# Sample

**Mark-to-Market Form 4.10**

**PAE to Owner Transmitting Ownership Certification Requirements**

From: PAE

To: Owner

Transmission: Overnight Hard Copy - With Evidence of Receipt

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Project Name: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

Dear: ***[(name of owner)]{.underline}***

In all new financings, it is imperative that the lender or insurer be
satisfied that the principals of the entity have acceptable history of
ownership, that the entity can legally execute the documents reflecting
the new financing and appropriately own and manage the property for the
term of the financing.

In Mark-to-Market, we require that the information needed to satisfy
these concerns be submitted within 45 days of the kick off meeting, held
\[by conference call\] on \-\-\-\-\-\-\-\-\--, 200X. This permits
adequate time not only to review the material, but to take appropriate
action in the event that some change in the ownership entity or
ownership documents must be made. If we cannot complete the review or
make any necessary changes in a timely manner, the closing may be
delayed and the rents may be reduced prior to restructuring -- adding
extraordinary financial burden to the property.

The deadline for submission of the documents in this transaction is
\-\-\-\-\-\-\-\-\-\-\-\-\--, 200x.

All of the necessary guidance for submitting the appropriate information
is enclosed. It must be submitted in the form of a certification
containing all of the information listed in the enclosure and must
include all of the required attachments. . If the certification and
attachments are not submitted within the time requested, we, as PAE, may
recommend that the owner be declared non-cooperative. If OAHP agrees and
the issue is not resolved within 10 days of the letter declaring the
owner non-cooperative, processing will be discontinued, rents will be
reduced without restructuring of the debt and the transaction will be
returned to HUD Multifamily as a troubled project.

Please contact ............................ if you have any questions
about preparation of the submission. We are anxious to receive the
information and assure that the restructuring of this transaction can
proceed smoothly and without interruption.

Sincerely,

**[*(PAE project manager*)]{.underline}**

***[(official title)]{.underline}***

## Enclosed: Ownership Certification Instructions 

**Instructions for Submission of Ownership Documents and Supporting
Information**

## General

Your submission must include a letter that contains the information and
certifications listed below. In addition, the submission must include a
number of attachments that will be listed in the letter.

We have included the prescribed form of certifications and guidance on
the information that must be submitted.

We have also included explanatory material that provides appropriate
definitions and selections from the Mark-to-Market Operating Procedures
Guide that are necessary to complete the certification.

## Letter Certification

### Address: Your letter must be on the ownership entity letterhead and addressed as follows:

TO: U.S. Department of HUD

Office of Multifamily Housing Assistance Restructuring ("OAHP")

[Name of Preservation Office Director]{.mark}, OAHP Preservation Office
Director

> [OAHP region]{.mark} Region

TO: [name of PAE]{.mark} ("PAE")

Re: FHA Project No. [number]{.mark}

Project Name: [name]{.mark}

Location: [address, city, state]{.mark}

**Certification: your letter must start with the following statement:**

With respect to the referenced project ("Project") and its owner
("Ownership Entity"), I hereby certify and agree as follows:

**Document Submission: Your letter must include the following paragraphs
and all of the documents needed must be listed and attached:**

1.  The following is a true and complete list of all organizational
    documents (e.g., partnership agreement, articles of incorporation
    and bylaws, limited liability company operating agreement,
    certificate of limited partnership) of the Ownership Entity,
    including all amendments and modifications thereto ("Organizational
    Documents"):

> \[insert a list of the documents\]

2.  True, correct and complete copies of all Organizational Documents
    are attached hereto.

3.  In the event of any change in the Organizational Documents, I will
    immediately amend this certification and advise OAHP of such change.

**Certifications: Your letter must contain the following
certifications:**

4.  I have reviewed Appendix F to the Mark-to-Market Operating
    Procedures Guide as provided to me and **\[insert the appropriate
    phrase\]**

> the Organization Documents are in compliance with the requirements of
> Appendix F.

**\[or\]**

> the Organizational Documents are not in compliance with such
> requirements. I agree to use best efforts to seek amendment of the
> Organizational Documents to remedy all exceptions no later than
> **\[insert date**\].

5.  The Organizational Documents provide in **\[provide the appropriate
    citation in the documents\]** that the consent of the Ownership
    Entity to the implementation of a Mark-to-Market restructuring plan
    for the Project will be valid and enforceable if given in the
    following manner: **\[describe consent process\]**

**Example, "by any general partner", or "by vote of partners having at
least 51% Partnership Interests". Provide citation; for example,
"pursuant to Article IX of the Limited Partnership Agreement".**

6.  The Organizational Documents provide in **\[provide the appropriate
    citation in the documents\]** that the Ownership Entity will
    continue **\[insert the appropriate phrase\]**

in perpetuity.

> **\[or\]**
>
> through **\[insert date\].** I understand and agree that the term of
> any mortgage loan originated at the Mark-to-Market closing (including,
> without limitation, any Mark-to-Market Mortgage Restructuring Note
> and/or Contingent Repayment Note) shall not extend past such date or
> such extended date as may be achieved through duly authorized
> modification of the Organizational Documents.

7.  I agree to notify OAHP if any change in Principals (as defined by
    HUD in the instructions to Form HUD-2530 provided to me) in the
    Ownership Entity occurs or is contemplated, through the
    Mark-to-Market closing date.

8.  **\[Insert the appropriate paragraph\]**

The Ownership Entity was approved by HUD at the time of original
development of the Project. No changes in Principals have occurred since
original HUD approval except: **\[insert "none" or provide the name and
SSN of each new Principal, date when each new Principal became a
Principal, and statement whether HUD approval was obtained with respect
to each change\]**

> **\[or\]**

The Ownership Entity was approved by HUD pursuant to a Final Transfer of
Physical Assets (TPA) approval issued by HUD on **\[insert date\],** a
true and complete copy of which approval is attached hereto. Except as
set forth below, no changes in Principals have occurred since original
HUD approval except: **\[insert "none" or provide the name and SSN of
each new Principal, date when each new Principal became a Principal, and
statement whether HUD approval was obtained with respect to each
change\]**

9.  The following is a complete and accurate listing of all parties with
    ownership interests (e.g., partners, stockholders, members of a
    limited liability company) of the Ownership Entity, as of the date
    of this certification, showing each party's full name, Social
    Security Number / Tax Identification Number and ownership
    interest(s):

####  \[Note: ownership interests must add to 100%\]

10. The following is a complete and accurate list of all Principals of
    the Ownership Entity, other than parties identified in the preceding
    paragraph**. \["Principal" is defined in the explanatory materials
    provided with this document. Principals to be listed here would
    include (without limitation) the management agent (including, if the
    management agent is a corporation, its officers and directors) and
    officers and directors of any corporate general partner.\]**

11. The Ownership Entity is currently the title holder of record to the
    Project or the lessee of record to the ground lease to the Project
    (whichever is applicable), a true and correct copy of the
    appropriate conveyancing document is attached hereto.

12. Attached hereto is a current, complete and accurate legal
    description of the Project.

13. Authorized Representatives.

    a.  I am duly authorized by the Ownership Entity to make the
        certifications contained herein.

    b.  The Mark-to-Market Restructuring Commitment should be addressed
        to the following representative of the Ownership Entity:
        **\[insert name, address\]**

    c.  The signature block for the Ownership Entity for the
        Restructuring Commitment, and for the Mark-to-Market closing
        documents, should be prepared as follows: **[\[insert name of
        Ownership Entity\]]{.underline}**

> by **[\[insert name and title of authorized
> representative]{.underline} (If this is not the same as the
> representative who is signing this certification, explain why two
> different authorized representatives will be utilized.\]**

d.  The authorized representative named in subparagraph c. is **\[or
    will be, on or before {insert date}\]** duly authorized to bind the
    Ownership Entity to enter into a Mark-to-Market debt restructuring
    transaction and to execute any and all documents on behalf of the
    Ownership Entity to effectuate the transaction. On or before such
    date, I will provide to OAHP evidence of such authorization.

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14. As of the date of this certification: **\[Insert the appropriate
    paragraph\]**

> The Ownership Entity has fee simple title to the real estate on which
> the Project is situated.
>
> **\[or\]**
>
> The Ownership Entity has a leasehold interest in the real estate on
> which the Project is situated, and a true and correct copy of the
> ground lease is attached hereto. I have reviewed Appendix F to the
> Mark-to-Market Operating Procedures Guide and determined that the
> ground lease is in compliance with the requirements set forth in
> paragraph A of Appendix F.
>
> **\[or\]**
>
> The Ownership Entity has a leasehold interest in the real estate on
> which the Project is situated, and a true and correct copy of the
> ground lease is attached hereto. I have reviewed Appendix F to the
> Mark-to-Market Operating Procedures Guide and determined that the
> ground lease is not in compliance with such requirements, I agree to
> use best efforts to seek amendment of the ground lease to remedy all
> exceptions by **\[insert date\].**

15. I agree that all of the foregoing certifications shall remain true
    and correct at all times through and including the Mark-to-Market
    closing date. In the event any such certification is no longer
    complete or correct, and without limiting OAHP's rights and
    remedies, the Ownership Entity shall immediately provide to OAHP an
    updated document completing or correcting the certification.

16. I acknowledge that the making of a false statement of fact in this
    certification will constitute grounds for a finding that the
    Ownership Entity has failed to cooperate in the restructuring
    process, which finding may result in discontinuance of the
    restructuring process and reduction of rents to market levels, as
    provided in the Mark-to-Market Operating Procedures Guide, Section
    6-6.C.

Date: [date]{.mark}

[name of Ownership Entity]{.mark}

by:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name: [name of authorized representative]{.mark}

Title: [title of authorized representative]{.mark}

[]{.mark}

[]{.mark}

##### Explanatory attachments 

-   OPG Appendix F, paragraph B (see item 3)

-   Definition of "principals" (see items 6 and 8)

-   OPG Appendix F, paragraph A (see item 12)

**Explanatory Attachment For Item 4:**

**Excerpt from OPG Appendix F, Detailed Guidance for PAE's Attorney,**

**Closing Document Preparation (revised January 2003)**

B.  **Organizational Documents of Mortgagor Entity.** Organizational
    documents are required to be submitted with Form 4.10 (within 30
    days after the kickoff meeting) and to be updated at closing. They
    must expressly indicate that the duration of the ownership entity is
    at least coextensive with the term of **the FHA-insured Section
    223(a)(7) mortgage and any HUD-held secondary mortgage financing**,
    that the terms of the Regulatory Agreement as modified by the M2M
    Modification of the Existing Regulatory Agreement take precedence in
    the event of any conflict with the terms of the organizational
    documents, that the ownership entity has authority to enter into the
    transaction and to comply with the requirements of the applicable
    mortgage insurance program and that unless previously approved
    otherwise by HUD, the mortgagor is a single asset entity.

    1.  If the mortgagor entity applying for the FHA-insured financing
        is newly created, the operating partnership agreements, articles
        of incorporation, or articles of organization must include
        provisions stating that:

        a.  If any of the provisions of the organizational documents
            conflict with the terms of the Note, Mortgage, Security
            Agreement, or FHA Regulatory Agreement, the provisions of
            the Note, Mortgage, Security Agreement or FHA Regulatory
            Agreement control.

        b.  No provision required by HUD to be inserted into the
            organizational documents may be amended without prior
            OAHP/HUD approval, for so long as FHA is the insurer or the
            holder of the Note.

        c.  No provision in the organizational documents that results in
            any of the following will have any force or effect without
            the prior written consent of OAHP/HUD:

            i.  Any amendment that modifies the term of the mortgagor
                entity;

            ii. Any amendment that activates the requirement that a HUD
                previous participation certification be obtained from
                any additional partner, or an additional member of a
                limited liability company;

            iii. Any amendment that in any way affects the Note,
                 Mortgage, Security Agreement, or the Regulatory
                 Agreement;

            iv. Any amendment that would authorize any member of a
                limited liability company, other than the Managing
                Member or pre-approved Successor Managing Member to bind
                the company for all matters concerning the project which
                required HUD consent or approval;

            v.  A change in the Managing Member/General Partner or
                pre-approved Successor Managing Member of the mortgagor
                entity; or

            vi. Any change in a guarantor of any obligation to the
                Secretary.

        d.  The mortgagor entity is authorized to execute a Note,
            Mortgage, or Security Agreement in order to secure a loan to
            be insured by the Secretary and to execute the Regulatory
            Agreement and other documents required by the Secretary in
            connection with the insured Section 223(a)(7) mortgage.

        e.  Any incoming partner/member/owner must as a condition of
            receiving an interest in the partnership/company agree to be
            bound by the Note, Mortgage, Security Agreement, Regulatory
            Agreement, and any other documents required in connection
            with the Section 223(a)(7) insured mortgage loan to the same
            extent and on the same terms as the other
            partners/members/owners.

        f.  Notwithstanding any other provisions, upon any dissolution,
            no title or right to possession and control of the Project,
            and no right to collect the rents from the Project, shall
            pass to any person who is not bound by the Regulatory
            Agreement in a manner satisfactory to the Secretary.

    2.  *Corporate Mortgagor*.

        a.  Copy of Articles of Incorporation and Code of Regulations or
            Bylaws and all amendments thereto, certified by jurisdiction
            where filed;

        b.  Certificate of Good Standing. If the mortgagor is a foreign
            corporation, a certificate of good standing from the
            State/Commonwealth where the project is located and the
            state of incorporation or an opinion from mortgagor\'s
            attorney that such certificate is not required in that
            jurisdiction;

        c.  Enabling resolution which authorizes the loan and designates
            the appropriate officer(s) to execute the loan documents;
            and

        d.  Incumbency Certificate certified by corporate officer.

        e.  Corporate articles of incorporation and bylaw provisions,
            which make the corporation responsible for indemnifying its
            board members are not acceptable, except to the extent
            mandated by State law.

    3.  *Partnership Mortgagor*.

        a.  Certified copy of Partnership Agreement and all amendments
            thereto;

        b.  Copy of Certificate of Partnership, if applicable, which has
            been recorded in the appropriate jurisdiction, if required.
            If the mortgagor is a foreign partnership, a copy of the
            application for registration as a foreign partnership, and
            an indication that it is qualified to do business in the
            State/Commonwealth where the project is located;

        c.  Copy of the \"Full, Force and Effect\" Certificate, or
            Certificate of Good Standing, if any provided by the
            State/Commonwealth; and

        d.  If less than all the general partners are signing the loan
            documents, a partnership resolution which authorizes the
            loan and designates the appropriate partner for signing.

    4.  *Limited Liability Company Mortgagor*.

        a.  Certified copy of Articles of Organization and Operating
            Agreement or Code of Regulations and all amendments thereto;

        b.  Certificate of Continued Existence. If the mortgagor is a
            foreign limited liability company holding a license, and a
            Certificate of Continued Existence from the State with
            jurisdiction, or, alternatively, a legal opinion from an
            attorney licensed to practice in the State in which the
            project is located to the effect that the limited liability
            company is qualified to do business and hold title to real
            estate in that State;

        c.  Enabling resolution which authorizes the loan and designates
            the appropriate Managing Member to execute the loan
            documents; and

        d.  Incumbency Certificate with authorized Member\'s signature.

**Explanatory Attachment For Items 10:**

**Excerpt from Instructions to Form HUD-2530,**

**Definition of "Principals"**

Principals include all individuals, joint ventures, partnerships,
corporations, trusts, nonprofit organizations, any other public or
private entity, that will participate in the proposed project as a
sponsor, owner, prime contractor, turnkey developer, managing agent,
nursing home administrator or operator, packager, or consultant.
Architects and attorneys who have any interest in the project other than
an arms length fee arrangement for professional services are also
considered principals by HUD.

In the case of partnerships, all general partners regardless of their
percentage interest and limited partners having a 25 percent or more
interest in the partnership are considered principals. In the case of
public or private corporations or governmental entities, principals
include the president, vice president, secretary, treasurer and all
other executive officers who are directly responsible to the board of
directors, or any equivalent governing body, as well as all directors
and each stockholder having a 10 percent or more interest in the
corporation.

**Explanatory Attachment for Item 14:**

**Excerpt from OPG Appendix F, Detailed Guidance for PAE's Attorney,**

**Closing Document Preparation (revised January 2003)**

A.  **Ground Leaseholds**. Ground leaseholds must conform to the FHA
    Lease Addendum Form FHA-2070.

    1.  The term of the Lease Addendum may be varied to conform with
        applicable State and local law except any term changes must be
        consistent with the Section of the National Housing Act under
        which the project is underwritten:

        a.  Mortgages insured under Sections 220, 221(d), and 236
            pursuant to Section 223(a)(7) must have a lease term that
            satisfies one of the following requirements:

            i.  Term is 99 years and is renewable, or

            ii. Term has at least 10 years to run after maturity date of
                the mortgage.

        b.  Mortgages insured under Section 207 pursuant to Section
            223(a)(7) must have a lease term that satisfies one of the
            following requirements:

            i.  Term is 99 years and is renewable, or

            ii. Term is at least 50 years from the date the mortgage is
                executed.

    2.  PAE\'s counsel needs to ensure the non-default status of any
        ground lease that exists at the time of closing. This can be
        done by collecting an estoppel certificate from the lessor as
        part of the closing package. This certificate must be dated
        within 30 days of closing and state that the lessee is current
        on all rents due, the lessee is not in default of any lease
        provision and no event has occurred which, with the passage of
        time, would be a default under the lease.