***Revisions to SFPD Sales Procedures***

*Directive Number:* **94-74**

U.S. Department of Housing and Urban Development

Office of Housing

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Special Attention of:

Notice H 94-74 (HUD)

All Directors of Housing

All Directors of Housing Management Issued: 09/29/94

All CPD Directors Expires: 09/30/95

All Chief Property Officers
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Cross References:

59 FR 48702 (Sept. 22, 1994)

Handbook 4310.5, REV-2

Housing Notice 94-43

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Subject: Revisions to SFPD Sales Procedures

This Notice provides guidance for the implementation of 24 CFR Part

291 published in the Federal Register as a Final Rule on September 22,

1994, and emphasizes revisions being made to the Regulation. It also

supersedes Housing Notices 93-82, 94-44, and any provisions of Housing

Handbook 4310.5, REV-2, which are not consistent with this Notice.

However, unless otherwise specifically stated herein, sales procedures

described in the Handbook still apply.

Throughout this Notice, reference is made to Directors of Housing

Management having Field Office responsibility for the program. After the

next stage of re-organization takes effect, these responsibilities will

automatically come under Single Family Division Directors in most Field

Offices.

A. Statement of Purpose

The purpose of the Single Family Property Disposition Program is to

reduce the inventory of acquired properties in a manner that expands

homeownership opportunities, strengthens neighborhoods and

communities, and ensures a maximum return to the mortgage insurance

fund.

B. Owner-Occupant Purchaser

Owner-Occupant Purchaser means a State, governmental entity, tribe, or

agency thereof; or private nonprofit organization which has been

pre-approved to participate in the program \-- in addition to an

individual purchaser who intends to use the property as his or her

principal residence. Governmental entities include those with general

governmental powers (e.g. a city or county), as well as those with

limited or special powers (e.g., public housing agencies).

Standards for pre-qualifying nonprofits not previously qualified to

participate in other HUD programs are provided in Attachment 1. The

basic responsibility for pre-qualifying participants rests with

Housing; however, in individual Field Offices CPD may accept this

responsibility in whole or on a shared basis with Housing.

C. Revitalization Area

Revitalization Area means a neighborhood that has a significant

concentration of vacant properties, including properties needing

extensive repairs that have been in HUD\'s inventory at least eight

months; exhibits other characteristics of economic distress; and has

been targeted by the locality for establishing affordable housing and

providing adequate supportive services.

Beginning in Fiscal Year 1995, and annually thereafter, Directors of

Housing Management will determine areas that are suitable for applying

deep discount pricing (30 percent off fair market value) on HUD-owned

properties being offered without mortgage insurance, in consultation

with local officials. Standards for making this determination will be

identical to those applied in Fiscal Year 1994 for determining

\"exception sales\" on individual properties. These are:

1\. The neighborhood has a significant concentration of vacant

properties, including those owned by HUD, and exhibits other

characteristics of economic distress;

2\. The neighborhood is targeted by the locality for establishing

affordable housing and providing adequate supportive services;

and,

3\. In general, properties remain in HUD\'s inventory for at least

eight months OR require minimum property standards (MPS) related

repairs exceeding \$15,000, or 50 percent of the estimated \"as

repaired value,\" whichever is greater.

For tracking purposes, revitalization areas will still be identified

by ZIP code. If appropriate, Field Office staff may consider the

entire ZIP code a revitalization area or only those neighborhoods

within the ZIP code meeting the standards defined above. In either

event, the 30 percent discount shall apply to uninsurable properties

only located within the targeted revitalization area.

Where the City has a HUD-approved Comprehensive Housing Affordability

Strategy (CHAS), or successor plan, it is important to ensure that

revitalization areas are coordinated with it to the maximum extent

feasible. For this purpose, Housing staff must consult with Community

Planning and Development (CPD) staff in the appropriate local HUD

Office before contacting City officials, and, for those jurisdictions

having significant HUD inventories, become familiar with the City\'s

plans for those areas.

Directors of Housing Management shall identity their revitalization

areas by ZIP code and notify the Director, Single Family Property

Disposition, Headquarters, of their selections by August 31, 1995, and

annually thereafter. Revitalization area designations shall remain in

effect for the balance of the following fiscal year. However, if a

property has been offered to a nonprofit or public agency prior to

implementation of new fiscal year revitalization areas, that offering

shall remain open until the nonprofit or public agency has had its

opportunity to purchase according to the guidelines and timeframes

referenced in G.2. herein. The sale of such a property shall be at

the appropriate discount in effect at the time of the original

offering.

D. Exceptions for Individual Properties

Individual uninsurable properties not located in a revitalization

area, may occasionally be sold at the 30 percent discount if they meet

the three standards for establishment of a revitalization area and are

located in a neighborhood where seller concessions, such as take-back

financing, are common and/or a predominance of other buyers in the

area are investor owners. If more than ten of these deeply discounted

individual transactions occur within a Field Office jurisdiction

during a Fiscal Year, the Director of Housing Management must approve

each such sale in writing, briefly stating his/her rationale.

E. Establishing List Price

Properties outside of Revitalization Areas, except those qualifying

under the \"exception\" criteria (See D. above), shall be priced in

accordance with standard procedures. Properties located within

Revitalization Areas shall be priced as follows:

1\. Upon acquisition, it is necessary to determine the level of

repairs needed to bring the property up to the intent of MPS;

i.e., based on visual inspection, the property is structurally

sound, free of roof leaks, and has operable mechanical systems.

2\. If the estimated repairs exceed \$5,000, the property shall be

assigned to a qualified specification writer, or fee inspector,

for a detailed listing of the repairs, with cost estimates,

required for the property to meet MPS.

The initial determination as to whether the MPS-related repairs

exceed \$5,000 may be made, at Field Office option, by the REAM or

the appraiser. Assignment of the case to a specification writer

shall be independent of other requirements of the REAM and

appraiser and it is not expected that this action will alter

present requirements, including timeliness, for these contractors

to perform other contract services.

3\. The specification writer may be obtained under a Field Office

contract, under which work orders could be placed by HUD, the

REAM, or the appraiser, or

The REAM may be required to procure the specification services

directly, i.e., the specification writer would be a subcontractor

to the REAM. Orders for this service could be placed by HUD, the

REAM or the appraiser.

4\. If the property in its present condition meets the intent of MPS,

or can be made to meet the intent of MPS by the completion of a

few minor repairs, not to exceed \$5,000, the appraiser then

estimates the \"as repaired value\" as if the property was brought

up to market typical condition, and also estimates the cost of

MPS repairs, if any. Field Office staff will subtract the MPS

related repair costs from the \"as repaired value\" to arrive at

list price; however, if the REAM (or appraiser) determines that

the property requires major repairs or rehabilitation, estimated

to be in excess of \$5,000 in order to meet the intent of MPS, the

property must be assigned to a specification writer, according to

the optional procedure adopted by the Field Office. (Attachment

3 of this Notice is a rehabilitation checklist which may be

helpful to the specification writer. It is for guidance only and

does not represent any type of warranty by HUD. This disclaimer

must be contained on any locally devised rehabilitation checklist

given

to the public.) Upon receipt of the \"as repaired value\"

appraisal and the specification writer\'s report, the Field Office

will subtract the cost of the MPS-related repairs, as determined

by the specification writer, to arrive at the list price.

F. Properties Eligible for Mortgage Insurance (See Attachment 2)

Properties eligible for mortgage insurance shall be offered

competitively to owner-occupant buyers (See B. above) for a period of

10 to 30 days, as determined by the Field Office, prior to being

placed on the general market. Property shall be sold to the net

highest bidder without taking into consideration any applicable

discount. In the event of identical tie net bids being received,

award of the sales contract is determined by drawing lots.

G. Properties Not Eligible for Mortgage Insurance (See Attachment 2)

State and local governments, public agencies, including public housing

authorities, and qualified private nonprofit organizations that have

been preapproved to participate by HUD, may purchase properties in

this category directly at a discount off list price for use in HUD and

local housing or homeless programs. This opportunity shall be given

prior to their being offered to individuals who will occupy them as

their primary residence or to the general public.

1\. HUD Notification Procedures

Nonprofits and public agencies participating in this program must

designate areas of interest by ZIP code in writing to the Chief

Property Officer in the local HUD Office. Upon request, and for

only those properties not eligible for mortgage insurance, Field

Office staff shall notify participating agencies of properties in

these areas as they become available prior to public listing.

Agencies interested in the same area must receive property lists

at the same time, based on intervals agreed upon between HUD and

the purchasers. Properties will be sold on a first come-first

served basis as determined by HUD\'s receipt of a signed sales

contract.

2\. Agency Notification Procedures

Nonprofits and public agencies participating in this program must

notify HUD of preliminary interest in specific properties within

5 days of HUD\'s notification. In the interest of time,

participating agencies are encouraged, but not required, to

transmit their property interest via facsimile where feasible.

(If HUD notification is by mail, this 5 days will begin to run 5

days after mailing.) Those properties in which purchasers

express an interest will be held off market for a 10 day

consideration and inspection period. Other properties on the

list will continue to be processed for public sale. At the end

of the 10 day consideration and inspection period, properties for

which no nonprofit or public agency has expressed a specific

intent to purchase will be offered for sale under the competitive

bid process. Properties in which an agency buyer has expressed

an intent to purchase will continue to be held off market for up

to 10 additional days pending receipt of the sales contract.

3\. Unsold Properties

If properties in this category are not purchased by a nonprofit

organization or government entity within the allotted time, they

shall then be offered on a 10-day competitive bid period to

individuals who will occupy them as their primary residences, or

to the general public (also subject to a 10-day competitive bid

period), with a priority period for the aforementioned

individuals. (See Attachment 2.)

H. Sales to General Public

Properties which remain unsold after progressing through the steps

described in F. and G. are then offered to the general public under a

competitive bidding process.

1\. Unless conditions have changed which affect the previously

established price or terms, properties shall be offered at the

same listing price. If conditions dictate, a new listing price

may be established, using current pricing procedures.

2\. Insurable properties (See F. above) have been through a

competitive bidding process and will, therefore, be offered under

an extended listing basis unless the listing price is changed,

thus necessitating a new 10-day competitive bid period.

3\. Nonprofits and government agencies which purchase competitively

during this period, and are the successful bidder without any

discount being considered, then will be given the applicable

discount off the gross sales price for that property. Such sales

at the 30 percent discount are also subject to the resale

restrictions described in Section J. (See Attachment 6 for

specific instructions related to SAMS.)

4\. Unsold properties are to be reanalyzed regularly, at least

approximately every 30 days, to determine the cause(s) for lack

of sales offers. Where warranted, prices may be adjusted in

accordance with current procedures.

5\. In any competitive bidding process, offers will continue to be

accepted on the basis of the highest net return. In the event of

identical tie net bids involving an owner-occupant buyer, the

contract, provided it is otherwise acceptable, shall be awarded

to the owner-occupant buyer. Tie net bids not involving an

owner-occupant buyer, or two owner-occupant buyers, shall be

determined by a drawing of lots.

I. Discount Levels

The amount of the discount on sales to nonprofits and government

agencies will vary depending on the location of the property being

sold, the type of sale, and the number of properties purchased and

closed in a single transaction. Homeless providers who wish to

purchase a HUD owned property, including properties currently leased,

must also receive the appropriate discount as described below.

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1\. Revitalization Areas

For insurable properties, the discount shall be 10 percent; 15

percent if five or more properties are purchased and closed in a

single transaction. For uninsurable properties, the discount

shall be 30 percent.

2\. Non-Revitalization Areas

For insurable and uninsurable properties, the discount shall be

10 percent; 15 percent if five or more properties are purchased

and closed in a single transaction.

3\. Exception Properties

By definition, properties which are sold under the exception

provision of D. above are not eligible for mortgage insurance.

The discount on such properties is 30 percent.

4\. Sales Commission/Closing/Financing Costs

Usually no real estate broker will be used, and no sales

commission or closing/financing costs paid on these transactions.

However, occasionally, a nonprofit or government agency may elect

to use a broker in order to facilitate identification of

HUD-owned properties suitable for a particular program, or

request that HUD pay a dollar amount towards closing or financing

costs. In this instance, any applicable discount applied at

closing will be minus the full sales commission and/or the

closing-financing costs claimed on the Sales Contract.

J. Financing

In the future, HUD may offer seller financing (purchase money

mortgages/PMMs) to nonprofits and government agencies with a five year

term at 85 percent of purchase price with principal and interest

calculated on a 30 year basis. While PMMs are not authorized for use

at this time, instructions for implementing this incentive are in

Attachment 4.

Meanwhile, Field Office staff should make available information about

other HUD programs which provide funding for acquisition and

rehabilitation of single family properties. These programs include:

HOPE 3, HOME, CDBG, Section 108 Loan Guarantees, and the 203(k)

Rehabilitation Home Mortgage Insurance Program. If the Field Office

is not co-located with Community Planning and Development, the

Director of Housing Management must ensure that printed materials

describing the relevant program options are on hand for distribution,

and refer inquiries to CPD staff when appropriate.

K. Resale Restrictions on Properties Sold at 30 Percent Discount

It is expected that properties purchased from HUD at a 30 percent

discount will be kept affordable to the income level of the targeted

buyers.

1\. Properties are primarily intended to be resold to persons who are

at or below 115 percent of median income for their area, when

adjusted for family size, or used to shelter the homeless.

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2\. Properties may not be resold to an investor within one year of

HUD\'s closing. Individual exceptions may be granted by the

Director of Housing Management in unusual circumstances. A

request for such an exception must be made in writing to the

local HUD Office with reasons given for needing the exception.

(Longer resale restrictions may apply depending on the source of

acquisition and/or rehabilitation financing used.)

3\. Without a specific written exception being granted by the Field

Office, on an individual property basis, properties may not be

occupied by, or resold to, any of the purchaser\'s officers,

directors, elected or appointed officials, or employees, or the

spouse, child, stepchild, parent, stepparent, or business

associate of any of the above.

4\. Notwithstanding the above, it is reasonable to expect that a

nonprofit sponsor, like any housing developer, is entitled to a

fee which covers costs. This fee should include overhead and

staffing related to the project. Some fluctuation in the

developer\'s fee is to be expected, however, as a general rule it

is not anticipated that a nonprofit should realize more than a

six to 10 percent rate of return on HUD properties purchased at

the 30 percent discount, except where a higher rate is otherwise

authorized by another HUD program.

NOTE: Attachment 5 is a sample Land Use Restriction Addendum which

may be added to certain sales contracts executed with

nonprofits and government agencies at the option of the Field

Office. It is designed to limit profit according to the above

and to ensure that the appropriate targeted population

ultimately benefits. It is not required, or recommended, for

application in all sales to nonprofits and government agencies,

but should be used when the Director of Housing Management, in

consultation with Field Counsel, has reason to believe it

appropriate. If resale restrictions do not survive HUD\'s

closing in your State, Field Counsel may wish to consider

placing the addendum in a separate contract to be signed at the

closing.

L. Other Key Features

1\. Program Monitoring/Remedies for Abuse

a\. Investor Buyers. SAMS has been modified to record the

Social Security Number (SSN) of individual buyers so that

investors may not represent themselves as owner-occupants

with impunity. This number is already being collected on

the Form HUD 9548, Sales Contract, approved by OMB for use

through September 30, 1995. Chief Property Officers must

now ensure that it is entered on the Sales Contract and then

into SAMS on the Sales Offer Accepted screen (CM-DS-OA).

SAMS II will allow the user to compare the SSN of a buyer

with all previous buyers in a given period within a Field

Office jurisdiction.

When a Field Office learns of alleged falsification of the

sales documents, it should refer the matter to the Inspector

General for possible investigation. Consideration should

also be given, in consultation with local HUD counsel, to a

Limited Denial of Participation.

b\. Nonprofit/Government Agency Buyer. When a Field Office

identifies a program abuse by a buyer in this category, it

should consider one or a combination of the following:

application of the Land Use Restriction Addendum (Attachment

5\) to any future sales contracts; in consultation with local

HUD counsel, a Limited Denial of Participation; and referral

of the matter to the Inspector General for further

investigation.

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Written notice of any potential adverse action must be given

to the buyer, clearly stating HUD\'s reasons, and the buyer

must be afforded an opportunity to respond in writing before

any further action is taken. HUD may also limit the number

of properties held for a purchaser, based upon the

purchaser\'s financial capacity as determined by HUD, and

upon past performance in HUD programs.

2\. Advertising and Outreach

Letters explaining these changes to the SFPD Sales Program should

be sent to all brokers and participating nonprofits and

government agencies by each Field Office within 30 days of

receiving this Notice. Where feasible, outreach sessions should

also be offered in order to answer questions and provide

technical assistance to program users needing it.

3\. Agency Reporting

Nonprofits which have purchased in the SFPD Sales Program at the

30 percent discount level should be asked to submit a letter to

the Director of Housing Management by December 31, 1994, and

annually thereafter, giving basic information about their program

accomplishments over the past year.

Contents of this letter should include the number of properties

acquired from HUD at the 30 percent discount during the previous

Fiscal Year, and, for each property resold in that period, by

address, its acquisition cost, rehabilitation cost, and resale

price. In addition, the letter should contain an overview of

other program costs, including any developer\'s fee applied, and

certify that resale buyers were at or below 115 percent of median

income for their area when adjusted for family size. The letter

must be signed by the Executive Director of the nonprofit, or the

staff person with chief operating responsibilities.

If this report is not received within 30 days of its due date,

the agency should be denied further participation in the deep

discount program until it is received, and found acceptable to

HUD.

Participating units of government should also provide this letter

unless its contents would duplicate information already collected

by other HUD program submissions. Nonprofits submitting this

information under requirements of another HUD program need not

duplicate their efforts either. For example, HOPE 3 grant

recipients, which are required to submit Annual Performance

Reports to CPD, will not also be required to submit an annual

letter to the Director of Housing Management.

4\. Direct Sales to HUD Tenants

HUD tenants in occupancy, except former mortgagors, will be

offered the right of first refusal to purchase, at current full

market value, provided there is a recognized ability to acquire

financing, a good rent paying history exists, and a request has

been made to HUD to be offered the right of first refusal. This

right of first refusal applies to properties in both

revitalization and non-revitalization areas. An inspection must

be made to determine the appropriate market approach and current

fair market value. The tenant then would be given the

opportunity to submit a sales contract under a non-competitive

bidding period. The Field Office may elect to pay the financing

and/or closing costs on the same basis as for other purchasers.

A selling broker would not be involved; therefore, a sales

commission will not be indicated on the contract.

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5\. Leases to Homeless Providers

Please refer to Housing Notice 94-43 issued June 14, 1994, for

complete details on this procedure and a listing of Field Offices

mandated to continue offering properties for lease on a priority

basis based on their inventory as of October 1. For all other

Field Offices, properties may not be made available for lease to

a homeless provider until they have been marketed for 30 days.

M. Other Regulatory Changes

1\. Granting of First Extension to Closing Time at No Charge to

Owner-Occupant Buyer Where the Delay is Not the Buyer\'s Fault.

Since experience has shown that extensions are often necessary,

through no fault of the purchaser, the initial 15-day extension

shall be provided at no cost to owner-occupant purchasers where

documentation indicates that (a) proper and timely loan

application was made, (b) the delay is not the buyer\'s fault, and

\(c\) mortgage approval is imminent. Further, extensions shall be

granted at no cost, at any time and to any purchaser, where the

delay is the fault of HUD or a direct endorsement lender. On

Section 203(k) transactions, an initial extension of 30 days may

be granted at no cost provided the above conditions have been

met.

2\. Removal of the Six Percent Cap on Closing and Financing Costs

HUD Will Pay.

This regulatory modification was done to accommodate possible

needed future programmatic changes. No change is intended to the

maximum percentages which may now be paid, i.e., five percent

under normal market conditions and, for proven hard to sell

properties, up to six percent. Any future change to these

maximum percentages will be announced by a notice or handbook

change.

3\. Competitive Sales Procedure

Properties are sold to the general public on a competitive bid

basis through local real estate brokers except where direct sales

procedures are appropriate to governmental entities, nonprofits,

displaced persons, and HUD tenants in occupancy. If a property

fails to generate an acceptable offer during the bidding period,

it will remain on the market for an extended listing period. If

it remains unsold and its price or terms are changed, the

property will be subject to another competitive bidding period.

4\. Direct Sales to Other Individuals or Entities

A direct sale may be made to an individual or entity that does

not meet any of the categories mentioned in 3. above if a finding

is made in writing by the Assistant Secretary for Housing-Federal

Housing Commissioner, or his or her designee, that such a

sale would further the goals of the National Housing Act and be

in the best interests of the Secretary.

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5\. Earnest Money Deposits

a\. The deposit required for a property priced at \$50,000 or

less is \$500. For a property priced over \$50,000, the

deposit required shall be set by Field Office staff taking

into consideration comparable practice in the area, local

housing market conditions, and the ability of typical buyers

to secure financing. It shall be no less than \$500 and no

more than \$2,000. On vacant lots, the deposit is 50 percent

of the list price.

b\. In the case of an uninsured sale, 100 percent of the earnest

money deposit tendered by an owner-occupant purchaser will

be returned where the purchaser was pre-approved for

mortgage financing in an appropriate amount by a recognized

mortgage lender and, despite good faith efforts, is unable

to obtain mortgage financing. Such situations most commonly

will arise where, even though the purchaser has been

pre-approved for a loan, the lender will not approve a

mortgage on the particular property being purchased. Where

an owner-occupant purchaser has not been pre-approved and

despite good faith efforts cannot obtain mortgage financing,

50 percent of the earnest money deposit will be returned.

For purposes of implementing this change, \"pre-approved\"

means a commitment has been obtained from a recognized

mortgage lender for mortgage financing in a specified dollar

amount sufficient to purchase the property.

c\. If the buyer is a nonprofit or government agency, they

should be cautioned not to enter into sales contracts unless

acquisition financing is \"in hand\", or there is a reasonable

expectation that it will become available within the 60 day

closing timeframe. If HUD experiences repeated delays in

scheduled closings with an agency, Field Office staff should

require an earnest money deposit of \$500 on future

transactions. The deposit shall be subject to forfeiture on

the same basis as other sales which fail to close within the

contract timeframe, including approved extensions.

6\. Conveyance of Occupied Properties in Those Instances Where it is

in HUD\'s Best Interest Due to Excessive Eviction or Relocation

Expenses Required by local Law

Although infrequent, there are instances where excessive eviction

and/or relocation expenses must be paid by mortgagees and

reimbursed by the Department in the claim for insurance benefits.

In the interest of cost effectiveness, where a State or local law

requires the payment of high eviction costs or excessive

relocation expenses as part of the eviction process, Field

Offices will determine whether to accept a property occupied,

without requiring that all other eligibility criteria, except for

habitability, be met by the remaining occupants, rather than

incur the excessive costs that would be generated by an eviction.

Any questions regarding this Notice may be directed to the Single

Family Property Disposition Division at (202) 708-0740 or 708-1832.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Assistant Secretary for Housing

\- Federal Housing commissioner

Attachments

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ATTACHMENT 1

PREQUALIFICATION STANDARDS FOR NONPROFITS TO

PARTICIPATE IN THE SFPD DISCOUNT SALES PROGRAM

Field Office Housing staff is responsible for pre-qualifying nonprofit

organizations to participate in the SFPD discount sales program, unless

Field Office CPD staff agrees to accept this responsibility, or unless
they

have been previously qualified by participation in another HUD program.
To

participate, a nonprofit must meet the following standards:

1 Provide a list of all Board members, including names and titles;

2\. Provide evidence of the IRS ruling granting tax exempt status under

501(c) of the Internal Revenue Code of 1986, as amended;

3\. Provide a certification signed by an authorized representative of
the

organization in the following format that the organization has a

voluntary Board of Directors:

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Recommended form of certification:

(Name of Organization) certifies that the members of its Board of

Directors serve in a voluntary capacity and receive no compensation,

other than reimbursement for expenses, for their services and the

nonprofit organization operates in a manner so that no part of its

net earnings inures to the benefit of any individual, corporation,

or other entity.

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Print authorized representative\'s name

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Signature

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Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title

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4\. Provide evidence of the administrative capability of the applicant
to

develop and carry out the proposed homeownership program in a

reasonable time and a successful manner. Include in this discussion

the past experience of the applicant, if any, in acquisition,

rehabilitation, counseling and training, and/or managing homeownership

program or other affordable housing programs. /1

5\. Provide evidence of the capability of the applicant to handle

financial resources, including any prior relevant financial management

experience.

6\. Describe any unresolved serious problems, or any outstanding audit

findings, involving the applicant and describe how these problems are

being resolved.

7\. If possible, submit the auditor\'s summary of a certified
independent

audit report covering the applicant\'s activities prepared within the

last two years. If none is available, provide a certification of

adequacy of the applicant\'s internal management controls from an

independent certified public account who has examined the current

internal management controls, or is establishing those systems for a

new entity.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1 Participating nonprofit organizations should be able to demonstrate

prior experience as a lower income housing provider within the past

two years. For the purpose of this program, minimum prior experience

is defined as the acquisition, rehabilitation, and resale of five

single family properties during that period. Organizations lacking

this experience will be restricted to buying 10 properties, and have

to complete rehabilitation and resale of five, prior to purchasing

additional HUD-owned properties at a discount.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ATTACHMENT 2

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SINGLE FAMILY PROPERTY DISPOSITION PROCESSING FLOW CHART

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\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

TENANTS IN OCCUPANCY

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

o RIGHT OF FIRST REFUSAL WHERE QUALIFIED AND REQUEST MADE

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

HOMELESS PROVIDERS

o APPLICABLE IF FIELD OFFICE HAS \<200 ACQUIRED PROPERTIES

o LEASE ONLY

o PRE-DESIGNATED AREAS

o IS CALENDAR DAYS FROM MAILING OF LIST TO SUBMIT SIGNED LEASE

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

INSURED SALES UNINSURED SALES

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

OWNER OCCUPANTS, (INCLUDES NONPROFITS AND

NONPROFITS/GOVERNMENT AGENCIES) GOVERNMENT AGENCIES

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

o 10-30 DAY PERIOD, FIELD OFFICE o 30% DISCOUNT IN

OPTION REVITALIZATION AREAS

o FIRST 10 DAYS COMPETITIVE BID PERIOD; o 10% DISCOUNT IN ALL

BALANCE, IF ANY, EXTENDED LISTING OTHER AREAS (15% IF 5

o FAIR MARKET VALUE OR MORE PROPERTIES

o HIGHEST NET BID WITHOUT ANY DISCOUNT PURCHASED AND CLOSED

BEING CONSIDERED SIMULTANEOUSLY)

o DISCOUNTS (ONLY TO NONPROFITS/GOVT o PURCHASE ONLY-NO LEASE

AGENCIES; PROVIDED AT CLOSING; o 5 CALENDAR DAYS TO

APPLICABLE TO ALL INSURED INDICATE PRELIMINARY

SALES REGARDLESS OF LOCATION): INTEREST (PLUS 5 DAYS

o 10% (15% IF 5 OR MORE PURCHASED IF LISTING IS MAILED)

AND CLOSED SIMULTANEOUSLY) o 10 CALENDAR DAYS TO

INDICATE FIRM INTEREST

o 5 CALENDAR DAYS TO

SUBMIT SIGNED SALES

CONTRACT

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\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

INDIVIDUAL OWNER

OCCUPANTS

o 10-30 DAY PERIOD

(FIELD OFFICE OPTION)

o FIRST 10 DAYS

COMPETITIVE BID

PERIOD; BALANCE, IF

ANY, EXTENDED LISTING

o AT FIELD OFFICE

OPTION, THIS STEP MAY

BE OMITTED AND

PROPERTIES LISTED TO

GENERAL PUBLIC, IF

THIS OPTION IS TAKEN,

AND AFTER BEING FIRST

OFFERED TO NONPROFITS

AND GOVERNMENT

AGENCIES, PROPERTIES

IN THIS CATEGORY MUST

THEN BE LISTED FOR A

10 DAY COMPETITIVE BID

PERIOD DURING WHICH

BIDS FROM INVESTORS

MAY NOT BE CONSIDERED

IF ACCEPTABLE BID

RECEIVED FROM

INDIVIDUAL OWNER

OCCUPANT

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

GENERAL PUBLIC

o FAIR MARKET VALUE

o INSURED SALES: EXTENDED LISTING OR 10 DAY COMPETITIVE BID PERIOD,

AT FIELD OFFICE OPTION

o UNINSURED SALES AND INSURED SALES IF PRICE/TERMS ARE CHANGED:

10 DAY COMPETITIVE BID PERIOD

o ELIGIBLE BUYERS: OWNER-OCCUPANTS, INCLUDING GOVERNMENT AGENCIES

AND NONPROFITS, AND INVESTORS

o HIGHEST NET BID WITHOUT DISCOUNT BEING CONSIDERED

o APPLICABLE DISCOUNTS (ONLY TO NONPROFITS AND GOVERNMENT AGENCIES;

PAYABLE AT CLOSING):

o REVITALIZATION AREA:

o UNINSURED SALE: 30%

o INSURED SALE: 10% (15% IF 5 OR MORE PROPERTIES PURCHASED

AND CLOSED SIMULTANEOUSLY)

o NONREVITALIZATION AREA:

o ALL PROPERTIES: 10% (15% IF 5 OR MORE PROPERTIES PURCHASED

AND CLOSED SIMULTANEOUSLY)

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\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ATTACHMENT 3

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LISTING OF NEEDED REPAIRS AND ESTIMATED COSTS /1

FHA Case Number:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Street Address: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City and State: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Repairs needed to meet the \"intent\" of the Minimum Property Standards

(MPS). \"Intent\" is defined as: based upon a visual inspection, the

property is structurally sound, free of roof leaks, and has operable

mechanical systems:

CATEGORY ESTIMATED COST

\_\_\_\_\_\_\_\_\_\_\_

Structural \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Roof \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Plumbing \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Electrical \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Heating \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Air Conditioning \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Subtotal Estimated Costs: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Total Estimated Costs: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1

If a more detailed listing of MPS repair items is needed, it may

be helpful to utilize a work write-up (Specification repairs).

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ATTACHMENT 4

SELLER FINANCING: PURCHASE MONEY MORTGAGES

In the future, HUD may offer seller financing (Purchase Money Mortgages
or

\"PMMs\") to qualified affordable homeownership providers with a five
year

term at 85 percent of the purchase price with principal and interest

calculated on a 30 year basis. Underwriting will be done by Mortgage

Credit Analysts in the Field Office. The interest rate will be the

\"Freddie Mac\" five year balloon rate which is provided to all Field
Offices

via telegram each Monday.

a\. Nonprofits and government agencies wishing to participate in this

portion of the sales program must meet normal FHA mortgage credit

underwriting standards.

b\. PMMs are due upon resale of the property and are not assumable at

resale of a property.

c\. HUD\'s PMMs may be subordinate to a rehabilitation loan.

d\. A maximum of 5,000 PMMs may be closed nationwide in a given Fiscal

Year.

e\. Procedures for processing, underwriting, closing, and servicing PMMs

are provided in the exhibits which accompany this Attachment. Exhibit

2 is a model of the legal instruments which should be reviewed by

local counsel in preparation of drawing these instruments for the

Field Office jurisdiction. Exhibit 3 is a model of the subordination

agreement, again for review by local counsel in preparation of this

instrument for local use.

f\. See Attachment 6 for specific instructions related to SAMS.

(PMM 1)

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EXHIBIT 1 TO

ATTACHMENT 4

PROCESSING, UNDERWRITING, CLOSING, SERVICING AND

SUBORDINATING OF PURCHASE MONEY MORTGAGES (PMMS)

PROCESSING AND UNDERWRITING PMMs

1\. Applications are to be attached to the Sales Contract

An application for a PMM will be attached to the sales contract (form

HUD-9543) when the nonprofit organization or government agency submits

the sales contract to the local Field Office. The documents to be

included in the application will depend on if the entity purchasing

the property and applying for a PMM is a nonprofit organization or a

government agency. The application criteria below must be met:

a\. Nonprofit organizations must attach the following documents to

the sales contract: (1) balance sheets and statements of income

and expenses for each of the most current three years of

operation, or if the nonprofit has not been in existence for

three years, these financial statements shall be for each year

since formation of the nonprofit organization; and (2) evidence,

as required by this notice, that verify that the nonprofit

organization meets the requirements set forth in the Section III,

Eligible Participants, of this notice.

Format of Financial Statements - Statements need not be audited

or in a specified format. However, statements must, at a

minimum, provide the information contained in form HUD-92417 to

enable Mortgage Credit to make a determination of the nonprofit\'s

current and past financial condition and must contain, on the

face of the financial statements, the certification which appears

in paragraph 4-5d(3) of HUD Handbook 4571.1, REV-2.

b\. Government Agencies must attach the following documentation to

the sales contract: (1) the agency must provide evidence from

its legal counsel that it has the legal authority and capacity to

become the mortgagor and that the state or local government is

not in bankruptcy, and (2) there is no legal prohibition that

would prevent HUD from obtaining a deficiency judgment (if

permitted by state law for other types of mortgages) in the event

of foreclosure or deed-in-lieu of foreclosure.

Items (b)(1) and (2) are the application. Once the Chief

Property Officer (CPO) has determined that this documentation is

sufficient to meet the above requirements; then, the application

can be approved and the sales transaction can proceed to closing.

2\. Nonprofit\'s Applications are submitted to Mortgage Credit for

Underwriting.

After ratifying the sales contract, the CPO will send the application

to the Chief of Mortgage Credit. The application will be underwritten

and a recommendation issued to the CPO as to rejecting or approving

the application. If approved, the CPO will notify the purchaser that

the application has been approved and the sales transaction will

proceed to closing. If the application is rejected, the purchaser can

terminate the contract or pursue other financial means to close the

sales transaction within the remaining time allowed by the sales

contract. The CPO may issue extensions (per extension policy) at

his/her discretion.

PAGE 1 OF 5

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EXHIBIT 1 TO

ATTACHMENT 4

a\. Prerequisite to the Mortgage Credit Analysis - Prior to

performing the mortgage credit analysis, Mortgage Credit will

determine if the nonprofit organization meets the requirements of

Section III, Eligible Participants, of this notice. Once these

requirements are met, Mortgage Credit will begin a full

evaluation of the nonprofit organization.

b\. Mortgage Credit Analysis - Applications will be generally

underwritten following the mortgage credit procedures and

analyses as set forth in HUD Handbook 4470.1, REV-2.

c\. Credit Investigation - The nonprofit organization will be subject

to a credit investigation that will be conducted by Mortgage

Credit and will include the ordering of factual data and/or

commercial credit reports on the nonprofit to determine basic

acceptability of its credit reputation and previous experience.

The investigation shall also include checking within the various

components of the Field Office and with other HUD Field Offices

in whose jurisdiction(s) the nonprofit has done or is doing

business.

Note: The cost of the credit investigation is chargeable to the

purchaser. It is payable at closing or is deductible from the

earnest money deposit if the sales contract is not consummated or

the purchasers are rejected respective to a PMM mortgage credit

analysis.

d\. Analysis of Financial Data - Financial statement analyses are

completed with the objective of determining:

\(1\) the nonprofit\'s financial history and capacity to carry the

rehabilitation of the property through to completion and the

property\'s final disposition (e.g., sale to a lower income

homeowner). Mortgage Credit will analyze the financial

statements for the most current three years of operations to

establish trends in current assets and liabilities, working

capital, fixed assets, long-term liabilities, net income,

and current ratios (current assets divided by current

liabilities) and will record these determinations on a

financial statement analysis work sheet;

\(2\) the nonprofit\'s ability to provide the capital necessary for

the earnest money deposit and the closing and other costs

related to the sales transaction; and

\(3\) the nonprofit\'s ability to provide the necessary funds to

meet the rehabilitation costs and carrying costs (e.g., PMM

principal and interest payments during the rehabilitation,

taxes, hazard insurance) that occur during the term of the

PMM.

Note: Multiple Applications - Where nonprofit\'s submit

multiple PMM applications, Mortgage Credit will evaluate

their financial capacity to provide the minimum capital set

forth in (2) and (3) above. For example, Mortgage Credit

must determine that the nonprofit\'s ability to put up

capital for each purchase (e.g. \$5,000) or five purchases

(e.g., \$25,000).

CLOSING PMMs

1\. Property Disposition (PD) will send the Sales Transaction to its

Closing Agent - HUD\'s contract closing agent will be responsible for

the sales closing of properties sold with PMMs. The only closing

expense incurred by the HUD will be the closing agent\'s fee. Any

other closing costs are the responsibility of the purchasers.

PAGE 2 OF 5

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EXHIBIT 1 TO

ATTACHMENT 4

2\. Closing Agent to Prepare the PMM and Note - In addition to the

preparation of the special warranty deed, HUD\'s closing agent will be

required to prepare and file for recordation the deed of trust or

mortgage and note documents on the sale of PMMs.

To assist the closing agent in the preparation of these documents, the

Field Office should provide the closing agent with the locally drafted

deed of trust or mortgage and note and with all pertinent sales

information. The closing agent will establish the mortgagor\'s monthly

mortgage payments based on the information provided. The first

mortgage payment will be due on the first day of the month following

sales closing. A model of the Purchase Money Mortgage or Deed of

Trust is set forth in Exhibit 1. The provisions incorporated in

Exhibit 1 should appear in the locally drafted deed of trust or

mortgage and note.

3\. Prepaids at Closing - At the time of closing, the purchasers will be

required to establish an escrow account consisting of prepaid taxes.

Prepaid taxes should be entered on Lines 1003-1004 (Borrower\'s column)

of the form HUD-1.

No prepaid interest is required on this type of sale at closing.

Instead, the prepaid interest will be included in the first billing

statement sent by HUD to the purchasers. The closing agent should

forward the check for the prepaid taxes along with the closing package

to the PD. PD will then be required to provide the LM Branch with the

documents set forth in the section on servicing below.

4\. Hazard Insurance - HUD does not escrow for the payment of the hazard

insurance premiums each year, the purchaser will be required to

present at least a binder (if not the policy) to the closing agent at

the time of closing. HUD must be named the insured, co-insured or

beneficiary. Failure to provide this documentation may delay the

sales closing. The purchaser will be required to provide evidence of

hazard insurance, on an annual basis, until the PMM is paid in full.

5\. Monthly Billing Statements - The closing agent should notify the

purchasers that a monthly billing statement will be issued. The

billing statement will reflect the monthly principal and interest

payment, real estate tax escrow, and other amounts (delinquent

interest, advances, etc.). Any prepaid interest not collected at

closing will be reflected in the first billing.

SERVICING PMMs

1\. After the PMM is Closed

After the closing agent has closed the sales transaction and Property

Disposition (PD) has received the documents from the closing agent,

PD will send Loan Management (LM) sufficient information (e.g., the

mortgage note, a copy of the mortgage or deed of trust, copy of the

sales contract, settlement statement, etc.) to enter the PMM into the

Single Family Mortgage Notes System (SFMNS). When the mortgage or

deed of trust is received, it will be sent to LM.

PD will also deliver a check for the prepaid real estate taxes to LM,

who will put the system account number on the check and send it,

along with a Form 2022, Schedule of Collections, to the lock box in

Atlanta, Georgia. The schedule of collections is to note that the

check represents a prepayment of taxes. Do not deposit this check to

the SAMS lockbox.

Note: These borrowers are investors and are not eligible for any

type of assignment assistance.

PAGE 3 OF 5

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EXHIBIT 1 TO

ATTACHMENT 4

2\. Setting up the PMM account in the SFMNS

Once LM receives the following information from PD, LM can setup the

PMM account into the SFMNS (See PMM Account Setup Instructions below):

PMM Account Requirements

I. Interest Rate

II\. Mortgage Data

A. Term of the Mortgage (In Months)

B. Mortgage Beginning Date

C. Mortgage Expiration Date

III\. Original Mortgage Amount

IV\. Monthly Principal and Interest Payments

V. Property Address

VI\. Mortgagor Information

A. Organization\'s Name

B. Organization\'s Mailing Address

C. Contact Person

1\. Work Telephone Number

2\. Home Telephone Number

D. Organization\'s Federal Income Tax ID Number

VII\. Property Tax Information

A. Tax Payee Name

B. Property Tax ID Number

C. Tax Amount

D. Tax Due Date

E. Legal Description (if available)

PMM ACCOUNT SETUP INSTRUCTIONS

I. Access the QLNA Screen and Enter the following data:

SHORT NAME (Always enter the last name first then as much of the

first name, up to 15 characters. DO NOT USE COMMAS.)

A. Amounts:

1\. ORIG - Original Mortgage Amount

2 P & I- Principal and Interest Amount

3\. ESC1 - Monthly Escrow Payment Amount

B. Legal Description (if available)

C. Miscellaneous:

1\. INTR - Interest Rate

2\. ASGN - Servicing Office

3\. ORIG - Originating Office

4\. TERM - Enter if less than 360 payments (the system

assumes 360)

5\. PROP - Region

6\. SER CD - Servicer Code

D. ORIG LOAN - Original Loan Date

F. FHA Case Number - Sell-explanatory

PAGE 4 OF 5

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EXHIBIT 1 TO

ATTACHMENT 4

II\. Complete the MNAM Screen using the PO and MO Screens or the

PO/MO/PS Screens as appropriate.

III\. Loan Screen One (LNS1) - LN TYPE-11

IV\. Loan Screen Two (LNS2)

A. Enter Extra Code 48

B. Enter 000 (no service charge) in the Service Charge Option

Field

V. MESC Screen-ANALYSIS - Enter \"L\"

VI\. ERET Screen

A. PARCEL NUMBER - Enter the Property Parcel Number

B. AMOUNT LAST PAID - Enter the amount of the taxes last paid

C. DATE LAST PAID - Enter the date the taxes were last paid as

follows: JAN 31, 1993

VII\. MONT Screen - Enter a reminder trailer to appear 3 months prior

to the expiration of the PMM\'s term. When the reminder trailer

appears on the monitoring report (246 Report), the Field Office

must notify in writing the borrower that the note is due and

payable in full by the end of the PMM\'s term.

3\. Handling and Protecting the PMM and Note - PD will deliver to LM the

PMM and note. LM must handle and protect the PMM and note in

accordance with HUD Handbook 1911.1, REV-4, Handling

and Protecting Cash and Other Negotiable Instruments.

SUBORDINATION OF PMMs

1\. Subordination of PMMs - Borrowers can request that HUD subordinate
its

PMM. HUD will allow the subordination of a PMM to a new first

mortgage where the proceeds are to rehabilitate the property. The

combined indebtedness of the new mortgage and the PMM cannot exceed

the value of the property on the date that the new mortgage is

executed. The appraisal used to establish this value is the appraisal

used by the lender to establish the new first mortgage. Borrowers

will be responsible for making payments under the new first mortgage

and the PMM that is subordinate to a second lien. PMMs cannot be more

than a second lien.

2\. Execution and Recordation of the Subordination Documents -
Borrowers,

who request subordination of the PMM, must send their request to LM.

Upon LM\'s agreement with the request, LM will have prepared a

subordination agreement to allow the PMM to be subordinated to the

new first mortgage. The borrowers will be responsible for the costs

associated with the preparation and recordation of these documents. A

model of the subordination instructions and agreement are in Exhibit

2\.

NOTE: HUD has been advised by its Counsel that since HUD will be
providing

PMMs on sales, HUD must comply with the Real Estate Settlement

Procedures Act (RESPA) and Regulation Z, Truth-in-Lending. HUD

Field Offices can procure the respective documents from HUD

Headquarters when PMMs are made available for usage with the

Modified Sales Procedures.

PAGE 5 OF 5

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EXHIBIT 2 TO

ATTACHMENT 4

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MODEL MORTGAGE FORM

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Space Above This Line for
Recording Data \_\_\_\_\_\_\_\_\_\_\_

State of /1

M O R T G A G E /2

THIS MORTGAGE (\"Security Instrument\") is given on , 19 . The

Mortgagor is

, whose address is

(\"Borrower\"). This Security Instrument is given to the Secretary of

Housing and Urban Development of and whose address is

(\"Lender\"). Borrower owes Lender the principal sum

of Dollars (U.S. \$ ). This debt is evidenced by Borrower\'s

note dated the same date as this Security Instrument (\"Note\"), which

provides for monthly payments, with the full debt, if not paid earlier,
due

and payable on

This Security Instrument secures to Lender: (a) the repayment

of the debt evidenced by the Note, with interest, and all renewals,

extensions and modifications; (b) the payment of all other sums, with

interest, advanced under paragraph 6 to protect the security of this

Security Instrument; and (c) the performance of Borrower\'s covenants
and

agreements under this Security Instrument and the Note. For this
purpose,

Borrower does hereby mortgage, grant and convey to the Lender /3, the

following described property located in County /4:

which has the address of Street

City , State Zip Code ,

(\"Property Address\");

TOGETHER WITH /5 all the improvements now or hereafter erected on the

property, and all easements, rights, appurtenances, rents, royalties,

mineral, oil and gas rights and profits, water rights and stock and all

fixtures now or hereafter a part of the property. All replacements and

additions shall also be covered by this Security Instrument. All of the

foregoing is referred to in this Security Instrument as the
\"Property.\"

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 1 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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Borrower warrants and will defend generally the title to the Property

against all claims and demands, subject to any encumbrances or record.

UNIFORM COVENANTS. (Optional.)

1\. Payment of Principal, Interest and Late Charge. Borrower shall

pay when due the principal of, and interest on, the debt evidenced by
the

Note and late charges due under the Note.

2\. Monthly Payments of Taxes, Insurance and Other Charges. Borrower

shall include in each monthly payment, together with the principal and

interest as set forth in the Note and any late charges, an installment
of

any (a) taxes and special assessments levied or to be levied against the

Property, (b) leasehold payments or ground rents on the Property, and
(c)

premiums for insurance required by Paragraph 4.

Each monthly installment for items (a), (b) and (c) shall equal

one-twelfth of the annual amounts, as reasonably estimated by Lender,
plus

an amount sufficient to maintain an additional balance of not more than

one-sixth of the estimated amounts. The full annual amount for each item

shall be accumulated by Lender within a period ending one month before
an

item would become delinquent. Lender shall hold the amounts collected in

trust-to-pay items (a), (b) and (c) before they become delinquent.

If at any time the total of the payments held by Lender for items (a),

\(b\) and (c), together with the future monthly payments for such items

payable to Lender prior to the due dates of such items, exceeds by more

than one-sixth the estimated amount of payments required to pay such
items

when due, and if payments on the Note are current, then Lender shall
either

refund the excess over one-sixth of the estimated payments or credit the

excess over one-sixth of the estimated payments to subsequent payments
by

Borrower, at the option of Borrower. If the total of the payments made
by

Borrower for item (a), (b), or (c) is insufficient to pay the item when

due, then Borrower, shall pay to Lender any amount necessary to make up
the

deficiency on or before the date the item becomes due.

As used in this Security Instrument, \"Secretary\" and \"Lender\" means

the Secretary of Housing and Urban Development or his or her designee.

If Borrower tenders to Lender the full payment of all sums secured by

this Security Instrument, Borrower\'s account shall be credited with the

balance remaining for all installments for items (a), (b) and (c),

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 2 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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and Lenders shall promptly refund any excess funds to Borrower.

Immediately prior to a foreclosure sale of the Property or its
acquisition

by Lender, Borrower\'s account shall be credited with any balance
remaining

for all installments for items (a), (b) and (c).

3\. Application of Payments. All payments under paragraphs 1 and 2

shall be applied by Lender as follows:

First, to any taxes, special assessments, leasehold payments or ground

rents, and fire, flood and other hazard insurance premiums, as required;

Second, to interest due under the Note;

Third, to amortization of the principal of the Note;

Fourth, to late charges due under the Note.

4\. Fire, Flood and Other Hazard Insurance. Borrower shall insure all

improvements on the Property, whether now in existence or subsequently

erected, against any hazard, casualties, and contingencies, including
fire,

for which Lender requires insurance. This insurance shall be maintained
in

the amounts and for the periods that Lender requires. Borrower shall
also

insure all improvements on the Property, whether now in existence or

subsequently erected, against loss by floods to the extent required by
the

Secretary. All insurance shall be carried with companies approved by

Lender. The insurance policies and any renewals shall be held by Lender

and shall include loss payable clauses in favor of, and in a form

acceptable to, Lender.

In the event of loss, Borrower shall give Lender immediate notice by

mail. Lender may make proof of loss if not made promptly by Borrower.

Each insurance company concerned is hereby authorized and directed to
make

payment for such loss directly to Lender, instead of Borrower and to
Lender

jointly. All or any part of the insurance proceeds may be applied by

Lender, at its option, either (a) to the reduction of the indebtedness

under the Note and this Security Instrument, first to any delinquent

amounts applied in the order in Paragraph 3, and then to prepayment of

principal, or (b) to the restoration or repair of the damaged property.

Any application of the proceeds to the principal shall not extend or

postpone the due date of the monthly payments which are referred to in

Paragraph 2, or change the amount of such payments. Any excess insurance

proceeds over an amount required to pay all outstanding indebtedness
under

the Note and this Security Instrument shall be paid to the entity
legally

entitled thereto.

In the event of foreclosure of this Security Instrument or other

transfer of title to the Property that extinguishes the indebtedness,
all

right, title and interest of Borrower in and to insurance policies in
force

shall pass to the purchaser.

5\. Preservation, Maintenance and Protection of the Property;

Borrower\'s Loan Application; Leaseholds.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 3 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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Borrower shall not commit waste or destroy, damage or substantially
change

the Property or allow the Property to deteriorate, reasonable wear and
tear

excepted. Lender may inspect the Property if the Property is vacant or

abandoned or the loan is in default. Lender may take reasonable action
to

protect and preserve such vacant or abandoned Property. Borrower shall

also be in default if Borrower, during the loan application process,
gave

materially false or inaccurate information or statements to Lender (or

failed to provide Lender with any material information) in connection
with

the loan evidenced by the Note. If this Security Instrument is on a

leasehold, Borrower shall comply with the provisions of the lease. If

Borrower acquires fee title to the Property, the leasehold and fee title

shall not be merged unless Lender agrees to the merger in writing.

6\. Charges to Borrower and Protection of Lender\'s Rights in the

Property. Borrower shall pay all governmental or municipal charges,
fines

and impositions that are not included in Paragraph 2. Borrower shall pay

these obligations on time directly to the entity which is owed the
payment.

If failure to pay would adversely affect Lender\'s interest in the
Property,

upon Lender\'s request Borrower shall promptly furnish to Lender
receipts

evidencing these payments.

If Borrower fails to make these payments or the payments required by

Paragraph 2, or fails to perform any other covenants and agreements

contained in this Security Instrument, or there is a legal proceeding
that

may significantly affect Lender\'s rights in the Property (such as a

proceeding in bankruptcy, for condemnation or to enforce laws or

regulations), then Lender may do and pay whatever is necessary to
protect

the value of the Property and Lender\'s rights in the Property,
including

payment of taxes, hazard insurance and other items mentioned in
Paragraph

2\.

Any amounts disbursed by Lender under this Paragraph shall become an

additional debt of Borrower and be secured by this Security Instrument.

These amounts shall bear interest from the date of disbursement at the
Note

rate, and at the option of Lender shall be immediately due and payable.

7\. Condemnation. The proceeds of any award or claim for damages,

direct or consequential, in connection with any condemnation or other

taking of any part of the Property, or for conveyance in place of

condemnation, are hereby assigned and shall be paid to Lender to the
extent

of the full amount of the indebtedness that remains unpaid under the
Note

and this Security Instrument. Lender shall apply such proceeds to the

reduction of the indebtedness under the Note and this Security
Instrument,

first to any delinquent amounts applied in the order provided in
Paragraph

3, and then to prepayment of principal. Any application of the proceeds

to the principal shall not extend or postpone the due date of the
monthly

payments, which are referred to in Paragraph 2, or change the amount of

such payments. Any excess proceeds over an amount required to pay all

outstanding indebtedness under the Note shall be paid to the entity
legally

entitled thereto.

8\. Fees. Lender may collect reasonable fees and charges.

9\. Grounds for Acceleration of Debt.

\(a\) Default. Lender may require immediate payment in full of

all sums secured by this Security Instrument if:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 4 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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\(i\) Borrower defaults by failing to pay in full any monthly

payment required by this Security Instrument prior to or on

the due date of the next monthly payment, or

\(ii\) Borrower defaults by failing, for a period of thirty

days, to perform any other obligations contained in this

Security Instrument.

\(b\) Sale Without Credit Approval. Lender shall, if permitted by

applicable law, require immediate payment in full of all sums

secured by this Security Instrument if:

\(i\) All or part of the Property, or a beneficial interest

in a trust owning all or part of the Property, is sold or

otherwise transferred (other than by devise or

descent) by the Borrower, and

\(ii\) The Property is not occupied by the purchaser or

grantee as his or her principal residence, or the purchaser

or grantee does so occupy the Property, but his or her

credit has not been approved in accordance with the

requirements of the Secretary.

\(c\) No Waiver. If circumstances occur that would permit Lender

to require immediate payment in full, but Lender does not require

such payments, Lender does not waive its rights with respect to

subsequent events.

10\. Reinstatement. Borrower has a right to be reinstated if Lender

has required immediate payment in full because of Borrower\'s failure to
pay

an amount due under the Note or this Security Instrument. This right

applies even after foreclosure proceedings are instituted. To reinstate

the Security Instrument, Borrower shall tender in a lump sum all amounts

required to bring Borrower\'s amount current including, to the extent
they

are obligations of Borrower under this Security Instrument,

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 5 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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foreclosure costs and reasonable and customary attorney\'s fees and
expenses

properly associated with the foreclosure proceeding. Upon reinstatement
by

Borrower, this Security Instrument and the obligations that it secures

shall remain in effect as if Lender had not required immediate payment
in

full. However, Lender is not required to permit reinstatement if: (i)

Lender has accepted reinstatement after the commencement of foreclosure

proceedings within two years immediately preceding the commencement of a

current foreclosure proceeding, (ii) reinstatement will preclude

foreclosure on different grounds in the future, or (iii) reinstatement
will

adversely affect the priority of the lien created by this Security

Instrument.

11\. Borrower Not Released; Forbearance By Lender Not a Waiver.

Extension of the time of payment or modification of amortization of the

sums secured by this Security Instrument granted by Lender to any
successor

in interest of Borrower shall not operate to release the liability of
the

original Borrower or Borrower\'s successor in interest. Lender shall not
be

required to commence proceedings against any successor in interest or

refuse to extend time for payment or otherwise modify amortization of
the

sums secured by this Security Instrument by reason of any demand made by

the original Borrower or Borrower\'s successors in interest. Any

forbearance by Lender in exercising any right or remedy shall not be a

waiver of or preclude the exercise of any right or remedy.

12\. Successors and Assigns Bound; Joint and Several Liability;

Co-Signers. The covenants and agreements of this Security Instrument
shall

bind and benefit the successors and assigns of Lender and Borrower,
subject

to the provisions of paragraph 9(b). Borrower\'s covenants and
agreements

shall be joint and several. Any Borrower who co-signs this Security

Instrument but does not execute the Note: (a) is co-signing this
Security

Instrument only to mortgage, grant and convey that Borrower\'s interest
in

the Property under the terms of this Security Instrument; (b) is not

personally obligated to pay the sums secured by this Security
Instrument;

and (c) agrees that Lender and any other Borrower may agree to extend,

modify, forbear or make any accommodations with regard to the term of
this

Security Instrument or the Note without that Borrower\'s consent.

13\. Notices. Any notice to Borrower provided for in this Security

Instrument shall be given by delivering it or by mailing it by first
class

mail unless applicable law requires use of another method. The notice

shall be directed to the Property Address or any other address Borrower

designates by notice to Lender. Any notice to Lender shall be given by

first class mail to Lender\'s address stated herein or any address
Lender

designates by notice to Borrower. Any notice provided for in this
Security

Instrument shall be deemed to have been given to Borrower or Lender when

given as provided in this paragraph.

14\. Governing Law; Severability. This Security Instrument shall be

governed by Federal law and the law of the jurisdiction in which the

Property is located. In the event that any provision or clause of this

Security Instrument or the Note conflicts with applicable law, such

conflict shall not affect other provisions of this Security Instrument
or

the Note which can be given effect without the conflicting provision. To

this end the provisions of this Security Instrument and the Note are

declared to be severable.

15\. Borrower\'s Copy. Borrower shall be given one conformed copy of

this Security Instrument.

16\. Assignment of Rents. Borrower unconditionally assigns and

transfers to Lender all the rents and revenues of the Property. Borrower

authorizes Lender or Lender\'s agents to collect the rents and revenues
and

hereby directs each tenant of the Property to pay the rents to Lender or

Lender\'s agents.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 6 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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However, prior to Lenders notice to Borrower of Borrower\'s breach of
any

covenant or agreement in the Security Instrument, Borrower shall collect

and receive all rents and revenues of the Property as trustee for the

benefit of Lender and Borrower. This assignment of rents constitutes an

absolute assignment and not an assignment for additional security only.

If Lender gives notice of breach to Borrower: (a) all rents received

by Borrower shall be held by Borrower as trustee for benefit of Lender

only, to be applied to the sums secured by the Security Instrument; (b)

Lender shall be entitled to collect and receive all of the rents of the

Property; and (c) each tenant of the Property shall pay all rents due
and

unpaid to Lender or Lender\'s agent on Lender\'s written demand to the

tenant.

Borrower has not executed any prior assignment of the rents and has

not and will not perform any act that would prevent Lender from
exercising

its rights under this paragraph 16.

Lender shall not be required to enter upon, take control of or

maintain the Property before or after giving notice of breach to
Borrower.

However, Lender or a judicially appointed receiver may do so at any time

there is a breach. Any application of rents shall not cure or waive any

default or invalidate any other right or remedy of Lender. This
assignment

of rents of the Property shall terminate when the debt secured by the

Security Instrument is paid in full.

17\. Foreclosure Procedure. For illustration only. Needs state

adaptation. If Lender requires immediate payment in full under Paragraph

9, /6 Lender may invoke the power of sale and any other remedies
permitted

by applicable law. Lender shall be entitled to collect all expenses

incurred in pursuing the remedies provided in this paragraph 17,
including,

but not limited to, reasonable attorney\'s fees and costs of title
evidence.

If Lender invokes the power of sale, Lender shall give notice of sale

to Borrower in the manner provided in Paragraph 13. Lender shall publish

and post the notice of sale, and the Property shall be sold in the
manner

prescribed by applicable law. Lender or its designee may purchase the

Property at any sale. The proceeds of the sale shall be applied in the

following order: (a) to all expenses of the sale, including, but not

limited to, reasonable attorney\'s fees; (b) to all sums secured by this

Security Instrument; and (c) any excess to the person or persons legally

entitled to it.

Add any state-specific provisions in accordance with HUD

requirements. At the Lender\'s option, the provisions may be

designated as NON-UNIFORM COVENANTS.

Number as final paragraph or leave unnumbered but place after

numbered paragraphs. Riders to this Security Instrument. If one or more

riders are executed by Borrower and recorded together with this Security

Instrument, the covenants of each such rider shall be incorporated into
and

shall amend and supplement the covenants and agreements of this Security

Instrument as if the rider(s) were in a part of this Security
Instrument.

Check applicable box(es) .

Condominium Rider Growing Equity Rider Other specify

Planned Unit Graduated Payment

Development Rider Rider

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 7 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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BY SIGNING BELOW /7, Borrower accepts and agrees to the terms

contained in this Security Instrument and in any rider(s) executed by

Borrower and recorded with it.

Witnesses /8:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (SEAL)

Borrower

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (SEAL)

Borrower

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Space Below This Line for
Acknowledgement /9 \_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 8 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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Footnotes for Model Mortgage Form

1\. Add the appropriate jurisdiction and use \"Commonwealth of\" or

\"Territory of\" if appropriate.

2\. Substitute \"Deed of Trust\" or \"Security Deed\" when appropriate

for the jurisdiction. For deeds of trust (except Colorado-see special

instructions), the first three sentences should be replaced with the

following: \"THIS DEED OF TRUST (\"Security Instrument\") is made on

\_\_\_\_\_\_\_\_, 19\_\_. The grantor or \"trustor,\" if commonly used
in the

jurisdiction is \_\_\_\_\_\_\_\_\_\_\_ (\"Borrower\"). The trustee is
\_\_\_\_\_\_\_\_\_\_\_

(\"Trustee\"). The beneficiary is \_\_\_\_\_\_\_\_\_\_\_\_\_ which is
organized and

existing under the laws of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ and whose
address is \_\_\_\_\_\_\_\_\_\_\_

(\"Lender\").\" For a security deed (Georgia), see special instructions.

3\. For deeds of trust, substitute \"Trustee with power of sale,\" for

\"Lender.\" For mortgages, where applicable, \"with power of sale\" may
be

added. The phase \"mortgage, grant and convey\" may be replaced with
other

language appropriate to the jurisdiction, such as \"irrevocably grant
and

convey,\" \"grant and convey,\" and \"mortgage and hypothecate.\" The

FNMA/FHLMC form for the jurisdiction may be used for guidance.

4\. For Louisiana and Alaska, \"Parish\" and \"Judicial District,\"

respectively, shall be substituted for \"County.\" In the District of

Columbia, Guam, Hawaii, Virgin Islands, Virginia and Puerto Pico, a
county

designation is not required.

5\. Add \"to have and to hold this property unto Lender and Lender\'s

successors and assigns. Forever,\" immediately preceding \"Together
with\"

for the following states: Alabama, Connecticut, Georgia, Maine, North

Carolina, South Carolina, or Vermont.

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PAGE 9 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6\. Following the introductory phrase (up to the footnote), Paragraph

17 must be adapted to conform to applicable law of the jurisdiction.
(The

model form is an example of paragraph 17 designed for use in Michigan).

Paragraph 17 must include the mortgagee\'s right to a public sale of the

Property, including a power of sale if legally permissible. All rights
to

a deficiency judgment must be preserved to the extent legally
permissible,

except as provided in the special instructions for Iowa, North Dakota,
and

Wisconsin. Paragraph 17 may require the mortgagor, in the event of

foreclosure, to pay costs and reasonable and customary attorney\'s fees
and

trustee\'s fees, which may bear interest from the date of disbursement
(not

to exceed the note rate) and may be immediately due and payable. Lenders

should use the foreclosure provisions in Paragraph 19 of the current

approved FNMA/FHLMC mortgage form for the jurisdiction (Paragraph 18 for

Guam, the Virgin Islands and Puerto Rico) with any necessary adaptation
to

conform to these instructions. (The initial sentences of FNMA/FHLMC

Paragraph 19 concerning notice and acceleration should be omitted;
except

for Georgia, New York and Maine, the foreclosure language begins in the

middle of the fourth sentence, Paragraph 19.) In the New York and Maine

forms, lender may leave out the 30 day notice part of the FNMA/FHLMC

foreclosure provision. Lenders are not to insert \"Lender in
Possession\"

paragraphs from the non-uniform covenant sections of the FNMA/FHLMC
forms.

7\. For Oklahoma, the following provisions shall be included in bold

print at the end of the mortgage immediately before \"BY SIGNING
BELOW\":

Notice to Borrower

A Power of Sale has been granted in this Security Instrument.

A Power of Sale may allow the Lender to take the property and sell it

without going to court in a foreclosure action upon default by

Borrower under this Security Instrument.

8\. The witness lines may be omitted if state or local law does not

require witnesses.

9\. Any legally valid form of acknowledgement may be used.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 10 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

MODEL NOTE FORM

State of /1

NOTE

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

, 19

Property Address

1\. PARTIES

\"Borrower\" means each person signing at the end of this Note, and

the person\'s successors and assigns. \"Lender\" means the Secretary of

Housing and Urban Development and its successors and assigns.

2\. BORROWER\'S PROMISE TO PAY; INTEREST

In return for a loan received from Lender, Borrower promises to pay

the principal sum of Dollars (U.S. \$ ), plus interest, to the

order of Lender. Interest will be charged on unpaid principal, from the

date of disbursement of the loan proceeds by Lender, at the rate of

per cent ( %) per year until the full amount of principal has been

paid.

3\. PROMISE TO PAY SECURED

Borrower\'s promise to pay is secured by a mortgage, deed of trust or

similar security instrument that is dated the same date as this Note and

called the \"Security Instrument.\" The Security Instrument protects the

Lender from losses which might result if Borrower defaults under this
Note.

4\. MANNER OF PAYMENT

\(A\) Time

Borrower shall make a payment of principal and interest to Lender

on the first day of each month beginning on , 19 . Any

principal and interest remaining on the first day of

, 20 will be due on that date, which is called the

maturity date. /2

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 11 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(B\) Place

Payment shall be made at

or at such place as Lender may designate in

writing by notice to Borrower.

\(C\) Amount

Each monthly payment of principal and interest will be in the

amount of \$ . This amount will be part of a larger monthly

payment required by the Security Instrument, that shall be applied to

principal, interest and other items in the order described in the

Security Instrument.

\(D\) Allonge to this note for payment adjustments

If an allonge providing for payment adjustments is executed by

Borrower together with this Note, the covenants of the allonge shall

be incorporated into and shall amend and supplement the covenants of

this Note as if the allonge were a part of this Note. Check

applicable box.

Graduated Payment Allonge Other specify

Growing Equity Allonge

5\. BORROWER\'S RIGHT TO REPAY

Borrower has the right to pay the debt evidenced by this Note, in

whole or in part, without charge or penalty, on the first day of any
month.

6\. BORROWER\'S FAILURE TO PAY

\(A\) Late Charge for Overdue Payments

If Lender has not received the full monthly payment required by

the Security Instrument, as described in Paragraph 4(C) of this Note,

by the end of fifteen calendar days after the payment is due, Lender

may collect a late charge in the amount of percent ( %) of

the overdue amount of each payment. /3

\(B\) Default

If Borrower defaults by failing to pay in full any monthly

payment, then Lender may, in the case of payment defaults, require

immediate payment in full of the principal balance remaining due and

all accrued interest. Lender may choose not to exercise this option

without waiving its rights in the event of any subsequent default.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 12 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(C\) Payment of Costs and Expenses

If Lender has required immediate payment in full, as described

above, Lender may require Borrower to pay costs and expenses including

reasonable and customary attorney\'s fees for enforcing this Note.

Such fees and costs shall bear interest from the date of disbursement

at the same rate as the principal of this Note.

7\. WAIVERS

Borrower and any other person who has obligations under this Note

waive the rights of presentment and notice of dishonor. \"Presentment\"

means the right to require Lender to demand payment of amounts due.

\"Notice of dishonor\" means the right to require Lender to give notice
to

other persons that amounts due have not been paid.

8\. GIVING OF NOTICES

Unless applicable law requires a different method, any notice that

must be given to Borrower under this Note will be given by delivering it
or

by mailing it by first class mail to Borrower at the property address
above

or at a different address if Borrower has given Lender a notice of

Borrower\'s different address.

Any notice that must be given to Lender under this Note will be given

by first class mail to Lender at the address stated in Paragraph 4(B) or
at

a different address if Borrower is given a notice of that different

address.

9\. OBLIGATIONS OF PERSONS UNDER THIS NOTE

If more than one person signs this Note, each person is fully and

personally obligated to keep all of the promises made in this Note,

including the promise to pay the full amount owed. Any person who is a

guarantor, surety or endorser of this Note is also obligated to do these

things. Any person who takes over these obligations, including the

obligations of a guarantor, surety or endorser of this Note, is also

obligated to keep all of the promises made in this Note. Lender may

enforce its rights under this Note against each person individually or

against all signatories together. Any one person signing this Note may
be

required to pay all of the amounts owed under this Note.

BY SIGNING BELOW, Borrower accepts and agrees to the terms and

covenants contained in this Note. /4, /5

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (SEAL)

Borrower

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (SEAL)

Borrower

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 13 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Footnotes for Model Note Form

1\. Use either the appropriate jurisdiction or substitute
\"Multistate.\"

Use \"Commonwealth of\" or \"Territory of\" if appropriate.

2\. For Maryland, the Note may be amended if the borrower does not

voluntarily elect to pay interim interest at closing. The following must

be inserted at the beginning of subsection 4(A): \"Borrower shall pay

\$\_\_\_\_\_\_\_\_ as interest due on the unpaid principal for the
period between

the date of this Note and the first day of the next month on the first
day

of \_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_. Thereafter,\".

3\. The late charge may be printed in the form but shall not exceed 4%.

4\. Include any required or customary form of authentication.

5\. The model note is a multistate form which requires adaption for the

following jurisdiction.

a\. Alaska. Add the Borrower\'s Post Office address, if different

from the property address.

b\. Kansas. Delete \"including reasonable and customary attorney\'s

fees\" from Paragraph 6(C).

c\. Kentucky. The first sentence of Paragraph 6(C) should be changed

to read:

If Lender has required immediate payment in full, as described

above, Lender may require Borrower to pay \$500.00 for costs and

expenses for enforcing this Note.

d\. Louisiana. Add the following text following the Borrower\'s

signature lines:

\"NE VARIETUR\" for identification with a mortgage given before

me on \_\_\_\_\_\_\_\_\_, 19\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notary qualified in \_\_\_\_\_\_\_\_\_\_ Parish, Louisiana.

e\. Puerto Rico. See special instructions.

f\. Vermont. At the end of the note immediately before \"BY SIGNING

BELOW,\" add the following notice in at least ten point type:

Notice to Co-Signer

Your signature on this Note means that you are equally liable

for repayment of this loan. If Borrower does not pay, Lender

has a legal right to collect from you.

g\. Virginia. The first sentence of Paragraph 7 should be changed

to read: \"Borrower and any other person who has obligations

under this Note waive the rights of presentment and notice of

dishonor and waive the homestead exemption.\"

After the Borrower\'s signature lines, add:

This is to certify that this is the Note described in and secured

by a Deed of Trust dated \_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_ on the
Property

located in
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Virginia.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 14 OF 15

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EXHIBIT 2 TO

ATTACHMENT 4

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My Commission expires:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Public Notary

h\. West Virginia. Add to the end of Paragraph 6(A): \"but not

more than \$\_\_\_\_\_\_\_\_\_\_\_\_.\"

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PAGE 15 OF 15

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EXHIBIT 3 TO

ATTACHMENT 4

Instructions to complete the subordination agreements for a purchase
money

mortgage or deed of trust held by HUD which is subordinated to a
mortgage

or deed of trust where the proceeds are used for rehabilitation.

INSTRUCTIONS - OVERVIEW

Subordination of HUD\'s purchase money mortgage or deed of trust:

1\. Use of the subordination agreements - The mortgagee can use the

appropriate sample agreement for a purchase money mortgage or

deed of trust that is subordinated to a mortgage or deed of trust

where the proceeds are used for rehabilitation.

2\. Exhibits to be used:

EXHIBIT 2-A, Mortgage subordination agreement to be used

with a purchase money mortgage.

EXHIBIT 2-B, Deed of trust subordination agreement to be

used with a purchase money deed of trust.

3\. Conformity to state and local laws - these exhibits must conform

to state and local laws.

Page 1 of 5

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EXHIBIT 3A TO

ATTACHMENT 4

Mortgage subordination agreement to be used with a mortgage where the

proceeds are used for rehabilitation.

BLANKS INSTRUCTIONS - FILL IN

1 Old FHA Case Number

2 THRU 4 Current day, month and year - execution date of the

agreement

5 Name of the mortgagors

6 Name of the mortgagee of the rehabilitation mortgage

7 Execution date of the purchase money mortgage

8 AND 9 Liber and folio

10 AND 11 County and State in which the mortgage is recorded

12 Amount of the purchase money mortgage

13 Rehabilitation mortgage amount

14 Legal description

15 THRU 17 Witnesses

18 THRU 20 First party (mortgagors), second party (HUD) and

third party (mortgagee)

NOTE: SUBORDINATION AGREEMENTS RESPECTIVE TO THESE TRANSACTIONS MUST BE

EXECUTED BY THE AUTHORIZED OFFICIAL AT THE LOCAL HUD FIELD OFFICE.

Page 2 of 5

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EXHIBIT 3A TO

ATTACHMENT 4

SAMPLE

SUBORDINATION AGREEMENT

(Mortgage)

OLD FHA Case No.: #1

This Agreement made the #2 day of #3, 19 #4 among #5 (Owner),

party of the first part (hereinafter called First Party) and Secretary
of

the Department of Housing and Urban Development, party of the second
part

(hereinafter called Second Party) and #6, party of the third part

(hereinafter called Third Party).

WHEREAS, First Party executed a mortgage dated #7 and recorded in

Liber #8 Folio #9 of the Land Records of #10 County, State of #11

made payable to the Second Party in the principal sum of \$ #12; and

WHEREAS, Third Party has agreed to make a loan of \$ #13

to be secured by a mortgage covering

#14 description ;

provided the Second Party will agree that the lien of said mortgage
shall

be prior and superior to any right, title, interest, claim or lien which

the Second Party may have in or to said premises;

NOW, Therefore, in consideration of the premises and the promises of

the parties contained herein, each to the other, the benefits to be

derived, the parties hereby covenant and agree as follows:

The Second Party covenants and agrees with said Third Party that said

mortgage securing a loan to First Party shall be a first lien upon

said property, superior to any rights, title, interest, claim or lien

which Second Party may have in or upon said premises.

In Witness Whereof, the said First Party, Second Party and Third Party

have duly executed this Agreement the day and year first above written.

\_\_\_\_\_\_\_\_\_\_\_#15\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#18\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness First Party

\_\_\_\_\_\_\_\_\_\_\_#16\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#19\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness Second Party

\_\_\_\_\_\_\_\_\_\_\_#17\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#20\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness Third Party

(Acknowledgments required by State law)

Page 3 of 5

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EXHIBIT 3B TO

ATTACHMENT 4

Deed of trust subordination agreement to be used with a deed of trust
where

the proceeds are used for rehabilitation.

BLANKS INSTRUCTIONS - FILL IN

1 Old FHA Case Number

2 THRU 4 Current day, month and year - execution date of the

agreement

5 Name of the mortgagors

6 Name of the mortgagee of the rehabilitation

deed of trust

7 AND 8 Execution date and recordation date of the purchase

money deed of trust

9 AND 10 Liber and folio

11 AND 12 County and State in which the purchase money deed of

trust is recorded

13 Amount of the purchase money deed of trust

14 Amount of the rehabilitation deed of trust

15 AND 16 Execution date of the rehabilitation deed of trust

17 Legal description

18 Execution date of the rehabilitation deed of trust

19 THRU 21 Witnesses

22 THRU 24 Grantors (Mortgagors), Beneficiary (HUD) and

Lender (Mortgagee)

NOTE: MORTGAGE SUBORDINATION AGREEMENTS RESPECTIVE TO THESE

TRANSACTIONS MUST BE EXECUTED BY THE AUTHORIZED OFFICIAL AT THE

LOCAL HUD FIELD OFFICE.

Page 4 of 5

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EXHIBIT 3B TO

ATTACHMENT 4

SAMPLE

Subordination Agreement

(Deed of Trust)

OLD 235 FHA Case No.: #1

This Agreement made this #2 day of #3, 19 #4 by and among, #5 , owner

of the real property described in this Agreement, hereinafter referred
to

as \"Grantor\", Secretary of Housing and Urban Development, present
owner of

the Note secured by the deed of trust first described in this Agreement,

hereinafter referred to as \"Beneficiary\", and #6 , beneficiary named
in the

deed of trust secondarily described in the Agreement, hereinafter
referred

to as \"Lender\".

WHEREAS, Grantor is a party to a Deed of Trust dated #7

and recorded #8 in Liber #9 folio #10 of the Land Records of #11 County,

State of #12 to secure a Note made payable to the Beneficiary in the

principal sum of \$ #13, (hereinafter called the Purchase Money Deed of

Trust) and,

WHEREAS, Grantor has executed, or is about to execute, a Deed of Trust

to be recorded concurrently with this Agreement to secure a Note for the

sum of \$ #14 dated #15 , 19 #16 , in favor of the Lender, which conveys
in

trust real property described as follows:

#17

description

and,

WHEREAS, it is the intention and understanding of all parties to this

Agreement that the lien or charge of the Deed of Trust last above

mentioned, and of any renewals, replacements, modifications or
extensions

of that Deed of Trust, shall be and remain at all times, prior and
superior

to any rights, title, interest, claim, or lien which the Beneficiary may

have in or upon said premises as set forth in the Purchase Money Deed of

Trust first above mentioned.

Now, Therefore, in consideration of the premises, the promises of the

parties contained herein, each to the other, the benefits to be derived,

the parties hereby covenant and agree as follows:

The said Beneficiary covenants and agrees with said Lender that said

Deed of Trust dated #18 to secure a loan made by Lender to Grantor

shall be and remains at all times a lien or charge upon said property,

superior to any rights, title, interest, claim or lien which

Beneficiary may have in or upon said premises.

In Witness Whereof, the said Grantor, Beneficiary, and Lender have

duly executed this Agreement the day and year first above written.

\_\_\_\_\_\_\_\_\_\_\_#19\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#22\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness Grantor

\_\_\_\_\_\_\_\_\_\_\_#20\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#23\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness Beneficiary

\_\_\_\_\_\_\_\_\_\_\_#21\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_#24\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness Lender

(Acknowledgments required by State law)

Page 5 of 5

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ATTACHMENT 5

Model Land Use Restriction Addendum

This addendum is incorporated by reference to the FHA Sales

Contract executed on this same day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_,

199\_\_, between
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (purchaser)
and the

Department of Housing and Urban Development, Seller.

1\. Unless an exception is granted in writing by the Seller:

a\. the initial purchaser shall resell the property only to a

person who intends to occupy the property as his or her principal

residence and whose income is at or below 115 percent of the

median income in the area, when adjusted for family size, or a

State, government entity, tribe, or agency thereof, or a private

nonprofit organization as defined in 24 CFR 291.405.

b\. the initial purchaser shall not resell the property for an

amount in excess of the net development cost plus ten percent of

the net development cost. Net development cost is the total cost

of the project, including items such as acquisition cost,

architectural fees, permits and survey expenses, insurance, and

taxes, and excluding overhead and any developer\'s fee.

c\. the property may not be occupied by or resold to any of the

purchaser\'s officers, directors, elected or appointed officials,

or employees, or the spouse, child, stepchild, parent,

stepparent, or business associate of any of the above.

2\. This Addendum survives the expiration, if any, by operation

of law or otherwise, of the FHA Sales Contract, and shall

terminate five years from the date contained herein.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Purchaser Witness

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Seller: Secretary of Housing and Witness

Urban Development by: (type name)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ATTACHMENT 6

SAMS PROCEDURES FOR MODIFIED SALES PROCESS

A. Establishment of Revitalization Areas

SAMS has been programmed to allow the user to identify properties

within ZIP code areas designated by the Director of Housing Management

as revitalization areas. When developing the disposition program, the

Chief Property Officer will designate a property as being in a

revitalization area.

B. Leases to Homeless Providers

SAMS has been programmed to list for pre-designated areas all

unoccupied properties in inventory in Step 1 for consideration for

lease by homeless providers. The CM FB AV, Properties Available

report, was developed to provide listings of properties by ZIP code

and by DM Step and will be used here. The report will be retrieved

for Step 1 properties only for one specified ZIP code or for all ZIP

codes; the report will be mailed to the appropriate homeless

providers. The report will include only properties with a fee status

of HUD owned, vacant. The report will block movement of cases to Step

3 for 15 days to allow Homeless Providers to indicate their firm

interest in the properties, which will be done by the submission of a

lease. If no interest is expressed during the review period, the

properties will be processed for sale. Additionally, if the

properties are released by the Homeless Provider prior to the

expiration of the 15-day period, the CM DS C3 has a special override

to permit the property to be programmed in the usual manner.

When firm interest is indicated for a specific property during the

consideration period, SAMS will allow the field office to override the

\"cannot program\" status and move the property to Step 3 in a held off

market status of HOM 4, Programmed for Rent. The field office will

establish the lease upon receipt in the Tenant Management (TM)

subsystem through the SAMS Service Center. The system will reflect

the lease type as HH.

C. Direct Sales to Non-profits and Government Agencies

SAMS classifies properties as being insurable or uninsurable and all

of its processing procedures fall into one of those two

classifications. If a property is insurable, SAMS does not require

any special processing procedures because non-profits and government

agencies are allowed to bid competitively on the properties, but

cannot purchase by direct sale. On the other hand, if a property is

uninsurable, the non-profits and government agencies have the first

opportunity to acquire the property by purchasing direct sale and the

following procedures are required:

For uninsurable properties the Chief Property Officer must produce

lists for participating agencies in the designated ZIP code areas of

HUD-owned properties that have disposition programs, but are not yet

listed for sale (SAMS DM Steps 3-5). The lists are produced for

participating agencies through the use of the CM FB AV report. SAMS

has been programmed to flag this category of cases on this report for

a period of 10 days during which agencies may indicate their

preliminary interest in the properties. The flagged cases will be

permitted to move to SAMS Step 5 during this 10-day period, but cannot

be moved to Step 6 - Listed For Sale. Individual cases released by

the agencies during this hold period can be moved to SAMS Step 6 using

the CM DS LS screen. However, the system will not allow the use of

the CM DS M5 screen for moving flagged cases as a group. Cases not

receiving preliminary interest during the 10-day period are listed for

sale in the usual manner. If notification of preliminary interest is

expressed by a participating agency, the property is placed in either

HOM 14 (non-profit) or HOM 15 (government agency) by completing the CM

DS WR and the CM DS C3.

The CM RP HD report has been modified for monitoring cases in

specified HOM categories and is specifically intended to monitor the

time period for non-profits and government agencies to demonstrate

their firm interest in properties. The report will display the date a

property entered HOM 14 and HOM 15 and the number of days elapsed to

date. All cases exceeding 10 days will be prominently identified.

Upon notification of firm interest by a participating agency, the

property must be reprogrammed as a direct sale type G (government

agency) or N (non-profit). Complete the CM DS WR and the CM DS C3.

Participating agencies have five days to submit a sales contract. If

the property reprogrammed as direct sale type G or N remains in Step 3

more than 5 days, the newly created CM RP DS, Aging of Direct Sales

report, will clearly identify the case as overdue for receipt of a

sales contract. When completing the Direct Sale pop-up screen, field

offices should indicate \"Discount\" = y. The system will default to

the correct discount amount on the basis of the disposition program.

Upon receipt and review of the sales contract and signature by the

CPO, complete the expanded Sales Offer Accepted (CM DS OA) data

screen, making certain to include the appropriate pop-up screen

information.

If an uninsurable property is being purchased as a direct sale, the

non-profit or government agency may use 203K financing, even though

the property was not so offered. When such a property is reprogrammed

as a direct sale, the CM DS C3 must be amended to show the 203K

financing.

D. Seller Financing by Purchase Money Mortgages

For properties sold through the use of purchase money mortgages, the

SP screen must indicate PM in the Finance Type field in order for the

recordation to be accurate.

NOTE: See Section J of Notice regarding the use of purchase money

mortgages.

E. Discount for Simultaneous Purchase and Simultaneous Closing of 5 or

More Properties Excluding Uninsurable Properties in Revitalization

Areas

If a non-profit or government agency purchases simultaneously 5 or

more properties programmed for a 10% discount and closes those

properties concurrently, the purchaser receives an additional 5%

discount on each property. The completion of such a bulk purchase

will be reflected only in the Sales Package (HUD-1) Received screen

(CM DS SP). The user must indicate in the Special Sale Effort field

that a bulk purchase was completed. Line 507, Marketing Allowances,

of the HUD-1 must reflect either 5% of the \"as-is\" sales price shown

in the C3 direct sale pop-up screen if the purchases were completed

as a direct sale or 15% of the sales price from the OA screen if the

purchases were completed through the competitive bid process.

F. Sales to General Public

Non-profits and government agencies may submit offers on any property

available only to owner occupants or to all the general public while

it is in a competitive bid period or in an extended listing period.

If the bidder is successful, the field office must complete the CM DS

OA data screen, indicating the appropriate Sale Type which must be

other than Direct Sale. The Field Office must also indicate \"Y\" in

the field \"Non-profit or Governmental Agency\". A pop-up screen will

then guide the user in recordation of appropriate discount

information. If the property, by virtue of being uninsurable in a

revitalization area, would have had a 30% discount as a direct sale to

a non-profit or government agency, the property also would have the

30% discount as a competitive sale and should be so recorded on the

pop-up screen.

SUMMARY OF PROCEDURES

A. Establishment of Revitalization Areas

At the discretion of the Director of Housing Management

B. Leases to Homeless Providers

1\. Retrieve Properties Available report (CM FB AV) for properties

in Step 1

2\. Send report to Homeless Providers

3\. Upon notification of firm interest, program property

HOM 4 (CM DS C3)

4\. Upon receipt of lease, establish in TM subsystem as lease type HH

C. Direct Sales to Non-profits and Government Agencies

Uninsurable properties

a\. Retrieve the Properties Available report (CM FB AV) for Steps 3-5

for uninsurable properties

b\. Provide report to non-profits and government agencies

c\. Upon notification of preliminary interest, program HOM 14 or

HOM 15, as applicable (CM DS C3)

d\. Upon notification of firm interest, reprogram as direct sale

type N or G, as applicable (CM DS C3)

e\. Upon receipt of the signed sales contract, complete the CM DS OA

screen to identify sales to non-profits or government agencies.

Complete pop-up screen for appropriate information.

D. Seller Financing by Purchase Money Mortgages

Reflect the use of purchase money mortgages in the Finance Type field

of the SP screen.

NOTE: See Section J of Notice regarding the use of purchase money

mortgages.

E. Discount for Simultaneous Purchase and Simultaneous Closing of 5 or

More Properties Outside of Revitalization Areas

Reflect bulk purchase in Special Sale Effort field of SP screen and

reflect additional 5% discount from direct sale \"as-is\" price or

from competitive bid sales price on Line 507, Marketing Allowances,

of the HUD-1 and of the SP screen.

F. Sales to General Public

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