Sec. 05.05.02.09. Loan Procedures

A. Early Start. In certain circumstances and upon the request of a sponsor who has applied for a loan which has been recommended for approval by the Housing Finance Review Committee and approved by the Secretary, the Administration may approve the beginning of construction of a project before the initial loan closing. All construction undertaken by the sponsor before initial loan closing is at the risk of the sponsor, and does not bind or obligate the Administration to make the loan. The early start approval letter sets forth various conditions, such as receipt by the Administration of acceptable plans and specifications and delivery of payment and performance bonds, which shall be complied with before beginning construction. If the conditions are complied with and the loan is closed, the loan reimburses the sponsor, as specified in the loan closing documents, for a portion of the costs incurred in the construction undertaken before initial loan closing.

B. Construction Loan Closing.

(1) The sponsor shall furnish or cause to be furnished to the Administration and its counsel satisfactory evidence of compliance with the terms and conditions of the loan before the closing of the loan.

(2) The Administration shall request the sponsor to have its attorney review the required legal documents for closing in the form prescribed by the Administration, and to submit comments for the Administration's and its counsel's review. When all procedures and requirements are completed, initial loan closing shall be arranged by counsel to the Administration.

(3) The sponsor shall tender an off-site bond, cash, or an unconditional, irrevocable letter of credit to the Administration at the time of construction loan closing to assure completion of any off-site improvements.

C. Construction Period Disbursements. The Administration may:

(1) Conduct regular on-site inspections of construction;

(2) Make construction loan disbursements on the basis of work-in-place plus materials acceptably stored on site, less 10 percent retention; and

(3) Make disbursement for materials acceptably stored off-site, if the materials are:

(a) In a bonded warehouse,

(b) Set aside and labeled with the project's name,

(c) Inspected by the Administration's inspector,

(d) Insured, with the Administration as a named insured, and

(e) Documented by evidence of payment for the materials.

D. Permanent Loan Closing. Permanent loan closing shall be arranged after construction completion and cost certification according to such procedures and documentation as may be required by the Administration.