**Appendix D:**

# Processing Transfers of Physical Assets (TPA) for M2M Full Debt Restructuring

1.  **Overview.**

    A.  **Applicability**.

        i.  **Full Restructures**. This Appendix covers transfers
            proposed as part of Full Debt Restructuring Plans in
            accordance with the M2M Operating Procedures Guide,
            Chapter 4. The transfer must take place either:

            a.  After OMHAR and the purchaser execute the Restructuring
                Commitment but prior to the M2M closing; or

            b.  Immediately following the M2M closing, but under the
                same set of escrow instructions as the M2M closing.

        ii. **OMHAR**-**Lites.** TPAs for OMHAR-Lite transactions will
            be handled by Multifamily Hubs and Program Centers.

    B.  **Full or Modified Review.** The PAE will conduct either a Full
        or Modified TPA review (as discussed in more detail below).

    C.  **PAE and OMHAR Roles.**

        i.  **Review and Approval.** The PAE will receive the
            purchaser's application and supporting materials, review
            them, determine their acceptability, and (if they are
            acceptable) recommend that the OMHAR Regional Office
            Director approve the transfer.

            a.  **Alternative Process:** The Hub or Program Center may
                process and approve the TPA under existing guidance.

        ii. **Closing.** For all OMHAR-approved TPAs, the PAE's counsel
            will oversee and manage the closing of the transfer.

            a.  **Alternative Process.** If the Hub or Program Center
                processes and approves the TPA, the TPA closing normally
                will take place under the control and management of the
                Hub / PC field counsel. Also, when the PAE is not
                processing the TPA, the PAE is not responsible for
                including Final TPA Approval Letter in the closing
                docket.

    D.  **Approval of Modified TPAs.** For Modified TPA transactions,
        typically only one approval is issued. The purpose of this
        approval is to authorize the new principal(s) to assume their
        new roles. Typically, the Modified TPA approval will require the
        parties to submit as-closed documents after the TPA closes.

    E.  **Approval of Full TPAs.** For Full TPA transactions, two
        approvals are issued.

        i.  **Preliminary Approval (Full TPAs Only).** Based on the
            PAE's recommendation, the RO will grant Preliminary TPA
            Approval for the transfer to close.

        ii. **Final TPA Approval (Full TPAs only).** Based on the PAE's
            certification that the transfer closed in accordance with
            the Preliminary Approval, the RO will grant Final TPA
            Approval after TPA closing has occurred. This approval may
            be given at the closing table, after all requirements have
            been satisfied.

    F.  **NOTE.** The new principals may not assume control or ownership
        of the project until OMHAR has issued Approval (Modified TPA) or
        Preliminary Approval (Full TPA). If the M2M restructuring
        ultimately does not close, the Approval will be withdrawn and
        considered canceled. Thereafter, responsibility for further
        consideration of the TPA reverts to the Multifamily Hub or
        Program Center.

2.  **Other Guidance.** OMHAR has determined that compliance with this
    Appendix will satisfy applicable HUD requirements. Some applicable
    HUD requirements are incorporated within this Appendix, and the
    remaining applicable HUD requirements are referenced in this
    Appendix (and shown in ***bold italics***). All referenced guidance
    is available on the OMHAR Web site, on the Operating Procedures
    Guide web page
    (http://www.hud.gov/offices/omhar/readingrm/opglinks.cfm), under
    "Appendix D".

3.  **Objectives of TPA Review.** The PAE's recommendation for OMHAR
    approval is based on the PAE's determination that the proposed TPA
    will satisfy each of the following objectives:

    A.  **Purchaser Suitability.** The purchaser has the capabilities
        necessary to own the property successfully.

        i.  Prospective owners / managing general partners must satisfy
            the PAE that they have sufficient experience to operate the
            property. A troubled property may require an owner/managing
            general partner who has demonstrated the ability to
            successfully own and manage troubled multifamily properties.

        ii. If the purchaser is not clearly suitable, the PAE must
            discuss the purchaser with the Hub or Program Center to
            assess the purchaser's performance on other HUD properties.

        iii. The proposed management agent must satisfy the PAE that
             he/she has sufficient experience to enable him/her to
             successfully manage the project. The type and length of
             experience required will vary depending upon the degree of
             difficulty of managing the particular project.

    B.  **Soundness.** The property will be physically, financially and
        managerially sound, on a long-term basis, after the transfer. In
        general, this determination is made through the PAE's normal M2M
        underwriting and structuring.

    C.  **Proper Legal Structure.** The acquiring entity's governing
        documents, and the proposed legal documents effecting the
        transfer, meet applicable HUD requirements. In general, this
        determination is made in accordance with the ***TPA Handbook
        Exhibit G***, a memo from HUD's Office of General Counsel
        concerning counsel review of TPA legal documents.

    D.  **Consistency.** The terms of the TPA must be consistent with
        the Restructuring Commitment and with the terms of the proposed
        post-M2M 1^st^ mortgage financing.

4.  **Type of Post-M2M Financing.** The type of first mortgage financing
    (post-M2M) helps determine whether TPA approval is required:

    A.  **Modification of Insured or HUD Held Loan.** Transfers
        occurring in M2M loan-modification transactions require TPA
        approval.

    B.  **223(a)(7) Loans.** Transfers occurring in M2M 223(a)(7)
        transactions require TPA approval. The 223(a)(7) loan proceeds
        cannot be used to finance the purchase price.

    C.  **223(f) and 221(d)(4) Loans.** These M2M transactions are
        purchases with new mortgages and therefore do not trigger any
        TPA requirements. HUD requirements for purchaser suitability,
        soundness, and proper legal structure are met as a part of the
        new loan underwriting by the Multifamily Hub or Program Center.

    D.  **Non FHA Financing.** If the transfer results in new
        conventional financing, with a Mortgage Restructuring Mortgage
        and/or Contingent Repayment Mortgage to be held by HUD, the PAE
        must satisfy itself that the purchaser is acceptable as a
        borrower under the restructuring and/or contingent mortgage. The
        purchaser suitability portions of this Appendix will help the
        PAE make this determination.

5.  **When Is A Modified TPA Required?** In general, a modified TPA is
    required when a property undergoes a change of control of the
    current mortgagor (such as substitution of general partner, transfer
    of a 50 percent or greater interest in the project, or any other
    transaction resulting in a change of control)*.*A Modified TPA
    review is required for each of these types of transactions:

    A.  A transfer of more than 50% of the partnership interest in a
        partnership that does not trigger a dissolution of the
        partnership.

    B.  A substitution of one or more general partners.

    C.  A transfer of more than 50% of the stock of a corporate owner,
        or a transfer of less than 50% of the stock that also results in
        a change in control.

    D.  A transfer of a portion, or all, of the beneficial interest in a
        passive trust, that does not cause a change in control.

    E.  A transfer of more than 50% of the stock of a corporate general
        partner, or a transfer of less than 50% of the stock that also
        results in a change in control of the general partner.

    F.  Other transactions that do not fall into one of the above
        categories, but that result in a change in control of the owner.
        The PAE is authorized to make a determination as to when a
        change of control has occurred. If there is doubt as to whether
        the transfer requires a review, the review is encouraged.

6.  **When Is A "Full" TPA Review Required?** In general, a full TPA is
    required when a property is sold or conveyed to a new mortgagor who
    assumes or takes subject to an existing FHA insured mortgage or a
    HUD-held mortgage.

    A.  **Novel Transactions.** When a novel transaction is proposed,
        OMHAR reserves the right to direct the PAE to treat the
        transaction as requiring a full review and to request any
        additional documentation it deems necessary.

    B.  **Transactions Requiring Full Review.** A Full Review TPA is
        required for each of the following transaction types:

        i.  A transfer of title from the owner to a buyer.

        ii. A transfer of partnership interests that triggers a
            dissolution of the partnership.

        iii. A transfer of 100% of the beneficial interest of a passive
             trust accompanied by a change in control.

7.  **TPA Processing Fee Waiver.** The application fee for TPAs taking
    place in conjunction with M2M Full Debt Restructuring transactions
    is routinely waived. OMHAR Headquarters has responsibility for
    ensuring waivers are obtained; there are no requirements placed on
    the processing PAE.

8.  **TPA Timing.**

    A.  Timing vs. M2M Closing. The TPA may be closed at any time after
        OMHAR gives Preliminary TPA Approval and before the M2M closing.
        At the option of the parties, the TPA may also be closed
        immediately following the M2M closing, in which case the M2M and
        TPA closings must be encompassed within a single set of closing
        instructions and a single escrow agreement.

    B.  Plan Timing Carefully. PAEs should work closely with purchasers
        and sellers to ensure that each understands the exact sequence
        of events. In particular, it is important that all parties agree
        who will hold title at the time of the M2M closing. The M2M
        claim payment will be made on behalf of that party, and the
        restructuring of the financing will take place during that
        party's ownership of the property.

9.  **Purchaser's Submission Package for Modified TPA Review.** The
    proposed new mortgagor must submit, for review and approval by the
    PAE and its counsel, the items listed in Attachment 1.

10. **Approval for Modified TPAs.** After review of the documentation
    and discussion with the parties involved in the transfer, the PAE
    provides a ***Form 7.24*** ***Certification of Modified TPA
    Documents***. In order to make this certification, the PAE will:

    A.  **2530 Clearance.** Receive Previous Participation approval from
        the Multifamily Hub or Program Center, for each new principal.

    B.  **Purchaser Suitability.** Establish the suitability of each
        proposed new principal (see item 3.A above).

    C.  **Acceptable Business Arrangements.** Satisfy itself that the
        business arrangements between seller and purchaser, contained in
        a binding Purchase and Sale Agreement executed by the seller and
        purchaser, are acceptable.

    D.  **Draft OMHAR Approval Letter.** Include a draft ***OMHAR
        Modified TPA Approval Letter*** for the OMHAR Portfolio
        Director's signature. This letter must list any post-closing
        conditions (such as submission of as-closed legal documents).

11. **Post-Closing Requirements for Modified TPAs.**

    A.  **Final Approval Not Applicable.** No "Final" TPA approval is
        required for modified TPAs.

    B.  **Post Closing Document Collection.** The PAE retains copies of
        all documents to be included with the M2M final closing dockets.
        The PAE will collect any as-closed documents required under the
        ***OMHAR Modified TPA Approval Letter***.

    C.  **Post Closing Document Distribution.** The PAE distributes the
        complete TPA package in accordance with Chapter 8 of the OPG by
        including it in the closing docket for the M2M transfer.

12. **Purchaser's Submission Package for Full TPA Review.** The proposed
    new mortgagor submits, for review and approval by the PAE and its
    counsel, the documents listed in Attachment 2.

13. **Preliminary Approval for Full TPAs.** After review of the
    documentation and discussion with the parties involved in the
    transfer, the PAE provides a ***Form 7.22*** ***Certification of
    (Full) TPA Documents and Request for Preliminary TPA Approval***. In
    order to make this certification, the PAE will:

    A.  **2530 Clearance.** Receive Previous Participation approval from
        the Multifamily Hub or Program Center, for each new principal.

    B.  **Purchaser Suitability.** Establish the suitability of each
        proposed new principal (see item 3.A above).

    C.  **Acceptable Business Arrangements.**

        i.  Satisfy itself that the business arrangements between seller
            and purchaser, contained in a binding Purchase and Sale
            Agreement executed by the seller and purchaser, are
            acceptable.

        ii. Review the documents for legal sufficiency and demonstrated
            business and management experience to determine the
            acceptability of the transfer.

        iii. Assure that the proper forms have been used, the correct
             parties have executed the documents, and that the
             transaction is fully described and documented.

    D.  **PAE Certification.** After review of the documentation and
        discussion with the parties involved in the transfer, the PAE
        provides a ***Form 7.22 Certification of (Full) TPA Documents
        and Request for Preliminary TPA Approval***.

    E.  **OMHAR Approval.** If recommending approval, the PAE includes a
        draft ***OMHAR Preliminary (Full) TPA Approval Letter***.

14. **Final Approval For Full TPAs.**

    A.  **PAE / Purchaser's Submission Package for Final Approval for
        Full TPAs.** The package contains the documents listed in
        Attachment 3.

    B.  **PAE Certification.** Using ***Form 7.23 Certification of
        (Full) TPA Documents and Request for Final TPA Approval***, the
        PAE will certify to OMHAR that the transaction closed in
        accordance with OMHAR's Preliminary Approval and other
        applicable requirements.

    C.  **Draft OMHAR Approval Letter.** The PAE will provide a draft
        ***OMHAR Final (Full) TPA Approval Letter*** for the OMHAR
        Portfolio Director's signature.

    D.  **Post Closing Document Distribution.**

        i.  The PAE retains copies of all documents to be included with
            the M2M final closing dockets.

        ii. After the OMHAR Portfolio Director grants Final Approval,
            the PAE collects any remaining documentation and distributes
            the complete TPA package in accordance with Chapter 8 of the
            OPG by including it in the closing docket for the M2M
            transfer.

15. **Multiple Transfers**. Parties frequently structure their proposals
    as multiple project transfers. A series of simultaneous project
    transfers is legally acceptable provided the parties have submitted
    all relevant documents with respect to each transfer. A separate
    review of each transfer must be performed to determine the
    acceptability on the entire proposal. However, the two transactions
    can be combined in one application with minimal review required of
    the first (2530 clearance, for example) in order to expedite the HUD
    review process. This same rationale is also applicable to any other
    interim "status" transfers by deed. To expedite the review of
    particularly complex multiple transfers, the PAE attorney should
    contact the OMHAR closing staff for referral to HUD counsel for
    assistance. In particular, questions often arise with respect to the
    amount of time between transfers.

16. **For Profit Acquisition of Nonprofit Property.** The transfer must
    comply with the requirements of Handbook 4350.1, Chapter 13,
    paragraphs 17 through 23.

17. **Optional Suggested Procedures** to assist in a smooth and complete
    TPA process:

    A.  **Pre-submission meeting.** Experience strongly suggests that a
        pre-submission meeting will be helpful. PAE staff should meet
        with the owner and purchaser before submission of the TPA
        package in order to review OMHAR and HUD\'s requirements with
        the parties (see detail at Attachment 5 to Housing Notice
        H-99-13) and to provide copies of model HUD documents. Such a
        pre-submission meeting may be particularly useful with a
        purchaser who has not previously done business with the
        Department and should assist in facilitating and expediting the
        TPA process.

    B.  **Review for completeness.** HUD advises that in analyzing the
        processing of TPA's, the single largest factor contributing to
        delays is the acceptance of incomplete TPA packages. HUD
        recommends that if the package is incomplete, it should be
        returned without processing and the purchaser and owner advised
        of the deficiencies.

**Attachment 1: Submission Package for Modified TPAs Under M2M**

1.  **Notification that Change of Control is Imminent.** This is an
    advisory letter announcing that a transfer is being considered and
    identifying the parties.

2.  **Narrative description of the TPA in the context of the
    Restructuring Plan.** Any new party that is a REIT (real estate
    investment trusts) or LLC / LLP should be clearly identified.
    Compliance with ***Housing Notice H 95-66*** is required for LLC's.

3.  **Previous Participation Certification (*Form HUD-2530*).** Required
    for all new principals, including any new management agent. The PAE
    will submit all HUD-2530s to the Multifamily Hub or Program Center
    for processing.

4.  **Amended Organizational Documents.** A copy of the Proposed Amended
    Partnership Agreement.

5.  For Transfers of a 50 Percent or Greater Interest:

    A.  Copies of [Proposed]{.underline} Additional Financing Documents
        (if any). The buyer and seller must provide to the PAE copies of
        all documents that discuss financial arrangements between buyer,
        seller, the Project, and OMHAR/HUD, regardless of when the
        financial transactions take place.

    B.  For partnership mortgagors: Attorney's Certification that the
        transfer does not cause a dissolution under applicable state
        law. If the transaction would cause dissolution of the
        partnership, a Full TPA Review is required.

6.  **Resumes.** Resume for Incoming General Partner(s),and new
    Management Agent, if any.

7.  ***Form HUD-92458, Rental Schedule and Information***. The front of
    the HUD-92458 should reflect the rents established in the
    Restructuring Plan. The back should reflect any applicable changes
    in principals.

8.  **Physical Inspection Report.** Notice H-99-13 (section A.7.b)
    requires the purchaser to submit a physical inspection report
    meeting HUD requirements.

    A.  The Purchaser may fulfill this requirement by accepting the
        PAE's Physical Condition Assessment.

9.  **Additional Requirements.**

    A.  **Requirements Normally Applicable Only for Full TPAs**. The PAE
        may, in addition, impose any requirements that would be
        applicable under a Full TPA review.

        B. **Deferred Purchase Price Documents, If Applicable.** If any
        portion of the purchase price will be paid other than in cash at
        closing, the deferred portion of the purchase price is termed
        "secondary financing" for TPA purposes. Submit the proposed
        legal documents (executed but not recorded) governing the
        payment of the deferred purchase price. If there will be any
        "secondary financing":

        i.  Administrative Requirements. The PAE must determine if the
            administrative requirements of ***Paragraph 13-15 of HUD
            Handbook 4350.1*** have been met.

        ii. OMHAR Review. MAHRA has specific provisions for debt
            subordination in M2M transactions where "secondary
            financing" is proposed; any secondary financing must be
            reviewed by OMHAR for acceptability.

        iii. Mortgagee Consent. If there will be any
             [secured]{.underline} secondary financing, approval of the
             first mortgagee must be obtained.

    B.  **If Flexible Subsidy Is Involved.** Normal HUD requirements
        (Notice H-99-13 Section A.10) do not apply in M2M; instead, the
        Flexible Subsidy loans normally will be modified and
        subordinated in accordance with OPG Appendix P. The PAE should
        contact Jo Anne Garrison at OMHAR HQ (x3651).

    C.  **Preservation Properties.** If the property was preserved under
        LIHPRHA or ELIHPA, the PAE should contact Jo Anne Garrison at
        OMHAR HQ (x3651). Such properties are eligible for M2M only if
        sold. They also have existing use agreements that will need to
        be subordinated to the M2M Use Agreement.

    D.  **Management Documents.** If a change in management is proposed:

        i.  Management Certification (per HUD Handbook 4381.5).

        ii. Management Form 2530 -- Form 2530 is required for the
            proposed management agent and its principals.

        iii. Management Entity Profile (HUD Form 9832).

    E.  **Credit reports.** Credit reports are required on all proposed
        mortgagor entity principals. Reports must be from an acceptable
        credit reporting agency and must include an original on the
        agency's letterhead.

**Attachment 2: Submission Package for Preliminary Approval of Full TPAs
Under M2M**

**(Replaces Notice H-99-13 Attachment 5, for M2M TPAs)**

1.  **TPA Application Form. *Form HUD-92666.*** The form must be
    properly executed. Note that if a lien is being created, the
    mortgagee must sign the application.

2.  **Mortgagee Consent.** Consent by the Mortgagee to the proposed
    transfer is required only if there is a deferred purchase price (see
    item 20 below) and a lien is proposed to be created against the
    property.

3.  **TPA Fee.** The submission package need not include a TPA fee (see
    Appendix D, paragraph 7, regarding fee waivers).

4.  **Purchaser's Letter. "**Purchaser" is defined to include all
    individuals purchasing as individuals or as principals in a joint
    venture, all general partners in a purchasing partnership, or a
    corporation. This letter must be signed by an authorized principal
    of the purchasing entity and must describe in full detail:

    A.  All financial consideration that will flow to the project and to
        the mortgagor / seller as a result of the transfer. All
        financial consideration that will flow to the project and to HUD
        as a result of the transfer.

        i.  The Purchaser may reference the Sources and Uses of Funds
            statement (item 9 below) and the Seller / Purchaser
            Affidavit (item 11 below) in fulfillment of this
            requirement.

    B.  The business transaction (the TPA in the context of the
        Restructuring Plan, as reflected in the Source and Use of Funds
        Statement), including but not limited to:

        i.  How the transaction complies with OMHAR's Objectives For TPA
            Review (Appendix D, paragraph 3).

        ii. An explanation of the organization and structure of the
            purchasing entity.

        iii. An explanation of the business transaction reflected in the
             Sources and Uses of Funds statement.

        iv. The Purchaser\'s motivation for acquiring the project.

        v.  An explanation of its relationship to the management agent
            and whether it expects to make changes in the management of
            the project, particularly within the first year following
            preliminary approval.

        vi. An explanation of why it believes the proposed repair
            program and/or deposit to the reserve for replacement
            account will be adequate to maintain the project in safe,
            decent and sanitary condition.

            a.  The Purchaser may fulfill this requirement by concurring
                with the PAE's suggested repairs and Reserve deposits.

        vii. An explanation of how it will correct any financial
             deficiencies reflected in the interim financial statement,
             including eliminating payables at Preliminary Approval and
             making sure the various escrows (property tax, insurance)
             and trust accounts (tenant security deposit) will be
             properly funded as a result of the TPA.

    C.  The letter must state that if the project is HUD-insured the
        project mortgage is current or will be brought current at
        Preliminary Approval. If the mortgage is held by HUD, the letter
        must state that the mortgage is either current or it must
        describe a plan for bringing the mortgage current.

        i.  The purchaser may fulfill this requirement by requesting
            Preliminary Approval contingent upon the closing of the M2M
            debt restructuring.

5.  **Purchaser's Certificate of Previous Participation.** ***Form HUD
    2530*** -- required for all new principals. The term "principal"
    includes:

    A.  The new ownership entity.

    B.  All general partners.

    C.  Individuals and/or entities who will own an interest in the
        project greater than 24%[^1], or who own 10% or more of the
        stock of a corporate mortgagor.

    D.  Any proposed new management agent.

    E.  All consultants and/or packagers for profit.

    F.  Any other entities defined as "principals" in the instructions
        to the form.

6.  **Purchaser's Resume.** Required for all M2M transfers, regardless
    of the purchaser's previous participation in HUD programs. The
    purchaser must describe its background and qualifications to own the
    project. The resume should, at a minimum, reference all of the
    purchaser's previous experience in the multifamily housing industry.
    The Resumes for each principal of the purchaser should be submitted
    and should be in sufficient detail for the PAE to understand the
    nature of their real estate experience.

7.  **Purchaser's Personal Financial Statement.** If the proposed
    mortgagor entity has not yet been formed and capitalized, personal
    financial statements are required for the proposed mortgagor entity
    and all principals, using ***FHA Form 92417***.

8.  **Credit reports.** Credit reports, to be ordered by the mortgagee,
    are required on all proposed mortgagor entity principals. Reports
    must be from an acceptable credit reporting agency and must include
    an original on the agency's letterhead.

    A.  If no traditional first mortgage is proposed, the PAE will order
        the credit reports.

9.  **Sources and Uses of Funds.** This shows ALL expected sources of
    funds and ALL expected uses of these funds.

    A.  Purchasers will use the standard M2M format (Restructuring
        Commitment Exhibit F).

    B.  The applicant may modify this format to suit the particular
        transaction, but the modification may not be less detailed or
        combine items to avoid specificity.

10. **Executed but Unrecorded Sale, Option or Land Contract.** Submit
    the applicable sale document in its entirety. The Contract must
    recite all consideration to the seller or its affiliates. The PAE
    will require recordation of the Contract as part of the M2M closing.

    A.  Required Contract Provision. The Contract must include the
        following language: "This (describe document) is expressly
        conditioned upon preliminary approval by HUD of the transaction
        as set forth in the Application for Transfer of Physical Assets,
        and supporting documents submitted in connection therewith. No
        transfer of any interest in the project under this (describe
        document) shall be effective prior to such approval by HUD.
        Buyer will not take possession of the project nor assume
        benefits of project ownership prior to such approval by HUD. The
        Buyer, his heirs, executors, administrators or assigns, shall
        have no right upon any breach by Seller hereunder to seek
        damages, directly or indirectly, from the FHA Project which is
        the subject of this transaction, including from any assets,
        rents, issues or profits thereof, and Buyer shall have no right
        to effect a lien upon this project or the assets, rents, issues,
        or profits thereof."

    B.  If Land Contract Is Used. If a Land Contract is used, the Land
        Contract must comply with applicable requirements in ***TPA
        Handbook Exhibit G***, at Section II, Paragraph K; and Section
        III, Paragraph G.

11. **Executed Seller/Purchaser Affidavit.** This is a sworn statement
    declaring that the Contract recites all of the consideration passing
    between the parties to the transfer, and identifying any identity of
    interest between parties contributing or receiving funds in the
    transaction.

12. **Interim Unaudited Financial Statements.** The statements must be
    prepared in accordance with Handbook 4370.2. The period covered runs
    from the date of the last audited financial statement to the date of
    the TPA application. Unaudited statements are acceptable at the time
    of preliminary submission; final approval requires audited
    statements, from the last AFS date to the date of TPA closing.

13. **Pro Forma Balance Sheet.** Pro forma balance sheet (prepared
    according to Handbook 4370.2). This Balance Sheet will show how the
    project accounts are expected to appear the day after the expected
    date of closing.

14. **Mortgagee Escrow Statement.** The mortgagee should provide an
    opinion (certified) as to the adequacy of the present escrow
    balances (taxes, property insurance) and present monthly deposits to
    meet the next anticipated tax and insurance bills.

15. **Physical inspection report.** Notice H-99-13 (section A.7.b)
    requires the purchaser to submit a physical inspection report
    meeting HUD requirements.

    A.  The Purchaser may fulfill this requirement by accepting the
        PAE's Physical Condition Assessment.

16. **MIO plan (if needed).** Management Improvement and Operating (MIO)
    Plan - Where the project will have physical, management, or
    financial needs or changes at the time of the transfer, a MIO plan
    or another plan acceptable to HUD must be submitted, which describes
    the timing and extent of planned repairs and financial contribution
    and the timing for all management or procedural changes.

    A.  The Purchaser may fulfill this requirement by executing the M2M
        Restructuring Commitment.

17. **Management Documents.**

    A.  Management Certification (per HUD Handbook 4381.5).

    B.  Management Form 2530. ***HUD Form 2530*** is required for the
        proposed management agent and its principals.

    C.  Management Entity Profile. Using ***HUD Form 9832***. The PAE
        may also request a summary or resume of the proposed management
        agent and its principals.

18. **Proposed Mortgage Assumption Document.** Proposed Modification
    Agreement, or Proposed Release and Assumption Agreement, as
    appropriate, executed by the parties but not recorded.

19. **Proposed New Regulatory Agreement.** Draft proposed regulatory
    agreement, executed by the Purchaser but not recorded.

20. **Deferred Purchase Price Documents, If Applicable.** If any portion
    of the purchase price will be paid other than in cash at closing,
    the deferred portion of the purchase price is termed "secondary
    financing" for TPA purposes. Submit the proposed legal documents
    ([not]{.underline} executed or recorded) governing the payment of
    the deferred purchase price. If there will be any "secondary
    financing":

    A.  Administrative Requirements. The PAE must determine if the
        administrative requirements of ***Paragraph 13-15 of HUD
        Handbook 4350.1*** have been met.

    B.  OMHAR Review. MAHRA has specific provisions for debt
        subordination in M2M transactions where "secondary financing" is
        proposed; any secondary financing must be reviewed by OMHAR for
        acceptability.

    C.  Mortgagee Consent. If there will be any [secured]{.underline}
        secondary financing, approval of the first mortgagee must be
        obtained.

21. **Proposed Deed.** Proposed form of deed, not recorded.

22. **Proposed Bill of Sale and Assignment.** Proposed form, executed by
    purchaser and seller. ***Form HUD-92228*** provides a model but is
    not required.

23. **Title Report.** Issued by a title company acceptable to the PAE
    and conforming to applicable M2M program requirements.

    A.  If the PAE has obtained a title report, the Purchaser may
        fulfill this requirement by accepting the PAE's title report.

24. **Mortgagor's Oath.** ***Form HUD-2478*** provides a model but is
    not required.

25. **Proposed Rental Schedule. *Form HUD-92458.*** The front of the
    HUD-92458 should reflect the restructuring plan rents. The back
    should reflect the name of the proposed new mortgagor entity and
    should identify its principals. Approval of this form in conjunction
    with a TPA is not an approval to change the rents; rent changes in
    M2M are processed separately under existing procedures.

26. **Executed Organizational Documents.**

    A.  Unless the purchaser is an individual, full details as to the
        entity acquiring the project shall be provided.

    B.  If the purchaser is a Limited Liability Corporation/Partnership,
        the documents must comply with ***Notice H-95-66***. See item
        29.B below.

    C.  If the purchaser is a corporation, trust, or partnership, two
        certified copies of the charter, trust, or partnership agreement
        must be furnished.

    D.  The organizational documents of a corporation, trust or
        partnership[^2] must establish:

        i.  that the duration of the mortgagor is at least coextensive
            with the post-M2M financing and Use Agreement.

        ii. the authority of the mortgagor to own and operate the
            project,

        iii. the authority of the mortgagor to execute and be bound by
             the Regulatory Agreement and other relevant governing
             documents,

        iv. that the terms of the Regulatory Agreement and Use Agreement
            take precedence in the event of any conflict with the terms
            of the organization documents, and

        v.  who is authorized to execute the Regulatory Agreement, other
            relevant governing documents, and other papers on behalf of
            the mortgagor.

27. **Certification of Purchaser's Attorney.** The purchaser's attorney
    must certify that, following preliminary TPA approval, all documents
    requiring execution and/or recordation will be executed and, as
    required, recorded in the form reviewed and approved by HUD. The
    attorney must use the form ***Purchaser's Attorney's Certification
    on Execution and Recordation.***

28. **Byrd (lobbying) Amendment Certification.** An authorized
    representative of the purchaser must sign and submit a ***Byrd
    Amendment Certification***. If lobbying expenditures have been made,
    an authorized representative of the purchaser must sign and submit
    ***Standard Form LLL***.

29. **Additional Requirements.**

    A.  **Special REIT Requirements.** In the case of transfers to
        REITs, special riders to the note, mortgage and regulatory
        agreement may be required to be executed and recorded. Other
        legal and/or state-specific requirements may also be imposed.
        The PAE should investigate these issues with its legal counsel
        and bring these potential transfers to OMHAR's attention as
        early in the TPA process as possible.

    B.  **Special LLC / LLP Requirements.** In the case of transfers to
        LLCs, or LLPs, special riders to the note, mortgage and
        regulatory agreement may be required to be executed and
        recorded. Other legal and/or state-specific requirements may
        also be imposed. The PAE should investigate these issues with
        its legal counsel and bring these potential transfers to OMHAR's
        attention as early in the TPA process as possible. Compliance
        with ***Housing Notice H-95-66*** is required for LLC's and
        LLP's.

    C.  **Allonge (if applicable).** Executed but unrecorded.

    D.  **If Flexible Subsidy Is Involved.** Normal HUD requirements
        (Notice H-99-13 Section A.10) do not apply in M2M; instead, the
        Flexible Subsidy loans normally will be modified and
        subordinated in accordance with OPG Appendix P. The PAE should
        contact Jo Anne Garrison at OMHAR HQ (x3651).

    E.  **Preservation Properties.** If the property was preserved under
        LIHPRHA or ELIHPA, the PAE should contact Jo Anne Garrison at
        OMHAR HQ (x3651).Such properties are eligible for M2M only if
        sold. They also have existing use agreements that will need to
        be subordinated to the M2M Use Agreement.

30. **Documents To Be Reviewed By PAE Counsel.** The documents above
    numbered 1, 2, 4, 10, 18-23, 26, 27 and 29C must be reviewed by the
    PAE counsel. **\[These are the docs that H-99-13 says should be
    reviewed by counsel\]**

**Attachment 3: Submission Package for Final Approval of Full TPAs Under
M2M**

1.  **Executed and Recorded Documents.** Provide one Court-certified or
    recorded and one conformed copy of all recorded executed documents,
    including:

    A.  Deed or assignment of the deed (recorded plus one copy),

    B.  Mortgage assumption document (Attachment 2 item 18).

    C.  New Organizational Documents (certified or recorded, as required
        for type of entity, plus one copy),

    D.  Contract - Sale, Option or Land (recorded plus one copy), and

    E.  Original Regulatory Agreement, if applicable (2 copies
        evidencing original recording are sufficient, original not
        required.)

> If the documents are not available within a timeframe that allows the
> PAE to complete its Closing Docket, the PAE may obtain Court-certified
> copies. In such cases, the executed and recorded documents should
> later be provided to OMHAR as trailing documents.

2.  **Executed and Unrecorded Documents.** Provide two copies, certified
    by the purchaser, trustee or other authorized person to be true
    copies, of all unrecorded executed documents.

3.  **Legal Status Documents**.

    A.  Certification of Change in Documents. The purchaser's attorney
        must certify that, prior to final execution and recordation, any
        OMHAR required changes and no others were made to the documents.
        See ***Purchaser's Attorney\'s Certification of Changes***.
        Provide an original certificate and one conforming copy.

    B.  Title Policy - Provide an original and one copy of title policy
        or endorsement, as appropriate. If the mortgagor-seller is to be
        released, a proposed title binder or letter from the company
        issuing the original mortgagee's policy shall show that after
        the transfer the mortgage will remain a first lien on the
        property and the mortgagee will still be protected by a
        mortgagee's title policy.

    C.  Attorney's Opinion - Attorney's Opinion stating that the
        transaction has been legally consummated and that the purchaser
        is legally authorized to operate the project and is obligated to
        abide by the terms of the Regulatory Agreement. The opinion must
        also state that the documents that were executed and/or recorded
        are the same, in form and content, as those approved by OMHAR in
        the preliminary review process. The attorney shall not have an
        identity of interest with the purchaser or seller.

4.  **Financial Status/Management Documentation**:

    A.  Audited Interim Financial Statement - covering the period from
        the date of the last audited report furnished to OMHAR/HUD to
        the date of the transfer. Provide the original and one copy.

    B.  Purchaser's Balance Sheet. Showing the actual condition as of
        the date of the transfer of title to the purchaser (provide the
        original plus one copy).

    C.  Deferred Payment Notes. If applicable, provide one certified and
        one additional copy of any deferred payment notes approved by
        OMHAR and certified to be true copies by the holder.

    D.  Mortgagee's Statement. Provide an original statement of account
        plus one copy for all trust and escrow accounts showing balances
        as of date of transfer of title to the purchaser. Documentation
        of transfer of these to the purchaser must also be provided.

    E.  Rental Schedule (***Form HUD-92458***) dated after the date of
        transfer of the project. The Rental Schedule must list the
        HUD-approved principals, all of whom must have received 2530
        clearance. Provide two copies.

**Attachment 4: Frequently Asked Questions**

1.  **'Determinative Criteria'.** Handbook 4350.1 refers to HUD's
    Determinative Criteria for approving TPAs. Are these applicable in
    M2M TPAs? *Yes. The principles underlying the Determinative Criteria
    have been incorporated into Appendix D.*

2.  **Management Review.** Notice H-99-13 requires a management review.
    How is this requirement satisfied in M2M TPAs? *This is satisfied by
    the PAE's normal underwriting, by the PAE's determination of the
    acceptability of ownership and management.*

3.  **Flexible Subsidy.** Are Flexible Subsidy loans handled differently
    in M2M TPAs? *Yes; in M2M, OMHAR has delegated authority to modify
    Flex loans. See OPG Appendix P.*

4.  **Physical Inspection.** Notice H-99-13 requires the purchaser to
    submit a physical inspection report meeting HUD requirements. How is
    that handled in M2M? *The purchaser may satisfy this requirement by
    accepting the PAE's PCA.*

5.  **Non-HUD Funds.** Handbook 4350.1 requires that all non-HUD funds
    be committed prior to issuance of Preliminary TPA Approval. How is
    this handled in M2M? *In M2M, Preliminary TPA Approval is not issued
    until OMHAR and the purchaser have executed the Restructuring
    Commitment, which in turn requires that all funds be committed.*

6.  **Affordability.** Handbook 4350.1 requires that TPAs provide for
    the continuing affordability of the property for the remaining
    original mortgage term. How is this handled in M2M? *The M2M Use
    Agreement, calling for a minimum 30-year affordability period,
    satisfies this requirement.*

7.  **Checklists.** Do Attachments 5-8 of Notice H-99-13 apply in M2M
    TPAs? *All requirements from these attachments have been
    incorporated into Appendix D.*

8.  **Subsidy Layering.** Does the M2M subsidy layering requirement
    satisfy the similar requirement for TPAs? *Yes.*

[^1]: Notice H-99-13 substituted 'greater than 24%' for the '25% or
    greater' in previous guidance.

[^2]: Notice H-95-66 includes similar requirements for LLCs and LLPs.