furthermore, failure to submit 
the required records upon request or to make such records available may 
be grounds for debarment action pursuant to 29 CFR 5.12.
    4. Apprentices and Trainees.
    (i) Apprentices. Apprentices will be permitted to work at less than 
the predetermined rate for the work they performed when they are 
employed pursuant to and individually registered in a bona fide 
apprenticeship program registered with the U.S. Department of Labor, 
Employment and Training Administration, Office of Apprenticeship 
Training, Employer and Labor Services, or with a State Apprenticeship 
Agency recognized by such Office, or if a person is employed in his or 
her first 90 days of probationary employment as an apprentice in such 
an apprenticeship program, who is not individually registered in the 
program, but who has been certified by the Office of Apprenticeship 
Training, Employer and Labor Services, or a State Apprenticeship Agency 
(where appropriate) to be eligible for probationary employment as an 
apprentice. The allowable ratio of apprentices to journeymen on the job 
site in any craft classification shall not be greater than the ratio 
permitted to the contractor as to the entire work force under the 
registered program. Any worker listed on a payroll at an apprentice 
wage rate, who is not registered or otherwise employed as stated above, 
shall be paid not less than the applicable wage rate on the wage 
determination for the classification of work actually performed. In 
addition, any apprentice performing work on the job site in excess of 
the ratio permitted under the registered program shall be paid not less 
than the applicable wage rate on the wage determination for the work 
actually performed. Where a contractor is performing construction on a 
project in a locality other than that in which its program is 
registered, the ratios and wage rates (expressed in percentages of the 
journeyman's hourly rate) specified in the contractor's or 
subcontractor's registered program shall be observed. Every apprentice 
must be paid at not less than the rate specified in the registered 
program for the apprentice's level of progress, expressed as a 
percentage of the journeymen hourly rate specified in the applicable 
wage determination. Apprentices shall be paid fringe benefits in 
accordance with the provisions of the apprenticeship program. If the 
apprenticeship program does not specify fringe benefits, apprentices 
must be paid the full amount of fringe benefits listed on the wage 
determination for the applicable classification. If the Administrator 
determines that a different practice prevails for the applicable 
apprentice classification, fringes shall be paid in accordance with 
that determination. In the event the Office of Apprenticeship Training, 
Employer and Labor Services, or a State Apprenticeship Agency 
recognized by such Office, withdraws approval of an apprenticeship 
program, the contractor will no longer be permitted to utilize 
apprentices at less than the applicable predetermined rate for the work 
performed until an acceptable program is approved.
    (ii) Trainees. Except as provided in 29 CFR 5.16, trainees will not 
be permitted to work at less than the predetermined rate for the work 
performed unless they are employed pursuant to and individually 
registered in a program which has received prior approval, evidenced by 
formal certification by the U.S. Department of Labor, Employment and 
Training Administration. The ratio of trainees to journeymen on the job 
site shall not be greater than permitted under the plan approved by the 
Employment and Training Administration. Every trainee must be paid at 
not less than the rate specified in the approved program for the 
trainee's level of progress, expressed as a percentage of the 
journeyman's hourly rate specified in the applicable wage 
determination. Trainees shall be paid fringe benefits in accordance 
with the provisions of the trainee program. If the trainee program does 
not mention fringe benefits, trainees shall be paid the full amount of 
fringe benefits listed on the wage determination unless the 
Administrator of the Wage and Hour Division determines that there is an 
apprenticeship program associated with the corresponding journeyman 
wage rate on the wage determination which provides for less than full 
fringe benefits for apprentices. Any employee listed on the payroll at 
a trainee rate who is not registered and participating in a training 
plan approved by the Employment and Training Administration shall be 
paid not less than the applicable wage rate on the wage determination 
for the classification of work actually performed. In addition, any 
trainee performing work on the job site in excess of the ratio 
permitted under the registered program shall be paid not less than the 
applicable wage rate on the wage determination for the work actually 
performed. In the event the Employment and Training Administration 
withdraws approval of a training program, the contractor will no longer 
be permitted to utilize trainees at less than the applicable 
predetermined rate for the work performed until an acceptable program 
is approved.
    (iii) Equal employment opportunity. The utilization of apprentices, 
trainees and journeymen under 29 CFR part 5 shall be in conformity with 
the equal employment opportunity requirements of Executive Order 11246, 
as amended, and 29 CFR part 30.
    5. Compliance with Copeland Act Requirements. The contractor shall 
comply with the requirements of 29 CFR Part 3, which are incorporated 
by reference in this contract.
    6. Subcontracts. The contractor or subcontractor will insert in any 
subcontracts the clauses set forth in subparagraphs 1 through 10 of 
this paragraph B and such other clauses as HUD or its designee may by 
appropriate instructions require, and a copy of the applicable 
prevailing wage determination, and also a clause requiring the 
subcontractors to include these clauses in any lower tier subcontracts. 
The prime contractor shall be responsible for the compliance by any 
subcontractor or lower tier subcontractor with all contract clauses 
referenced in this subparagraph.

[[Page 46281]]

    7. Contract termination and debarment. A breach of the contract 
clauses in 29 CFR 5.5 may be grounds for termination of the contract, 
and for debarment as a contractor or a subcontractor as provided in 29 
CFR 5.12.
    8. Compliance with Davis-Bacon and Related Act Requirements. All 
rulings and interpretations of the Davis-Bacon and Related Acts 
contained in 29 CFR Parts 1, 3, and 5 are herein incorporated by 
reference in this contract.
    9. Disputes concerning labor standards. Disputes arising out of the 
labor standards provisions of this contract shall not be subject to the 
general disputes clause of this contract. Such disputes shall be 
resolved in accordance with the procedures of the Department of Labor 
set forth in 29 CFR parts 5, 6, and 7. Disputes within the meaning of 
this clause include disputes between the contractor (or any of its 
subcontractors) and HUD or its designee, the U.S. Department of Labor, 
or the employees or their representatives.
    10. Certification of Eligibility.
    (i) By entering into this contract, the contractor certifies that 
neither it (nor he or she) nor any person or firm who has an interest 
in the contractor's firm is a person or firm ineligible to be awarded 
Government contracts by virtue of Section 3(a) of the Davis-Bacon Act 
or 29 CFR 5.12(a)(1) or to be awarded HUD contracts or participate in 
HUD programs pursuant to 24 CFR Part 24.
    (ii) No part of this contract shall be subcontracted to any person 
or firm ineligible for award of a Government contract by virtue of 
Section 3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1) or to be 
awarded HUD contracts or participate in HUD programs pursuant to 24 CFR 
Part 24.
    (iii) The penalty for making false statements is prescribed in the 
U.S. Criminal Code, 18 U.S.C. 1001. Additionally, U.S. Criminal Code, 
Section 1010, Title 18, U.S.C., ``Federal Housing Administration 
transactions'', provides in part: ``Whoever, for the purpose of * * * 
influencing in any way the action of such Administration * * * makes, 
utters or publishes any statement, knowing the same to be false * * * 
shall be fined not more than $5,000 or imprisoned not more than two 
years, or both.''
    C. Contract Work Hours and Safety Standards Act. 1. Applicability 
and Definitions. This paragraph C of Article 1 is applicable only if a 
direct form of federal assistance is involved, such as Section 8, 
Section 202/811 Capital Advance, grants etc., and is applicable only 
where the prime contract is in an amount greater than $100,000. As used 
in this paragraph C, the terms ``laborers'' and ``mechanics'' include 
watchmen and guards.
    2. Overtime requirements. No contractor or subcontractor 
contracting for any part of the contract work which may require or 
involve the employment of laborers or mechanics shall require or permit 
any such laborer or mechanic in any workweek in which he or she is 
employed on such work to work in excess of forty hours in such workweek 
unless such laborer or mechanic receives compensation at a rate not 
less than one and one-half times the basic rate of pay for all hours 
worked in excess of forty hours in such workweek.
    3. Violation; liability for unpaid wages; liquidated damages. In 
the event of any violation of the immediately preceding subparagraph 
C.2, the contractor and any subcontractor responsible therefor shall be 
liable for the unpaid wages. In addition, such contractor and 
subcontractor shall be liable to the United States (in the case of work 
done under contract for the District of Columbia or a territory, to 
such District or to such territory) for liquidated damages. Such 
liquidated damages shall be computed with respect to each individual 
laborer or mechanic, including watchmen and guards, employed in 
violation of such subparagraph, in the sum of $10 for each calendar day 
on which such individual was required or permitted to work in excess of 
the standard workweek of forty hours without payment of the overtime 
wages required by the clause set forth in such subparagraph.
    4. Withholding for unpaid wages and liquidated damages. HUD or its 
designee shall, upon its own action or upon written request of an 
authorized representative of the Department of Labor, withhold or cause 
to be withheld from any moneys payable on account of work performed by 
the contractor or subcontractor under any such contract, or under any 
other Federal contract with the same prime contractor, or under any 
other Federally-assisted contract subject to the Contract Work Hours 
and Safety Standards Act which is held by the same prime contractor 
such sums as may be determined to be necessary to satisfy any 
liabilities of such contractor or subcontractor for unpaid wages and 
liquidated damages as provided in the clause set forth in subparagraph 
3 of this paragraph C.
    5. Subcontracts. The contractor or subcontractor shall insert in 
any subcontracts the clauses set forth in subparagraphs 1 through 5 of 
this paragraph C and also a clause requiring the subcontractors to 
include these clauses in any lower tier subcontracts. The prime 
contractor shall be responsible for compliance by any subcontractor or 
lower tier subcontractor with the clauses set forth in such 
subparagraphs 1 through 5.
    D. Section 242 and Title XI Overtime Requirements. 1. 
Applicability. This paragraph D of Article 1 is applicable only to 
projects with mortgages insured or to be insured under Section 242 or 
Title XI of the National Housing Act.
    2. Overtime requirements. No contractor or subcontractor 
contracting for any part of the contract work which may require or 
involve the employment of laborers or mechanics shall require or permit 
any such laborer or mechanic in any workweek in which he or she is 
employed on such work to work in excess of eight hours in any calendar 
day or forty hours in such workweek unless such laborer or mechanic 
receives compensation at a rate not less than one and one-half times 
the basic rate of pay for all hours worked in excess of eight hours in 
any calendar day or forty hours in such workweek, as the case may be.
    3. Violation; liability for unpaid wages. In the event of any 
violation of the immediately preceding subparagraph, the contractor and 
any subcontractor responsible therefor shall be liable for the unpaid 
wages.
    4. Withholding for unpaid wages and liquidated damages. HUD or its 
designee shall withhold or cause to be withheld from any moneys payable 
on account of work performed by the contractor or subcontractor under 
any such contract, or under any other contract subject to the 
provisions contained in this paragraph D which is held by the same 
prime contractor, such sums as may be determined to be necessary to 
satisfy any liabilities of such contractor or subcontractor for unpaid 
wages as provided in the clause set forth in subparagraph 3 of this 
paragraph.
    5. Subcontracts. The contractor or subcontractor shall insert in 
any subcontracts the clauses set forth in subparagraphs 2 through 5 of 
this paragraph D and also a clause requiring the subcontractors to 
include these clauses in any lower tier subcontracts. The prime 
contractor shall be responsible for compliance by any subcontractor or 
lower tier subcontractor with the clauses set forth in such 
subparagraphs 2 through 5.
    E. Certification. For projects with mortgages insured under the 
National Housing Act that are subject to paragraph B of this Article 1, 
the Contractor is required to execute the

[[Page 46282]]

Contractor's Prevailing Wage Certificate on page 2 of form HUD-92448 as 
a condition precedent to insurance by HUD of that certain mortgage 
loan, or an advance thereof, made or to be made by the Lender in 
connection with the construction of the project.

Article 2: Equal Employment Opportunity

    A. Applicability. This Article 2 applies to any contract for 
construction work, or modification thereof, as defined in the 
regulations of the Secretary of Labor at 41 CFR Chapter 60, which is 
paid for in whole or in part with funds obtained from the Federal 
Government or borrowed on the credit of the Federal Government pursuant 
to a grant, contract, loan insurance, or guarantee, or undertaken 
pursuant to any Federal program involving such grant, contract, loan, 
insurance, or guarantee.
    B. The Contractor will not discriminate against any employee or 
applicant for employment because of race, color, religion, sex, 
disability, or national origin. The Contractor will take affirmative 
action to ensure that applicants are employed, and that employees are 
treated during employment without regard to their race, color, 
religion, sex, disability or national origin. Such action shall 
include, but not be limited to the following: Employment, upgrading, 
demotion, or transfer; recruitment or recruitment advertising; layoff 
or termination; rates of pay or other forms of compensation; and 
selection for training including apprenticeship. The Contractor agrees 
to post in conspicuous places available to employees and applicants for 
employment notices to be provided setting forth the provisions of this 
nondiscrimination clause.
    C. The Contractor will, in all solicitations or advertisements for 
employees placed by or on behalf of the Contractor state that all 
qualified applicants will receive consideration for employment without 
regard to race, color, religion, sex, disability, or national origin.
    D. The Contractor will send to each labor union or representative 
of workers with which it has a collective bargaining agreement or other 
contract or understanding a notice to be provided advising the said 
labor union or workers representatives of the Contractor's commitments 
hereunder, and shall post copies of the notice in conspicuous places 
available to employees and applicants for employment.
    E. The Contractor will comply with all provisions of Executive 
Order 11246 of September 24, 1965 and of the rules, regulations, and 
relevant orders of the Secretary of Labor.
    F. The Contractor will furnish all information and reports required 
by Executive Order 11246 of September 24, 1965, and by rules, 
regulations, and orders of the Secretary of Labor, or pursuant thereto, 
and will permit access to its books, records, and accounts by the 
Secretary of Labor for purposes of investigation to ascertain 
compliance with such rules, regulations, and orders.
    G. In the event of the Contractor's noncompliance with the 
nondiscrimination clauses of this contract or with any of the said 
rules, regulations, or orders, this contract may be canceled, 
terminated, or suspended in whole or in part and the Contractor may be 
declared ineligible for further government contracts or federally 
assisted construction contracts in accordance with procedures 
authorized in Executive Order 11246 of September 24, 1965, and such 
other sanctions may be imposed and remedies invoked as provided in 
Executive Order 11246 of September 24, 1965, or by rule, regulations or 
order of the Secretary of Labor, or as otherwise provided by law.
    H. The Contractor will include the provisions of paragraphs A 
through H in every subcontract or purchase order unless exempted by 
rules, regulations, or orders of the Secretary of Labor issued pursuant 
to Section 204 of Executive Order 11246 of September 24, 1965, so that 
such provisions will be binding upon each subcontractor or vendor. The 
Contractor will take such action with respect to any subcontract or 
purchase order as the Secretary of Housing and Urban Development or the 
Secretary of Labor may direct as a means of enforcing such provisions, 
including sanctions for noncompliance. Provided, however, that in the 
event the Contractor becomes involved in, or is threatened with, 
litigation with a subcontractor or vendor as a result of such direction 
by the Secretary of Housing and Urban Development or the Secretary of 
Labor, the Contractor may request the United States to enter into such 
litigation to protect the interests of the United States.

Article 3: Equal Opportunity for Businesses and Lower Income Persons 
Located Within the Project Area

    A. This Article 3 is applicable to projects covered by Section 3, 
as defined in 24 CFR part 135.
    B. The work to be performed under this contract is on a project 
assisted under a program providing direct Federal financial assistance 
from the Department of Housing and Urban Development and is subject to 
the requirements of Section 3 of the Housing and Urban Development Act 
of 1968, as amended, 12 U.S.C. 1701u. Section 3 requires that to the 
greatest extent feasible opportunities for training and employment be 
given lower income residents of the unit of local government or the 
metropolitan area (or non-metropolitan county) as determined by the 
Secretary of Housing and Urban Development in which the project is 
located and contracts for work in connection with the project be 
awarded to business concerns which are located in, or owned in 
substantial part by persons residing in the same metropolitan area (or 
non-metropolitan county) as the project.

Article 4: Health and Safety

    A. This Article 4 is applicable only where the prime contract is in 
an amount greater than $100,000.
    B. No laborer or mechanic shall be required to work in surroundings 
or under working conditions which are unsanitary, hazardous, or 
dangerous to his or her health and safety as determined under 
construction safety and health standards promulgated by the Secretary 
of Labor by regulation.
    C. The Contractor shall comply with all regulations issued by the 
Secretary of Labor pursuant to Title 29 CFR Part 1926, and failure to 
comply may result in imposition of sanctions pursuant to the Contract 
Work Hours and Safety Standards Act, 40 U.S.C. 3701 et seq.
    D. The Contractor shall include the provisions of this Article 4 in 
every subcontract so that such provisions will be binding on each 
subcontractor. The Contractor shall take such action with respect to 
any subcontract as the Secretary of Housing and Urban Development or 
the Secretary of Labor shall direct as a means of enforcing such 
provisions.

OMB No. (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 2 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

[[Page 46283]]

Department of Housing and Urban Development, Office of Housing
Guide for Opinion of Borrower's Counsel {For use in HUD Insured 
Multifamily and Health Care Transactions{time} 
{To Be on Firm Letterhead{time} 
{Insert Date of Endorsement{time} 

 Re: Project Name------------------------------------------------------

 FHA Project No.-------------------------------------------------------

 Location--------------------------------------------------------------

 Borrower--------------------------------------------------------------

[LENDER]
[ADDRESS]

[LENDER'S ATTORNEY]
[ADDRESS]

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
{INSERT APPROPRIATE HUD ADDRESS{time} 

    Ladies and Gentlemen: We are [I am] [general/special] counsel to --
------ {INSERT NAME OF BORROWER{time}  (the ``Borrower''), a --------, 
{INSERT TYPE OF ENTITY{time}  organized under the laws of the State of 
-------- {INSERT STATE{time}  (the ``Organizational Jurisdiction), in 
connection with a mortgage loan (the ``Loan'') in the [original/
increased] amount of ------ Dollars ($------) from -------- {INSERT 
NAME AND TYPE OF LENDER{time}  (the ``Lender'') to the Borrower. The 
proceeds of the Loan will be used to [construct/rehabilitate/purchase/
refinance] that certain [multifamily housing/hospital/extended care 
facility/nursing home/board and care/assisted living facility] project 
(the ``Project''), commonly known as -------- and located in -------- 
{INSERT COUNTY AND STATE{time}  (said State to be referred to 
hereinafter as the ``Property Jurisdiction'') on the property described 
in Exhibit B {ATTACH LEGAL DESCRIPTION{time}  (together with all 
improvements and fixtures thereon) (the ``Property''). The Loan is 
being insured by the Federal Housing Administration (FHA), an 
organizational unit of the United States Department of Housing and 
Urban Development (``HUD''), pursuant to a commitment for insurance [of 
advances OR upon completion OR for refinancing] issued to Lender by --
----, Agent of the Federal Housing Commissioner, dated ------ [as 
amended by that certain letter from ------ to ------, dated ------] 
(``FHA Commitment''). The Loan is being funded from -------- {DESCRIBE 
FINANCING SOURCE, e.g., tax-exempt bonds/mortgage backed securities 
guaranteed by GNMA/ participation certificates, etc.{time}  The 
Borrower has requested that we [I] deliver this opinion and has 
consented to reliance by Lender's counsel in rendering its opinion to 
Lender and to reliance by Lender and HUD in making and insuring, 
respectively, the Loan and has waived any privity between Borrower and 
us [me] in order to permit said reliance by Lender, counsel to Lender 
and HUD. We [I] consent to reliance on this opinion by Lender, counsel 
to Lender, and HUD.
    In our [my] capacity as [general/special] counsel to the Borrower, 
we [I] have prepared or reviewed the following:
    A. The [{DESCRIBE ORGANIZATIONAL DOCUMENTS, e.g. for corporations: 
State certified copies of the articles of incorporation, the by-laws, 
the borrowing resolution, the incumbency certificate and the good 
standing certificate(s), fictitious Name Registration, Foreign 
Corporation Registration; for partnerships: certified copies of the 
partnership agreement and any amendments thereto, the certificate of 
limited partnership, and any amendments thereto, the good standing 
certificate (or its equivalent) if provided in the Organizational 
Jurisdiction, etc.{time} ] of the Borrower (collectively, the 
``Organizational Documents'');
    B. The FHA Commitment [extensions and assignment(s) thereof, if 
any];
    C. The Commitment issued by the Lender and accepted by the 
Borrower, dated ------, (the ``Loan Commitment'');
    D. The Regulatory Agreement (--) {INSERT APPROPRIATE FORM 
NO.{time}  by and between HUD and the Borrower, dated ------, (the 
``Regulatory Agreement'');
    E. The Note (94001M) in the original principal amount of ------ 
Dollars ($------) OR in the increased principal amount of ------Dollars 
($------) by Borrower in favor of Lender, dated ------, (the ``Note'');
    F. [The Security Instrument (Mortgage OR Deed of Trust)] (94000M 
{WITH APPROPRIATE STATE RIDER ATTACHED------), executed by Borrower for 
the benefit of Lender, granting a security interest in the Property, 
dated ------, (the ``Security Instrument'');
    G. {INSERT THE NUMBER OF UCC's TO BE FILED{time}  Uniform 
Commercial Code Financing Statements executed by the Borrower as debtor 
and naming the Lender and HUD as secured parties, to be filed in ------
, {INSERT LOCATION(S){time}  (the Filing Offices), upon the {DESCRIBE 
EVENTS{time}  (the ``Financing Statements'');
    H. The Security Agreement by and between Borrower and the Lender, 
granting a security interest under the Uniform Commercial Code, in 
those items of personalty described therein, dated ------, (the 
``Security Agreement'');
    [I. {TO BE INSERTED IF THE SECURITY INSTRUMENT IS ON A LEASEHOLD 
ESTATE{time}  The Ground Lease executed by {INSERT LESSOR{time}  as 
lessor and Borrower as lessee recorded in the land records of ------, 
dated ------, (the ``Ground Lease'').]
    [J. {TO BE INSERTED FOR CONSTRUCTION/REHABILITATION LOANS{time}  
The Building Loan Agreement (92441M) executed by Lender and Borrower, 
dated ------, (the ``Building Loan Agreement'').]
    [K. {TO BE INSERTED FOR CONSTRUCTION/REHABILITATION LOANS{time}  
The Construction Contract (92442M) executed by ------ (the ``General 
Contractor'') and Borrower, dated ------ (the ``Construction 
Contract'').]
    L. The Mortgagee's Certificate (92434M), executed by the Lender, 
dated ------.
    M. The Working Capital Escrow (92412M), executed by the Borrower, 
dated ------.
    N. The Agreement and Certification (93305M){INSERT APPROPRIATE FORM 
NO.{time} , executed by the Borrower, dated ------.
    O. The Mortgagor's Oath (92478M), executed by the Borrower, dated 
------.
    P. The Borrower's Opinion Certification, pertaining to factual 
matters relied on by us [me] in rendering this opinion, executed by the 
Borrower, dated ------, a copy of which is attached hereto as Exhibit 
-- (the ``Certification of Borrower'').
    Q. A search conducted by ------ dated ------ {no earlier than 30 
days before this opinion{time}  of the financing records of the county 
and Property Jurisdiction [and Organizational Jurisdiction] (the ``UCC 
Search'').
    [R. A receipt from the insurance company providing flood insurance 
evidencing payment for the premium, dated ------, (the ``Flood 
Insurance Receipt'').]
    S. The Title Insurance Policy [or date-down if appropriate in a 
refinancing, for example] issued by ------ {acceptable company under 
HUD's regulations{time} , together with all endorsements, and naming 
HUD and the Lender as insureds as their interests may appear, dated --
--, (the ``Title Policy'').
    [T. The following documents evidencing zoning compliance, ------, 
{DESCRIBE ALL DOCUMENTS FULLY{time}  (the ``Zoning Certificate'').]
    [U. The building permit(s) issued on ------ by ------ (the 
``Building Permit'').]

[[Page 46284]]

    [V. The following permits, ------, {DESCRIBE PERMITS{time}  which 
are required for the operation of the project, issued by on ------ 
(``Other Permits'').]
    [W. The Surveyor's Plat OR Survey showing completed project, 
prepared by ------, dated ------, (the ``Survey'').]
    X. The Surveyor's Report (92457M), executed by ------, dated ------
, (the ``Surveyor's Report'').
    [Y. The deferred note (91710M, 91712M or 92223M) executed by 
Borrower in favor of ------, dated ------, (the ``Deferred Note'').]
    [Z. The Performance Bond (92452M) and the Payment Bond (92452A-M) 
issued by ------ (Surety) to secure payment and performance of ------ 
(General Contractor) and running to ------ OR the Completion Assurance 
Agreement (92450M) executed by the General Contractor, dated ------, 
(the ``Assurance of Completion'').]
    [AA. The Owner-Architect Agreement (AIA B181 with HUD Supplement) 
executed by ------ {INSERT DESIGN AND/OR CONSTRUCTION ARCHITECT{time}  
and Borrower, dated ------, (the ``Owner-Architect Agreement'').]
    [BB. The Off-Site Bond (92479M) issued by ------ (Surety) to secure 
the completion of off-site work by ------ (General Contractor) and 
running to the Lender and HUD OR Escrow Agreement for Off-Site 
Facilities (92446M) with Schedule ``A'' executed by ------ dated ------ 
(the ``Assurance of Completion of Off-Site Facilities'').]
    [CC. The following documents assuring water, electricity, sewer, 
gas, heat or other utility services (the ``Assurance of Utility 
Services''): ------ {DESCRIBE FULLY.{time} 
    [DD. The Contractor's and/or Borrower's Cost Breakdown (92328M) 
executed by the General Contractor, dated ------, (the ``Cost 
Breakdown'').]
    [EE. The Latent Defects Bond (93259M) issued by ------ and securing 
the performance of the General Contractor and running to the Lender and 
HUD OR Escrow executed by ------, dated ------ (the ``Guarantee against 
Latent Defects'').]
    [FF. The Escrow Agreement for Incomplete Construction (92456M) with 
Schedule A executed by the General Contractor, dated ------, (the ``On-
Site Deposit Escrow'').]
    [GG. The Contractor's Prevailing Wage Certificate (on page 2 of 
form 92448M) executed by ------, dated------, (the ``Contractor's 
Prevailing Wage Certificate'').]
    HH. The Request for Final Endorsement of Credit Instrument (92023M) 
and/or Request for Endorsement of Credit Instrument and Certificate of 
Mortgagee, Borrower and General Contractor (92455M) executed by the 
Borrower and the Lender, dated------, (the ``Request for 
Endorsement''). {MODIFY AS APPROPRIATE FOR INSURANCE UPON COMPLETION, 
REFINANCINGS, ETC.{time} 
    [II. The Operating Deficit Escrow (92476a-M) executed by ------, 
dated ------, (the ``Operating Deficit Escrow'').]
    [JJ. The Repair Escrow executed by ------, dated------, (the 
``Repair Escrow'').]
    [KK. All documents executed by Borrower and any State or local 
government entity pertaining to development of the Property (the 
``Public Entity Agreement'').]
    [LL. The following documents executed or delivered in connection 
with the financing of the loan with the proceeds of bonds [exempt from 
federal taxation]:------{LIST DOCUMENTS IN ACCORDANCE WITH 
INSTRUCTIONS{time}  (the ``Bond Documents'').]
    MM. The Good Standing Certificate(s) {SEE ``A'' ABOVE{time}  issued 
by [Organizational Jurisdiction OR Property Jurisdiction, if 
different], dated------{DATE INSERTED MUST BE WITHIN 30 DAYS OF THE 
DATE OF ENDORSEMENT{time} , (the ``Good Standing Certificate'').
    [NN. The certificate executed by ------ {INSERT ARCHITECT OR OTHER 
PROFESSIONAL{time} , dated------, (the ``Certificate'').]
    OO. A search conducted by------ dated [no earlier than 30 days 
before this opinion] of the public records of the federal District 
Court and State and local courts in: (i) the jurisdiction where the 
Property is located; (ii) the jurisdiction(s) where the Borrower is 
located and does business; and (iii) the jurisdiction where the general 
partner of the Borrower is organized (the ``Docket Search'').

    Note: Numerical references in parentheses above are to FHA and 
HUD form numbers.

    The documents listed in B through I above are referred to 
collectively as the ``Loan Documents.'' The documents listed in J 
through OO are referred to collectively as the ``Supporting 
Documents.'' The documents listed in A through OO are referred to 
collectively as the ``Documents.''
    In basing the several opinions set forth in this document on ``our 
[my] knowledge,'' the words ``our [my] knowledge'' signify that, in the 
course of our [my] representation of the Borrower, no facts have come 
to our [my] attention that would give us [me] actual knowledge or 
actual notice that any such opinions or other matters are not accurate. 
Except as otherwise stated in this opinion, we [I] have undertaken no 
investigation or verification of such matters. Further, the words ``our 
[my] knowledge'' as used in this opinion are intended to be limited to 
the actual knowledge of the attorneys within our [my] firm who have 
been involved in representing the Borrower in any capacity including, 
but not limited to, in connection with this Loan. We [I] have no reason 
to believe that any of the documents on which we [I] have relied 
contain matters which, or the assumptions contained herein, are untrue, 
contrary to known facts, or unreasonable.
    In reaching the opinions set forth below, we [I] have assumed, and 
to our [my] knowledge there are no facts inconsistent with, the 
following:
    (a) Each of the parties to the Documents, other than the Borrower 
(and any person executing any of the Documents on behalf of the 
Borrower), has duly and validly executed and delivered each such 
instrument, document, and agreement to be executed in connection with 
the Loan to which such party is a signatory, and such party's 
obligations set forth in the Documents are its legal, valid, and 
binding obligations, enforceable in accordance with their respective 
terms.
    (b) Each person executing any of the Documents, other than the 
Borrower (and any person executing any of the Documents on behalf of 
the Borrower), whether individually or on behalf of an entity, is duly 
authorized to do so.
    (c) Each natural person executing any of the Documents is legally 
competent to do so.
    (d) All signatures of parties other than the Borrower (and any 
person executing any of the Documents on behalf of Borrower) are 
genuine.
    (e) All Documents which were submitted to us [me] as originals are 
authentic; all Documents which were submitted to us [me] as certified 
or photostatic copies conform to the original document, and all public 
records reviewed are accurate and complete.
    (f) All applicable Documents have been duly filed, indexed, and 
recorded among the appropriate official records and all fees, charges, 
and taxes due and owing as of this date have been paid.
    (g) The parties to the Documents and their successors and/or 
assigns will: (i) act in good faith and in a commercially reasonable 
manner in the exercise of any rights or enforcement of any remedies 
under the Documents; (ii) not engage in any conduct in the exercise of 
such rights or enforcement of such

[[Page 46285]]

remedies that would constitute other than fair and impartial dealing; 
and (iii) comply with all requirements of applicable procedural and 
substantive law in exercising any rights or enforcing any remedies 
under the Documents.
    (h) The exercise of any rights or enforcement of any remedies under 
the Documents would not be unconscionable, result in a breach of the 
peace, or otherwise be contrary to public policy.
    (i) The Borrower has title or other interest in each item of (i) 
real and (ii) tangible and intangible personal property 
(``Personalty'') comprising the Property in which a security interest 
is purported to be granted under the Loan Documents [and, where 
Personalty is to be acquired after the date hereof, a security interest 
is created under the after-acquired property clause of the Security 
Agreement].
    In rendering this opinion we [I] also have assumed that the 
Documents accurately reflect the complete understanding of the parties 
with respect to the transactions contemplated thereby and the rights 
and the obligations of the parties thereunder. We [I] also have assumed 
that the terms and the conditions of the Loan as stated in the 
Documents have not been amended, modified or supplemented, directly or 
indirectly, by any other agreement or understanding of the parties or 
waiver of any of the material provisions of the Documents. After 
reasonable inquiry of the Borrower, we [I] have no knowledge of any 
facts or information that would lead us [me] to believe that the 
assumptions in this paragraph are not justified.
    In rendering our [my] opinion in paragraph 13, we [I] also have 
assumed that: (i) all Personalty in which a security interest is 
created under the Documents (other than accounts or goods of a type 
normally used in more than one jurisdiction) is located at the Property 
except for the following itemized property:------ [Certain health care 
receivables, income, bank accounts, etc. and other such property which 
is not located within the physical description of the realty should be 
listed here.]. and (ii) Borrower's [Chief Executive Office] [only place 
of business] [residence] is located in------. After reasonable inquiry 
of the Borrower, we [I] have no knowledge of any facts or information 
that would lead us [me] to believe that the assumptions and factual 
exception set forth in this paragraph are not justified.
    In rendering this opinion, we [I] have, with your approval, relied 
as to certain matters of fact set forth in the Certification of 
Borrower, the Good Standing Certificate(s) [and certain other specified 
Documents,] as set forth herein. After reasonable inquiry of the 
Borrower as to the accuracy and completeness of the Certification of 
Borrower, the Good Standing Certificate(s), [and such other Documents], 
we [I] have no knowledge of any facts or information that would lead us 
[me] to believe that such reliance is not justified.
    Based on the foregoing and subject to the assumptions and 
qualifications set forth in this letter, it is our [my] opinion that:
{TO BE USED IN CASES WHERE ORGANIZATIONAL DOCUMENTS WERE PREPARED BY 
BORROWER'S ATTORNEY{time} 
    1. The Borrower is a ------ {INSERT TYPE OF ENTITY{time}  duly 
organized and validly existing under the laws of the Organizational 
Jurisdiction. The Borrower is duly qualified to do business and, based 
solely on the Certificate(s) of Good Standing, copy attached hereto as 
Exhibit [--], is in good standing under the laws of the Organizational 
Jurisdiction, [and is qualified to do business as a foreign ---- entity 
in the Property Jurisdiction based on a review of ---- .]
{OR, IF THE BORROWER IS A TRUST OR LIMITED LIABILITY COMPANY 
(LLC){time} 
    The Borrower is ------ {INSERT NAME OF THE TYPE OF TRUST OR NAME OF 
LLC{time}  duly formed and validly existing under the laws of the 
Organizational Jurisdiction [, and is qualified to do business as a 
foreign ------ entity in the Property Jurisdiction].
{AND, IF THE GENERAL PARTNER OF A PARTNERSHIP BORROWER OR MANAGING 
MEMBER OF AN LLC BORROWER IS AN ENTITY{time} 
    The general partner of the Borrower is a ------ {INSERT TYPE OF 
ENTITY{time} , duly organized, validly existing and, based solely on 
the Certificate(s) of Good Standing, copy attached hereto as Exhibit 
[--], in good standing under the laws of the Organizational 
Jurisdiction [and is qualified to do business as a foreign ------ 
{INSERT TYPE OF ENTITY{time}  in the Property Jurisdiction].
{TO BE USED IN CASES, PRINCIPALLY REFINANCINGS, WHERE ORGANIZATIONAL 
DOCUMENTS WERE NOT PREPARED BY BORROWER'S ATTORNEY{time} 
    1. Based solely on the Certificate(s) of Good Standing, copy 
attached hereto as Exhibit [--], the Borrower is a ---- {INSERT TYPE OF 
ENTITY{time}  validly existing under the laws of the Organizational 
Jurisdiction and in good standing under the laws of the Organizational 
Jurisdiction [and is qualified to do business as a foreign ---- entity 
in the Property Jurisdiction].
{OR, IF THE BORROWER IS A TRUST{time} 
    The Borrower is ------ {INSERT NAME OF THE TYPE OF TRUST{time}  
validly existing under the laws of the Organizational Jurisdiction [and 
is duly qualified to do business as a foreign ---- entity in the 
Property Jurisdiction].
{AND, IF THE GENERAL PARTNER OF A PARTNERSHIP BORROWER OR THE MANAGING 
MEMBER OF AN LLC IS AN ENTITY{time} 
    Based solely on the Good Standing Certificate(s), copy attached 
hereto as Exhibit [--], the general partner of the Borrower is a ------
{INSERT TYPE OF ENTITY{time} , validly existing and in good standing 
under the laws of ------ {INSERT STATE{time}  [and is qualified to do 
business as a foreign ------ {INSERT TYPE OF ENTITY{time}  in the 
Property Jurisdiction].
    2. The Borrower has the [corporate/partnership/trust] power and 
authority and possesses all necessary governmental certificates, 
permits, licenses, qualifications and approvals to own and operate the 
Property and to carry out all of the transactions required by the Loan 
Documents and to comply with applicable federal statutes and 
regulations of HUD in effect on the date of the FHA Commitment. [In 
transactions involving health care facilities where there is a lease or 
other contract affecting the license, Certificate of Need (CoN) and/or 
receivables, this provision and some of the provisions below may have 
to be modified accordingly to reflect HUD policy. In such cases, 
approval must be obtained from the Office of General Counsel, Office of 
Insured Housing.]
    3. The execution and delivery of the Loan Documents by or on behalf 
of the Borrower, and the consummation by the Borrower of the 
transactions contemplated thereby, and the performance by the Borrower 
of its obligations thereunder, have been duly and validly authorized by 
all necessary [corporate/partnership/trust] action by, or on behalf of, 
the Borrower.
    4. All authorizations, consents, approvals, and permits have been 
obtained from, appropriate actions have been taken by, and necessary 
filings have been made with all necessary Organizational and Property 
Jurisdictions or federal courts or governmental authorities, all as 
disclosed on Exhibit --, attached hereto, and as listed and set forth 
in Paragraph(s) 2 and ---- of this opinion [i.e. good standing 
certificate]. To the best of our knowledge, these represent all such 
authorizations, consents,

[[Page 46286]]

approvals, permits, actions and filings that are required in connection 
with the execution and delivery by the Borrower of the Loan Documents 
and the ownership [and operation] of the Property.
    5. Each of the Loan Documents has been duly executed and delivered 
by the Borrower and constitute the valid and legally binding promises 
or obligations of the Borrower, enforceable against the Borrower in 
accordance with its terms, subject to the following qualifications:
    (i) the effect of applicable bankruptcy, insolvency, 
reorganization, moratorium and other similar laws affecting the rights 
of creditors generally; and
    (ii) the effect of the exercise of judicial discretion in 
accordance with general principles of equity (whether applied by a 
court of law or of equity); and
    (iii) certain remedies, waivers, and other provisions of the Loan 
Documents may not be enforceable, but, subject to the qualifications 
set forth in this paragraph at (i) and (ii) above, such 
unenforceability will not preclude (a) the enforcement of the 
obligation of the Borrower to make the payments as provided in the 
Mortgage and Note (and HUD's regulations), and (b) the foreclosure of 
the Mortgage upon the event of a breach thereunder.
    [6. {TO BE INSERTED WHEN ANY OR ALL OF THE LOAN DOCUMENTS ARE NOT 
HUD APPROVED FORMS OR WHEN HUD APPROVED FORMS HAVE BEEN REVISED OR 
MODIFIED IN CONNECTION WITH THE LOAN{time}  The execution and delivery 
of, and the performance of the obligations under, the Loan Documents 
will not violate the Organizational Documents of the Borrower or any 
applicable provisions of local or State law.
    [7. {INSERT FOR LOANS INVOLVING CONSTRUCTION OR 
REHABILITATION{time}  To our [my] knowledge there are no proposed 
change(s) of law, ordinance, or governmental regulation (proposed in a 
formal manner by elected or appointed officials) which, if enacted or 
promulgated after the commencement of construction/rehabilitation, 
would require a modification to the Project, and/or prevent the Project 
from being completed in accordance with the plans and specifications, 
dated ------, executed by ------ {INSERT BORROWER{time}  and ------ 
{INSERT GENERAL CONTRACTOR{time} , and ------ {INSERT GENERAL 
CONTRACTOR{time} , and referred to in the Construction Contract (the 
``Plans and Specifications'').]
    [8. {INSERT IF THERE IS NO ZONING ENDORSEMENT INCORPORATED INTO THE 
TITLE POLICY{time}  The attached Zoning Certificate states that the 
Property appears on the zoning maps of [Property Jurisdiction] as being 
located in a ---- zone. According to the zoning ordinance of the 
Property Jurisdiction, the use of the Property as a---- is a permitted 
use in such zone.

 or

    Based solely on the Zoning Certificate, the Property may be used 
for ------ as a permitted use.]
    [9. {USE FOR NEW CONSTRUCTION OR SUBSTANTIAL REHABILITATION IN 
CASES WHERE THE DEPARTMENT DOES NOT RECEIVE A CERTIFICATE DIRECTLY FROM 
THE PROFESSIONAL{time}  Based solely on the Certificate, construction/
rehabilitation of the Project in accordance with the Plans and 
Specifications will comply with all applicable land use and zoning 
requirements.
    {USE FOR REFINANCINGS{time}  Based solely on the Certificate, the 
Project complies with all applicable land use and zoning requirements.]
    10. Based solely on (a) our [my] knowledge and (b) the 
Certification of Borrower, the execution and delivery of the Loan 
Documents will not: (i) cause the Borrower to be in violation of, or 
constitute a default under the provisions of, any agreement to which 
the Borrower is a party or by which the Borrower is bound, (ii) 
conflict with, or result in the breach of, any court judgment, decree 
or order of any governmental body to which the Borrower is subject, or 
(iii) result in the creation or imposition of any lien, charge, or 
encumbrance of any nature whatsoever on any of the property or assets 
of the Borrower, except as specifically contemplated by the Loan 
Documents.
    11. Based solely on (a) our [my] knowledge, (b) the Certification 
of Borrower and (c) the Docket Search; there is no litigation or other 
claim pending before any court or administrative or other governmental 
body or threatened in writing against the Borrower (or any Principal 
thereof as defined in the HUD regulations), or the Property, [{TO BE 
INSERTED WHEN BORROWER IS NOT A SOLE-ASSET BORROWER{time}  or any other 
properties of the Borrower (or any Principal)] [, except as identified 
on Exhibit --].
    12. The Mortgage is in appropriate form for recordation in ------ 
{INSERT PROPER NAME OF LOCAL LAND RECORDS OFFICE{time}  of ------ 
{INSERT COUNTY OR CITY{time}  of the Property Jurisdiction, and is 
sufficient, as to form, to create the encumbrance and security interest 
it purports to create in the Property.
    13. Filing of the Financing Statements in the Filing Offices will 
perfect the security interests of both Lender and HUD in the Personalty 
of the Borrower located in the Project Jurisdiction and in any 
Personalty which the Borrower is entitled to receive (such as health 
care receivables), but only to the extent that, under the Uniform 
Commercial Code in effect in the Project Jurisdiction, a security 
interest in each described item of Personalty can be perfected by 
filing. The Filing Offices are the only offices in which the Financing 
Statements are required to be filed in order to perfect the Lender's 
and HUD's security interests in the Personalty.
    14. The Loan does not violate the usury laws or laws regulating the 
use or forbearance of money of the Property Jurisdiction.
    [15. {FOR USE ONLY IF BORROWER IS A TRUST{time}  The Borrower is an 
irrevocable trust that has a term consistent with HUD's requirements 
and the term of the irrevocable trust is not affected by the terms of 
any of the beneficiaries' interests.] [The laws of the Property 
Jurisdiction govern the interpretation and the enforcement of the Loan 
Documents notwithstanding that the Borrower may be formed in a 
jurisdiction other than the Property Jurisdiction. The Borrower can sue 
and be sued in the Property Jurisdiction without the necessity of 
joining any of the beneficiaries of the Borrower, including without 
limitation, a suit on the Note or a foreclosure proceeding arising 
under the Mortgage. Venue for any foreclosure proceeding under the 
Mortgage may be had in [Property Jurisdiction].
    [16. {USE IN CASES INVOLVING BOND FINANCING{time}  Based solely on 
the opinion of ------ {INSERT BOND COUNSEL{time} , dated as of the date 
hereof and attached hereto as Exhibit --, to the extent that any of the 
provisions of the Bond Documents are inconsistent with any of the 
provisions of the Loan Documents or Supporting Documents, the 
provisions of the Loan Documents or Supporting Documents shall govern.]
    [17. {USE IN CASES WHERE THE DEVELOPMENT OF THE PROPERTY IS 
GOVERNED BY AN AGREEMENT WITH A PUBLIC ENTITY{time}  Based upon our 
knowledge and the Certification of Borrower, there is no default under 
the Public Entity Agreement, and construction in accordance with the 
Plans and Specifications and within the time frame specified in the 
Construction Contract will not lead to a default under the Public 
Entity Agreement.]

[[Page 46287]]

    In addition to the assumptions set forth above, the opinions set 
forth above are also subject to the following qualifications:
    (i) The Uniform Commercial Code of the Property Jurisdiction 
requires the periodic filing of continuation statements with ---- [and 
----] not more than ---- prior to and not later than the expiration of 
the ---- year period from the date of filing of the Financing 
Statements and the expiration of each subsequent -- year period after 
the original filing, in order to maintain the perfection and priority 
of security interests and to keep the Financing Statements in effect.
    (ii) We express no opinion as to the laws of any jurisdiction other 
than the laws of the Property Jurisdiction [and the Organizational 
Jurisdiction, if it is different,] and the laws of the United States of 
America. The opinions expressed above concern only the effect of the 
laws (excluding the principles of conflict of laws) of the Property 
Jurisdiction [and the Organizational Jurisdiction, if it is different] 
and the United States of America as currently in effect. We assume no 
obligation to supplement this opinion if any applicable laws change 
after the date of this opinion, or if we become aware of any facts that 
might change the opinions expressed above after the date of this 
opinion.
    We [I] confirm that:
    (a) Based on the Organizational Documents, the name of the Borrower 
in each of the Documents and the Title Policy and FHA Commitment is the 
correct legal name of the Borrower;
    (b) The legal description of the Property is consistent in the 
Documents wherein it appears and in Exhibit B hereto;
    (c) We [I] do not have any financial interest in the Project, the 
Property, or the Loan, other than fees for legal services performed by 
us, arrangements for the payment of which have been made; and we [I] 
agree not to assert a claim or lien against the Project, the Property, 
the Borrower, the Loan proceeds or income of the Project;
    (d) Other than as Counsel to the Borrower, we [I] have no interest 
in the Borrower (or any principal thereof) or the Lender or any other 
party involved in the Loan transaction and do not serve as [a director, 
officer or] [an] employee of the Borrower or the Lender. We [I] have no 
undisclosed interest in the subject matters of this opinion. We [I] do 
not represent the Lender, any investing lender or investor in the loan 
transaction, any bridge lender involved in the loan transaction, any 
lender with a commitment to purchase the loan or any interest therein 
or any other party involved in the Project or the loan transaction;
    (e) [FOR USE IN MAP TRANSACTIONS ONLY] Based solely upon our [my] 
knowledge and the Certificate of the Borrower, there is no identity of 
interest between the Borrower and the Lender;
    (f) Based solely on the Surveyor's Report and the Surveyor's Plat, 
flood insurance [is OR is not] required pursuant to 42 U.S.C. 4012a(a); 
[{INSERT IF FLOOD INSURANCE IS REQUIRED{time}  Based solely on the 
Flood Insurance Receipt, flood insurance is in effect which satisfies 
the requirements of 42 U.S.C. 4012a(a);]
    (g) To our [my] knowledge, there are no liens or encumbrances 
against the Property which are not reflected as exceptions to coverage 
in the Title Policy;
    (h) We [I] have reviewed and discussed the terms of the Regulatory 
Agreement with Borrower;
    (i) Based upon the Certification of Borrower and to the best of our 
[my] knowledge, there are no side-deals (transactions outside the 
parameters of the HUD form closing documents and the commitment) 
between Borrower and any party to the transaction) other than as 
disclosed in the aforesaid Documents; and
    (j) This document does not deviate from the format approved by OMB 
and obtained from HUD on ---- except for such changes as have been 
identified to and specifically approved by HUD counsel.
    The foregoing opinions are for the exclusive reliance of HUD, 
[Lender OR Lender and Lender's counsel] and any subsequent holder of 
the Note.

 Sincerely,

-----------------------------------------------------------------------
[Authorized Signature]

Certification/Warning

    Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------
{ADD ADDITIONAL LINES IF MORE THAN TWO SIGNATORIES{time} 

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.
(For use in HUD-Insured MULTIFAMILY AND HEALTHCARE Transactions)

Department of Housing and Urban Development Federal Housing 
Administration

Instructions to Guide for Opinion of Borrower's Counsel

Explanatory Comments

    The Guide for this opinion was originally prepared in 1994 in view 
of changes in opinion practice as reflected by the ABA Accord and 
various State law bar reports on opinion letters and has been revised 
to reflect approximately seven years experience in using the Guide. The 
principal purpose of this Guide remains to achieve a uniform format 
which can be utilized throughout the Nation and which will be familiar 
to HUD counsel in all jurisdictions. Such a standardized format is 
crucial in an era when less resources are available to the Department; 
however, it should be emphasized that certain limited changes can be 
authorized by HUD field counsel as required by local law or by the 
unique or programmatic nature of the transaction (e.g. refinancing 
transactions under Section 241 of the National Housing Act). An effort 
has been made in these revised instructions to specify examples in more 
(but not all) of those areas where such changes can be authorized. 
Otherwise, the format of the Guide must be followed and is not open to 
negotiation. In this regard, revisions cannot be justified because of a 
particular Opinion having been approved by another HUD field office. 
The exercise of discretion by one HUD field counsel in unique 
circumstances cannot become the basis for any modification to the 
Opinion. Any

[[Page 46288]]

requested modification must be analyzed on its own merit and in a 
particular context. In these explanatory comments, the document may be 
referred to as the ``Guide'' or the ``Opinion,'' depending upon the 
context.
    The Department regards the Counsel to the Borrower as a crucial, 
central figure in the process of preparing and executing the legal and 
administrative documents necessary to achieve a closing in those 
multifamily rental and health care mortgage insurance programs where a 
note is endorsed for mortgage insurance by the Department. Please note 
that pursuant to the overall document reform effort for the multifamily 
rental and health care closing documents, ``Mortgagor'' is now referred 
to as ``Borrower'' and ``Mortgagee'' is now referred to as ``Lender;'' 
however, those new uses are defined to mean ``Mortgagor'' and 
``Mortgagee'' as those terms are used in the National Housing Act. 
Pursuant to 24 CFR Part 24, Sec.  24.105(p), attorneys or others in a 
business relationship with the Borrower are defined as ``principals.'' 
Counsel to the Borrower has significant obligations to its client (the 
Borrower), the Lender and the Department. In part, these 
responsibilities entail the exercise of due diligence to assure the 
accurate and timely preparation, completion and submission of the forms 
required by the Department in connection with the transaction. Further, 
the Counsel to the Borrower and any other attorneys involved in the 
transaction should be thoroughly familiar with the regulations, 
procedures and directives of the Department pertaining to each mortgage 
insurance transaction in which Counsel participates. The Department 
takes seriously the preparation and completion of the various documents 
involved in the mortgage insurance process (most of which are HUD form 
documents) and cannot overemphasize the importance of the following 
bolded language which must appear in all documents relied upon by the 
Department in insuring the mortgage loan:

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

[Add Additional Lines if More Than Two Signatories]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24, 28 and 30.
    Please note that this certification/warning also appears in the 
Opinion and cannot be deleted under any circumstances.
    Article IX of the UCC was recently revised in virtually all of the 
jurisdictions in which HUD insures multifamily rental and health care 
facility loans. It is imperative that Counsel to the Borrower be aware 
of these changes in State law and that the UCC documentation be 
prepared so as to comply with HUD requirements and State law. 
Furthermore, in connection with health care facility closings, it is 
imperative that the UCC documentation cover the Certificate of Need 
(CoN) and the license and that these two documents be tied to the 
security property covered by the mortgage for the duration of the 
mortgage. Please note that the Opinion has been amended to cover these 
points. See G, below, for a more specific discussion of UCC 
securitization and some major changes by HUD with respect to the legal 
documentation.
    With limited State law related exceptions, HUD anticipates that 
Borrower's Counsel will be able to follow the Guide in rendering an 
Opinion in virtually all multifamily rental housing closings involving 
new construction and substantial rehabilitation and there should be few 
changes in refinancing and health care transactions. Generally, HUD 
field counsel should not accept Opinions that otherwise substantially 
or materially deviate from the Guide. Although we understand that 
attorneys and law firms may have evolved particular styles and forms of 
opinion, HUD field counsel do not have time to negotiate each and every 
Opinion for stylistic changes and differences in thinking among 
opinions committees. It is essential that the Guide be followed in both 
style and substance in order to ensure a timely closing. The Counsel to 
the Borrower is expected to complete a draft Opinion for submission to 
HUD field counsel at least fifteen days prior to the closing along with 
the other closing documents. Any deviations must be specifically 
identified (redlined or highlighted) and discussed with field counsel 
at that time so that the deviations can be resolved prior to the 
closing. Any material deviation not required by State or local law or 
otherwise authorized by these instructions must be brought to the 
attention of the Assistant General Counsel, Multifamily Mortgage 
Division, by field counsel along with an explanation by Counsel to the 
Borrower as to the necessity for the deviation.
    It was anticipated that the Guide could be utilized in connection 
with all types of closings: insured advances or insurance upon 
completion (for new construction or substantial rehabilitation); final 
closings (for refinancings, etc.). This has proved to be the case and, 
furthermore, the Guide format has been adapted and used in Transfers of 
Physical Assets (TPAs) and hospital mergers, for example. However, 
numerous questions have been raised--particularly in cases involving 
Section 241 supplemental loans and the various refinancing transactions 
under Section 223. Therefore, it is important that the correct options 
be selected in instances where choices are provided and that 
appropriate deletions or modifications be made to accommodate unique 
circumstances or programs. On the other hand, it should be emphasized 
that this does not authorize field counsel to approve changes to the 
Guide in cases other than where the Guide is being adapted for a 
special use, e.g. refinancing or equity loan transaction, TPA, etc. 
Furthermore, HUD has made an administrative policy decision to not 
require an opinion by Counsel to the borrower for projects within the 
``Small Projects Mortgage Insurance Pilot Program (SPP).'' A Notice 
will be issued defining small project and clarifying the parameters of 
the SPP. The Lender will have the option of requiring an opinion by 
Counsel to the Borrower if the Lender so elects. It is anticipated that 
the Certification of the Owner will be expanded slightly for use in the 
SPP to provide assurances and comfort to HUD

[[Page 46289]]

in such cases. Otherwise, the Guide or a variation thereof should be 
utilized in all FHA-insured multifamily rental project and health care 
facility closings.
    The Guide is not intended to serve as a closing checklist; 
therefore, HUD field counsel may update or modify existing closing 
checklists as necessary to meet constantly changing program needs and 
handbook instructions and directives. For example, many deletions from 
the list of Guide documents are appropriate for various types of 
refinancings, operating loans, equity loans, etc. whereas several 
additional documents are necessary in the case of loans for health care 
facilities (e.g. certificate of need, license, etc.), supplemental 
loans, and certain complex refinancings.
    Brackets continue to be used in the Guide to indicate alternate 
language, insertions, documents, or instructions depending on the 
applicable facts and underlining is used to indicate blanks that must 
be completed.
    The Guide contains some instructions and definitions and is largely 
self-explanatory; however, the following expanded instructions and 
clarifications should provide additional assistance to both private 
counsel and HUD counsel. The numbers and letters used below relate to 
the paragraph numbers and letters in the Guide unless page numbers are 
specifically designated.

Page 1 and Introductory Paragraph

     Letterhead and date: The Opinion must be on the firm 
letterhead and dated the date of endorsement of the note by HUD.
     Reference: Data regarding the project, name, HUD project 
number, and location and the name or title of the Borrower must be 
accurate and inserted in the appropriate blanks.
     Addressees: The Opinion must be delivered to HUD as well 
as the Lender to establish the explicit right of each to rely on the 
Opinion. The Lender's counsel may be relying on the Opinion for certain 
aspects of its opinion. If so, the Opinion must also be addressed to 
counsel to the Lender. HUD is aware that recent case law has raised 
issues about the extent to which a Lender can rely upon such an 
opinion; therefore, the matter of reliance by the Lender could be 
clarified by the parties at the outset in jurisdictions where the issue 
has been raised. Regardless of case law, HUD continues to believe that 
this is a unique transaction where the federal interest as insurer of 
the Lender is clear from the outset and that it is as a result of the 
unique federal requirements that Counsel to the Borrower is retained to 
represent the borrower in such a fashion that the Opinion rendered by 
Counsel to the Borrower necessarily must be addressed to, and relied 
upon by, HUD as the insurer of the Lender and the Lender in order for 
the loan transaction to go forward. In cases where counsel to the 
Lender elects not to rely upon the Opinion or Counsel to the Borrower 
does not wish to permit reliance by counsel to the Lender, the Opinion 
should not be addressed to and/or delivered to the Lender's counsel. 
Furthermore, Lender and counsel to the Lender are not permitted to rely 
upon the Opinion with respect to the certification by the Lender that 
the closing documents, which are mandated by HUD forms and models, 
comport with the version of such forms and models provided to the 
Lender by HUD with the exception of the Opinion itself. Counsel to the 
Borrower must provide such certification with respect to the Opinion.
     Description of the Loan: The loan amount is the original 
principal amount of the loan being insured unless a modification is 
necessitated in connection with the closing.
     Source of funds for the Loan: In the second full sentence 
on page 2 the source of funds must be accurately identified; however, 
in certain transactions, such as low-income housing tax credit 
transactions, the source of the funds may not be known at the time the 
Opinion is rendered. In such cases, a general statement to that effect 
will suffice. Furthermore, it is important to note that this 
identification does not have to reach a level of particularity that 
identifies all individual investors in any case.

List of Documents

     In General: If there are no brackets around a particular 
document, the document is one which is commonly used for initial 
endorsements for insured advances completion cases; however, it should 
be emphasized that it is impossible to list every document for every 
insured loan. Further, no attempt has been made to list all documents 
utilized in all types of refinancings and certain specialized programs, 
e.g. certificates of need and licenses for health care programs. 
Conversely, some documents may not be utilized in a particular 
transaction and should be deleted from the list in the actual Opinion. 
Brackets around the name of the document indicate that the document may 
or may not be used for every loan. If bracketed documents are not used 
in a particular loan transaction, then delete such documents from the 
list in the actual Opinion. Each document executed in connection with 
the loan must be listed by its correct title, showing each party 
executing it and its date. If documents are dated ``as of'' a 
particular date, then such phrase should be included in the description 
in the text. It is imperative that care must be taken to compile a list 
that accurately and completely reflects the transaction in the 
submission to HUD of the initial draft. After HUD review of the initial 
draft, the Opinion may have to be modified, as necessary, to satisfy 
HUD. To the extent documents are later found in the closing docket file 
which do not comport with HUD requirements and which were not shown on 
the list, HUD reserves the right to refuse to accept or recognize the 
documents unless the documents are brought into compliance with HUD 
requirements. This should be explained to the Borrower when reviewing 
the Regulatory Agreement with the Borrower.
    All documents executed in connection with the loan transaction must 
be listed regardless of whether the document is required by HUD or 
whether the Borrower is a party to the document. It should be 
emphasized that Counsel to the Borrower is not assuming responsibility 
for the content of documents that Counsel does not prepare and/or that 
the Borrower does not execute. The review is necessary to provide 
assurance of consistency from document to document. The appropriate HUD 
or FHA form number, if applicable, must be indicated in parenthesis 
after each document
    A. Organizational Documents: All of the Organizational Documents 
must be reviewed and care should be taken to ensure adherence to the 
HUD guidelines and directives pertaining to such documents as set forth 
in the appropriate closing handbooks and instructions.
    G. In the original version of the Guide, the requirement that HUD 
be named in the Financing Statements as a secured party or as its 
interests may appear was standardized through requiring the insertion 
of appropriate language in the Security Agreement. The purpose was to 
clarify that, under certain circumstances, HUD may assert some rights 
in the personalty arising under the Regulatory Agreement which would 
precede an assignment of the Security Instrument. Based upon experience 
to date, a decision has been made that HUD need not be so named in the 
Financing Statements filed in the name of the Lender-of-Record; 
however, it should be emphasized that a separate set of Financing 
Statements must now be filed in the name of HUD placing HUD in a 
secondary position with respect to all personalty except certain health 
care receivables in cases where

[[Page 46290]]

such receivables cannot be pledged to a private lender. In the case of 
such receivables, HUD must be placed in a first position. It is the 
responsibility of the Lender to ensure that such Financing Statements 
and Security Agreements are properly filed in the name of said Lender 
and HUD.
    The procedures may vary depending upon whether the jurisdiction has 
enacted the new Article IX of the UCC or not. Counsel to the Borrower 
must check to ensure that the Lender has properly filed such Financing 
Statements and has properly structured the Security Agreement(s). 
Increasing value and volume of major moveable equipment in the health 
care area and increasing problems with receivables, the Certificate of 
Need (CoN) and the license make it more imperative that there be 
specificity in the UCC documentation with respect to the securitization 
of such personalty. HUD has made an effort to give HUD maximum 
contractual protection with respect to the personalty under the newly 
revised Regulatory Agreement for 232 facilities; however, this does not 
diminish the need to describe the personalty with specificity in the 
UCC documentation. With respect to health care facilities, the Security 
Agreement(s) must cover all personalty, including equipment (with major 
moveables being described with specificity). Further, all receivables 
must be specifically described as well as the Certificate of Need (CoN) 
and the license. Please note that the receivables, CoN and license must 
all be securitized in favor of the Lender-of-Record (and HUD as 
appropriate) regardless of whether the facility is operated by the 
Borrower or by a lessee. This is a major departure from prior practice 
in some offices and its significance cannot be over-emphasized.
    J. Building Loan Agreement: This document is a ``bracketed 
document'' which should only be used in cases involving new 
construction or substantial rehabilitation. Hence, the document is not 
required in equity loan transactions and most refinancing transactions 
and many supplemental loan transactions.
    K. Construction Contract. See J. above.
    L. Mortgagee's Certificate: It has been argued that this document 
is unnecessary in the context of certain insured secondary loan 
transactions because the form is used to document the first Lender's 
consent to the second loan. In insured secondary loan transactions, it 
should be emphasized that a Mortgagee's Certificate is obtained that is 
like the Mortgagee's Certificate obtained in a new construction 
closing. It has nothing to do with the consent of the first lender to 
the secondary financing transaction. In secondary financing cases (such 
as under Section 241) where the consent of the first lender is obtained 
for a second Security Instrument insured by HUD, a separate document 
(for which there is no specified format) is utilized.
    Regardless, the Mortgagee's Certificate is executed by the lender 
making the loan being insured, which in the cases at issue would be the 
lender making the second loan, and is one of the most significant 
closing documents. HUD places great reliance upon the Mortgagee's 
Certificate and considers it necessary to reveal all fees, side 
transactions, etc. Furthermore, the document now contains a 
certification that the closing documents conform to the HUD-approved 
format except for changes approved by field counsel. In this regard, 
the document is crucial to HUD's endorsement of the note for insurance. 
Counsel to the Borrower is not responsible for the execution of the 
document and only needs to review the document in the capacity as 
Counsel to the Borrower to be certain that the document conforms to the 
transaction the Borrower is agreeing to and that the document 
accurately reflects the fees and escrows, etc. that are required of the 
Borrower.
    It should be noted that the Mortgagor's Certificate has been 
eliminated and the substantive provisions have been incorporated into 
the Regulatory Agreement.
    P. Certification of Owner: Several persons have questioned whether 
the references in Paragraph 6 to the Public Entity Agreement and the 
Regulatory Agreement should be changed so that both refer instead to 
the Public Entity Agreement. The references should not be changed 
because HUD wants assurance that there will be no violations of the 
Regulatory Agreement as a result of events that have occurred with the 
passage of time; however, the language has been clarified to eliminate 
several ambiguities. Some types of PEAs may also involve a regulatory 
agreement and the certification is being clarified to cover both the 
HUD Regulatory Agreement and the local one.
    Q. UCC searches: The UCC Search must be conducted within thirty 
days of closing and can be conducted by either the title insurance 
company, a reputable document search firm, the Counsel to the Borrower 
or any other attorney licensed in the jurisdiction.
    R. Flood insurance receipt: Arguments have been made that this 
document is not necessary in equity loan, supplemental loan and 
refinancing transactions. Flood plain maps change. In insuring a first 
or a second Security Instrument, it is just as significant that HUD 
know whether the property is located in an area where flood insurance 
is required and, if so, whether the insurance is in effect regardless 
of whether a prior HUD-insured first Security Instrument is in effect. 
HUD would not necessarily have the data on file, and it was determined 
that this is a matter which Counsel to the Borrower could confirm under 
item (f) near the end of the Guide. Note that no opinion is required, 
and the factual determinations necessitated by the Guide are considered 
within the usual duties of Counsel to the Borrower.
    S. Title Insurance Policy: Currently the 1992 ALTA Format (with 
appropriate endorsements) is required by HUD in most jurisdictions.
    T. Evidence of zoning compliance: The evidence of zoning compliance 
will vary depending on the circumstances. The evidence should establish 
that the building, if constructed according to plans and circumstances, 
will comply with all zoning requirements. The evidence may be in the 
form of a letter or certificate from the appropriate local official 
stating that, if the building is constructed according to the plans and 
specifications submitted for review, the building will comply with all 
zoning requirements. In refinancing cases where no construction is 
involved, the evidence may be in the form of a letter certifying that 
the existing building(s) is (are) in compliance with outstanding zoning 
requirements or, if not, the nonconforming variance, etc., is 
acceptable. If the locality has no zoning ordinance, a letter should be 
submitted from the chief executive stating such. In those 
circumstances, it may be necessary to obtain a letter from the local 
planning body of the county in which the project is located, that the 
proposed development is compatible with the county's comprehensive 
plan. If the zoning approval is based upon a variance or other special 
action, the closing may have to be delayed until the time for appeals 
has run. In extremely complex cases, an opinion may need to be obtained 
from legal counsel specializing in local zoning matters. Such letter 
must be attached as an exhibit and referenced in the appropriate 
paragraphs of the Opinion.
    In cases involving refinancings, it has been suggested by some 
attorneys that HUD should have zoning information on hand either as a 
result of the closing of the first HUD-insured loan or due to periodic 
site reviews. HUD would not normally maintain data pertaining to local 
zoning law and the data with

[[Page 46291]]

respect to the first loan would only be valid with respect to the 
closing date of that loan. Paragraphs 7, 8 and 9 of the Opinion contain 
several options with respect to local zoning law. It is important that 
HUD be assured that there have been no changes in the land use or 
zoning which would adversely affect the continued use of the property 
as a rental housing project. In this context, we reemphasize that the 
attorney responsible for this matter must be licensed in the property 
jurisdiction.
    U. Building permit(s): If no building permit is required, this 
document is not applicable and should be deleted from the Opinion. 
(This would also be true with respect to occupancy permits (under V.) 
unless new permits are required under local law in connection with 
``pure'' refinancing transactions.)
    V. Permits required for the operation of the project: Several 
practitioners have argued that the documentation is unnecessary in 
refinancing transactions; however, they have not indicated whether such 
a position would affect their wording of Paragraph 4 of the Guide. In 
all cases, HUD is concerned that any permits required for the continued 
operation of the project be proper and in place such that an opinion 
can be rendered with respect to Paragraph 4. It is crucial in existing 
projects that HUD be assured that no new requirements have been imposed 
which would thwart continued operation of the project. If no such 
permits are required, Paragraph 4 should be amended accordingly. This 
is a matter that Counsel to the Borrower, as a specialist in the 
property jurisdiction, should be able to ascertain.
    W. Surveyor's plat or survey: The survey must be signed, sealed and 
dated within 90 days of the closing. In certain refinancing 
transactions, a survey would not normally be required because no new 
construction would have taken place and, presumably, nothing would have 
changed with respect to the building(s) and the site. In such 
situations, if there is other satisfactory evidence that no site 
changes have occurred, an administrative waiver would necessitate the 
deletion of the item from the Opinion. See X. below. If the borrower's 
attorney were to become aware of any changes, this would have to be 
addressed in the Opinion and a survey could be required by HUD 
depending upon the circumstances.
    X. Surveyor's Report: Unless there is a title endorsement 
protecting against any encroachments, etc., there will have to be a 
surveyor's certificate indicating that nothing has changed since the 
last survey with respect to encroachments, lot line violations, 
construction activity, etc. HUD should not be incurring the risk of 
insuring any loan if there has been any action which would impair the 
lender's and HUD's respective positions. As an alternative to a 
surveyor's certificate, the borrower's attorney could rely upon an 
appropriate certificate from a qualified architect and insert 
appropriate language in the Opinion.
    Z. Assurance of completion (bonds or agreement): This documentation 
(now bracketed) would not be utilized in a pure refinancing or equity 
loan transaction and, therefore, would only be used in cases involving 
some construction where the regulation pertaining to assurance of 
completion is applicable.
    AA. Owner-Architect Agreement: This document (now bracketed like 
Documents J and K) should only be indicated (where the Guide indicates 
``{INSERT DESIGN AND/OR CONSTRUCTION ARCHITECT{time} '') in cases 
involving new construction or substantial rehabilitation.
    BB. Off-Site Bond or Agreement: This document should only be used 
in cases where off-site work is involved. As such, the document would 
not normally be used in pure equity loan transactions or in refinancing 
transactions involving no construction.
    CC. Assurance of utility services: These documents do not pertain 
to pure Section 241(f) equity loan transactions and certain refinancing 
transactions and, therefore, should be deleted in those instances.
    FF. Escrow Deposit for On-Site Improvements: If any such 
improvements are required in connection with an equity loan, 
supplemental loan or refinancing transaction, the form document 
specified should be tailored to the situation as determined by field 
counsel. In a situation where such an escrow is necessary, Counsel to 
the borrower should modify the form as necessary and present it to 
field counsel for review.
    GG. Contractor's Prevailing Wage Certificate: This item is no 
longer required in the HUD closing checklist; therefore, some attorneys 
have taken the position that it can be eliminated from the Opinion. 
HUD's position remains that the item should be reviewed by Counsel to 
the Borrower for the purpose of assuring consistency between the 
documents and performance under the Construction Contract to which the 
Borrower is a party.
    KK. Public Entity Agreement: The references to this document and to 
the Regulatory Agreement in Paragraph 6 of the Certification of 
Borrower have created some confusion about whether the reference to the 
Regulatory Agreement should be changed to Public Entity Agreement. The 
two separate references were intended; however, a clarification has 
been made as discussed in P. above.
    LL. Bond Documents: This does not include all documents involved in 
the typical bond financing. It does include those principal documents 
such as the Prospectus, the Indenture, a sample Bond, etc. All 
documents executed by the Borrower or which establish or describe any 
obligations of the Borrower must be included.
    NN. Certificate issued by architect or other professional: Normally 
such a document would not be necessary in the case of a pure Section 
241(f) equity loan and certain refinancing transactions and should be 
deleted unless those circumstances mentioned under the last sentence 
pertaining to Document X, above, make the certificate appropriate. Note 
that ``Certificate'' is a defined term and that the Certificate can 
come from ``an architect or other professional.'' Consequently, there 
is no form for the Certificate and HUD field counsel should defer to 
HUD administrators specializing in architectural and engineering 
matters in determining the acceptability of the Certificate. It is 
referenced in Paragraph 9 of the Opinion and should not be confused 
with the Zoning Certificate that is also a defined term and is 
referenced in Paragraph 8.
    OO. Docket search: The Docket Search can be conducted by either the 
title insurance company, a reputable document search firm, the Counsel 
to the Borrower or any other attorney licensed in the jurisdiction. 
Arguments have been made by private counsel that such a docket search 
is not necessary in all transactions. One of the main purposes of the 
new Guide was to clearly define the work to be performed by Counsel to 
the Borrower. It was determined that such a search was within the scope 
of the fees permitted as a Security Instrument line item. Such a search 
is important in the case of an existing subsidized project where 
matters of public record could reveal circumstances wherein it would be 
inadvisable for HUD to go forward with insuring another loan.
    An argument has also been made that several record searches in 
separate jurisdictions could be necessitated in some cases and that 
this would cost a significant amount of money with little benefit. As 
the Guide was being developed, HUD was cognizant of such a scenario; 
however, the benefit to HUD of establishing that the public records are 
clear outweighs the costs to the

[[Page 46292]]

borrower of conducting such searches. In the case where a sole-asset 
borrower is being created, however, a search of the public records in 
the jurisdiction where the borrower is located (assuming a different 
location from the others iterated) is unnecessary. The Opinion could be 
amended in those instances to indicate that particular state of facts; 
however, all of the other searches would have to be done.

Opinions

    1. This paragraph contains several options depending upon whether 
the Borrower's organizational documents were prepared by Counsel 
rendering the Opinion and the type of borrower entity. Care should be 
taken to ensure that the correct option is selected and that the 
requisite information is inserted correctly. It is intended that, where 
the borrower entity or general partner of the borrower entity is 
established by Counsel to the Borrower, no reliance on other sources is 
permitted and Counsel must opine as to the due organization of the 
Borrower. If a Certificate of Good Standing is not available in the 
State, but an equivalent document is (i.e., Certificate of Existence), 
then the bracketed language must be revised to reflect the name/title 
of the equivalent document so obtained. Any Certificate of Good 
Standing or equivalent document issued by the applicable governmental 
authority must be dated no more than 30 days prior to the date of the 
Opinion of Borrower's Counsel. If the Borrower is a foreign corporation 
or partnership, the Opinion must recite the review of all government 
approvals required to do business in the Property jurisdiction. If a 
Certificate of Good Standing or equivalent document cannot be obtained 
from the applicable governmental authority (e.g., for general 
partnerships, then the Borrower's attorney will be required to do the 
due diligence necessary to give the opinion or may engage other counsel 
to render such opinion). If the Property jurisdiction is not the State 
of formation for the borrower entity, Counsel must also opine that the 
Borrower is qualified to transact business in the Property 
jurisdiction. Such opinion may be made solely on the basis of a 
certificate from the applicable governmental authorities of the 
Property jurisdiction, and if Counsel is relying on such 
certificate(s), then the opinion must expressly identify those 
certificate(s) and they must be attached to the Opinion as an exhibit. 
If the Borrower is an individual, paragraph one should be deleted from 
the Opinion.
    2. This paragraph provides, among other things, that the Borrower 
possesses all the necessary governmental certificates, permits, 
licenses, qualifications and approvals to own and operate the Property. 
This particular provision has generated considerable controversy--
particularly where health care facilities are being constructed or 
substantially rehabilitated in large, urban jurisdictions having a 
multitude of regulatory requirements pertaining to ownership and 
operation. Consequently, field counsel have discretion to permit a 
modification in which Counsel to the Borrower itemizes those local 
governmental requirements which have been evaluated and indicates that, 
after due diligence inquiry and insofar as the attorney is aware, these 
local requirements comprise the entire universe of such requirements. 
The Opinion should further state that, based upon such itemized local 
requirements and compliance therewith (with all permits, certificates, 
etc. being itemized), the Borrower possesses the power and authority 
necessary to own and operate the Property and to carry out all of the 
transactions required by the Loan Documents and to comply with 
applicable federal statutes and regulations of HUD in effect on the 
date of the FHA commitment. In many instances involving new 
construction, some items such as a certificate of occupancy will not 
have been obtained by the time of closing. In such instances, field 
counsel have discretion to permit an appropriate clarification with 
respect to that particular instrument.
    11. If the Borrower or any principal of the Borrower is involved in 
any litigation or there is any litigation pertaining to the Property, 
all such litigation matter(s) must be disclosed in writing to HUD field 
counsel in order that the Department can determine whether the 
endorsement of the loan is possible. Note that litigation involving a 
principal of the Borrower must be disclosed. Confusion has developed 
when there has been litigation involving lower tiers of a partnership. 
If the issue cannot be resolved through reference to the definition of 
``principal'' in the 2530 regulations, HUD field counsel should consult 
with HUD program administrators and determine whether the litigation 
should be disclosed. If the litigation involves compliance with civil 
rights requirements, it must immediately be brought to the attention of 
appropriate Fair Housing and Equal Opportunity personnel (regardless of 
whether a ``principal'' or some lesser component of the Borrower is the 
subject of the litigation).
    13. If any UCC Financing Statements have been filed on the 
Personalty in conjunction with any transaction other than the Loan, 
they must be identified to the HUD field counsel as well as details 
with respect to how such Financing Statements will be terminated at the 
time of closing.
    If the property is an elderly housing project or a health care 
facility or if the loan otherwise is to be secured by significant 
amounts of personal property, the matter should be discussed with field 
counsel. In the event further discussion is necessary, field counsel 
should contact the Assistant General Counsel, Multifamily Mortgage 
Division. For projects in which the personalty is mostly household 
appliances (e.g., refrigerators) or a limited quantity of smaller 
equipment, the Opinion will be limited as shown. In other instances, 
the Opinion may have to be expanded particularly with respect to 
ensuring that items such as receivables, income stream, etc. are 
security property. Some examples of such expansion are indicated in the 
new format because of omissions in the past with respect to projects 
insured by HUD under Section 232 and 242. Further it should be noted 
that Lender is now required to prepare, have HUD properly execute and 
file UCC financing statements showing HUD as a secured party in a 
second position to Lender and in a first position as to certain health 
care receivables in which a private lender cannot hold a first 
position. Either a separate or Lender's Security Agreement (depending 
upon the law of the jurisdiction) will have to also reflect this new 
requirement.
    One or more UCC searches performed not more than 30 days prior to 
the date of the Opinion must be made and attached to the Opinion.
    15. If the Borrower is a trust (other than a land trust), then 
Paragraph 15 must be included in the Opinion. The second sentence need 
only be included if the trust was formed in a jurisdiction other than 
the Property jurisdiction.
    16. This Section has been modified to clarify that taxable as well 
as tax-exempt bond financing is covered and that other third-party 
source of funds financings are also covered.

Acceptability of Counsel:

     Counsel to the Borrower must opine as to the law of the 
Property jurisdiction and must also opine as to the law of the State of 
Borrower's organization, if different from the Property jurisdiction. 
HUD requires that Counsel to the Borrower be admitted to practice law 
in each jurisdiction in which such admission is required by the laws or 
ethical considerations of the bar to be able to give the opinion. If 
multiple

[[Page 46293]]

jurisdictions are involved, two opinions may be required: one with 
respect to the organization of the Borrower and another with respect to 
the real property and loan issues. A combination of the Borrower's 
regular Counsel and special local counsel may be required to satisfy 
this requirement. If Counsel's satisfaction of these requirements is 
not evident from the letterhead of the firm, the field counsel should 
include a written explanation in the Washington docket. In all events, 
each provision in the Guide must be addressed whether one or more 
opinions is required to do so.

Signatures:

     The Opinion may be signed by an authorized attorney(s) of 
the law firm, in the name of such attorney(s).

Certification of Borrower:

     A form of Certification of Borrower is attached. The form 
represents the minimum amount of information that should be obtained 
from the Borrower (but additions, revisions and rephrasings are 
acceptable so long as the Borrower is certifying as to factual matters 
and not legal conclusions). Please note that one significant addition 
to the certification is that Counsel to the Borrower has reviewed and 
discussed the terms of the Regulatory Agreement with the principals (as 
defined in the HUD regulations) of the Borrower entity. A certification 
has been added wherein the Borrower either certifies that there are no 
side-deals, or discloses any side deals in the Certification. The 
Certification of Borrower must be dated the same date as the Loan 
Documents.

Identity of Interest:

     Numerous issues have been raised with respect to the 
confirmation in (d) of the penultimate paragraph of the Guide. A 
decision was made that the attorney signing the Opinion could not have 
an identity of interest with any party to the transaction. No waivers 
are possible in such instance. In instances where other members of the 
firm have an interest in the Borrower or another entity involved in the 
transaction, such interest must be disclosed and such interest must be 
acceptable to field counsel based upon the ethics rules of the 
applicable bar. Furthermore, any interest must be administratively 
acceptable to HUD, and 2530 clearance must be obtained. In addition, 
there appears to be an increasing trend wherein Lenders are insisting 
upon using counsel to the Lender to handle many aspects of the 
transaction even though the Opinion is being signed by a separate 
attorney. There have been some instances where counsel to the Lender 
has asked to represent the borrower in whole or in part and to provide 
all or a part of the Opinion. Confirmation (d) has been clarified to 
reflect the intent of HUD from the inception of the Opinion that any 
such representation of both parties is not permitted notwithstanding 
State or local ethics rules.
     Please note that a new confirmation has been added to 
provide comfort to HUD that there is no identity of interest between 
the Borrower and the Lender in MAP transactions. HUD imposed this new 
MAP requirement and it is most important that Counsel to the Borrower 
explain this to the Borrower as well as the necessity of an accurate 
representation by the Borrower in the Borrower's Certification to 
Counsel. This requirement is not applicable to transactions processed 
under traditional processing and the requirement should be deleted in 
such cases.

Liens:

     Confirmation (f) contains a statement that there are no 
liens or encumbrances against the Property. Several attorneys have 
objected to making the statement because they indicate that, at the 
time of closing, there may be liens that have actually not been 
released even though the title company has received funds and/or 
release documents to do so and intends to process the release after the 
closing. Except in cases involving the insurance of secondary loans, 
HUD is only authorized to insure first mortgages; consequently, there 
cannot be any liens and encumbrances on the property when HUD endorses 
the note for insurance. As a result, there cannot be any liens 
outstanding which would prime the insured loan. Hence, Paragraph (f) 
should not be changed.
    Certification as to Regulatory Agreement: A new confirmation has 
been added as (g) wherein the Counsel to the Borrower confirms through 
a certification to HUD that Counsel to the Borrower has reviewed and 
discussed the terms of the Regulatory Agreement with the principals (as 
defined in the HUD regulations) of the Borrower entity. This 
certification parallels a similar certification by the Borrower and is 
deemed necessary to avoid certain principals asserting they were 
unaware of the requirements of the Regulatory Agreement when HUD 
attempts to enforce the terms of the Regulatory Agreement against them.
    Certification as to Side-Deals: A new confirmation has been added 
wherein Counsel to the Borrower confirms that, based upon the 
Certification by the Borrower and to the best of Counsel's knowledge, 
there are no side deals except as indicted in such Certification.

Reliance on Other Opinions:

    The issue of proper wording and format has probably surfaced most 
often in cases where Counsel to the Borrower is relying on opinions 
issued by other attorneys. This has occurred most often in cases 
involving a separate opinion for bond financing documentation, property 
jurisdiction vs. organizational jurisdiction, zoning, etc. In this 
area, it is imperative that Counsel to the Borrower specifically 
reference and attach the additional opinion(s) and that such opinions 
track the language of the Guide as close as is practical under the 
circumstances. HUD field counsel should exercise discretion in this 
area, taking the unique circumstances into account.

Reliance on Opinion by Subsequent Holders of Note:

    In the dialogue with the lending industry pertaining to revision of 
the various closing forms, the lenders made the suggestion that HUD 
consider the approaches taken by Freddie Mac and Fannie Mae. After a 
comparative analysis, HUD was the only one of the three which took a 
position that the Opinion could not be relied upon by subsequent 
holders of the Note. The 1994 HUD format merely required that the 
Opinion be made available for informational purposes to prospective 
purchasers. HUD determined that it would be desirable to permit 
reliance by subsequent holders in order to simplify and reduce the cost 
of certain refinancings, modifications, etc. The last paragraph of the 
current format of the Opinion has been modified to permit such 
reliance.

{To be used in HUD-Insured MULTIFAMILY AND HEALTH CARE 
Transactions{time} 

Exhibit A To Opinion of Borrower's Counsel

CERTIFICATION OF BORROWER

    This Certification of Borrower is made the ------ day of ------ , 
20-- , by ---------- , (the ``Borrower'') for reliance upon by --------
-- (the ``Borrower's Counsel'') in connection with the issuance of an 
opinion letter dated of even date herewith (the ``Opinion Letter'') by 
(``Borrower's Counsel'') as a condition for the provision of mortgage 
insurance by the Department of Housing and Urban Development (``HUD'') 
of the $---- loan (the ``Loan'') from ------ (the ``Lender'') to 
Borrower. In connection with the Opinion Letter, the Borrower hereby

[[Page 46294]]

certifies to Borrower's Counsel for its reliance, the truth, accuracy 
and completeness of the following matters:
    1. The Organizational Documents are the only documents creating the 
Borrower or authorizing the Loan, and the Organizational Documents have 
not been amended or modified except as represented to Counsel and as 
represented in the Opinion Letter.
    2. The terms and conditions of the Loan as reflected in the Loan 
Documents have not been amended, modified or supplemented, directly or 
indirectly, by any other agreement or understanding of the parties or 
waiver of any of the material provisions of the Loan Documents.
    3. All tangible personal property of the Borrower in which a 
security interest is granted under the Loan Documents [other than off-
site construction materials and/or accounts or goods of a type normally 
used in more than one jurisdiction and/or additional collateral 
personalty] is located at the Property (as defined in the Opinion 
Letter) and the Borrower's [Chief Executive Office] [only place of 
business] [residence] is located in ---------- , except for the 
following personalty:----------[Include any Bank Accounts, Income, 
Receivables, Etc.] ---------- .
    4. The execution and delivery of the Loan Documents will not (i) 
cause the Borrower to be in violation of, or constitute a material 
default under the provisions of any agreement to which the Borrower is 
a party or by which the Borrower is bound, (ii) conflict with, or 
result in the breach of, any court judgment, decree or order of any 
governmental body to which the Borrower is subject, or (iii) result in 
the creation or imposition of any lien, charge, or encumbrance of any 
nature whatsoever upon any of the property or assets of the Borrower, 
except as specifically contemplated by the Loan Documents.
    5. There is no litigation or other claim pending before any court 
or administrative or other governmental body or threatened against the 
Borrower or any Principals of the Borrower (as Principal is defined in 
the HUD regulations in 24 CFR Part 24), the Property, or any other 
properties of the Borrower [except as identified on Exhibit [--], List 
of Litigation, in the Opinion Letter.]
    6. There is no default under the Public Entity Agreement (PEA) (as 
defined in the Opinion Letter) nor have events occurred which with the 
passage of time will result in a default under the PEA and/or the 
Regulatory Agreement between Borrower and HUD.
    7. The source(s) of any funds advanced by Borrower for purposes of 
meeting any equity requirement of HUD or contributing to the 
feasibility of the Project or for any other Project purpose (Up-front 
Funds) is (are):
    8. There are no transactions outside the terms of the HUD form 
documents between Borrower and any party involved in the construction 
or management of the Project, the Lender, any party providing funds to 
the Lender or any other party to the Loan (Side-Deals) except as here 
identified (Borrower understands that, in MAP transactions, no identity 
of interest (as defined by HUD in outstanding MAP directives) between 
Borrower and Lender is permitted):


    Note: All capitalized terms not defined herein shall have the 
meanings set forth in the Opinion Letter.


    IN WITNESS WHEREOF, the Borrower has executed this Certification of 
Borrower effective as of the date set forth above.

BORROWER:

 /s/-----------------------------------------------------------

 /s/-----------------------------------------------------------

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 [Add Additional Lines if More Than Two Signatories]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24, 28 and 30.

Residual Receipts Note (Nonprofit Mortgagors)

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

 Project Name:---------------------------------------------------------

 HUD Project No. (the ``Project'')-------------------------------------

For value received --------
(``Maker'') promises to pay to --------
(``Payee'') the sum of ---- Dollars ($----) at ------ with interest at 
the rate of ---- % (per centum) per annum, which shall not be 
compounded, subject to the following:
    1. Principal and interest on this Note shall be due and payable on 
the maturity date (the ``Maturity Date'') which is hereby defined as 
the maturity date of the note and mortgage (respectively, the ``HUD 
Note'' and the ``HUD Mortgage'') insured by the Secretary of Housing 
and Urban Development (``HUD'') financing the Project, provided that if 
the HUD Note is prepaid in full, the holder of this Note, at its option 
and without notice, may declare the whole principal sum or any balance 
thereof, together with interest thereon, immediately due and payable.
    2. So long as HUD or its successors or assigns, are the insurers or 
holders of the first mortgage on the Project, payments due under this 
Note shall be payable only from residual receipts of the Project, as 
the term residual receipts is defined in the regulatory agreement dated 
(insert date) ------ between HUD and Maker (the ``Regulatory 
Agreement''). The restriction on payment imposed by this paragraph 
shall not excuse any default caused by

[[Page 46295]]

the failure of the Maker to pay the indebtedness evidenced by this 
Note.
    3. Prepayments to principal and interest on this Note may be made 
only from the Residual Receipts Fund, as that term is defined in the 
Regulatory Agreement, and only after obtaining the prior written 
approval of HUD. Such prepayments may be made only after final 
endorsement of the HUD Note for insurance by HUD and after the end of a 
semiannual or an annual fiscal period of Maker.
    4. Notwithstanding the provisions of paragraphs numbered 2 and 3. 
above, Maker also may make payments due hereunder from sources other 
than Project income or assets of the Project.
    5. This Note is non-negotiable and may not be sold, transferred, 
assigned, or pledged by Payee except with the prior written approval of 
HUD.
    6. In the event that the maturity date of the HUD Mortgage is 
extended and such extension is approved by HUD, then, in such event, 
the Maturity Date of this Note shall automatically be extended to the 
extended maturity date of the HUD Mortgage without the consent of 
Payee.
    7. Any unauthorized payments, as determined by HUD, shall be 
returned to the Project, as the term ``Project'' is defined in the 
Regulatory Agreement.
    8. This Note is made and delivered in payment of -------- .
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
    9. Presentation, demand and notice of demand, non-payment and 
protest of this Note are waived.
    10. The terms and provisions of this Note are also for the benefit 
of and are enforceable by HUD against either party or any other person.

IN WITNESS WHEREOF Maker has signed this Note on this -------- day of 
------, 20------ .

MAKER:
-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

 Title:----------------------------------------------------------------

[Remainder of this page intentionally left blank.]

    Payee hereby certifies that this is a bona fide transaction and 
that Payee fully understands all the requirements of this Note, and 
that no prepayment of principal or interest shall be accepted without 
evidence that HUD has authorized such prepayment. If an unauthorized 
prepayment is accepted, the funds shall be returned to the Project 
immediately upon discovery.

PAYEE:

 By:-------------------------------------------------------------------
    Name and Title:

Residual Receipts Note (Limited Dividend Mortgagors)

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

 Project Name:---------------------------------------------------------

 HUD Project No. (the ``Project'')-------------------------------------

For value received --------
(``Maker'') promises to pay to --------
(``Payee'') the sum of ---- Dollars ($----) at ------ with interest at 
the rate of ---- % (---- per centum) per annum, which shall not be 
compounded, subject to the following:
    1. Principal and interest on this Note shall be due and payable on 
the maturity date (the ``Maturity Date'') which is hereby defined as 
the maturity date of the note and mortgage (respectively, the ``HUD 
Note'' and the ``HUD Mortgage'') insured by the Secretary of Housing 
and Urban Development (``HUD'') financing the Project, provided that if 
the HUD Note is prepaid in full, the holder of this Note, at its option 
and without notice, may declare the whole principal sum or any balance 
thereof, together with interest thereon, immediately due and payable.
    2. So long as HUD or its successors or assigns, are the insurers or 
holders of the first mortgage on the Project, payments due under this 
Note shall be payable only from residual receipts of the Project, as 
the term residual receipts is defined in the regulatory agreement dated 
(insert date) ------ between HUD and Maker (the ``Regulatory 
Agreement''). The restriction on payment imposed by this paragraph 
shall not excuse any default caused by the failure of the Maker to pay 
the indebtedness evidenced by this Note.
    3. Prepayments to principal on this Note may be made only from the 
Residual Receipts Fund, as that term is defined in the Regulatory 
Agreement, and only after obtaining the prior written approval of HUD. 
Such prepayments may be made only after final endorsement of the HUD 
Note for insurance by HUD and after the end of a semiannual or an 
annual fiscal period of Maker. No payments of interest shall be made 
prior to maturity of this Note.
    4. Notwithstanding the provisions of paragraphs numbered 2 and 3, 
above, Maker also may make payments due hereunder from sources other 
than Project income or assets of the Project.
    5. This Note is non-negotiable and may not be sold, transferred, 
assigned, or pledged by Payee except with the prior written approval of 
HUD.
    6. In the event that the maturity date of the HUD Mortgage is 
extended and such extension is approved by HUD, then, in such event, 
the Maturity Date of this Note shall automatically be extended to the 
extended maturity date of the HUD Mortgage without the consent of 
Payee.
    7. Any unauthorized payments, as determined by HUD, shall be 
returned to the Project, as the term ``Project'' is defined in the 
Regulatory Agreement.
    8. This Note is made and delivered in payment of --------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
    9. Presentation, demand and notice of demand, non-payment and 
protest of this Note are waived.
    10. The terms and provisions of this Note are also for the benefit 
of and are enforceable by HUD against either party or any other person.

IN WITNESS WHEREOF Maker has signed this Note on this -------- day of 
---- , 20------ .

MAKER:
-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

 Title:----------------------------------------------------------------

[Remainder of this page intentionally left blank.]

    Payee hereby certifies that this is a bona fide transaction and 
that Payee fully understands all the requirements of this Note, and 
that no prepayment of principal or interest shall be accepted without 
evidence that HUD has authorized such prepayment. If an unauthorized 
prepayment is accepted, the funds shall be returned to the Project 
immediately upon discovery.
PAYEE:
 By:-------------------------------------------------------------------
    Name and Title:

[[Page 46296]]

Escrow Agreement for Incomplete Construction

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

    This Agreement is effective as of the ---- day of --------, 20----, 
by and among ---------- (hereinafter, the Borrower), and --------------
------ (hereinafter, the Lender, acting as Depository). The terms 
Lender and Borrower shall be deemed to have the meanings set forth in 
the HUD regulatory agreement for this transaction.
    The Borrower is constructing or substantially rehabilitating a 
housing project or health care facility identified as HUD Project No. 
------ with the proceeds of a loan (hereinafter, the Mortgage Loan) 
from the Lender. The Mortgage Loan is subject to disbursement under a 
certain Building Loan Agreement between the Borrower and Lender, dated 
----------, which Building Loan Agreement is by reference incorporated 
herein and made a part hereof.
    Pursuant to a Commitment dated ----------, the Secretary of Housing 
and Urban Development (hereinafter, HUD) has insured advances of the 
Mortgage Loan under Section ------ of the National Housing Act, as 
amended, and regulations and directives issued pursuant thereto.
    The Borrower has not yet completed certain improvements 
(hereinafter, the Improvements) required by the Building Loan 
Agreement. The Improvements are listed, together with the estimated 
completion cost, in the attached Exhibit A. The Borrower intends to 
complete the Improvements.
    In order to induce HUD to insure the Mortgage Loan in its maximum 
approved amount, and in order to induce the Lender to advance the 
entire approved amount prior to completion of the Improvements, the 
Borrower agrees to provide security for their completion, based on the 
estimate in Exhibit A and whatever additional amount is required by 
HUD.
    In consideration of the premises, the parties acknowledge and agree 
as follows:
    1. The Borrower will complete the Improvements on or before the --
-- day of --------, 20-- (hereinafter, the completion date). The work 
will be done and completed, free of liens, in accordance with the 
Drawings and Specifications referred to in the Building Loan Agreement. 
The Borrower further agrees to pay for all labor and material necessary 
to complete the Improvements.
    2. The Borrower acknowledges that all work performed pursuant to 
this Agreement is subject to the labor standards contained in Form HUD-
92554M, Supplementary Conditions of the Contract for Construction, or 
its replacement, as acknowledged from time to time by the original 
General Contractor in executing the Contractor's Prevailing Wage 
Certificate on the back of Form HUD-92448, Contractor's Requisition, 
Project Mortgages, or its replacement. The Borrower expressly agrees to 
be bound by the terms and provisions of the said Conditions and the 
Certificate. Prior to the release of any funds deposited hereunder, the 
Borrower will submit a Contractor's Prevailing Wage Certificate duly 
executed by each and every contractor performing any of the work and 
dated subsequent to the completion of such work.
    3. The Borrower has deposited with the Lender the cash amount of 
$--------, receipt of which is acknowledged by the Lender, to be held 
and disbursed as follows:
    a. In the event the Borrower completes the Improvements in 
accordance with the cited requirements on or before the completion 
date, and there is no default under the Mortgage Loan, the Lender, upon 
receipt of written approval from HUD, will return the sum deposited 
hereunder to the Borrower, without interest.
    b. In the event HUD determines that the Borrower has failed to 
complete the Improvements in the manner or within the time required by 
this Agreement, the Lender, with the approval of HUD, will have the 
right, in its discretion, to complete the Improvements, and to pay the 
cost thereof, including reasonable costs incurred by the Lender as a 
result of such failure, from the amount deposited under this Agreement. 
For this purpose, the Borrower irrevocably appoints the Lender as its 
attorney-in-fact, with full power of substitution, to do and perform 
for it, the Borrower, in its name, place and stead, all matters and 
things which the Lender will deem necessary and proper to be done to 
effectuate the completion of the Improvements, and to apply the amount 
deposited under this Agreement to the payment of debts, expenses, costs 
and charges of any kind contracted or incurred in connection therewith. 
This power of attorney will provide the Lender with full and sufficient 
authority, and the orders given by the Lender as attorney-in-fact for 
the Borrower will be good and sufficient vouchers for all payments made 
by virtue thereof. In this connection, the Lender will have full 
authority to enter into and upon the project and take charge thereof, 
together with all materials, appliances, fixtures and other 
improvements; and, as attorney-in-fact for the Borrower, to call upon 
and require contractors to complete the Improvements. To the extent 
that the Lender and/or its contractors complete the Improvements, such 
work remains subject to the labor standards referenced in Section 2 of 
this Agreement, and the Lender shall obtain a Contractor's Prevailing 
Wage Certificate duly executed by each contractor performing any of the 
work. In the event the Lender completes the Improvements in accordance 
with this Agreement, any unexpended balance of the sum deposited with 
the Lender will be returned to the Borrower, without interest, subject 
to the rights of the Lender and HUD under the Mortgage Loan documents. 
The Lender will not be responsible for the completion of the 
Improvements beyond the expenditure of the amount deposited, and if 
that amount is insufficient, the Lender will be under no obligation to 
proceed further with the Improvements or to demand additional sums from 
the Borrower. The power granted herein is coupled with an interest, and 
the Borrower acknowledges and agrees that all powers granted herein to 
the Lender may be assigned to HUD.
    c. This Agreement is made for the benefit of the Lender and HUD, 
either of which shall have the right to enforce the provisions herein.

IN WITNESS WHEREOF, the parties have duly executed this Agreement.

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of

[[Page 46297]]

influencing an official action of HUD (acting by and through the 
Federal Housing Commissioner) in insuring a multifamily rental or 
health care facility mortgage loan, and may be relied upon by HUD and 
the Commissioner as a true statement of the facts contained therein.

BORROWER
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Print name and title
LENDER, acting as DEPOSITORY
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Print name and title

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

Request for Final Endorsement of Credit Instrument

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 1.0 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Project Name:
-----------------------------------------------------------------------
Project Number:
-----------------------------------------------------------------------
Project Address:
-----------------------------------------------------------------------
Date of Commitment:
-----------------------------------------------------------------------
Mortgagor:
-----------------------------------------------------------------------

To the Department of Housing and Urban Development

The undersigned declares that construction of this project is 
complete*; and that advances have been made to the above mortgagor 
in accordance with your Certificate of Insurance on the dates and in 
the amounts set forth in the schedule below; that the undersigned 
has paid no kickback and no fee or other consideration, directly or 
indirectly, to any person who has received payment or other 
consideration from any other person in connection with this mortgage 
transaction, including the purchase or sale of the mortgaged 
property, except for compensation paid, if any, for the actual 
performance of services and approved by you; and that to the best of 
the undersigned's knowledge and belief the said loan is now eligible 
for mortgage insurance and accordingly, the undersigned hereby 
requests final endorsement of the attached credit instrument for 
mortgage insurance in the total sum of $------.????

                          Schedule of Advances
------------------------------------------------------------------------
        Date             Amount              Date             Amount
------------------------------------------------------------------------
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
                     ..............  ...................  ..............
------------------------------------------------------------------------

Subtotal (amount advanced to date):--------
$--------
A final advance in the following amount will be disbursed immediately 
upon your final endorsement of the note for insurance when added to the 
advances previously made.--------
$--------
Total:--------
$--------
Mortgagee:
-----------------------------------------------------------------------
By: (Signature, Title & Date)
-----------------------------------------------------------------------
 X---------------------------------------------------------------------

*Minor items of construction still to be completed are covered by an 
Escrow Deposit Agreement (form HUD-92456), three conformed copies 
whereof are herewith delivered to you. There is held in escrow as a 
guarantee of the completion thereof the amounts determined by your 
office as necessary for such purpose.
Certificate of Mortgagor
-----------------------------------------------------------------------
Project Number:
-----------------------------------------------------------------------

To: Department of Housing and Urban Development (HUD)

    In order to induce HUD to finally endorse the credit instrument for 
mortgage insurance, and with the intent that HUD rely upon the 
statements hereinafter set forth, the undersigned makes the following 
certifications:

    1. That it has received the sum of $-------- which when added to 
the final advance will total $--------, constituting the full insurable 
amount of the mortgage for this project.
    2. That construction of the project is complete and is in 
accordance with the plans and specifications approved by HUD; that said 
mortgage is a good and valid first lien on the property therein 
described; that the property is free and clear of all liens other than 
that of subject mortgage except for a lien approved by HUD given in 
favor of government entity or other HUD-approved lien expressly 
subordinate to HUD's first lien; that all outstanding unpaid 
obligations and past due interest payments contracted by or on behalf 
of the mortgagor entity directly or indirectly, in connection with the 
mortgage transaction, the acquisition of the property, the construction 
of the project, or the arrearage relative to any project are listed 
below:
* (a) HUD-approved notes (copies attached) --------
$--------
(b) Due General Contractor --------
$--------
* (c) Other --------
$--------

[[Page 46298]]

    3. That, except for the amounts due on notes listed in item (a) of 
paragraph 2 above, the undersigned agrees to pay the foregoing 
obligations in cash and to furnish HUD receipts, or other evidence of 
payment satisfactory to HUD, within 45 days following receipt of the 
final advance of mortgage proceeds on its ``Certificate of Actual 
Cost:'' (form HUD-92330), supported by the documentation required 
therein. The Mortgagor further agrees that if HUD accepts estimates for 
any items, the Mortgagor will, at final endorsement, establish a cash 
escrow in the amount of $------ to pay all the ``to be paid in cash 
items'' identified on its Certification of Actual Cost and debts to 
third parties who made the original disbursements for an item listed as 
paid on Form 92330, unless documentation, satisfactory to HUD, 
evidencing that these amounts were paid by the Mortgagor subsequent to 
the submission of its Certification of Actual Cost. The Mortgagor 
understands that the items covered by this cash escrow must be paid 
within 45 days of the date of final endorsement.
Mortgagor:
-----------------------------------------------------------------------
By: (Signature & Title)
X
-----------------------------------------------------------------------
Date:
-----------------------------------------------------------------------


    *Note:
    This includes any past due amount under the construction loan. 
(If the space provided is inadequate to list all unpaid obligations, 
insert the total in each category and attach itemizations. If there 
are no outstanding obligations, so state.)

Certificate of General Contractor

Project Number:
-----------------------------------------------------------------------

To the Department of Housing and Urban Development

    The undersigned, as general contractor of the above project, makes 
the following certifications:
    1. That construction is in accordance with the plans and 
specifications which were approved by HUD.
    2. That all outstanding unpaid obligations contracted by or on 
behalf of the undersigned in connection with the construction contract 
are listed below. (If space below is inadequate, continue listing on an 
attached sheet and so note.)
(a) --------
$ --------
(b) --------
$ --------
(c) --------
$ --------
    3. That, except for unfinished work covered by an approved escrow 
deposit, the undersigned agrees to pay the foregoing obligations in 
cash, within 15 days following receipt of payment from owner.
General Contractor:
-----------------------------------------------------------------------
By: (Signature & Title)
X
-----------------------------------------------------------------------
Date:
-----------------------------------------------------------------------

Each signatory below hereby certifies that the statements and 
representations contained in the part signed by the respective 
signatory and all supporting documentation thereto are true, accurate, 
and complete. Each signatory, for its part only, hererby states this 
instrument has been made, presented, and delivered for the purpose of 
influencing an official action of HUD in insuring a multifamily rental 
or health care facility mortgage loan, and may be relied upon by HUD as 
a true statement of the facts contained therein.
 Name of Entity:-------------------------------------------------------
(MORTGAGEE)

 By:-------------------------------------------------------------------

 Printed Name, Title---------------------------------------------------

 Dated:----------------------------------------------------------------

 Name of Entity:-------------------------------------------------------
(MORTGAGOR)
 By:-------------------------------------------------------------------

 Printed Name, Title---------------------------------------------------

 Dated:----------------------------------------------------------------

 Name of Entity:-------------------------------------------------------
(GENERAL CONTRACTOR)

 By:-------------------------------------------------------------------

 Printed Name, Title---------------------------------------------------

 Dated:----------------------------------------------------------------

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

Lease Addendum

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

INSTRUCTIONS FOR LEASEHOLD PROJECTS

    These instructions and the following Lease Addendum have been 
prepared for use in connection with mortgage insurance for multifamily 
projects given pursuant to the National Housing Act found at 12 U.S.C. 
1701, et seq. (the ``Act''). The lease term and other provisions must 
comply with the section of the Act under which the mortgage is insured. 
The lease provisions must not conflict with any regulations or 
directives promulgated by the Department of Housing and Urban 
Development (``HUD'') with respect to such mortgage insurance. All rent 
amounts must have prior written approval by HUD.
    These instructions and the following addendum are based on the 
presumption that the lease will be a ground lease and all buildings, 
improvements and fixtures now or hereafter erected will be owned in fee 
simple by the Tenant and be deemed real estate under local law. The 
term ``Property'' shall be defined in the lease as the legally 
described land except the buildings and improvements now or hereafter 
located thereon. If the foregoing presumption is not correct the HUD 
closing attorney must be contacted for further instructions. The 
provisions of the following addendum must be set forth in the body of 
the lease or the addendum attached and incorporated by reference.

LEASE ADDENDUM

Notwithstanding any other provisions of this Lease, in the event of any 
conflict, inconsistency or ambiguity between the provisions of this 
Lease Addendum (``Addendum'') and the provisions of any other part of 
this Lease, the provisions of this Addendum shall prevail and control. 
So long as the mortgage insured by the Secretary of the Department of 
Housing and Urban Development (``HUD''), with respect to

[[Page 46299]]

FHA Project No. -------- known as (insert project name) ------------ 
(hereafter the ``Mortgage'') is in effect and not released; or there is 
any mortgage of this leasehold or of the buildings, improvements and 
fixtures now on or hereafter erected on the Property (hereafter the 
``Improvements'') which mortgage is insured by or held by HUD; or in 
the event the ownership of the Improvements or this leasehold is 
acquired by HUD, then in any such event, the following provisions shall 
be and are in full force and effect:
    (a) Tenant is authorized to obtain a loan, the repayment of which 
is to be insured by HUD and secured by a mortgage on this leasehold 
estate and the Improvements. Tenant is further authorized to execute 
all documents necessary as determined by HUD and otherwise to comply 
with the requirements of HUD for obtaining such an insured mortgage 
loan.
    (b) In the event that HUD acquires title to this leasehold estate 
or otherwise acquires title to Tenant's interest herein, HUD shall have 
the option to purchase good and marketable fee simple title to the 
Property and Landlord's interest, if any, in the Improvements (the 
``Interest''), free of all liens and encumbrances except such as may be 
waived or accepted by HUD. Such option shall be exercised within twelve 
(12) months after HUD so acquires such leasehold estate or Tenant's 
interest. The purchase price shall be the sum of ------------ Dollars 
($--------) payable in cash, or by Treasury check, provided all rents 
are paid to date of transfer of title. HUD shall, within said twelve 
months, give written notice to Landlord of its election to exercise 
said option to purchase. Landlord shall, within thirty (30) days after 
HUD gives such notice, execute and deliver to HUD a warranty deed of 
conveyance to HUD as grantee conveying the said fee and Interest and 
containing a covenant against the grantor's acts, but excepting 
therefrom acts of the Tenant and those claiming by, through or under 
the Tenant. Nothing in this option shall require the Landlord to pay 
any taxes or assessments that were due and payable by the Tenant.
    (c) If approved by HUD, the Tenant may convey, assign, transfer, 
lease, sublease or sell all or any part of its leasehold interest in 
the Property and its interest in the Improvements without the need for 
approval or consent by any other person or entity.
    (d)(i) Insurance policies shall be in an amount, and in such 
company or companies and in such form, and against such risks and 
hazards, as shall be approved by the Lender of the Mortgage 
(hereinafter, ``Lender,'' which term, when used herein, also shall be 
deemed to have the meaning set forth in the HUD regulatory agreement 
applicable to this transaction) and HUD.
    (ii) The Landlord shall not take out separate insurance concurrent 
in form or contributing in the event of loss with that specifically 
required to be furnished by the Tenant to the Lender. The Landlord may 
at its own expense, however, take out separate insurance which is not 
concurrent in form or not contributing in the event of loss with that 
specifically required to be furnished by the Tenant to the Lender.
    (e)(i) If all or any part of the Property or the Improvements or 
the leasehold estate shall be taken or damaged by condemnation, that 
portion of any award attributable to the Improvements or the Tenant's 
interest in the leasehold estate or damage to the Improvements or the 
Tenant's interest in the leasehold estate shall be paid to the Lender 
or otherwise disposed of as may be provided in the Mortgage. Any 
portion of the award attributable solely to the taking of the Property 
shall be paid to the Landlord. After the date of taking, the annual 
ground rent shall be reduced ratably by the proportion which the award 
paid to Landlord bears to the total value of the Property as 
established by the amount HUD is to pay, as set forth in paragraph (b) 
of this Addendum.
    (ii) In the event of a negotiated sale of all or a portion of the 
Property or the Improvements, in lieu of condemnation, the proceeds 
shall be distributed and annual ground rent reduced as provided in 
cases of condemnation, but the approval of HUD and Lender shall be 
required as to the amount and division of the payments to be received.
    (f) Landlord may terminate the Lease prior to the expiration date 
of the full term of this lease (``Expiration Date'') after a Tenant 
default under this lease (``Event of Default'') but only under the 
following circumstances and procedures. If any Event of Default shall 
occur, then and in any such event, Landlord shall at any time 
thereafter during the continuance of such Event of Default and prior to 
any cure, give a written notice of such default(s) (``Notice of 
Default'') to Tenant, the Lender and HUD, specifying the Event or 
Events of Default and the methods of cure, or declaring that an Event 
of Default is incurable. If the Event of Default is a failure to pay 
money, Landlord shall specify and itemize the amounts of such default. 
Failure to pay money shall be specified as a separate default and not 
combined with a non-monetary Event of Default. Within sixty (60) days 
from the date of giving the Notice of Default to Tenant, Tenant must 
cure a monetary default by paying Landlord all amounts specified in the 
Notice of Default and must cure any specified Event of Default that is 
capable of being cured within such period. During the period of 180 
days commencing upon the date Notice of Default was given to the Lender 
and HUD, the Lender or HUD may: (a) Cure any Event of Default; and (b) 
commence foreclosure proceedings or institute other state or federal 
procedures to enforce Lender's or HUD's rights with respect to the 
leasehold or Tenant Improvements (``Foreclosure''). If Tenant, Lender 
or HUD reasonably undertake to cure any Event of Default during the 
applicable cure period and diligently pursues such cure, Landlord shall 
grant such further reasonable time as is necessary to complete such 
cure. If HUD or Lender commences Foreclosure or other enforcement 
action within such 180 days, then its cure period shall be extended 
during the period of the Foreclosure or other action and for 90 days 
after the ownership of Tenant's rights under the Lease is established 
in or assigned to HUD or such Lender or a Purchaser at any foreclosure 
sale pursuant to such Foreclosure or other action. The transfer of the 
Tenant's rights under the Lease to Lender, HUD or Purchaser, pursuant 
to such Foreclosure or other action shall be deemed a termination of 
any incurable Event of Default and such terminated Event of Default 
shall not give Landlord any right to terminate the Lease. Such 
Purchaser may cure curable Events of Default within said 90 days. If 
after the expiration of all of the foregoing cure periods, no cure or 
termination of an existing Event of Default has been achieved as 
aforesaid, then and in that event, this Lease shall terminate, and on 
such date the term of this Lease shall expire and terminate and all 
rights of Tenant under the Lease shall cease and the Improvements, 
subject to the Mortgage and the rights of Lender thereunder, shall be 
and become the property of Landlord. All costs and expenses incurred by 
or on behalf of Landlord (including, without limitation, reasonable 
attorneys' fees and expenses) occasioned by any default by Tenant under 
this Lease shall constitute Additional Rent hereunder. Landlord shall 
have no right to terminate this Lease except as provided in this 
paragraph (f).
    (g) Upon termination of this Lease pursuant to paragraph (f) above, 
the Landlord shall immediately seek to obtain possession of the 
Property and

[[Page 46300]]

Improvements. Upon acquiring such possession, the Landlord shall notify 
HUD and the Lender in writing. The Lender and HUD shall each have six 
(6) months from the date of receipt of such notice of acquisition to 
elect to take, as tenant, a new lease on the Property and on the 
Improvements. Such new lease shall have a term equal to the unexpired 
portion of the term of this Lease immediately prior to such termination 
and shall, except as otherwise provided herein, be on the same terms 
and conditions as contained in this lease, including without 
limitation, the option to purchase set forth under paragraph (b) above, 
except that Lender's or HUD's liability for ground rent shall not 
extend beyond their occupancy under such lease. The Landlord shall 
tender such new lease to the Lender or HUD within thirty (30) days 
after a request for such lease and shall deliver possession of the 
Property and Improvements immediately upon execution of the new lease. 
Upon executing a new lease, the Lender or HUD shall pay to Landlord any 
unpaid ground rent due or that would have become due under this Lease 
to the date of the execution of the new lease, including any taxes 
which were liens on the Property or the Improvements and which were 
paid by Landlord, less any net rentals or other income which Landlord 
may have received on account of the Property and Improvements since the 
date of default under this Lease.
    (h) The Landlord agrees that within ten (10) days after receipt of 
written request from Tenant, it will join in any and all applications 
for permits, licenses or other authorizations required by any 
governmental or other body claiming jurisdiction in connection with any 
work which the Tenant may do hereunder and will also join in any grants 
for easements for electric, telephone, telecommunications, cable, gas, 
water, sewer and such other public utilities and facilities as may be 
reasonably necessary in the operation of the property or of any 
Improvements and if, at the expiration of such ten (10) day period, the 
Landlord shall not have joined in any such application, or grants for 
easements, the Tenant shall have the right to execute such application 
and grants in the name of the Landlord, and for that purpose, the 
Landlord hereby irrevocably appoints the Tenant as its Attorney-in-fact 
to execute such papers on behalf of the Landlord.
    (i) Nothing in this Lease contained shall require the Tenant to pay 
any franchise, estate, inheritance, succession, capital levy or 
transfer tax of the Landlord or any income excess profits or revenue 
tax, or any other tax, assessment charge or levy upon the rent payable 
by the Tenant under this lease.
    (j) All notices, demands and requests which are required to be 
given by the Landlord, the Tenant, the Lender or HUD shall be in 
writing and shall be sent by registered or certified mail, postage 
prepaid, and addressed to the address of the party as given in this 
instrument unless a request for a change in this address has been sent 
to the party giving the notice by registered or certified mail prior to 
the time when such notice is given.
    All notices to Lender or HUD shall be as follows:
If to Lender:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

If to HUD:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------

    (k) This lease shall not be modified without the written consent of 
HUD and the Lender.
    (l) The provisions of this Addendum benefit the Lender and HUD and 
are specifically declared to be enforceable against the parties to this 
lease and all other persons by the Lender and HUD.

Surplus Cash Note

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

Project Name:
HUD No: -------- (the ``Project'')

FOR VALUE RECEIVED, ------------ (``Maker'') promises to pay to ------
------ (``Payee'') the sum of -------- Dollars ($--------), payable at 
-------- with interest on any remaining balance of principal at ------
-- per cent (------%) per annum payable annually, commencing ----------
, 20----, and thereafter on the first day of -------- until the entire 
indebtedness has been paid. Any interest not so paid shall not create 
any default in the terms of this note but shall accrue and be payable 
in full on the maturity date hereof. In any event, the balance of 
principal, if any remaining unpaid, plus accrued interest, shall be due 
and payable on --------, 20---- (``Maturity Date''). [Note: The 
Maturity Date must be on or after the maturity date of the HUD insured 
mortgage.]

    This Promissory Note (``Note'') is made on and is subject to the 
following terms and conditions:
    1. In the event that the maturity date of that certain mortgage 
(the ``HUD Mortgage'') dated -------- in the principal amount of $----
---- made by Maker to ------------ (``HUD Lender,'' which term shall be 
deemed to have the meaning for ``Lender'' set forth in the HUD 
regulatory agreement for this Project) in connection with the HUD 
Project referenced above is extended and such extension is approved by 
the Secretary of Housing and Urban Development (``Secretary'' or 
``HUD'') then in such event the Maturity Date of this Note shall 
automatically be extended to the extended maturity date of the HUD 
Mortgage without the consent of Payee.
    2. So long as the Secretary or his/her successors or assigns, are 
the insurers or holders of the first mortgage on the HUD Project, 
payments due under this Note shall be payable only from surplus cash of 
said project, as the term surplus cash is defined in the Regulatory 
Agreement dated --------, 20---- between HUD and Maker. The restriction 
on payment imposed by this paragraph shall not excuse any default 
caused by the failure of the maker to pay the indebtedness evidenced by 
the Note.
    3. In the event that the indebtedness secured by the HUD Mortgage 
is paid in full and the HUD Mortgage released of record, then the 
holder of this Note may, at its option, declare the whole principal sum 
or any balance thereof, together with interest thereon, immediately due 
and payable.
    4. Maker may pay any part or all of the principal of this Note on 
any interest payment date. Provided, however, no such prepayment of 
principal in any amount or any payment of interest shall be made except 
from Surplus Cash in accordance with the conditions prescribed, in the 
Regulatory Agreement.

[[Page 46301]]

    5. Notwithstanding the provisions of paragraphs numbered 2 and 4 
above, the maker may also make payments due hereunder from sources 
other than project income or assets of the project.
    6. Any unauthorized payments, as determined by HUD, shall be 
returned to the Project as that term ``Project'' is defined in the 
Regulatory Agreement.
    7. No prepayment shall be made until after final FHA insurance 
endorsement of the note secured by the HUD Mortgage.
    8. This Note is non-negotiable and may not be sold, transferred, 
assigned or pledged by payee except with the prior written approval of 
HUD.
    9. Interest on this Note shall not and must not be compounded.
    10. The Maker hereby waives presentment, demand, protest and notice 
of demand, protest and nonpayment of this Note.
    11. The terms and provisions of this Note are also for the benefit 
of and are enforceable by HUD against either party or any other person.

IN WITNESS WHEREOF, the Maker has signed this Note on this -------- day 
of --------, 20----.
 MAKER:----------------------------------------------------------------

 By:-------------------------------------------------------------------
    Name:
    Title:

Completion Assurance Agreement

U.S. Department of Housing and Urban Development
    Office of Housing
    OMB Approval No. 0000-0000
    (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

This Agreement made this -------- day of --------, 20 ----, by and 
between ------------, Contractor, having an office at ------------, and 
--------, Borrower (which term also shall be deemed to have the meaning 
set forth in the HUD regulatory agreement applicable to this 
transaction), having an office at ------------, and ------------, 
Lender (which term also shall be deemed to have the meaning set forth 
in the HUD regulatory agreement applicable to this transaction), having 
an office at ------------.
WITNESSETH:
    Whereas, the Contractor and the Borrower have entered into a 
Construction Contract dated --------, 20-------- (the Construction 
Contract), providing for the construction of a housing project 
described in the Construction Contract, said project being known as 
Project No. --------, and a copy of the Construction Contract being on 
file with the Department of Housing and Urban Development (HUD); and
    Whereas, the construction of the Project is to be financed by a 
mortgage loan made to Borrower by the Lender, which loan is secured by 
a mortgage/deed of trust (hereinafter called the mortgage), to be 
insured by the Federal Housing Commissioner (hereinafter the 
Commissioner), pursuant to and under the provisions of the National 
Housing Act, as amended; and
    Whereas, the Lender is unwilling to make advances of mortgage 
proceeds and the Commissioner is unwilling to insure the mortgage 
unless the Contractor shall first furnish proper assurance to the 
Borrower and to the Lender for the performance of the obligations of 
the Contractor under the Construction Contract, including, but not 
limited to:
    (a) The completion of the Project in accordance with drawings and 
specifications referred to in the Construction Contract;
    (b) The completion of the Project free and clear of any liens, 
claims or encumbrances whatsoever, except for the lien of the mortgage;
    (c) The payment of all mechanics and laborers employed in the 
construction of the Project at wages prevailing in the locality of the 
project as determined by the Secretary of Labor in accordance with the 
Davis-Bacon Act, as amended;
    (d) The satisfaction of any loss, damage, expense or claim which 
the Borrower or Lender may suffer or sustain through the failure of the 
Contractor to fulfill the provisions of (a), (b), or (c) above or 
through the failure of the Contractor to fulfill all obligations under 
the Construction Contract.
    Now, Therefore, in consideration of the mutual promises and 
undertakings hereinafter contained, and for the purpose of inducing the 
commissioner to insure advances of mortgage money during construction, 
the parties hereto on behalf of themselves, their successors or assigns 
respectively, undertake and agree that:
    1. The Contractor has deposited with the Lender, or if the Lender 
so elects, with a depository satisfactory to the Lender, a Completion 
Assurance Fund; (hereinafter called the Fund), in the amount of ------
-- Dollars ($--------) to secure or indemnify the Borrower or Lender, 
as the case may be, for any expenses, loss, or damage suffered or 
sustained as the result of any default by the Contractor in the 
performance of the Construction Contract; it being understood and 
agreed that the Fund shall at all times be under the control of the 
Lender or its assigns and is deposited in the form of: /----/ Cash; or 
/----/ an unconditional irrevocable letter of credit issued to the 
Lender by a bank institution;
    2. The Lender shall maintain such Fund as a separate trust account 
to be disbursed in the following order:
    (a) To the Contractor or party making such deposit during the 
course of construction, as may be deemed necessary by the Lender and 
with prior written approval of the commissioner, or his/her authorized 
agent.
    (b) To the Borrower such portion of the Fund as deemed necessary by 
the Commissioner to recover any overpayment to the Contractor.
    (c) To the Contractor or party making such deposit, the balance of 
such fund so deposited remaining upon final endorsement of the Mortgage 
loan for insurance by the Commissioner or his/her authorized agent; 
except that there shall be withheld from the payment of said balance an 
amount equal to two and one-half percent (2\1/2\%) of the total amount 
of the Construction Contract, which sum is to be retained in such 
account for a period of fifteen (15) months from the date of completion 
as defined in the Construction Contract. Said sum shall be held as a 
fund to guarantee against defects in construction due to faulty 
materials or workmanship or damage to the mortgaged premises resulting 
from such defects, which defects or damage become apparent within one 
year after the date of the aforesaid completion. Said sum may be used 
for the correction of such defects or damage in the event the 
Contractor fails to make such corrections. The Contractor's liability 
for such corrections is not limited by the amount of such sum.
    (d) To the Lender the entire Fund or balance remaining therein in 
the event of a default by the contractor under the Construction 
Contract, to be used by the Lender to indemnify it and the Borrower as 
the case may be, for any loss, damage or expense whatsoever which they 
may

[[Page 46302]]

suffer by reasons of the Contractor's failure to properly perform the 
Construction Contract.
    In any event, any and all disbursements from the Fund shall be made 
only upon the prior written approval of the Commissioner, or his/her 
authorized agent.
    3. In the event the Lender assigns the mortgage to the Commissioner 
at any time during which the Fund has a balance remaining therein in 
the form of an unconditional irrevocable letter of credit, the 
Contractor authorizes the Lender to draw the remaining balance of said 
letter of credit in cash, if so required by the Commissioner, and 
deliver such cash within forty-five (45) days after the assignment is 
filed for record to the Commissioner to be held in accordance with the 
terms of this Agreement.
    4. Notwithstanding any of the provisions herein contained, it is 
expressly understood and agreed by all the parties thereto that in the 
event of a default by the Contractor in any of its obligations under 
the Construction Contract, the entire Fund or balance remaining therein 
may, at the option of the Lender and the Commissioner, be paid to the 
Commissioner together with an assignment of all rights hereunder 
granted to the Lender and the Borrower. The Contractor and Borrower 
hereby consent to the transfer of the rights of the Lender hereunder by 
assignment in case any other Lender or Lenders should become the 
Borrower or holder of the mortgage.
    5. This Agreement shall not alter or limit the obligations and 
liabilities of the contractor under the Construction Contract, but 
shall be deemed to be merely additional security for the performance by 
the Contractor of the obligations thereunder.
    6. It is understood and agreed that in the event the Fund is held 
by a depository other than the Lender, that said depository is not 
charged with any duty or responsibility to see to the performance of or 
compliance with any agreements between any of the parties hereto other 
than that of paying over the Fund as directed in writing by the Lender, 
nor to see to the application of the Fund after making disbursement as 
so directed.

IN WITNESS WHEREOF, the parties hereto have duly executed this 
Agreement as of the day and year first above written.

BORROWER
-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

-----------------------------------------------------------------------
Print name and title

LENDER
-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

-----------------------------------------------------------------------
Print name and title
CONTRACTOR
-----------------------------------------------------------------------
By:--------------------------------------------------------------------
-----------------------------------------------------------------------
Print name and title

DEPOSITORY
-----------------------------------------------------------------------
By:--------------------------------------------------------------------
-----------------------------------------------------------------------
Print name and title

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------
By:
 /s/-------------------------------------------------------------------
 Name, Title:----------------------------------------------------------
 Dated:----------------------------------------------------------------

By:
 /s/-------------------------------------------------------------------
 Name, Title:----------------------------------------------------------
(Printed)
 Dated:----------------------------------------------------------------
 Name of Entity:-------------------------------------------------------
By:
 /s/-------------------------------------------------------------------
 Name, Title:----------------------------------------------------------
Title:
(Printed)
 Dated:----------------------------------------------------------------
By:
 /s/-------------------------------------------------------------------
 Name, Title:----------------------------------------------------------
(Printed)
 Dated:----------------------------------------------------------------

Warning

Any person who knowingly presents a false, fictitious, or fraudulent 
statement or claim in a matter within the jurisdiction of the U.S. 
Department of Housing and Urban Development is subject to criminal 
penalties, civil liability, and administrative sanctions, including but 
not limited to: (i) fines and imprisonment under 18 U.S.C. 287, 1001, 
1010 and 1012; (ii) civil penalties and damages under 31 U.S.C. 3729; 
and (iii) administrative sanctions, claims, and penalties under 24 CFR 
parts 24 and 28.

Payment Bond

U.S. Department of Housing and Urban Development

Office of Housing
OMB Approval No. 0000-0000 (exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

CONTRACTOR/PRINCIPAL (Name and Address):
LENDER (Name and Address):
OWNER (Name and Address):
SURETY (Name and Principal Place of Business):
PROJECT (Name, FHA Number and Location):
CONSTRUCTION CONTRACT:
Date:
Amount:

BOND:
Date:
Amount:
RIDERS TO THIS BOND: --Yes --No
    This Payment Bond ( ``Bond'') is issued simultaneously with a 
Performance Bond-Dual Obligee (the ``Performance Bond'') issued in 
connection with the Project. As used herein, ``Obligees'' shall mean 
Owner and the additional obligee(s), if any, identified in a Rider to 
this Bond and ``Obligee'' shall mean any of the Obligees.
    1. Contractor has entered into a construction contract with Owner 
for the construction of the above-named Project. The construction 
contract (as the same may now or hereafter be amended by change order 
or otherwise) is made a part hereof by reference, and is hereinafter 
referred to as the ``Contract.''
    2. Contractor and Surety, jointly and severally, bind themselves, 
their heirs, executors, administrators, successors and assigns, to 
Obligees, for the use and benefit of Claimants as hereinafter

[[Page 46303]]

defined, in the sum of ---- Dollars ($--), to pay for labor, materials 
and equipment furnished for use in the performance of the Contract. Any 
approved increase in the total Contract price would increase the 
monetary obligation of the Obligors accordingly.
    3. This obligation shall be null and void if the Contractor 
promptly makes payment to all Claimants for all labor, material, or 
equipment used in the performance of the Contract.
    4. Contractor and Surety hereby jointly and severally agree with 
Obligees that every Claimant, who has not been paid in full before the 
expiration of a period of ninety (90) days after having last performed 
labor or last furnished materials or equipment, may sue on this Bond 
for the use of such Claimant, prosecute the suit to final judgment for 
such sum or sums as may be justly due Claimant, and have execution 
thereon. No Obligee shall be liable for the payment of any costs or 
expenses of any such suit.
    5. Surety shall have no obligation to Claimants under this Bond 
unless:
    a. Claimants who do not have a direct contract with the Contractor 
have given notice to any two (2) of the above-named parties, 
Contractor, Owner or Surety, within ninety (90) days after having last 
performed labor or last furnished materials or equipment included in 
the claim, stating that a claim is being made under this Bond and, with 
substantial accuracy, the amount claimed and the name of the party to 
whom the materials or equipment were furnished, or for whom the work or 
labor was done or performed.
    b. Any suit, action or proceeding brought by a Claimant under this 
Bond shall be instituted within one (1) year from the date (i) on which 
the Claimant gave the notice required by Paragraph 5a, or (ii) on which 
the last labor or service was performed by anyone or the last materials 
or equipment were furnished by anyone under the Contract, whichever 
occurs later. If this limitation is deemed to be in contravention of 
any controlling law, this Bond is deemed amended so as to be equal to 
the minimum period of limitation permitted by such law.
    6. The amount of this Bond shall be reduced by and to the extent of 
any payment or payments made in good faith hereunder, inclusive of the 
payment by Surety of mechanics' liens that may be filed of record 
against said Project, whether or not the claim for the amount of such 
lien is presented under and against this Bond. Notwithstanding the 
foregoing, no amounts paid to Owner without the written consent of 
Lender shall reduce the liability of Surety to Lender under this Bond.
    7. Surety hereby waives notice of any change, including changes of 
time, to the Contract or to related subcontracts, purchase orders and 
other obligations.
    8. Notice to the Surety, Owner, or Contractor shall be served by 
mailing the same by registered mail or certified mail, postage prepaid, 
to the address shown on this Bond or to such other address as may have 
been previously specified by the recipient in a notice given in 
accordance herewith.
    9. A Claimant is defined as one having a direct contract with 
Contractor or with a subcontractor of Contractor for labor, materials 
or equipment used in the performance of the Contract, including without 
limitation in the terms ``labor, materials or equipment'' that part of 
water, gas, power, light, heat, oil, gasoline, telephone service or 
rental of equipment directly applicable to the Contract, architectural 
and engineering services required for performance of the work of the 
Contractor and the Contractor's subcontractors, and all other items for 
which a mechanic's lien may be asserted in the jurisdiction where the 
labor, materials or equipment was furnished.
    SIGNED and SEALED this----day of ------, 20--.
Witness as to Contractor:
-----------------------------------------------------------------------
CONTRACTOR:
-----------------------------------------------------------------------
 By: ------------------------------------------------------------------
Name and Title (Printed)
SURETY:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
Name and Title (Printed)
 Project Name:---------------------------------------------------------
 Project Number:-------------------------------------------------------

ADDITIONAL OBLIGEE RIDER

(Additional obligee only allowed with prior HUD approval as indicated 
below.)

    1. This additional Obligee Rider is attached to and made a part of 
that certain Payment Bond (the ``Payment Bond''), dated ----, 20 -- 
executed and delivered by ------, as Contractor, and ------, as Surety, 
in favor of Obligees, in the sum of ------ ($----) with respect to the 
Project referenced above.
    2. All of the terms, conditions and provisions of the Payment Bond 
are hereby incorporated herein by this reference as if fully set forth 
herein.
    3. All defined terms as set forth in the Payment Bond shall have 
the same meaning herein.
    4. -------- is hereby added to the Payment Bond as an additional 
named Obligee.
    5. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Payment Bond, including 
especially but without limitation, the aggregate liability of Surety as 
described in paragraph 2 of the Payment Bond.

Signed and sealed this ---- day of ------, 20--.
Witness as to Contractor:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
CONTRACTOR:
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
SURETY:
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
 Project Name:---------------------------------------------------------
 Project Number:-------------------------------------------------------

ADDITIONAL SURETY RIDER

(Additional surety only allowed with prior HUD approval as indicated 
below.)

    1. This Additional Surety Rider is attached to and made a part of 
that certain Payment Bond (hereinafter ``Payment Bond''), dated ----, 
20---- executed and delivered by ------, as Contractor, and ------, as 
Surety, in favor of Obligees, in the sum of ------ ($----) with respect 
to the Project referenced above.
    2. All of the terms, conditions and provisions of the Payment Bond 
are hereby incorporated herein by this reference as if fully set forth 
herein.
    3. All defined terms as set forth in the Payment Bond shall have 
the same meaning herein.
    4. -------- (the ``Additional Surety'') is hereby added to the 
Payment Bond as an additional named surety.
    5. Each surety and additional surety (hereinafter collectively 
called ``Surety'') is held and firmly bound, jointly and severally, 
onto Obligees. Further, each undersigned Surety binds itself in the 
aforesaid full sum, ``jointly and severally,'' as well as ``severally'' 
for the purpose of allowing joint action or singular actions against 
any or all of them in the full amount of this Payment Bond and for all 
other purposes each Surety binds itself, jointly and severally with 
Contractor, for the payment of the full sums above stated. All 
references in the Payment Bond to ``Surety'' shall include the 
Additional Surety.
    6. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Payment Bond,

[[Page 46304]]

including especially but without limitation, the aggregate liability of 
the Surety as described in paragraph 2 of the Payment Bond.
SIGNED AND SEALED this ---- day of ------, 20--.
Witness as to Contractor:
CONTRACTOR:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
SURETY:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
Name and Title (Printed)
Approved by the United States Department of Housing and Urban 
Development
 By:-------------------------------------------------------------------

Performance Bond--Dual Obligee

U.S. Department of Housing and Urban Development

Office of Housing
OMB Approval No. 0000-0000
(exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 0.5 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.
CONTRACTOR/PRINCIPAL (Name and Address):
OWNER (Name and Address):
LENDER (Name and Address):
SURETY (Name and Principal Place of Business):
PROJECT (Name, FHA Number and Location):
CONSTRUCTION CONTRACT:
Date:
Amount:

BOND:
Date:
Amount:

RIDERS TO THIS BOND: --Yes --No
    This Performance Bond-Dual Obligee ( ``Bond'') is issued 
simultaneously with a Payment Bond ( ``Payment Bond'') issued with 
respect to the Project. As used herein, ``Obligees'' shall mean Owner, 
Lender and the additional obligee(s), if any, identified in a Rider to 
this Bond and ``Obligee'' shall mean any of the Obligees.
    1. Contractor has entered into a construction contract with Owner 
for the construction of the above-named Project. The construction 
contract (as the same may be now or hereafter amended by change order 
or otherwise) is made a part hereof by reference, and is hereinafter 
referred to as the ``Contract.''
    2. Lender has agreed to lend to Owner a sum of money to be secured 
by a mortgage, deed of trust, or security deed on the Project and to be 
used in making payments under the Contract, and desires protection as 
its interests may appear, in event of default by Contractor under the 
Contract.
    3. Contractor and Surety, jointly and severally, bind themselves, 
their heirs, executors, administrators, successors and assigns, unto 
Owner and unto Lender, its successors and assigns, as their respective 
interests may appear, as OBLIGEES, in the sum of ---- Dollars ($--), 
for the performance of the Contract. Any approved increase in the total 
Contract price would increase the obligation of the Obligors 
accordingly.
    4. The condition of this obligation is such that, if Contractor 
shall perform all the undertakings, covenants, terms, conditions and 
agreements of the Contract on its part to be performed, and fully 
indemnify and save harmless Obligees from all costs and damages which 
they may suffer by reason of failure to do so, and fully reimburse and 
repay Obligees all expenses which any of the Obligees may incur in 
making good any such default, then this obligation shall be null and 
void; otherwise it shall remain in full force and effect.
    5. Surety shall not be liable under this Bond to the Obligees, or 
any of them, unless the said Obligees, or any of them, make payments to 
the Contractor in accordance with the terms of the Contract as to 
payments, and perform all the other obligations to be performed under 
the Contract. However, Surety shall not assert a failure by the 
Obligees, or any of them, to make payments or perform obligations under 
the Contract unless each of the Obligees has been given written notice 
by Surety of any such failure and a reasonable period of time (but in 
no event less than thirty (30) days from receipt of said notice), in 
which to cure such failure.
    6. Surety agrees that any right of action that any of Obligees 
herein may have under this Bond may be assigned, without the consent of 
Contractor or Surety, to the Secretary of Housing and Urban 
Development, acting by and through the Federal Housing Commissioner, 
and that such assignment will in no manner invalidate or qualify this 
instrument.
    7. The aggregate liability of Surety hereunder to the Obligees or 
their assigns is limited to the penal sum above stated, and Surety, 
upon making any payment hereunder, shall be subrogated to, and shall be 
entitled to an assignment of, all rights of the payee, either against 
Contractor or against any other party liable to the payee in connection 
with the loss which is the subject of the payment. Notwithstanding the 
foregoing, no amounts paid to Owner without the written consent of 
Lender shall reduce the liability of Surety to Lender under this Bond.
    8. Any suit, action or proceeding by reason of any default whatever 
shall be instituted within two years after the date the Owner declares 
the Contractor in default of the Contract. If this limitation is deemed 
to be in contravention of any controlling law, this Bond is deemed 
amended so as to be equal to the minimum period of limitation permitted 
by such law.
    9. Surety hereby waives notice of any change, including changes of 
time, to the Contract or to related subcontracts, purchase orders and 
other obligations.
    10. Notice to the Surety, Owner, or Contractor shall be served by 
mailing the same by registered mail or certified mail, postage prepaid, 
to the address shown on this Bond or to such other address as may have 
been previously specified by the recipient in a notice given in 
accordance herewith.
    SIGNED and SEALED THIS ---- day of ------, 20--.

Witness as to Contractor:
-----------------------------------------------------------------------
CONTRACTOR:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
SURETY:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
 Project Name:---------------------------------------------------------
 Project Number:-------------------------------------------------------

[[Page 46305]]

ADDITIONAL OBLIGEE RIDER

(Additional obligee only allowed with prior HUD approval as indicated 
below.)

    1. This Additional Obligee Rider is attached to and made a part of 
that certain Performance Bond-Dual Obligee (the ``Performance Bond''), 
dated ------, 20--, executed and delivered by ------, as Contractor, 
and ------, as Surety, in favor of Obligees, in the sum of ------ ($--
--) with respect to the Project referenced above.
    2. All of the terms, conditions and provisions of the Performance 
Bond are hereby incorporated herein by this reference as if fully set 
forth herein.
    3. All defined terms as set forth in the Performance Bond shall 
have the same meanings herein.
    4. ------ is hereby added to the Performance Bond as an additional 
named Obligee.
    5. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Performance Bond, including 
especially but without limitation, the aggregate liability of the 
Surety as described in paragraph 3 of the Performance Bond.
    Signed and sealed this ---- day of ------, 20--.
Witness as to Contractor:
-----------------------------------------------------------------------
 CONTRACTOR:-----------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
 SURETY:---------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
Approved by the United States Department of Housing and Urban 
Development
 By:-------------------------------------------------------------------
 Project Name:---------------------------------------------------------
 Project Number:-------------------------------------------------------

ADDITIONAL SURETY RIDER

(Additional surety only allowed with prior HUD approval as indicated 
below.)

    6. This Additional Surety Rider is attached to and made a part of 
that certain Performance Bond-Dual Obligee (``Performance Bond''), 
dated ----, 20--, executed and delivered by ------, as Contractor, and 
------, as Surety, in favor of Obligees, in the sum of ------ ($----) 
with respect to the Project referenced above.
    7. All of the terms, conditions and provisions of the Performance 
Bond are hereby incorporated herein by this reference as if fully set 
forth herein.
    8. Except as set forth in paragraph 5 below, all defined terms as 
set forth in the Performance Bond shall have the same meanings herein.
    9. ------ (``Additional Surety'') is hereby added to the 
Performance Bond as an additional named surety.
    10. Each surety and additional surety (hereinafter collectively 
called ``Surety'') is held and firmly bound, jointly and severally, 
onto Obligees. Further, each undersigned Surety binds itself in the 
aforesaid full sum, ``jointly and severally,'' as well as ``severally'' 
for the purpose of allowing joint action or singular actions against 
any or all of them in the full amount of this Performance Bond and for 
all other purposes each Surety binds itself, jointly and severally with 
the Contractor, for the payment of the full sums above stated. All 
references in the Performance Bond to ``Surety'' shall include the 
Additional Surety.
    11. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Performance Bond, including 
especially but without limitation, the aggregate liability of the 
Surety as described in paragraph 3 of the Performance Bond.
    SIGNED AND SEALED this ---- day of ------, 20--.
Witness as to Contractor:
-----------------------------------------------------------------------
CONTRACTOR:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
SURETY:
-----------------------------------------------------------------------
 By:-------------------------------------------------------------------
-----------------------------------------------------------------------
Name and Title (Printed)
Approved by the United States Department of Housing and Urban 
Development
 By:-------------------------------------------------------------------

REQUEST FOR ENDORSEMENT OF CREDIT

INSTRUMENT AND CERTIFICATE OF MORTGAGEE, BORROWER AND GENERAL 
CONTRACTOR

(Insurance upon Completion)

U.S. Department of Housing and Urban Development

Office of Housing

(Execute Original plus two copies)

OMB Approval No.

(Exp. 00/00/00)

Public Reporting Burden for this collection of information is 
estimated to average 1.0 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (OMB Approval No.), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.
Project Name:
Lender:
[squ] Multifamily Accelerated Processing (MAP)
Project Number:
Borrower:
[squ] Traditional Application Processing (TAP)

To the U.S. Department of Housing and Urban Development (HUD):

    The Lender submits separately the original Note evidencing a loan 
to the undersigned Borrower, together with a recorded copy of the 
Security Instrument of even date securing the Note. The Lender requests 
endorsement of the Note for mortgage insurance in the total sum of $--
------, in accordance with Section ------ of the National Housing Act 
and its implementing regulations.
    The Lender submits separately a check for $-------- covering the 
first mortgage insurance premium, together with the other items called 
for in the HUD commitment dated ------, 20 ----, and in any extensions 
or amendments thereof (the Commitment). The Lender certifies that all 
conditions of the Commitment have been fulfilled to date.
    The Lender understands that the Security Instrument, the Note, this 
Request for Endorsement, and any documents submitted with this Request 
for Endorsement are considered to be consistent with and shall be 
interpreted consistently with HUD's regulations as such regulations 
constitute and pertain to the Contract of Insurance. The Lender agrees 
to be bound by such regulations and by all Directives of HUD.
    The definition of any capitalized term or word used herein can be 
found in this Request for Endorsement, the Regulatory Agreement between 
the Borrower and HUD, and/or the Security Instrument by the Borrower. 
The term ``financing charge(s),'' as used herein shall mean any charge, 
direct or indirect, for supplying the loan to or servicing the loan for 
the Borrower. Whenever used, the singular number shall include the 
plural, the plural the singular and the use of any gender shall be 
applicable to all genders.

[[Page 46306]]

    The Lender submits separately an appropriate security agreement 
executed by the Borrower (and Lessee, if appropriate, in the case of 
Health Care Facilities) covering all of the Personalty which, under 
applicable law, may be subject to a security interest under the Uniform 
Commercial Code (UCC), whether acquired now or in the future, and all 
products and cash proceeds and non-cash proceeds (UCC Collateral). The 
Lender will file timely appropriate Financing Statements under the UCC. 
The Lender agrees to file timely the appropriate Financing Statements 
under the UCC on behalf of HUD pursuant to HUD's rights under the 
Regulatory Agreement.
    The Lender submits separately the Sponsor's Guaranty Agreement to 
meet a subsidy differential in the amount of $------. (Applicable only 
to Section 231 and 232 nonprofit projects if required by HUD.)
    The Lender agrees to furnish HUD with a complete report of the 
results of any inspection of the Mortgaged Property that the Lender is 
required to perform under the applicable regulations or Directives of 
HUD.
Certificate of Mortgagee
    The Lender certifies that:
    1. To the best of our knowledge and information, the construction 
or the required repairs, as the case may be, have been completed in 
accordance with HUD's requirements, except for such items approved by 
HUD for delayed completion, and noted hereinafter.
    2. Impound accounts for taxes, insurance and mortgage insurance 
premiums have been established and are adequately funded.
    3. The Project is fully covered by insurance as required by the 
terms of the Security Instrument and the Commitment, and all such 
insurance policies have attached thereto a standard mortgagee clause 
making the loss payable to the Lender and the Secretary, Department of 
Housing and Urban Development, as their interests may appear.
    4. The Lender has received and submits to HUD separately (check 
applicable paragraphs):
    [squ] a. An Escrow Agreement guaranteeing the completion of off-
site improvements as required by HUD. The Borrower has made a cash 
deposit in the amount of $------.
    [squ] b. Evidence that the off-site improvements will be provided 
by the public authorities having jurisdiction, or by public utility 
companies serving the Project, at no cost to the Borrower.
    [squ] c. In the case of new construction or substantial 
rehabilitation, an Escrow Agreement covering incomplete on-site 
Improvements. The Borrowor has made a cash deposit in the amount of $--
----, at 150% of HUD's estimated cost.
    [squ] d. Or, in the case of refinancing, an Escrow Agreement 
covering the delayed repairs. The Borrower has made a cash deposit in 
the amount of $------, at 100% of HUD's estimated cost; with an 
additional ----% required by HUD, in the form of (cash or letter of 
credit) ------.
    5. The Lender has received a guarantee against defects due to 
faulty workmanship and defective materials and submits separately 
(check applicable paragraphs):
    [squ] a. A surety bond in an amount not less than 10% of the cost 
of construction, running for a period of not less than two years from 
the date of completion of the Project, as determined by HUD, which bond 
has been assigned to the Lender (or under which bond the Lender is a 
joint obligee) and which is assignable to HUD.
    [squ] b. An agreement between the Borrower, the general contractor 
and the Lender, under which the Lender is retaining for a period of one 
year following the date of completion of the Project, as determined by 
HUD, a sum equal to 2\1/2\% of the principal amount of the Security 
Instrument, in the form of (cash or letter of credit) --------, which 
sum, upon failure of the Borrower or the general contractor to cure any 
such defects due to faulty workmanship and defective materials to the 
satisfaction of HUD and the Lender, can be used for the purpose of 
curing such defects, or can be applied to the Indebtedness with HUD's 
consent.
    [squ] c. If the Project is insured pursuant to Section 223, and 
required repairs are delayed until after HUD's endorsement, the Lender 
has obtained an assurance against latent defects in the amount of 2\1/
2\% of the cost, in the form of (cash or letter of credit) --------, 
for a period of 12 months, which may be extended for up to 15 months, 
following the satisfactory completion of repairs.
    6. The Lender submits separately an Escrow Agreement evidencing the 
deposit in the amount of $------, in the form of (cash or letter of 
credit) ------, to meet a possible initial operating deficit during the 
period specified in the Commitment.
    7. If the Project is insured pursuant to Section 223, and if 
required by the Commitment, the Lender has collected cash as an initial 
deposit to the Reserve Fund for Replacements, in the amount of $------
--.
    8. Beginning with the date on which the first payment toward 
amortization is required to be made by the terms of the insured 
Security Instrument or at such later date as may be agreed to by HUD in 
writing, the Lender shall require a monthly deposit with the Lender or 
in a depository satisfactory to the Lender of one-twelfth (\1/12\) of 
the sum set forth in the Commitment constituting a Reserve Fund for 
Replacements which fund will be subject to the Lender's order and from 
which fund withdrawals may be made only upon the receipt of HUD's 
written permission. The amount of the monthly deposit may be increased 
or decreased from time to time at the direction of HUD. These funds 
will be deposited with the Lender by the Borrower in cash or in the 
form of obligations of, or guaranteed as to principal by, the United 
States of America. The Lender will, upon appropriate request by the 
Borrower, permit the conversion of the whole or a substantial part of 
such cash deposits into the form of obligations of, or fully guaranteed 
as to principal by, the United States of America. Notice of any failure 
to receive the required deposits will be forwarded to HUD within 60 
days of the date such deposits are due.
    9. In cases where a Residual Receipts Fund is required under the 
Regulatory Agreement, the Lender shall deposit or place in a depository 
satisfactory to the Lender all funds received from the Borrower after 
the end of each semi-annual or annual fiscal period, and will notify 
HUD if such funds are not received within 90 days of the end of such 
fiscal period. The Residual Receipts Fund will be subject to the 
control of the Lender and from which fund withdrawals may be made only 
upon the receipt of HUD's written permission except for permitted 
distributions pursuant to the terms of the Regulatory Agreement. These 
funds will be deposited with the Lender by Borrower in cash or in the 
form of obligations of or guaranteed as to principal by the United 
States of America. The Lender will, upon appropriate request by the 
Borrower, permit the conversion of the whole or a substantial part of 
such cash deposits into the form of obligations of, or fully guaranteed 
as to principal by, the United States of America. The Lender agrees to 
notify HUD in writing of any irregularity with respect to such Residual 
Receipts Fund immediately upon such irregularity coming to the 
attention of the Lender.
    10. No financing charges other than charges disclosed herein have 
been made and the Lender agrees that no other charges for financing 
will be

[[Page 46307]]

made. (Check and complete the following applicable subparagraphs, a, b, 
c, d, e, f, g or h.)
    [squ] a. No financing charges of any kind have been or will be 
imposed directly or indirectly.
    [squ] b. The Lender has collected cash as an initial service charge 
in the amount of $------.
    [squ] c. In addition to the initial service charge, the Lender has 
collected cash in the amount of $------ as a discount or financing 
charge for the construction or rehabilitation loan.
    [squ] d. The Lender is retaining the permanent loan. In addition to 
the initial service charge, the Lender has collected cash as a 
permanent placement fee in the amount of $------.
    [squ] e. The Lender has a firm commitment from ------ to purchase 
the loan when insured at a financing charge or discount of -- percent, 
and the Lender has collected in the form of (cash or letter of credit) 
------ in the amount of $------ to cover said charge or discount.
    [squ] f. This Project will be financed with (tax-exempt or taxable) 
------ bonds. Therefore, the Lender has collected in the form of (cash 
or letter of credit) ------ the amount of $------ to cover the costs of 
issuance. A statement is attached itemizing these costs with an 
explanation of the necessity of each cost.
    [squ] g. Additional financing charges or discounts of $------ are 
to be collected pursuant to the attachment hereto for the purpose shown 
in (c), (d), (e), (f) (strike inapplicable letters). The arrangement 
for the collection of additional financing charges or discount must 
follow forms and procedures prescribed by HUD.
    [squ] h. A servicing fee that is included in the interest rate and 
an administrative fee for investing the cash held in the Reserve Fund 
for Replacements and any other interest-bearing escrows required by 
HUD.
    [squ] i. The Security Instrument loan to be made to the Borrower 
will be financed through funds being provided by a third-party investor 
through the issuance to the investor of construction and permanent 
participation certificates pursuant to a participation agreement 
between the Lender and the investor, with respect to which agreement 
the Lender has agreed to repay the investor at a stated interest rate 
according to a fixed payment schedule.
    [squ] j. The Security Instrument loan to be made to the Borrower 
will be financed through funds being provided by a third-party investor 
through the issuance to the investor of construction and permanent 
fully modified, pass-through, mortgage-backed securities, guaranteed as 
to principal and interest by the Government National Mortgage 
Association.
    11. In the event of a default under the Security Instrument during 
the term of any prepayment lock-out or penalty, that is, prior to the 
date on which prepayments may be made with a penalty of one percent 
(1%) or less, the Lender will do the following:
    a. Request a three-month extension of the deadline prescribed by 24 
CFR 207.258 for filing a notice of our intention to file an insurance 
claim and our election to assign the Security Instrument;
    b. If you grant the requested extension of the notice-filing 
deadline, or a shorter period, assist the Borrower in arranging a 
refinancing to cure the default and avert an insurance claim;
    c. Report to HUD at least monthly on any progress in arranging a 
refinancing;
    d. Otherwise cooperate with HUD in taking reasonable steps in 
accordance with prudent business practices to avoid an insurance claim; 
and
    e. Require any successors or assigns to certify in writing that 
they agree to be bound by these conditions for the remainder of the 
term of the prepayment lock-out or penalty.
    12. The Lender certifies that in any case where a letter of credit 
has been accepted instead of cash, (a) such unconditional and 
irrevocable letter of credit has been issued by (1) another banking 
institution; (2) the Lender, subject to receiving HUD's written 
permission prior to endorsement; (b) if demand under the letter of 
credit is not immediately met, the Lender will forthwith provide cash 
equivalent to the undrawn balance thereunder without recourse to the 
Borrower, any sponsor, or the general contractor.
    13. The Lender has not paid any kickback or fee or other 
consideration, directly or indirectly, to any person who has received 
payment or other consideration from any other person in connection with 
this transaction, including the purchase or sale of the Mortgaged 
Property, except for compensation paid or to be paid, if any, for the 
actual performance of services and approved by HUD.
    14. The following are the only identities of interest, as defined 
by HUD in MAP Directives, between the Lender and the Borrower, any 
Principal of the Borrower, the Contractor, any subcontractor, or the 
seller of the land: ------------ (must indicate ``none'' for MAP 
transactions).
    15. No identity of interest, as defined by HUD Directives, exists 
between the Lender and the counsel to the Borrower.
    16. All funds, escrows, and deposits specified in this Request for 
Endorsement and any and all other funds held in connection with the 
transaction covered by this Request for Endorsement shall be funds held 
for or on behalf of the Borrower pursuant to the Contract of Insurance.
    17. All HUD form closing documents submitted to HUD in connection 
with this transaction (with the exception of the Opinion by Counsel to 
the Borrower and the accompanying Certification by the Borrower) 
conform to those documents the Lender obtained from HUD on ------ and 
such documents have not been changed or modified in any manner except 
as suitably identified and specifically approved by HUD field counsel 
as evidenced by the attached memorandum. It is understood that changes 
and modifications do not include filling in blanks, attaching exhibits 
or riders, deleting inapplicable provisions or making changes 
authorized by applicable HUD regulations and/or Directives. The Lender 
further certifies that all closing documents submitted to and accepted 
by HUD in connection with this transaction are listed in the attached 
memorandum.
    18. The Lender agrees to notify HUD in writing immediately upon 
learning of any violation of the Regulatory Agreement by the Borrower, 
the Lessee and/or the Operator, as applicable, in certain transactions 
involving the lease of the Project.
    19. The Lender agrees to promptly review any Borrower's request to 
transfer the Project and not unreasonably withhold the Lender's 
approval of the transfer. If HUD approves the transfer, the Lender 
agrees to execute a Release and Assumption Agreement or a Mortgage 
Modification Agreement incorporating the Regulatory Agreement in the 
Mortgage. It is understood that the Lender's consent to the transfer 
will in no way prejudice the Lender's rights under the Contract of 
Insurance with HUD. The Lender shall not collect any fee in connection 
with reviewing the transfer except the Borrower may reimburse the 
Lender for actual expenses incurred by the Lender in connection with 
reviewing the transfer.
Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a

[[Page 46308]]

multifamily rental or health care facility mortgage loan, and may be 
relied upon by HUD and the Commissioner as a true statement of the 
facts contained therein.

 Date------------------------------------------------------------------
 Lender----------------------------------------------------------------
 By--------------------------------------------------------------------

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

CERTIFICATE OF MORTGAGOR

    The undersigned Borrower certifies to HUD:
    1. The Borrower possesses the powers necessary for and incidental 
to the ownership and operation of the Project, as required by the 
appropriate provisions of the National Housing Act, the regulations, 
and Directives of HUD.
    2. The Borrower has read the foregoing Certificate of Mortgagee, 
and to the best of its knowledge and belief considers it correct.
    3. The project books and records will be kept in accordance with 
HUD Directives, and will be maintained to permit an accurate audit 
under HUD Directives. The undersigned further agrees that if the 
Project has been occupied prior to the date of this certificate, 
financial reports covering the entire period of occupancy will be 
furnished to HUD upon request.
    4. All funds escrowed with the Lender, as set forth in the 
Certificate of Mortgagee, may be held by the Lender for the purposes 
indicated therein, or in the event of a default and with HUD's 
permission may be applied to the Indebtedness.
    5. HUD and its authorized agents and the Lender are hereby granted 
the right to enter upon the Mortgaged Property at any and all times for 
the purpose of inspection.
    6. No fixtures or personal property acquired for the Project have 
been purchased on a conditional sale contract or other form of delayed 
payment.
    7. Additionally, the undersigned certifies that:
    (a) The Borrower has received the sum of $--------, constituting 
the full principal amount of the loan for this Project.
    (b) Construction or repairs are complete, except as otherwise noted 
in the Certificate of Mortgagee, and is in accordance with the drawings 
and specifications or list of repairs required by HUD. The Security 
Instrument is a good and valid first lien; the property is free and 
clear of all liens other than that of the -------- or such inferior 
liens as have been approved by HUD; and all outstanding unpaid 
obligations contracted by or on behalf of the Borrower, directly or 
indirectly, in connection with the mortgage transaction, the 
acquisition of the property, and the construction, substantial 
rehabilitation or repair of the Project are listed below:
    (1) HUD-approved notes (copies attached) $
    (2) Due General Contractor $
    (3) Other $

    (Note: If the space provided is inadequate to list all unpaid 
obligations, insert the total in each category and attach itemizations. 
If there are no outstanding obligations, so state.)

    (c) Except for any amounts due on notes listed in item 7(b)(1) 
above, the undersigned agrees to pay the foregoing obligations in cash 
and to furnish HUD with receipts, or other evidence of payment 
satisfactory to HUD, within 45 days following the date hereof.
    Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------
By:
 /s/-------------------------------------------------------------------
 Printed Name, Title:--------------------------------------------------
 Dated:----------------------------------------------------------------
By:
 /s/-------------------------------------------------------------------
 Printed Name, Title:--------------------------------------------------
 Dated:----------------------------------------------------------------

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) Fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

Certificate of General Contractor

    The undersigned general contractor certifies to HUD:
    1. The construction is in accordance with the drawings and 
specifications approved by HUD.
    2. All outstanding unpaid obligations contracted by or on behalf of 
the undersigned in connection with the construction contract are listed 
below:
-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

-----------------------------------------------------------------------
$--------

    (Note: If the space provided is inadequate to list all unpaid 
obligations, insert the total in each category and attach itemizations. 
If there are no outstanding obligations, so state.)

    3. Except for unfinished work funded by an escrow or escrows 
approved by HUD, the undersigned agrees to pay the foregoing 
obligations, and to furnish HUD receipts or other evidence satisfactory 
to HUD, within 15 days following receipt of payment from the Borrower.

Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.
 Name of Entity:-------------------------------------------------------

By:
 /s/-------------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

By:

 /s/-------------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------


[[Page 46309]]

-----------------------------------------------------------------------

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

Surveyor's Report

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (Exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 1.0 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

    Instructions: Submit a completed, signed Surveyor's Report with all 
survey map/plat submissions. See the Surveyor's Instructions for 
required map/plat submissions. Identify pertinent observed and 
otherwise known conditions on the Surveyor's Report.
    I certify that, on (date) ------, I made a survey of the premises 
standing in the
name of----------------------------------------------------------------
situated at (city, county, state):-------------------------------------
known as street numbers------------------------------------------------
and shown on the accompanying survey entitled:
    I made a careful inspection of said premises and of the buildings 
located thereon at the time of making such survey, and again, on (date) 
------, and on such latter inspection, I found said premises to be 
standing in the name of:
In my professional opinion, the following information reflects the 
conditions observed on the date of the last site inspection or 
disclosed in the process of researching title to the premise, and I 
further certify that such conditions(s) are shown on the survey map/
plat dated or has/have been updated thereon under Revision Date
    1. Rights of way, old highways or abandoned roads, lanes or 
driveways, drains, sewer or water pipes over and across said premises:
    2. Springs, streams, rivers, ponds or lakes located, bordering on 
or running through said premises:
    3. Cemeteries or family burying grounds located on said premises:
    4. Electricity, or electromagnetic/communications signal, towers, 
antenna, lines, or line supports located on, overhanging or crossing 
said premises:
    5. Disputed boundaries or encroachments. (If the buildings, 
projections or cornices thereof or signs affixed thereto, fences or 
other indications of occupancy encroach upon adjoining properties or 
the like encroach upon surveyed premises, specify all such):
    6. Earth moving work, building construction, or building additions 
within recent months:
    7. Building or possession lines. (In case of city or town property 
specify definitely as to whether or not walls are independent walls or 
party walls and as to all easements of support or ``Beam Rights.'' In 
case of country property report specifically how boundary lines are 
evidenced, that is, whether by fences or otherwise):
    8. Recent street or sidewalk construction and/or any change in 
street lines either completed or proposed by and available from the 
controlling jurisdiction:
    9. Flood hazard.
    10. Site used as a solid waste dump, sump, or sanitary landfill.

 Surveyor's Name: (print or type)--------------------------------------

 License Number--------------------------------------------------------

 Signature-------------------------------------------------------------

HUD Survey Instructions and Report for Insured Multifamily Projects

U.S. Department of Housing and Urban Development, Office of Housing, 
Federal Housing Commissioner

OMB Approval No. 0000-0000 (exp. 00/00/0000)

    Public reporting burden for this collection of information is 
estimated to average 0.5 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. This agency may not collect this 
information, and you are not required to complete this form, unless 
it displays a currently valid OMB control number.
    This information is necessary to secure a marketable title and 
title insurance for the property that provides security for project 
mortgage insurance furnished under the FHA multifamily programs. 
This information assists in making determinations regarding the 
property's compliance with applicable program regulations, e.g., 
those pertaining to flood hazard, and in reaching underwriting 
determinations regarding property suitability and worth for the 
intended use. This information is mandatory. HUD does not assure 
confidentiality and there are no sensitive questions.

    This survey is to be used in a loan transaction for which the U.S. 
Department of Housing and Urban Development (HUD) is to insure a 
multifamily project mortgage.
    Its uses will include:
    [ballot] Land title recordation (all cases).
    [ballot] Site grading plan preparation (item 1 below).
    [ballot] Plot plan design/redesign (item 2 below).
Special Project Features:
    [ballot] Care Facility,
    [ballot] Condo/Air-rights, and/or
    [ballot] Other: (Specify)
    Standards of Performance: In every instance the survey and map(s) 
and/or plat(s) must be made in accordance with the requirements for an 
``ALTA/ACSM Land Title Survey'' and in compliance with the:
     Minimum Standard Detail Requirements for ALTA/ACSM Land 
Title Surveys, as adopted by the American Land Title Association and 
American Congress on Surveying and Mapping, dated 1999;
     Table A, Optional Survey Responsibilities and 
Specifications, thereof, items 1 through 4 and 7 through 13 except for 
subitems 7b and 7c;
     And the following requirements as applicable:
    1. Site Grading Involved: Comply with table A, item 5. Contours may 
not exceed 1-foot vertical intervals, except that 2-foot and 5-foot 
vertical intervals may be used where the mean site gradient exceeds 5 
percent and 10 percent respectively. Where curbs and/ or gutters exist, 
show top of curb and flow line
    2. Plot Plan Design/Redesign Involved: Comply with Table A, Item 6.
    3. Condo/Air-rights Involved: The surveyor must provide a survey 
made in accordance with any applicable jurisdictional requirements or, 
in the absence of such requirements, professionally recognized 
standards.
    4. Flood Hazard Involved: Where any portion of the site is subject 
to flood hazard, show the 100 year return frequency flood hazard 
elevation and flood zone for all projects plus the 500 year return 
frequency, flood hazard elevation, and flood zone for care facility 
projects. For existing projects

[[Page 46310]]

show the site elevation at the entrances, lowest habitable finished 
floor, and basement for each primary building, and the vehicular 
parking area that serves each primary building. Take return frequency 
flood hazard elevations from the applicable Federal Flood Insurance 
Rate Map. Where such is not available, take the elevations from 
available State or local equivalent data, or when not available, work 
in conjunction with owner's engineer.
    5. Blanket Easement Involved. Show on the map/plat the location of 
any facility that is located within or traverses the property under 
provisions of a blanket easement.
    Additional Owner Requirements: The following requirements are not 
intended to void any other part of this instruction.

Owner's Representative/Contact:----------------------------------------
Name & Phone No:-------------------------------------------------------
Address:---------------------------------------------------------------

    Surveyor's Report: A current Surveyor's Report (not more than 120 
days old) must be included with the survey map(s)/plat(s) submitted to 
HUD for: project design review, construction contract document sets, as 
required during construction, upon project completion; and with the 
map(s)/plat(s) used at initial and final closing.
Certification: The survey map/plat must bear the following 
certification:
    ``I hereby certify to the U.S. Department of Housing and Urban 
Development (HUD), (Borrower), (Sponsor), (Lender), (Title Insurance 
Underwriter), (Other), and to their successors and assigns, that:
    ``I made an on the ground survey per record description of the land 
shown hereon located in (city or town, county, township, etc.), on 
(date); and that it and this (these) map(s) was (were) made in 
accordance with the HUD Survey Instructions and Report, form HUD-
92457M, and the requirements for an ALTA/ACSM Land Title Survey, as 
defined in the Minimum Standard Detail Requirements for ALTA/ACSM Land 
Title Surveys dated 1999.
    ``To the best of my knowledge, belief and information, except as 
shown hereon: There are no encroachments either way across property 
lines; title lines and lines of actual possession are the same; and the 
premises are free of any (subject to a) 100/500 year return frequency 
flood hazard, and such flood free (flood) condition is shown on the 
Federal Flood Insurance Rate Map, Community Panel No. ( if none, so 
state).''

Request for Approval of Advance of Escrow Funds

U.S. Department of Housing and Urban Development Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 1 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

    Request for Approval of Advance Payment of Escrow Funds: Completed 
by the depository. Submit to FHA in triplicate.

Project Name:
Project Number:
Advance Number:
Name of Borrower:
Date of Escrow Agreement:
Payment Amount Requested: $
Escrow Account Balance after this payment: $

    The Payment Requested is for:

[ ] offsite facilities
[ ] construction changes
[ ] non-critical repair
[ ] minor movables
[ ] construction costs not paid at final endorsement
[ ] (other)------------------------------------------------------------

    The Remaining Balance is for:

[ ] offsite facilities
[ ] construction changes
[ ] non-critical repair
[ ] minor movables
[ ] construction costs not paid at final endorsement
[ ] (other)------------------------------------------------------------

    The undersigned received the Request for Payment (see page 2) from 
the above-named Borrower.
    To the best of our knowledge, information, and belief, the sum 
requested is now payable.
    We intend to disburse that sum on or about (date): -- upon your 
approval.
Name of the Depository:
Name/signature of authorizing official/date:
Note: Original and two copies must be signed.
    Approval of Advance of Escrow Funds: Completed by the Department of 
Housing and Urban Development.

Name & Address of Depository:
Disbursement of funds is approved from the Escrow Deposit for:
[ ] offsite facilities
[ ] construction changes
[ ] non-critical repair
[ ] minor movables
[ ] construction costs not paid at final endorsement
[ ] (other)------------------------------------------------------------
Payment Approved: $
Approval Recommended: (name/signature of Housing Project Manager/date) 
x--------------------
Authorizing Agent for the Department of Housing and Urban Development:
(name/signature/date) x--------------------
    Request for Payment to be completed by Borrower. To be submitted to 
the depository in triplicate.

Project Name: Name/address of Depository:
Project Number:
Amount Requested: $
    The undersigned Borrower hereby requests a payment of funds 
covering advances provided by the Escrow Agreement for:

[ ] offsite facilities heretofore executed on the------day of--------, 
20----, as indicated by the net amount due for work performed up to----
--the day of--------, 20----, according to the following statement with 
respect to all items of construction listed in schedule ``A'' attached 
to the Agreement;
[ ] construction costs not paid at final endorsement and listed in 
Schedule ``A'' attached to the Agreement;
[ ] construction change(s) as identified by request number(s): --------
;
[ ] non-critical repairs pursuant to Section 223(f), [ ] Section 
223(a)(7), [ ] Section 232 or
[ ]----------(other).

[[Page 46311]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  C. Amounts completed  [ ]
 Item or construction change request   A. Estimated cost as stated     B. Amounts from final        Offsite  [ ] 223f  [ ]
                number                     in escrow agreement           endorsement escrow         223(a)(7)  [ ] Change       D. FHA approved amount
                                                                                                      orders  [ ] 241(f)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       $                            $                            $                            $
    Total............................  $                            $                            * % $                        ** % $
Less Retained 10% (Offsite/                                                                      $                            $
 Construction Change(s)).
Balance: Total Amount due to date....                                                            $                            $
Less previous payments...............                                                            $                            $
Net amount due on this requisition...                                                            $                            $
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Percentage derived from subtotal of Breakdown Items (Col. C divided by Col. A)
** (Col. D divided by Col. A)

    Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This instrument 
has been made, presented, and delivered for the purpose of influencing 
an official action of HUD (acting by and through the FHA Commissioner) 
in insuring a multifamily rental or health care facility mortgage loan, 
and may be relied upon by HUD and the Commissioner as a true statement 
of the facts contained therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

[ADD ADDITIONAL LINES IF MORE THAN TWO SIGNATORIES]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24, 28 and 30.
    Offsite and Construction Change Certification:
    The undersigned hereby certifies that (mark the appropriate box) [ 
] the total cost has been paid in full and in cash from funds other 
than mortgage proceeds; [ ] upon release of the amount deposited for 
this offsite item or construction change, payment in full shall be made 
to the contractor prior to the next request for an insured advance or 
loan disbursement and a receipt of payment from the general contractor 
shall be submitted with the next request for an insured advance or loan 
disbursement. The undersigned further certifies that all work, labor 
and materials to be paid under this Request are satisfactory and in 
accordance with the contract documents.

Name of Borrower:
Signature of authorized Borrower Official/date
-----------------------------------------------------------------------

    Architect's Offsite and Construction Change Certification:
    I certify, based on my on-site observations (or those of my 
authorized representative), that to the best of my knowledge, 
information and belief, the Work covered by the aforementioned is 
completed.
Architect's Signature/Date:
-----------------------------------------------------------------------

    Inspector's Offsite and Construction Change Certification:
    I certify that to the best of my knowledge, information and belief 
that the aforementioned work has been acceptably completed.
Inspector's Signature/Date:
-----------------------------------------------------------------------

Escrow Agreement for Noncritical, Deferred Repairs

U.S. Department of Housing and Urban Development

Office of Housing

OMB Approval No. 0000-0000

(exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

This Agreement is effective as of the ---- day of ------, between ----
--------Lender, and ------------Borrower.
The terms Lender and Borrower shall be deemed to have the meaning set 
forth in the HUD regulatory agreement for this transaction.
Borrower has acquired or refinanced a housing project or health care 
facility identified as HUD Project Number------, with the proceeds of a 
loan (the Mortgage Loan) from Lender. The United States Department of 
Housing and Urban Development (HUD) has endorsed and insured the 
Mortgage Loan pursuant to Sec.  ------of the National Housing Act, as 
amended, the regulations and the directives issued pursuant thereto.
Initial/final endorsement is conditioned upon assurance that funds be 
available for non-critical repairs deferred until after endorsement of 
the Mortgage Loan, where repairs are to be completed using mortgage 
proceeds. Funds deposited with Lender are to be held by Lender under 
the Contract of Mortgage Insurance for and on behalf of Borrower.
The non-critical, deferred repair cost estimate and list of repairs 
itemized on Exhibit A are attached to and made part of this Agreement. 
Borrower agrees to establish an escrow with Lender equal to at least 
150 percent of the estimated cost of the repairs.
In consideration of the premises, the parties acknowledge and agree as 
follows:

    1. Cash in the amount of $------has been withheld from the mortgage

[[Page 46312]]

proceeds. A letter of credit may not be substituted for this 100% 
escrow.
    2. An additional cash amount (or letter of credit, at option of 
Lender) of not less than 50% of the repair cost estimate is hereby 
placed in escrow, in the amount of $------.
    3. Lender may release funds from the mortgage proceeds portion of 
the escrow in proportion to the cost of work completed, less a 10 
percent holdback. The holdback amount must be held until all work is 
completed and found acceptable.
    4. Funds remaining in the escrow account, including the holdback 
portion, together with interest, may be released to Borrower when: (a) 
all repairs have been satisfactorily completed, (b) evidence of clear 
title has been provided to the field office, and (c) latent defect 
assurances have been provided by one of the following: (i) an escrow in 
cash, or letter of credit at the option of Lender equal to 2\1/2\ 
percent, or greater as warranted, of the repair cost maintained for 15 
months from completion of repairs to cover situations where the defect 
is discovered in the twelfth month and additional time is necessary to 
correct it or (ii) a Surety Bond covered by FHA form 3259 from a surety 
on the accredited list of the U.S. Treasury for at least 10 percent of 
the repair cost. The bond runs from the date of completion of repairs.
    5. All non-critical deferred repairs must be completed by Borrower 
within twelve (12) months of endorsement, or such shorter period as HUD 
and Lender may specify. If Borrower has not completed all repairs by 
the end of the repair period, including any approved extensions, Lender 
will complete the repairs using the escrowed funds. For this purpose, 
Borrower irrevocably appoints Lender as its attorney-in-fact. Lender 
will provide Borrower with a breakdown of these repairs and the cost of 
completion, including administrative expenses. Funds remaining in the 
escrow account after completion of the repair work will be returned to 
Borrower less reasonable administrative costs incurred in completing 
the repairs.
    6. In cases where actual costs are less than estimated, the maximum 
insurable loan amount must be recalculated. If the maximum insurable 
mortgage is reduced due to lower actual costs, the mortgagor must 
prepay the mortgage: (1) in amounts equal to the scheduled monthly 
principal payments, to the extent possible; with (2) any remainder 
going to the Reserve for Replacements Fund.
    7. In the event Borrower defaults under the Mortgage Loan, the 
remaining balance in the repair escrow is to be applied to the 
obligations of Borrower or to the Mortgage Loan, as directed by HUD.
    8. If any amount deposited under this Agreement is in the form of a 
letter of credit, the letter of credit was issued to Lender by a 
banking institution, and is unconditional and irrevocable. Lender is 
not the issuer thereof unless HUD has granted prior written consent. 
Lender will be responsible to HUD for collection under any letter of 
credit. In the event a demand for payment under the letter of credit is 
not immediately met, Lender will immediately provide a cash deposit 
equivalent to the undrawn balance of the letter of credit.
    IN WITNESS WHEREOF, the parties have duly executed this Agreement.

BORROWER:

-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

 Print name and title--------------------------------------------------

LENDER:
-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

 Print name and title--------------------------------------------------

Warning

    Any person who knowingly presents a false, fictitious or fraudulent 
statement or claim in a manner within the jurisdiction of the U.S. 
Department of Housing and Urban Development is subject to criminal 
penalties, civil liability and administrative sanctions, including but 
not limited to: (i) fines and imprisonment under 18 U.S.C. 287, 1001, 
1010 and 1012; (ii) civil penalties and damages under 31 U.S.C. 3729; 
and (iii) administrative sanctions, claims and penalties under 24 CFR 
parts 24 and 28.

Agreement of Sponsor To Furnish Additional Funds

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

    This Agreement is given this ---- day of ------, 20--, by --------
----, having an office at ------------, Sponsor of FHA Project No. ----
--, located in the City/County of ------, State of ------, which 
Project has been, is being, or will be constructed, rehabilitated, 
purchased or refinanced from the proceeds of a mortgage (or deed of 
trust) given by ------------, as Borrower (which term, when used 
herein, also shall be deemed to have the meaning set forth in the HUD 
regulatory agreement applicable to this transaction), to ------, as 
Lender (which term, when used herein, also shall be deemed to have the 
meaning set forth in the HUD regulatory agreement applicable to this 
transaction), having an office at ----a--.
    WHEREAS, the Secretary of Housing and Urban Development has issued 
his/her commitment to insure said mortgage pursuant to the provisions 
of the National Housing Act, which commitment is conditioned upon 
assurance that additional funds in the amount of $------ be made 
available for project purposes, primarily for the absorption of any 
deficit in the operation of the project during the initial period of 
occupancy; and,
    WHEREAS, financing of the project as proposed by the sponsors could 
not be obtained without the Secretary's endorsement for insurance;
    NOW, THEREFORE, THIS AGREEMENT WITNESSETH: That for and in 
consideration of the premises hereinabove set forth, and for the 
purpose of inducing the Secretary to insure said mortgage, the 
undersigned hereby jointly and severally agree and undertake with the 
Secretary to deposit on or before ------ [estimated date of 
completion], in escrow with a depository satisfactory to the Secretary, 
$------ in the following form [specify one]:
    -- (a) in cash, or
    -- (b) by an unconditional, irrevocable letter of credit issued to 
the depository by a banking institution, to be held and disbursed by 
the depository pursuant to the terms of an escrow agreement to be 
executed at the time of the making of the deposit in the form of HUD 
Form 2476a.
    IN WITNESS WHEREOF, the sponsor has executed this agreement as of 
the day and year first above written. Each signatory below hereby 
certifies that the statements and representations contained in this 
instrument and all supporting documentation thereto are true, accurate, 
and complete. This instrument has been made, presented,

[[Page 46313]]

and delivered for the purpose of influencing an official action of HUD 
(acting by and through the FHA Commissioner) in insuring a multifamily 
rental or health care facility mortgage loan, and may be relied upon by 
HUD and the Commissioner as a true statement of the facts contained 
therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

[ADD ADDITIONAL LINES IF MORE THAN TWO SIGNATORIES]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages under 
31 U.S.C. 3729; and (iii) administrative sanctions, claims, and 
penalties under 24 CFR parts 24 and 28.

Escrow Agreement: Additional Contribution by Sponsors for Operating 
Deficit

U.S. Department of Housing and Urban Development

Office of Housing

OMB Approval No. 0000-0000

(exp. 00/00/00)
    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.
    This Agreement made this ---- day of ------, 20----, by and between 
the Lender described more fully below and ------------, having an 
office at ------------, Sponsor of HUD Project No. ------, located in 
the City/County of ------, State of ------, which Project has been, is 
being, or will be constructed, from the proceeds of a security 
instrument given by ------------, as Borrower (which term, when used 
herein, also shall be deemed to have the meaning set forth in the HUD 
regulatory agreement applicable to this transaction), to ------, as 
Lender (which term, when used herein, also shall be deemed to have the 
meaning set forth in the HUD regulatory agreement applicable to this 
transaction), having an office at --------.
WITNESSETH:
    WHEREAS, the Secretary of Housing and Urban Development (HUD) has 
issued his/her commitment to insure said mortgage (or deed of trust), 
on which insurance Sponsor is relying for financing of the Project, and
    WHEREAS, said commitment is conditioned upon assurance that 
additional funds be made available for Project purposes, primarily for 
the absorption of any deficit resulting from the operation of the 
Project during the initial period of occupancy;
    NOW, THEREFORE, Sponsor and Lender hereby agree as follows:
    1. Sponsor has deposited with --------, Depository, $------, 
receipt of which is acknowledged by the Depository, to be held and 
disbursed by the Depository as hereinafter set out, said deposit being 
[specify one]:
    ---- (a) cash, or
    ---- (b) an unconditional irrevocable letter of credit issued to 
Depository by a banking institution,
    2. Said deposit shall be held subject to disbursement at the 
direction of HUD for a period of -- months following final endorsement 
of the mortgage loan for insurance plus any additional period by which 
the beginning of amortization of the loan may be deferred. 
Disbursements from the escrow may be authorized monthly by HUD to meet 
any cash deficit in the operation of the Project for the period 
immediately following substantial completion of construction. In 
determining the amount of such cash deficit, effect will be given to 
the Borrower's payments for amortization and deposits in the Reserve 
for Replacements, but no effect will be given to depreciation, 
officers' salaries, and management fees paid to the Borrower, Sponsor, 
Principals (as such term is defined in the HUD regulatory agreement 
applicable to this transaction) or their nominees.
    3. The deposit shall be subject to immediate application to the 
debt under the Security Instrument (as such term is defined in the HUD 
regulatory agreement applicable to this transaction) in the event of 
default thereunder at any time prior to the expiration of the escrow 
period.
    4. IT IS UNDERSTOOD AND AGREED that at the expiration of the escrow 
period, or at such earlier date as HUD, in his/her sole discretion, 
determines that the Project has achieved sustaining occupancy and 
income, any balance remaining on deposit will be returned to Sponsors, 
without interest.
    5. IT IS FURTHER UNDERSTOOD AND AGREED that the Depository will 
hold and disburse this escrow at the sole direction of HUD; and Sponsor 
hereby authorizes Lender, in the event the deposit hereunder is other 
than in cash, to draw against the letter of credit or to sell the bonds 
to the extent necessary to provide the cash necessary to make the 
disbursements directed by HUD, and in the event that such letter of 
credit cannot be converted to cash, the Lender shall immediately 
provide a cash deposit equivalent to the undrawn balance of the letter 
of credit.
    6. Whenever used herein, the singular number shall include the 
plural, the plural the singular, and the use of any gender shall be 
applicable to all genders.
    The parties have executed this Agreement as of the day and year 
first above written.
SPONSOR:

-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

Name and Title

LENDER:

-----------------------------------------------------------------------

 By:-------------------------------------------------------------------

Name and Title

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. Sec. Sec.  287, 1001, 1010 and 1012; (ii) civil penalties and 
damages under 31 U.S.C. Sec.  3729; and (iii) administrative sanctions, 
claims, and penalties under 24 CFR parts 24 and 28.

Bond Guaranteeing Sponsors' Performance

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5

[[Page 46314]]

hours per response, including the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. 
Send comments regarding this burden estimate or any other aspect of 
this collection of information, including suggestions for reducing 
this burden, to the Reports Management Officer, Office of 
Information Policies and Systems, U.S. Department of Housing and 
Urban Development, Washington, DC 20410-3600 and to the Office of 
Management and Budget, Paperwork Reduction Project (2502-0468), 
Washington, DC 20503. Do not send this completed form to either of 
the above addresses.

    This Agreement is made this ---- day of --------, 20----, by and 
between -------- Principal(s), having an office at --------, and ------
--, Surety, having an office at --------.
    The Principals have entered into a certain Agreement with the 
Secretary of Housing and Urban Development (the Secretary) dated ------
--, 20----, under which the Principals undertake to deposit in escrow 
the sum of -------- Dollars ($--------) (herein, the Deposit), on or 
before --------, 20----, in order to meet the requirements of the 
Secretary's Commitment for Insurance involving a certain housing 
project known as --------, No. -------- (the Project), located in ----
----.
    The Principals and the Surety are held and firmly bound unto the 
Secretary in the amount of the Deposit, for the payment whereof the 
Principals and Surety bind themselves, their heirs, executors, 
administrators, successors and assigns, jointly and severally by these 
presents; and the condition of the obligation is such that if the 
Principals shall make the Deposit required by the Agreement, or, in the 
event that the Principals shall default in such obligation the Surety 
shall, promptly after written notice of such default, make the Deposit 
on behalf of the Principals, then this obligation shall be null and 
void; otherwise it is to remain in full force and effect.
    The parties hereto have duly executed this Agreement as of the day 
and year first above written.

 PRINCIPAL:------------------------------------------------------------

 By:-------------------------------------------------------------------

Print name and title

 SURETY:---------------------------------------------------------------

 By:-------------------------------------------------------------------

Print name and title

Warning

    Any person who knowingly presents a false, fictitious or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages 
under 31 U.S.C. 3729; and (iii) administrative sanctions, claims and 
penalties under 24 CFR parts 24, 28 and 30.

Borrower's Oath (For Residential Housing, but not Section 232 Projects)

U.S. Department of Housing OMB and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.
To the Secretary of Housing and Urban Development:
 Date------------------------------------------------------------------

 Project No.-----------------------------------------------------------

     In accordance with the stated intent of Congress and with the HUD 
Regulatory Agreement between the borrower (which term shall be deemed 
to have the meaning set forth in the HUD regulatory agreement 
applicable to this transaction) and HUD, the undersigned hereby 
certifies:
    (1) That, to carry out the intent of Section 513 of the National 
Housing Act, 12 U.S.C. Sec.  1731b, as amended, so long as the mortgage 
covering the above numbered project is insured or held under the 
provisions of the National Housing Act, as amended, no part of the 
property described in the aforesaid mortgage will be rented for a 
period of less than thirty days or used for transient or hotel 
purposes, and said property shall be used principally for residential 
use;
    (2) That, to carry out the intent of Section 207(b) of the National 
Housing Act, 12 U.S.C. Sec.  1713(b), as amended, in selecting tenants 
for the property covered by the mortgage to be insured under the above 
number there will be no discrimination against any family by reason of 
the fact that there are children in the family, unless the HUD 
Regulatory Agreement covering the Project provides that the Project is 
intended primarily for occupancy by elderly persons; and
    (3) That the property will not be sold while the mortgage insurance 
is in effect or the mortgage is held by the Secretary unless the 
purchaser files with the Secretary a like certification executed by 
such purchaser under oath.

 BORROWER:-------------------------------------------------------------

 By:-------------------------------------------------------------------

 By:-------------------------------------------------------------------
 Name:
 Title
 Name:
 Title:

    [The borrower entity must execute this Oath before a notary 
public.]

Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages 
under 31 U.S.C. 3729; and (iii) administrative sanctions, claims, 
and penalties under 24 CFR parts 24, 28 and 30.

Notary Acknowledgment for Borrower

    Note: THE FOREGOING CERTIFICATION MUST BE GIVEN UNDER OATH IN 
ACCORDANCE WITH STATE LAW REQUIREMENTS FOR TAKING AN OATH.


County of----------))ss.

State of --------))ss

    Personally appeared before me this ---------- day of --------, 20--
,-------- who, after being duly sworn, says that he/she is the -------- 
of --------, a -------- organized and existing under the laws of the 
State of -------- and that he/she has authority to execute under oath 
and has so executed the above certification for and on behalf of such 
--------, and for her/himself.

[SEAL]

-----------------------------------------------------------------------
Notary Public
 My commission expires:------------------------------------------------
Notary Acknowledgment for Additional Principal
County of ----------))ss.

State of----------))ss.
    Personally appeared before me this ---- day of --------, 20--------
, who, after being duly sworn, says that he/she is a principal in ----
----, the borrower, and that as such he/she has executed the above 
certification for her/himself.

[SEAL]

-----------------------------------------------------------------------

[[Page 46315]]

Notary Public
 My commission expires:------------------------------------------------

Off-Site Bond--Dual Obligee

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000 (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

CONTRACTOR/PRINCIPAL (Name and Address):
OWNER (Name and Address):
LENDER (Name and Address):
SURETY (Name and Principal Place of Business):
PROJECT (Name, FHA Number and Location):
OFF-SITE CONSTRUCTION CONTRACT:
Date:
Amount:
BOND:
Date:
Amount:
RIDERS TO THIS BOND: --Yes -- No

    This Off-Site Bond is issued in connection with the Project named 
above. As used herein, ``Obligees'' shall mean Owner, Lender and the 
additional obligee(s), if any, identified in a Rider to this Bond and 
``Obligee'' shall mean any of the Obligees.
    1. Contractor has entered into a construction contract with Owner 
for the completion of off-site facilities and utilities necessary to 
operate the Project successfully. The Off-Site Construction Contract 
(as the same may now or hereafter be amended by change order or 
otherwise) is made a part hereof by reference, and is hereinafter 
referred to as the ``Off-Site Contract.''
    2. Lender has agreed to lend to Owner a sum of money to be secured 
by a mortgage on said project. The mortgage is to be insured by the 
Federal Housing Commissioner (hereinafter ``FHA'').
    3. Lender is unwilling to advance said funds to the Owner and FHA 
is unwilling to insure said mortgage without assurance that all off-
site facilities and/or utilities necessary to successfully operate the 
project will be installed not later than ------.
    4. Contractor and Surety, jointly and severally, bind themselves, 
their heirs, executors, administrators, successors and assigns, unto 
Owner and unto Lender, their successors and assigns, as each of their 
respective interests may appear, as OBLIGEES, in the sum of ------ 
Dollars ($----) to pay for labor, materials and equipment furnished for 
use in the performance of the Off-Site Contract. Any approved increase 
in the total Off-Site contract price would increase the monetary 
obligation of the Obligors accordingly.
    5. The obligations of this Bond shall be null and void if the 
Contractor installs and completes said off-site facilities and/or 
utilities, or cause the installation and completion of said off-site 
facilities and/or utilities according to the Off-Site Contract within 
the time hereinabove specified, free from all liens and claims of any 
and all persons performing the labor thereon or furnishing materials 
therefore, or both.
    6. Any suit, action, or proceeding by reason of any default 
whatever shall be instituted within two years of the date Owner 
declares Contractor in default of the Off-Site Contract. If this 
limitation is deemed to be in contravention of any controlling law, 
this Bond is deemed amended so as to be equal to the minimum period of 
limitation permitted by such law.
    7. Surety hereby waives notice of any change, including changes of 
time, to the Off-Site Contract or to related subcontracts, purchase 
orders and other obligations.
    8. Notice to Surety, Owner, or Contractor shall be served by 
mailing the same by registered mail or certified mail, postage prepaid, 
to the address shown on this Bond or to such other address as may have 
been previously specified by the recipient in a notice given in 
accordance herewith.
    9. Surety agrees that any right of action that any of the Obligees 
herein may have under this Off-Site Bond may be assigned, without the 
consent of Contractor or Surety, to the Secretary of Housing and Urban 
Development, acting by and through the Federal Housing Commissioner, 
and that such assignment will in no manner invalidate or qualify this 
instrument.

[Remainder of this page intentionally left blank.]

SIGNED and SEALED this ---- day of ----, 20--.
Witness as to Contractor:

-----------------------------------------------------------------------
CONTRACTOR:

-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------
Name and Title (Printed)

SURETY:

-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------
Name and Title (Printed)

    ADDITIONAL OBLIGEE RIDER TO OFF-SITE BOND-DUAL OBLIGEE (Additional 
obligee only allowed with prior FHA approval as indicated below)
    1. This Additional Obligee Rider is attached to and made a part of 
that certain Off-Site Bond-Dual Obligee (the ``Off-Site Bond''), dated 
----, executed and delivered by----, as Contractor, and ----, as 
Surety, in favor of Obligees, in the sum of---- ($----) with respect to 
the Project referenced above.
    2. All of the terms, conditions and provisions of the Off-Site Bond 
are hereby incorporated herein by this reference as if fully set forth 
herein.
    3. All defined terms, as set forth in the Off-Site Bond, shall have 
the same meaning herein.
    4. ------ is hereby added to the Off-Site Bond as an additional 
named Obligee.
    5. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Off-Site Bond, including 
especially but without limitation, the aggregate liability of the 
Surety as described in paragraph 4 of the Off-Site Bond.

SIGNED and SEALED this--day of ----, 20--.

Witness as to Contractor:

-----------------------------------------------------------------------

-----------------------------------------------------------------------
CONTRACTOR:

-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------

Name and Title (Printed)

SURETY:
-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------

Name and Title (Printed)

Approved by The United States Department of Housing and Urban 
Development

By:
-----------------------------------------------------------------------

ADDITIONAL SURETY RIDER

(Additional surety only allowed with prior FHA approval as indicated 
below)

    1. This Additional Surety Rider is attached to and made a part of 
that certain Off-Site Bond-Dual Obligee (the ``Off-Site Bond''), dated 
----, executed

[[Page 46316]]

and delivered by ------, as Contractor, and --, as Surety, in favor of 
Obligees, in the sum of ------ ($----) with respect to the Project 
referenced above.
    2. All of the terms, conditions and provisions of the Off-Site Bond 
are hereby incorporated herein by this reference as if fully set forth 
herein.
    3. All defined terms, as set forth in the Off-Site Bond, shall have 
the same meaning herein.
    4. ------ is hereby added to the Off-Site Bond as an additional 
named surety.
    5. Each surety and additional surety (hereinafter collectively 
called ``Surety'') is held and firmly bound, jointly and severally, 
onto Obligees. Further, each undersigned Surety binds itself in the 
aforesaid full sum, ``jointly and severally,'' as well as ``severally'' 
for the purpose of allowing joint action or singular actions against 
any or all of them in the full amount of this Bond and for all other 
purposes each Surety binds itself, jointly and severally with the 
Contractor, for the payment of the full sums above stated.
    6. Nothing herein shall alter or affect any of the terms, 
conditions and other provisions of the Off-Site Bond, including 
especially but without limitation, the aggregate liability of the 
Surety as described in paragraph 4 of the Off-Site Bond.

[Remainder of this page intentionally left blank.]

    SIGNED AND SEALED this ---- day of ----, 20--.

Witness as to Contractor:

-----------------------------------------------------------------------
CONTRACTOR:

-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------

Name and Title (Printed)
SURETY:

-----------------------------------------------------------------------

By:
-----------------------------------------------------------------------

Name and Title (Printed)

Approved by The United States Department of Housing and Urban 
Development

By:
-----------------------------------------------------------------------

Escrow Agreement For Latent Defects

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000, (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

THIS AGREEMENT is effective the ---- day of ------, 20-- by and between 
--------, the Lender and --------, the Borrower. The terms Lender and 
Borrower shall be deemed to have the meanings set forth set forth in 
the HUD regulatory agreement applicable to this transaction.

The Borrower has completed construction of a project known as ------ 
and further identified as HUD Project No. ------.

The Borrower is required to furnish a guarantee against latent defects, 
faulty workmanship and defective materials for a period of one year 
following the date of final completion of the project; and

The date of final completion of the project was ------, 20--.
    In consideration of the premises, the parties acknowledge and agree 
as follows:
    1. The Borrower herewith deposits with the Lender, and the Lender 
hereby acknowledges receipt of, the sum of $------ (the Fund) which is 
an amount equal to 2\1/2\% of the total amount of the Construction 
Contract to be retained for a period of fifteen months from the date of 
final completion, in the form of cash or an irrevocable, unconditional 
letter of credit issued to the Lender by a banking institution. The 
Fund is held by the Lender under the Contract of Mortgage Insurance for 
and on behalf of the Borrower.
    2. The Fund shall be maintained by the Lender to guarantee against 
defects in the construction due to faulty materials or workmanship, 
defective materials or damage to the project resulting from such 
defects, which defects or damage become apparent within one year after 
the date of final completion. Said Fund may be used for the correction 
of such defects or damage, as may be required by either the Lender or 
the U.S. Department of Housing and Urban Development (hereinafter, 
HUD), in the event the Borrower fails to make such corrections.
    3. The Borrower covenants and agrees on demand of either the Lender 
or HUD to remedy or cause to be remedied all defects in construction 
due to faulty workmanship, defective materials, or damage to the 
project resulting from such defects, within 60 days of notification by 
the Lender or HUD.
    4. The Borrower acknowledges that all work performed pursuant to 
this Agreement is subject to the labor standards contained in Form HUD-
92554, Supplementary Conditions of the Contract for Construction, or 
its replacement, as acknowledged from time to time by the original 
General Contractor in executing the Contractor's Prevailing Wage 
Certificate on the back of Form HUD-92448, Contractor's Requisition, 
Project Mortgages, or its replacement. The Borrower expressly agrees to 
be bound by the terms and provisions of the said Conditions and the 
Certificate. Prior to the release of any funds deposited hereunder, the 
Borrower will submit a Contractor's Prevailing Wage Certificate duly 
executed by each and every contractor performing any of the work and 
dated subsequent to the completion of such work.
    5. The Lender shall maintain such Fund separate from any escrow 
that may have been provided to assure completion of any incomplete 
construction items. The Fund shall be disbursed as follows:
    a. In the event the Borrower fails to comply with the provisions of 
Paragraph 3 of this Agreement, the Lender shall have the right and/or 
option to proceed to correct all said defects in construction and pay 
the cost thereof, including all the costs of the Lender, from the Fund. 
For this purpose, the Borrower hereby irrevocably authorizes and 
empowers the Lender to do and perform in its name and with full powers 
of substitution all matters and things which said Lender shall in its 
judgment deem necessary and proper to be done to effectuate the 
completion of said repairs and to apply the moneys herewith deposited 
to the payment of debts contracted or incurred. This warrant of 
attorney shall be the Lender's full and sufficient authority as 
attorney-in-fact for the Borrower for all payments made by virtue 
thereof. The Borrower hereby irrevocably authorizes and empowers the 
Lender to enter into and upon the said Project and take charge of all 
materials on the Project and in the name of the Borrower, as its 
attorney-in-fact, to call upon and require contractors to do that 
repair work which is their responsibility. To the extent that the 
Lender and/or its contractors complete

[[Page 46317]]

said repairs, such work remains subject to the labor standards 
referenced in Section 4 of this Agreement, and the Lender shall obtain 
a Contractor's Prevailing Wage Certificate duly executed by each 
contractor performing any of the work.
    b. The entire Fund or, if any sums were expended in accordance with 
the above paragraph, any balance remaining therein shall be returned to 
the Borrower upon the expiration of the time designated above unless 
there is a default under the Security Instrument.
    c. In the event the Borrower completes the repairs in the time 
period specified at paragraph 3 above, or no defects become apparent 
within one year after completion of the project and there is no default 
under the Security Instrument, the Lender shall upon written approval 
of HUD, return to the Borrower the amount of the deposit, together with 
interest.
    d. Any and all disbursements from said Fund shall be made only upon 
the prior written approval of HUD.
    6. In the event the Mortgage is assigned to HUD at any time during 
which the Fund has a balance remaining therein in the form of an 
unconditional letter of credit, the Borrower hereby authorizes the 
Lender to draw the remaining balance of said letter of credit in cash, 
if so required by HUD, and to deliver such cash to HUD as required 
pursuant to paragraph 6 hereof,
    7. In the event of a default by the Borrower under the Security 
Instrument and an assignment of the Security Instrument to HUD, the 
entire Fund or balance remaining therein shall be paid to HUD together 
with an assignment of all rights hereunder granted to the Lender. In 
such event, HUD may apply said funds to sums due under the Note. In the 
event the Lender elects to foreclose the Security Instrument in lieu of 
assigning it to HUD, the Lender may apply said funds to sums due under 
the Note.
    8. The Borrower's liability for the correction of defects or damage 
shall not be limited by the amount of the Fund established hereunder.

IN WITNESS WHEREOF, the parties have duly executed this Agreement.

BORROWER:
 By:-------------------------------------------------------------------

Print Name and Title
LENDER:

 By:-------------------------------------------------------------------

Print Name and Title

Warning

Any person who knowingly presents a false, fictitious, or fraudulent 
statement or claim in a matter within the jurisdiction of the U.S. 
Department of Housing and Urban Development is subject to criminal 
penalties, civil liability, and administrative sanctions, including but 
not limited to: (i) fines and imprisonment under 18 U.S.C. 287, 1001, 
1010 and 1012; (ii) civil penalties and damages under 31 U.S.C. 3729; 
and (iii) administrative sanctions, claims, and penalties under 24 CFR 
parts 24 and 28.

Escrow Agreement For Working Capital

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000, (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

THIS AGREEMENT is effective the ---- day of ------, 20 -- by and 
between ------, the Lender and ------, the Borrower. The terms Lender 
and Borrower shall be deemed to have the meanings set forth set forth 
in the HUD regulatory agreement applicable to this transaction.

The Borrower is the owner of a project known as ------ located at and 
further identified as HUD Project No. ------, which project has been, 
is being, or will be constructed from proceeds of a Mortgage Loan (or 
Deed of Trust) in the original principal amount of $------ 
(hereinafter, the Mortgage Loan) from the Lender with respect to which 
Mortgage Loan the Secretary of the United States Department of Housing 
and Urban Development (hereinafter, HUD) has issued a commitment to 
insure.

The commitment to insure is conditioned upon a working capital deposit 
being established and funded as indicated below, which working capital 
deposit has not been included in the Mortgage Loan proceeds but which 
could be funded from excess cash available to the Borrower. This 
requirement applies to both the profit-motivated and the not-for-profit 
Borrower.

In consideration of the premises, the parties acknowledge and agree as 
follows:

    1. At initial endorsement of the Mortgage Loan, the Borrower has 
deposited with the Lender, which acknowledges receipt of same, the sum 
of $------ (herein called the Deposit) in the form of [specify one]:
    a. -- cash, or
    b. -- an unconditional, irrevocable letter of credit issued to 
Lender by a banking institution.
    2. The Lender controls the Deposit and it is understood that the 
funds in the Deposit may be released or allocated for the purposes 
indicated below and for no other purpose without the prior written 
approval of HUD:
    (i) The cost of equipping and renting the project after final 
completion of construction of the project (Note: Not applicable to 
Section 232 Mortgages);
    (ii) For accruals during the course of construction, for interest, 
mortgage insurance premiums, taxes, ground rents, property insurance 
premiums and assessments, when funds available for these purposes under 
the Building Loan Agreement have been exhausted, and also for 
allocation to such accruals after completion of construction.
    3. Any balance of said funds, together with interest earned on the 
funds remaining in the Deposit after the date of sustaining occupancy 
as determined by HUD, will be returned to the Borrower, provided that 
the Mortgage Loan is not in default and unless HUD has directed other 
disposition.
    4. The Lender will not make any disbursements from the Deposit 
without the prior written approval of HUD for projects involving Low-
Income Housing Tax Credits, where the Borrower certifies at firm 
commitment that it will apply any balance of said funds to the reserve 
for replacement or any other restricted account specified by HUD.
    5. The Deposit, if in the form of cash, shall be held by the 
Lender, in an interest-bearing account that is fully guaranteed by the 
United States of America. The Lender may draw upon any letter of credit 
included in the Deposit and convert the same to cash, which cash shall 
then be held and disbursed pursuant to the terms of this Agreement.
    6. The Deposit together with interest, which is being held under 
the Contract of Mortgage Insurance, shall be subject to immediate 
application to the mortgage debt in the event of default under the 
Mortgage Loan at any time before the expiration of the escrow period.

[[Page 46318]]

    IN WITNESS WHEREOF, the parties have duly executed this Agreement.

BORROWER:

 By:-------------------------------------------------------------------
Name and Title

LENDER:

 By:-------------------------------------------------------------------

Name and Title

Warning

    Any person who knowingly presents a false, fictitious or fraudulent 
statement or claim in a matter within the jurisdiction of the U.S. 
Department of Housing and Urban Development is subject to criminal 
penalties, civil liability and administrative sanctions, including but 
not limited to: (i) fines and imprisonment under 18 U.S.C. 287, 1001, 
1010 and 1012; (ii) civil penalties and damages under 31 U.S.C. 3729; 
and (iii) administrative sanctions, claims and penalties under 24 CFR 
parts 24 and 28.

Sinking Fund Agreement (For Use in the Section 232 Program)

U.S. Department of Housing and Urban Development, Office of Housing

OMB Approval No. 0000-0000, (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average --.5-- hours per response, including the time 
for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Send comments regarding 
this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing this burden, to the 
Reports Management Officer, Office of Information Policies and 
Systems, U.S. Department of Housing and Urban Development, 
Washington, DC 20410-3600 and to the Office of Management and 
Budget, Paperwork Reduction Project (2502-0468), Washington, DC 
20503. Do not send this completed form to either of the above 
addresses.

THIS AGREEMENT is effective the ---- day of ------, 20-- by and between 
--------, Lender, and --------, Borrower, and -------- the Lessee/
Operator, if any. The terms Lender and Borrower shall be deemed to have 
the meanings set forth set forth in the HUD regulatory agreement 
applicable to this transaction.

The Borrower is the owner of a project known as ------ and further 
identified as Project No. ----, which project is financed by a Mortgage 
(or Deed of Trust) from the Lender with respect to which Mortgage the 
Secretary of the United States Department of Housing and Urban 
Development (HUD) has issued a commitment to insure.

The commitment to insure is conditioned upon a Sinking Fund account 
being established and funded in accordance with the Regulatory 
Agreement to assure that there are sufficient funds to amortize the 
principal of the loan. This Sinking Fund is required in addition to the 
Reserve for Replacement Fund, where Medicaid reimbursement is on a 
depreciation plus interest basis rather than a pass through of 
principal and interest on the mortgage. This fund is held by the Lender 
under the Contract of Mortgage Insurance.
    In consideration of the premises, the parties acknowledge and agree 
as follows:
    1. The Borrower agrees to direct and empower the payor of the 
capital reimbursement funds to deposit such funds into a trust account 
with the Lender. It is understood that the trust instrument shall be 
irrevocable unless approved by the Lender and shall provide that the 
trustee shall immediately segregate from each provider payment an 
amount representing the excess depreciation component of the capital 
reimbursement per a schedule prepared by the Lender and pay it into the 
Sinking Fund held by the Lender. In jurisdictions which do not allow 
the Borrower to direct and empower the payor of the capital 
reimbursement fund to deposit funds into a trust account, the Borrower 
and the Lender enter into this agreement by which the parties are 
obliged to establish, make payments to and maintain a separate account 
for the Sinking Fund.
    a. By October 1 of each year, Borrower shall prepare and file with 
the Lender a depreciation schedule reviewed by the Borrrower's 
independent public account showing the total projected reimbursement 
for depreciation and amount payable for principal payments coming due 
in each of Borrower's fiscal years, including the fiscal year during 
which the Mortgage Loan is paid.
    b. By January 1 of each year, the Lender shall prepare and file 
with the Borrower a funding schedule reflecting the amount required to 
be deposited in the Sinking Fund in each such project fiscal year and 
the cumulative balance in the Sinking Fund at the end of each project 
fiscal year.
    c. The amount specified in the sinking fund schedule is to be 
deposited into the account to pay future principle payments of the 
Mortgage (Deed of Trust). Sums are deposited monthly into the Sinking 
Fund within 15 days of the close of each month, and shall commence upon 
the earlier of: (i) a scheduled commencement of principal amortization 
of the Loan, or (ii) the receipt by the project of depreciation 
reimbursement by any third party payor. Such fund shall at all times be 
under control of the Lender.
    2. The Lender agrees:
    a. to establish and maintain the Sinking Fund in an interest 
bearing account in a bank whose capital and surplus are at least 
$50,000,000 and which is federally insured.
    b. to furnish HUD quarterly financial reports on the investments, 
accounting on balances, deposits and withdrawals to the local field 
office having jurisdiction unless otherwise directed by HUD.
    c. to monitor the Sinking Fund and examine the external auditor's 
fund balance report and notify HUD whether it complies with the Sinking 
Fund Agreement between the Borrower and the Lender, and
    d. to promptly notify the Borrower and HUD of any irregularities in 
connection with the Sinking Fund and to take such corrective action as 
the Lender and HUD deem appropriate.
    3. Nothing in this Agreement shall impair or prejudice any right 
that HUD may have with respect to such funds, particularly relating to 
the duty of the Lender of record to hold funds for and on behalf of the 
Borrower under the contract of mortgage insurance.
    4. The Sinking Fund constitutes funds held by the Lender for and on 
behalf of the Borrower, and as such, is unrelated to the bond 
transaction or any other source of funds for the mortgage loan.
    5. The Sinking Fund will be used to make principal payments in the 
later years of the Mortgage. In the event of default, the Lender shall 
have the power, only with the prior written approval of HUD or at the 
express direction of HUD, to apply the Sinking Fund to the payment of 
amounts due under the Note and related Loan Documents. Withdrawals from 
the Sinking Fund will be permitted by the Lender to be applied to 
principle payments due under the Note to the extent allowed by the 
Regulatory Agreement.
    6. In the event of a claim for insurance benefits, the amount of 
benefits is subject to surcharge if funds have been disbursed from the 
Sinking Fund in a manner or for purposes not in compliance with the 
Regulatory Agreement between HUD and the Borrower. No such surcharge 
shall be made on the basis of the Borrower's failure to make required 
deposits into the Sinking Fund.
    7. In the event the Borrower leases the Health Care Facility to an 
operator who is responsible for establishing and

[[Page 46319]]

maintaining the Sinking Fund with the Lender, the aforesaid Sinking 
Fund provisions shall be fully applicable to the Lessee/Operator.

IN WITNESS WHEREOF, the parties have duly executed this Agreement.

BORROWER

 By:-------------------------------------------------------------------
Print Name

LESSEE/OPERATOR, if applicable

 By:-------------------------------------------------------------------
Print Name and Title

LENDER

 By:-------------------------------------------------------------------
Print Name

Warning

    Any person who knowingly presents a false, fictitious or fraudulent 
statement or claim in a matter within the jurisdictionof the U.S. 
Department of Housing and Urban Development is subject to criminal 
penalities, civil liability and administrative sanctions, including but 
not limited to: (i) fines and imprisonment under 18 U.S.C. 287, 1001, 
1010 and 1012; (ii) civil penalties and damages under 31 U.S.C. 3729; 
and (iii) administrative sanctions, claims and penalties under 24 CFR 
parts 24 and 28.

Agreement and Certification

U.S. Department of Housing and Urban Development Office of Housing,

OMB Approval No. 0000-0000, (exp. 00/00/00)

    Public Reporting Burden for this collection of information is 
estimated to average 0.5 hour per response, including the time for 
reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Reports 
Management Officer, Office of Information Policies and Systems, U.S. 
Department of Housing and Urban Development, Washington, DC 20410-
3600 and to the Office of Management and Budget, Paperwork Reduction 
Project (2502-0468), Washington, DC 20503. Do not send this 
completed form to either of the above addresses.

To the Secretary of Housing and Urban Development:
 Date------------------------------------------------------------------
 Project No.-----------------------------------------------------------

This Agreement is effective as of the ---- day of ------ , 20 -- , by 
and among -------- (hereinafter, Borrower), and -------- (hereinafter, 
Lender), and (if applicable), -------- (hereinafter, the General 
Contractor), and the United States Department of Housing and Urban 
Development (hereinafter, HUD). As used herein, the terms Borrower and 
Lender shall be deemed to have the meanings set forth, respectively, in 
the HUD regulatory agreement applicable to this transaction.

Borrower has applied to Lender for a mortgage loan (hereinafter, the 
Mortgage Loan) for one of the following purposes [check applicable box] 
in connection with a facility identified as HUD Project No. ------ :
/ / Constructing or substantially rehabilitating a housing project or 
health care facility, the work to be performed by the General 
Contractor, and Lender has applied to HUD for insurance of the Mortgage 
Loan in the amount of $------ , under Section ---- of the National 
Housing Act, as amended, in which case all paragraphs below shall 
apply;

 or

/ / Financing or refinancing, after the completion of repairs (or 
satisfactory arrangements for completion of repairs), of a housing 
project or health care facility, and Lender has applied to HUD for 
insurance of the Mortgage Loan in the amount of $------ , under Section 
------ of the National Housing Act, as amended, in which case 
Paragraphs 1, 2, 6 and 8, below, shall apply;
HUD has issued a Commitment to insure the Mortgage Loan in said amount 
pursuant to said Section and regulations and directives issued pursuant 
thereto. The amount of the Mortgage Loan is subject to reduction, as 
provided in said Act, regulations and directives, and this Agreement is 
required accordingly.
    In consideration of the premises, the parties acknowledge and agree 
as follows:
    1. Prior to receipt of the final advance under the Mortgage Loan, 
and within the time fixed by the Mortgage Loan documents, Borrower 
agrees, if required by HUD procedures for cost certification and the 
National Housing Act, to submit to HUD (a) a fully completed and 
executed Mortgagor's Certificate of Actual Cost; and (b) a fully 
completed and executed Contractor's Certificate of Actual Cost, or 
Subcontractor's Certificate of Actual Cost, on forms prescribed by HUD. 
Borrower and the General Contractor understand, agree and will insure 
that each of the certificates of cost is supported by the certificate 
of an independent Certified Public Accountant or independent public 
accountant in form acceptable to HUD, if required by HUD procedures for 
cost certification.
    2. Borrower and Lender agree that the total advances under the 
Mortgage Loan cannot exceed the amount permitted by Section 227 of the 
National Housing Act, as amended, and the regulations and directives 
issued pursuant thereto. In the case of Mortgage Loans insured pursuant 
to Sections 223(a) or 223(f) of the National Housing Act, as amended, 
Borrower and Lender understand and agree that the Commitment and 
Mortgage Loan may be reduced to comply with the provisions of said 
Section 227 and regulations and directives issued pursuant thereto, and 
Borrower and Lender further agree to execute such instruments as may be 
required to accomplish such reduction.
    3. Borrower agrees that if it receives Mortgage Loan funds in 
excess of that permitted under the National Housing Act, and the 
regulations and directives issued pursuant thereto, it will pay upon 
demand forthwith to Lender any such excess for application to the 
reduction of the then-outstanding principal balance of the Mortgage 
Loan. Lender agrees that upon its receipt of such excess the contract 
of mortgage insurance is reduced accordingly, and Borrower and Lender 
agree to execute such instruments as may be required to accomplish such 
reduction. Borrower further agrees that if HUD, for cost certification 
purposes, accepts estimates for any items, Borrower will, at final 
endorsement, establish a cash escrow to pay all the ``to be paid in 
cash items'' identified in its Certificate of Actual Cost, and to pay 
debts to third parties who made the original disbursement for an item 
listed as paid on the Certificate, unless documentation, satisfactory 
to HUD, is submitted evidencing that Borrower paid these amounts after 
the submission of its Certificate. Borrower understands that the items 
covered by this cash escrow must be paid within 45 days of the date of 
final endorsement, except for those items in dispute, involved in 
litigation or those items that are non-critical repairs to be completed 
after endorsement and covered by an appropriate escrow agreement. If 
Borrower's actual cost is less than the estimates accepted for cost 
certification purposes, and HUD determines that this difference plus 
the net amount (total receipts less expenses of perfecting claims) of 
settlement of claims against bonding companies or others, would have 
required a reduction of the Mortgage Loan, Borrower understands that 
prepayment of the Mortgage Loan is required in an amount equal to the 
scheduled monthly principal payments, to the extent possible, and any 
remaining balance will be deposited to the project's Reserve Fund for 
Replacements.

[[Page 46320]]

    4. Borrower certifies that any financial or business interests or 
family relationships which exist between Borrower, or any of its 
officers, directors, stockholders, partners or principals (hereinafter, 
Principals) with the Architect or with the General Contractor, or 
subcontractors, suppliers, or equipment lessors, or with any of the 
Principals of any of the foregoing entities (hereinafter, an Identity 
of Interest) for the project are herewith listed by name, title, 
address, relationship and interest: (Attach exhibit if necessary. If 
None, so state).

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    5. Borrower agrees to notify HUD in writing, and within 10 days of 
the event, of any change in relationships covered by paragraph 4 
herein. In the event that such change establishes an Identity of 
Interest between Borrower or its Principals, and the General Contractor 
or its Principals, Borrower's Certificate of Actual Cost will be 
accompanied by the Contractor's Certificate of Actual Cost, in the form 
prescribed by HUD; and, if required by HUD, similar certificates by any 
subcontractor, supplier, or equipment lessor covered by this paragraph 
5. It is agreed that the absence of such notice may be treated by HUD 
as a representation that no such change in relationship has occurred.
    6. Borrower agrees to maintain and keep adequate records of all 
costs incurred in connection with the project, and to make such records 
available for examination by HUD upon request.
    7. If this Agreement discloses an Identity of Interest between 
Borrower and the General Contractor, Borrower will include in the 
construction contract a provision requiring the General Contractor, 
upon completion of the project, to submit to Borrower for delivery to 
HUD its Certificate of Actual Cost, in the form prescribed by HUD. 
Borrower further agrees to include in said contract the requirement 
that the General Contractor will maintain adequate records of all such 
costs, and make such records, documents, contracts and accounts 
available for review upon request by HUD.
    8. Borrower agrees that it will include in the construction 
contract, and require the inclusion in all subcontracts, whether for 
labor, material, or equipment leases, a provision that if there is, or 
comes into being, an Identity of Interest between Borrower and any 
subcontractor; or, in those cases in which the General Contractor is 
required to certify actual costs, between the General Contractor and 
any subcontractor, then, if HUD so requires, such subcontractor will 
submit to HUD a Certificate of Actual Cost in the form and with the 
audit standards prescribed by HUD, including the deduction of all 
kickbacks, rebates, adjustments, discounts, or any other arrangements 
in the nature thereof. For purposes of determining actual cost, no 
profit or general overhead may be included in the subcontract unless 
HUD has granted advance written approval of a specific dollar amount or 
a specific percentage.
    9. Borrower agrees that if there comes into being any Identity of 
Interest between Borrower and the Architect, or between the General 
Contractor and the Architect, the Architect will immediately be 
relieved of inspection duties and the maximum Architect's fees 
allowable for cost certification purposes will be $------ for design 
services only, and no fees will be allowed for supervision.
    10. If HUD processed the project to include a Builder's and 
Sponsor's Profit and Risk Allowance (hereinafter, BSPRA) under the 
National Housing Act, as amended, Borrower and General Contractor agree 
as follows:
    a. The form of construction contract will be cost-plus, with a 
maximum upset price. So long as the requisite Identity of Interest is 
maintained through final endorsement of the Mortgage Loan, and subject 
to paragraph 10.c herein, then in lieu of the General Contractor's fee, 
Borrower will be entitled to include in its Certificate of Actual Cost 
a BSPRA. The BSPRA will be determined by applying the profit and risk 
percentage provided for in Section 227 of the National Housing Act, as 
amended, and the regulations and directives issued pursuant thereto, 
that were in effect on the date of the Commitment, to the actual cost, 
as accepted by HUD, of those items which, under the provisions of the 
said Act, regulations and directives, are included in computing the 
BSPRA. For the purpose of determining actual cost, the General 
Contractor's general overhead will not exceed $------.
    b. If the Identity of Interest between Borrower and General 
Contractor is not maintained through final endorsement of the Mortgage 
Loan, then the BSPRA provided for in paragraph 10.a herein will not be 
applicable. Instead, Borrower will be entitled to include in its 
Certificate of Actual Cost a Sponsor's Profit and Risk Allowance 
(hereinafter, SPRA). The SPRA will be determined by applying the profit 
and risk percentage provided for in Section 227 of the National Housing 
Act, as amended, and the regulations and directives issued pursuant 
thereto, that were in effect on the date of the Commitment, to the 
actual cost, as accepted by HUD, of those items which, under the 
provisions of the said Act, regulations and directives, are included in 
computing the SPRA.
    c. If more than 50 percent of the actual cost of construction is 
subcontracted with any one contractor or subcontractor, or more than 75 
percent with three or fewer contractors or subcontractors (hereinafter, 
the 50-75% Rule), the BSPRA provided for in paragraph 10.a herein will 
not be allowed as an actual cost, and Borrower will be limited to the 
inclusion on its Certificate of Actual Cost of the SPRA cited in 
paragraph 10.b herein. Further, in that event, for the purpose of 
determining actual cost, HUD will not allow any expense for the General 
Contractor's general overhead.
    11. If HUD did not process the project to include a BSPRA, Borrower 
and General Contractor agree that the provisions of this paragraph 11 
apply. If there is an Identity of Interest between Borrower and the 
General Contractor, or in any other circumstance required by HUD, the 
form of construction contract will be cost-plus, with a maximum upset 
price. For the purpose of determining actual cost, the General 
Contractor's fee will not exceed $------, and the general overhead will 
not exceed $----. In the event that the 50-75% Rule is violated, for 
the purpose of determining actual cost, HUD will not allow any expense 
for the General Contractor's fee and general overhead. If an Identity 
of Interest does not exist or is not maintained through final 
endorsement of the Mortgage Loan, and if authorized by the National 
Housing Act, as amended, and the regulations and directives issued 
pursuant thereto, that were in effect on the date of the Commitment, 
Borrower will be allowed to include in its Certificate of Actual Cost 
the SPRA cited in paragraph 10.b of this Agreement.
    12. Borrower and the General Contractor understand that for 
purposes of the 50-75% Rule, the terms ``contractor'' and 
``subcontractor'' include material suppliers and equipment lessors, and 
any two or more contractors or subcontractors having an Identity of 
Interest or common ownership are considered as one contractor or 
subcontractor. Further, it is understood that the 50-75% Rule is not 
applicable to manufacturers of industrialized housing, trade items 
performed by persons on the General Contractor's payroll, mobile home 
park

[[Page 46321]]

programs, supplemental loan programs, or rehabilitation programs other 
than gut rehabilitation.
    13. Borrower and the General Contractor further understand and 
agree that if an Identity of Interest arises between Borrower and the 
General Contractor following their execution of a lump-sum form of 
construction contract, allowable costs will be governed by the 
applicable provisions of paragraphs 11 and 12 of this Agreement.
    14. The Contractor and Borrower represent, for themselves and any 
person or entity with which they are affiliated, as follows:
    a. All costs for work to be performed on the Project or related 
property are reflected in the Construction Contract and in the 
Contractor's and Mortgagor's Cost Breakdown.
    b. There are no agreements, contracts or arrangements, for costs, 
fees, consideration or compensation to the Contractor, its principals, 
employees or affiliates other than as recited as the contract sum in 
Article 4 (in the case of a Cost Plus Contract) or Article 4A (in the 
case of a Lump Sum Contract) except for BSPRA.
    c. Borrower and Contractor acknowledge that the existence of 
undisclosed, agreements, contracts, or other arrangements concerning 
construction work to be performed on property covered by a security 
instrument insured by HUD or concerning the compensation payable for 
such work, whether or not such agreement, contract or arrangement is 
with a party to the construction contract, is not permitted in HUD-
insured transactions. Borrower and Contractor acknowledge that full 
disclosure to HUD of all such agreements, contracts or arrangements, if 
any, is to permit accurate determination of the HUD-insured Mortgage 
Loan/construction amount. Failure to disclose any such agreements, 
contracts, or arrangements may constitute grounds for administrative 
sanctions and /or civil or criminal penalties.
    d. No agreement, contract or other arrangement, whether or not 
disclosed, shall increase the HUD-approved construction amount. The 
existence of any such agreement, contract or arrangement shall not 
impute to Lender or HUD of any obligation, financial or otherwise, to 
Borrower, Contractor, or other third-party.

IN WITNESS WHEREOF, the parties have duly executed this Agreement.

BORROWER

 By:-------------------------------------------------------------------
Print name and title

GENERAL CONTRACTOR

 By:-------------------------------------------------------------------
Print name and title

LENDER

 By:-------------------------------------------------------------------
Print name and title

UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT

 By:-------------------------------------------------------------------
Print name Authorized Agent

APPENDIX 12--B.2

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

HUD AMENDMENT TO AIA DOCUMENT B181 STANDARD FORM OF AGREEMENT BETWEEN 
OWNER AND ARCHITECT FOR HOUSING SERVICES FOR HUD PROJECT NO. ------

    The provisions of this Amendment supersede and void all 
inconsistent provisions that may exist between this Amendment and 
the Agreement.
    1. Definition of terms used in this Amendment. If not defined in 
this Amendment, terms shall have the meaning given them in the 
Agreement.
    a. Agreement. The AIA Document B181, Standard Form of Agreement 
Between Owner and Architect for Housing Services, between the Owner 
and the Architect to which this Amendment is attached.
    b. HUD. The U.S. Department of Housing and Urban Development.
    c. Mortgagee. The Lender, as defined in the HUD regulatory 
agreement applicable to this transaction.
    d. Owner. The Borrower, as defined in the HUD regulatory 
agreement applicable to this transaction.
    e. Subcontractor. Any person or entity providing services, 
material supplier, equipment lessor or industrialized housing 
manufacturer/supplier who has a direct contract with the Contractor 
responsible for construction of the Project.
    2. The Owner and the Architect represent that they have complied 
with outstanding architectural instructions in accordance with the 
Multifamily Accelerated Processing (MAP) Guide (for projects 
processed under the MAP Guide) or Handbook 4460.1 REV-2, 
Architectural Analysis and Inspections for Project Mortgage 
Insurance (for other projects), including review for compliance with 
appropriate HUD Minimum Property Standards; the accessible design, 
construction and alteration requirements of Section 504 of the 
Rehabilitation Act of 1973 (see 24 CFR part 8); the Fair Housing 
Accessibility Guidelines; the Uniform Federal Accessibility 
Standards; the accessible design and construction requirements of 
the Fair Housing Act (see 24 CFR 100.205 and ANSI-A117.1-1986, 
incorporated by reference into 24 CFR part 100); the Americans with 
Disabilities Act Guidelines, 37 CFR part 1191; and other current HUD 
directives. The Owner and Architect further represent that they will 
perform services for one another in accordance with the applicable 
requirements contained in these HUD directives.
    3. No portion of the duties, responsibilities and authority of 
the Architect or Owner shall be restricted, modified or extended, 
nor shall this Agreement be assigned in whole to anyone, without the 
written consent of HUD. Neither the Owner nor the Architect shall 
contract with anyone currently listed by the General Services 
Administration as a firm which is disbarred, suspended, proposed for 
debarment, or declared ineligible by federal agencies or by the 
General Accounting Office. The Owner and the Architect shall each 
require from their contractors, consultants and agents similar 
agreements (a) prohibiting contracts with such persons or entities 
and (b) requiring previous participation certificates.
    4. In order to assure the timely and economical completion of 
the project, the Owner, the Owner's Mortgagee, the surety under the 
performance bond or HUD may take control of the project or take 
responsibility for completion of the project's construction pursuant 
to said parties' legal rights under the agreements concerning the 
project. In such event, and notwithstanding the provisions of 
Paragraph 6.1 of this Agreement, the party taking control or taking 
responsibility for completion of construction, and any substitute 
contractor hired by said party, shall have the right to use the 
Drawings, Specifications and other documents, including those in 
electronic form, prepared by the Architect and the Architect's 
consultants. Such use shall be to the same extent and with the same 
limitations as the Owner under this Agreement or as the Contractor 
under the AIA Document A201 General Conditions of the Contract for 
Construction, provided the Owner has paid the Architect in 
accordance with this Agreement and is not in breach or default 
thereunder. The Architect's execution of this Amendment shall 
represent consent by the Architect and the Architect's consultants 
to such use.
    5. The Owner shall provide information to or obtain approval 
from the Owner's Mortgagee and HUD regarding any action or 
observation by either the Owner or the Architect that significantly 
increases the Project's cost or time of construction or decreases 
the quality of construction.
    a. The Architect shall assist the Owner in fulfilling the 
Owner's obligations to the Mortgagee and HUD by furnishing them with 
copies of all construction observation reports, certificates for 
payment, certificate of Substantial Completion, architect's 
supplemental instructions and other written interpretations of the 
Contract Documents made in the Architect's official capacity during 
the project.
    b. The certificates for payment and the certificate of 
Substantial Completion shall be in forms as prescribed by HUD.
    6. Notwithstanding the provisions of Article 9.8, the Architect 
shall:
    a. Advise the Owner on:
    (1) The type of consultant Owner should employ to specifically 
identify suspected on-site hazardous materials and preparation of 
the necessary Specifications for their abatement in accordance with 
HUD and other jurisdictional requirements, where:
    (a) The Phase I Environmental Report supplied by the Owner and/
or other Owner

[[Page 46322]]

supplied data indicate the potential presence of any hazardous 
material, or
    (b) The Architect observes or is otherwise made aware of 
potential on-site hazardous materials during the course of 
performing Project duties, including during the construction phase 
for the rehabilitation of existing improvements.
    (2) The format in which the Owner's consultants should prepare 
their Specifications for eliminating identified hazardous materials, 
and
    b. Incorporate the Owner's consultant's specifications for 
abatement of the hazardous conditions into the construction 
documents, i.e., bid documents, or change orders where hazardous 
materials are identified during construction.
    7. This Agreement shall not be terminated without seven days 
prior written Notice to the Mortgagee and HUD.
    8. The Owner and the Architect recognize the interest of the 
Mortgagee and HUD and that any action or determination by either the 
Owner or the Architect is subject to acceptance or rejection by the 
Mortgagee and by HUD.
    9. In addition to any other rights or remedies the Owner may 
have under this Agreement, if a duly authorized representative of 
HUD requests that the Architect be replaced due to the Architect's 
inadequate performance, unjustified delay or misrepresentation of 
material facts, the Owner may terminate this Agreement after giving 
the Architect at least seven days' written notice and an opportunity 
to correct such default.
    10. The Architect administering the Construction Contract shall 
disclose any identity of interest with the Owner, Contractor, and/or 
any Project subcontractor. An identity of interest is construed to 
exist where:
    a. The Architect has any financial interest in the Project other 
than the fee for professional service.
    b. The Architect advances any funds to the Owner, Contractor 
and/or any subcontractor; and/or the Contractor and/or any 
subcontractor advance any funds to the Architect.
    c. The Architect has any financial interest in the Owner, 
Contractor and/or any subcontractor; or the Owner, contractor and/or 
any subcontractor has any financial interest in the Architect.
    d. Any officer, director, stockholder or partner of the 
Architect has any financial interest in the Owner, Contractor and/or 
any subcontractor; or any officer, director, stockholder or partner 
of the Owner, Contractor and/or any subcontractor has any financial 
interest in the Architect.
    e. Any officer, director, stockholder or partner of the 
Architect is also an officer, director, stockholder or partner of 
the Owner, Contractor, and/or any subcontractor.
    f. The Owner, Contractor and/or any subcontractor, or any 
officer, director, stockholder or partner of such Owner, Contractor 
and/or subcontractor provides any of the required architectural 
services or, while not directly providing an architectural service, 
acts as a consultant to the Architect.
    g. Any family relationships exist between the officers, 
directors, stockholders or partners of the Architect and officers, 
directors, stockholders or partners of the Owner, Contractor, and/or 
any subcontractor that could cause or result in control of or 
influence over prices paid to the Architect or could result in 
control of or influence over performance by the Architect.
    h. Any side deal, agreement, contract or undertaking, that is 
inconsistent with related requirements for the relationship between 
the Owner and Architect as stipulated in the closing documents, 
except as approved by HUD.
    11. All identities of interest known to exist between the 
Architect and the Owner, Contractor and/or any subcontractor are 
listed herein. The Architect and Owner shall each inform HUD in 
writing within 5 working days of its first knowledge of any identity 
of interest that develops after execution of this Agreement. Upon 
the discovery of an undisclosed identity of interest, HUD may 
require the termination of this Agreement in accordance with 
paragraph 9, above.

List All Identities of Interest:

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    12. The funds for this Project, including the Architect's funds 
under this Agreement, will be provided, as the case may be, by the 
proceeds of a mortgage from a Mortgagee who in turn obtained 
commitment for mortgage insurance from HUD, in accordance with the 
National Housing Act, or from a capital advance from the U.S. 
Treasury pursuant to Section 202 of the Housing Act of 1959 or 
Section 811 of the Cranston-Gonzalez National Affordable Housing 
Act. Said Mortgagee, pursuant to the terms of a Building Loan 
Agreement, or said U.S. Treasury, pursuant to a Capital Advance 
Agreement, in accordance with HUD's rules and regulations, will 
agree to advance the proceeds of the mortgage or capital advance to 
the Owner for completion of the work, but only to the extent that 
charges accrued and only to the extent and for the purposes 
specified in the Building Loan Agreement or Capital Advance 
Agreement. The Building Loan Agreement or Capital Advance Agreement, 
when executed, shall specify the mortgage or capital advance 
proceeds available for the Design Phase and for administration of 
the Construction Contract during the Construction Phase. However, 
neither the mortgage or capital advance, nor the Building Loan 
Agreement or Capital Advance Agreement, provide funds for 
Reimbursable Expenses pursuant to paragraph 10 of this Agreement, 
Termination Expenses pursuant to paragraph 8 of this Agreement, or 
Additional Service Compensation pursuant to paragraph 11 of this 
Agreement. Although the Architect may agree to provide a greater 
degree of services for additional compensation, require compensation 
for reimbursable expenses or termination expenses, or require basic 
compensation in excess of that provided by the Building Loan 
Agreement or Capital Advance Agreement for such services, the 
obligation to compensate the Architect for the greater degree of 
services or the aforesaid expenses shall not be enforceable against 
the Owner, the Mortgagee, U.S. Treasury, HUD or the Project; 
provided, however, that any entity or individual other than Owner 
may agree to be responsible to the Architect for payment thereof 
and, in such case, shall be identified below.
Provider of additional payment pursuant to paragraph 12 of this 
Amendment, if any.

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    Executed as of the -- day of ------, 20--.
OWNER

 DATE------------------------------------------------------------------

:ARCHITECT

 DATE:-----------------------------------------------------------------
[Remainder of this page intentionally left blank.]

Certification

    Each signatory below hereby certifies that the statements and 
representations contained in this instrument and all supporting 
documentation thereto are true, accurate, and complete. This 
instrument has been made, presented, and delivered for the purpose 
of influencing an official action of HUD (acting by and through the 
FHA Commissioner) in insuring a multifamily rental or health care 
facility mortgage loan, and may be relied upon by HUD and the 
Commissioner as a true statement of the facts contained therein.

 Name of Entity:-------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

 By: /s/---------------------------------------------------------------

 Printed Name, Title:--------------------------------------------------

 Dated:----------------------------------------------------------------

[ADD ADDITIONAL LINES IF MORE THAN TWO SIGNATORIES]
Department of Housing and Urban Development, acting by and through 
the Federal Housing Commissioner
 Authorized representative:--------------------------------------------

 Dated:----------------------------------------------------------------


[[Page 46323]]

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Warning

    Any person who knowingly presents a false, fictitious, or 
fraudulent statement or claim in a matter within the jurisdiction of 
the U.S. Department of Housing and Urban Development is subject to 
criminal penalties, civil liability, and administrative sanctions, 
including but not limited to: (i) fines and imprisonment under 18 
U.S.C. 287, 1001, 1010 and 1012; (ii) civil penalties and damages 
under 31 U.S.C. 3729; and (iii) administrative sanctions, claims, 
and penalties under 24 CFR parts 24, 28 and 30.
[FR Doc. 04-16783 Filed 7-30-04; 8:45 am]
BILLING CODE 4210-27-P