4440.1

CHAPTER 7. FINAL ENDORSEMENT

7-1. REQUEST FOR FINAL ENDORSEMENT OF CREDIT INSTRUMENT, FHA FORM 2023.

After receipt by the mortgagee of approval of a final advance, FHA

Form 2023 completed and executed by the mortgagor, mortgagee, and

general contractor, must be submitted in duplicate, with the original

credit instrument and, if required, three conformed copies of Escrow

Deposit Agreement, FHA Form 2456.

a\. On receipt, FHA Form 2023 will be checked against each previously

approved FHA Form 2403 to determine that the amount of each

advance is correctly stated and that the total shown on the FHA

Form 2023 equals the total of all advances. If any error is

found, the form will be returned to the mortgagee with an

explanation of the correction required. The inclusion of an

amount advanced by the mortgagee to the mortgagor from escrow

funds required for completion of the project is a common source

of error, and it is important that such amounts be excluded from

FHA Form 2023. When reviewing this form, the Field Office

Director should examine the title evidence submitted prior to

final closing to confirm the certification by the mortgagor as to

items of outstanding indebtedness.

b\. Particular attention is directed to the required certifications

by the mortgagor and the general contractor with respect to their

obligations and the penalty provided by law for misstatements.

FHA Form 2023, as revised, requires in every case a full

disclosure by both the mortgagor and the general contractor of

all outstanding unpaid obligations. In addition, in cases where,

during the construction of the, project, there is strong evidence

of slow payment or nonpayment by the mortgagor or the general

contractor, it is within the discretion of the Field Office

Director to require that sufficient funds from the final advance

of mortgage proceeds be placed in escrow with the mortgagee or

with an escrow agent for disbursement to satisfy all unpaid

obligations disclosed on FHA Form 2023 and attachments. Such

funds are to be released from escrow only upon the mortgagee or

escrow agent being furnished with simultaneous acknowledgement of

payment by the general contractor and/or appropriate

subcontractor or materialman. However, in all cases the Field

Office Director shall proceed as follows:

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4440.1

(7-1) (1) Mortgagors shall be advised that all unpaid obligations

contracted in connection with the acquisition of land,

purchase of property, construction of the project, or the

mortgage transaction shall without exception be reported on

FHA Form 2023 as required by the Certificate of the

Mortgagor. Likewise, General Contractors shall be advised

that all unpaid obligations contracted in connection with

the construction contract shall be reported on FHA Form 2023

as required by the Certificate of the General Contractor.

\(2\) The unpaid obligations of the mortgagor listed under (b) and

\(c\) of paragraph 2 of the Certificate of the Mortgagor on

FHA Form 2023 shall not exceed the amount of the final

advance of mortgage proceeds. In the event that a FHA Form

is received showing such an excess, it shall be returned to

the mortgagor with the advice that the differences must be

liquidated by cash payment or through the issuance of stock

or a promissory note. A corrected FHA Form 2023 must then

be submitted. If a promissory note is used, it must be on

the proper HUD-FHA prescribed note form and no change in

substance shall be permitted. Two copies of all notes

should be obtained for filing in the Field Office and

Washington dockets.

\(3\) In any case where the amount of the unpaid obligations

certified by the general contractor exceeds me amount

certified as due the general contractor by the mortgagor,

the Field Office Director shall urge the prompt payment of

such excess obligation. If there is an identity of interest

between the mortgagor and the general contractor the Field

Office Director shall immediately notify the mortgagor that

final endorsement will be withheld until evidence is

furnished that sufficient cash is available to pay all

outstanding obligations in full.

\(4\) When these forms are satisfactorily completed and submitted,

it is in order to proceed with the final closing conference.

The date of final endorsement will be the date the Field

Office Director or his authorized agent affixes his

signature to the credit instrument. The original of FHA

Form 2023 will be filed in the Washington docket, the copy

of FHA Form 2456 will also be filed in the Washington

docket, and a conformed copy filed in the Field Office

docket.

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4440.1

Paragraph 3 of the Certificates of the Mortgagor and the General

Contractor on FHA Form 2023 require the emission of receipts for

the reported unpaid obligations within prescribed time limits.

\(a\) If the receipts for reported unpaid obligations are not

received by the deadline, it is the responsibility of the

Field Office Director to immediately make appropriate

inquiry in writing.

\(b\) If the receipts for reported unpaid obligations are not

received within two weeks from the date of such inquiry, the

Field Office Director will report the matter to the

Director, Office of Loan Management.

7-2. AMOUNT OF ENDORSEMENT. The credit instrument will be finally
endorsed

in an amount equal to the full amount of all insured advances to the

mortgagor, as shown by the applicable FHA Form 2023, regardless of

whether the final endorsement occurs before or after the commencement

of amortization of the insured mortgage.

7-3. WORKING CAPITAL DEPOSIT. On final endorsement of the mortgage, the

mortgage shall be entitled to release any balance of the working

capital deposit to the mortgagor (but only to the mortgagor.) The

Field Office Director is not required to approve or disapprove such

action; but, if consulted, shall point out to the mortgagor and

mortgagee that both should give careful consideration to the position

of the mortgagor (percentage of occupancy, etc.,) and should point

out, also that any release of such funds while a mortgage default

exists will be the sole responsibility of the mortgage,.

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