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Final Closing

According to current HUD handbooks for Section 202 and Section 811, Final Closing occurs when the following events have been completed:

The Cost Certification has been completed.

The Owner accepts the final capital advance amount that has been determined by HUD.

The title company has issued a title policy that is free of any liens that are unacceptable to HUD.

Construction has been completed according to the approved plans and specifications, except there may be items of delayed completion, which are covered by an escrow agreement.

The Final Closing takes place at the HUD Legal office. In addition to the acceptance of legal and other documents that HUD requires, the Owner makes payment to vendors cited in the Cost Certification, as approved by HUD.

HUD Letter to Owner Regarding the Final Closing

Following the completion of processing of the Cost Certification, HUD will issue a letter to the Owner providing the results of processing and directing the Owner to proceed to Final Closing. The HUD letter will cover the following:

Final Mortgage Amount. It will indicate whether the Capital Advance mortgage amount established at Firm Commitment has been supported by the approved allowed costs during construction, or if the amount will be increased or decreased. HUD's calculation of the Maximum Capital Advance for Final Closing appears on Form HUD-92580-CA which is attached to the letter. If the Capital Advance is increased as a result of processing, the Owner will be asked to accept the revised amount in writing.

Insurance Requirements. HUD provides a detailed list of all insurance policies that must be in place by the Final Closing, on Form HUD-90164-CA, Property Insurance Requirements (see Para. 5, Permanent Insurance). A Permanent Insurance Schedule for the project, FHA Form-2329, will be provided. This schedule establishes the total 100% insurable value, which supersedes that value as established in the Firm Commitment processing. [Please note that Para. 5.(a) of Form 90164-CA, regarding Fire and Extended Coverage Insurance, requires an amount not less than 80% of the 100% insurable value on Form 2329.]

If there were items of delayed completion, they will be indicated. Escrow requirements for incomplete work will also be shown. A determination of any incomplete work is typically done at the final inspection. The project architect presents an itemized list of work to be completed together with a dollar value for each item. The HUD inspector will then multiply the total value by 1.5 times and direct that that amount be held in escrow until the work has been completed. This is done as an incentive to complete the work quickly and prior to the Final Closing.

Any Davis-Bacon violations, which concern payroll payments made to construction workers, will be listed, and the Contractor will be required to present proof of compliance or make a payment into an escrow account, in accordance with the requirements of Form HUD-90176-CA, Escrow Deposit Agreement, prior to the closing.

HUD will direct the Owner to place in escrow funds needed to satisfy payment of all "to be paid" items listed in Form HUD-92330, Mortgagor's Certificate of Actual Costs, in the Owner's Cost Certification. The escrow may be adjusted downward if satisfactory proof of payments made after the cut-off date of the certification is presented.

HUD will determine the amount, if any, to be deposited into the Replacement Reserve or Residual Receipts account for the project.

HUD will advise if the Final Closing is to be delayed pending resolution of issues regarding REAC (building conditions), or FASS (financial reporting).

The Owner will be directed to submit to the Project Manager within 30 days of the date of the letter:

1. the final Sponsor's Requisition, Form HUD-92403-CA,

2. the final requisition from the General Contractor, Form HUD-92448, including the Prevailing Wage Certificate, if applicable, and

3. the complete closing package. Click here for HUD Legal Requirements for Final Closing.