92412-CA Escrow Agreement for Working Capital

Escrow Agreement for
Working Capital

U.S. Department of Housing
and Urban Development
Office of Housing

OMB Approval No. 2502-0470
(Exp. xx/xx/xxx)

Public Reporting Burden for this collection of information is estimated to average 0.5 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing
the collection of information. Response to this request for information is required in order to receive the benefits to be derived.
This agency may not collect this information, and you are not required to complete this form unless it displays a currently valid
OMB control number. While no assurance of confidentiality is pledged to respondents, HUD generally discloses this data only in
response to a Freedom of Information Act request.

This ESCROW AGREEMENT FOR WORKING CAPITAL (Agreement) made this _____
day of ____________________, 20____, by and between the United States Department
of Housing and Urban Development whose principal address is
_______________________________________________, and
____________________________________________________, (Owner), whose
principal address is _______________________________________________, [and if
applicable, _______________________________________________ (Depository
Institution), whose principal address is
_______________________________________________ , in connection with HUD
Project No. ____________________, located in the City/County of
____________________, State of ____________________, which Project [has been, is
being, or will be] [constructed, rehabilitated, purchased or refinanced] from the proceeds
of a Capital Advance provided to the Owner pursuant to Cranston-Gonzalez Affordable
Housing Act of 1990, as amended, or Section 202 of Housing Act of 1959, as amended.
(The definition of any capitalized term or word used herein can be found in this Escrow
Agreement for Working Capital, the Regulatory Agreement between Owner and HUD, the
Note, and/or the Security Instrument, except that the term Program Obligations means
(1) all applicable statutes and any regulations issued by the Secretary pursuant thereto
that apply to the Project, including all amendments to such statutes and regulations, as
they become effective, except that changes subject to notice and comment rulemaking
shall become effective only upon completion of the rulemaking process, and (2) all current
requirements in HUD handbooks and guides, notices, and mortgagee letters that apply to
the Project, and all future updates, changes and amendments thereto, as they become
effective, except that changes subject to notice and comment rulemaking shall become
effective only upon completion of the rulemaking process, and provided that such future
updates, changes and amendments shall be applicable to the Project only to the extent
that they interpret, clarify and implement terms in this Agreement rather than add or delete
provisions from such document. Handbooks, guides, notices, and mortgagee letters are
available on HUD's official website: (http://www.hud.gov/offices/adm/hudclips/index.cfm or
a successor location to that site)).
RECITALS:
A. HUD has issued a Firm Commitment to the Owner pursuant to the Cranston-Gonzalez
Affordable Housing Act of 1990, as amended, or Section 202 of the Housing Act of 1959,
as amended, and Program Obligations, on which the Owner is relying for financing of the
Project.

Escrow Agreement for Working Capital

Form 92412-CA 06/13

B. The Firm Commitment is conditioned upon a working capital escrow being established
and funded as indicated below. This requirement applies to both the profit-motivated and
the not-for-profit Owner.
AGREEMENTS:
In consideration of the mutual promises and undertakings contained herein, and for the
purpose of inducing HUD to provide the Capital Advance to the Owner, the parties
acknowledge and agree as follows:
1. At or before initial endorsement of the Note by HUD for the Capital Advance, Owner
shall deposit, or cause to be deposited subject to the control and order of HUD with a
depository institution satisfactory to HUD in accordance with Program Obligations, the sum
of $____________________ (Escrow).
2. It is agreed that HUD at all times shall control the Escrow. The Escrow shall take the
form of [specify as applicable]:
 cash, and/or
 one or more unconditional, irrevocable letter(s) of credit issued to Lender by a
banking institution, attached hereto as Exhibit “A”. The rating of the issuing banking
institution and the duration of such letter(s) of credit shall comply with Program
Obligations.
3. It is understood that the funds in the Escrow may be released or allocated for the
purposes indicated below and for no other purpose without the prior written approval of
HUD.
a. With respect to the Working Capital Amount, it will:
i. Cover shortfalls in interest, taxes, property insurance premiums, ground rents
and assessments during construction after funds available under Form HUD90167-CA, Capital Advance Agreement, are exhausted.

Escrow Agreement for Working Capital

Form 92412-CA 06/13

ii. Defray cost of initial marketing and rent-up. This includes: sales and advertising,
model furnishings including furnishings for public areas, and equipment and
supplies essential to initial rent-up, etc.
iii. Set up accruals for items due during the first operating year that project income is
not expected to cover, including real estate taxes, permanent property insurance
premiums, ground rents and assessments.

b. Final Release of Working Capital Deposit:
1. HUD will release any remaining funds to the Sponsor/Owner or, if applicable, the
developer three years after completion if the project is not financially stressed and the
project has reached final closing. The money belongs to the Sponsor/Owner or if
applicable, developer, and is expended at their discretion.
2. HUD will continue to hold any remaining funds until the financial problems are
resolved (e.g. has not reached sustaining occupancy, has poor liquidity or high
payables, is operating at a deficit or is near default).
3. HUD will use the remaining balance of the working capital deposit to fund an operating
deficit or cure a default before releasing the remaining funds to the Owner.
4. The Escrow may, at HUD’s direction, be subject to immediate application to the
Indebtedness if an Event of Default by Owner occurs at any time.

Escrow Agreement for Working Capital

Form 92412-CA 06/13

Each signatory below hereby certifies that each of their statements and representations
contained in this Agreement and all their supporting documentation thereto are true,
accurate, and complete. This Agreement has been made, presented, and delivered for the
purpose of influencing an official action of HUD in insuring the Loan, and may be relied
upon by HUD as a true statement of the facts contained therein.
IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement for
Working Capital as of the day and year first above written.

OWNER:

HUD:

_________________________

________________________

By_______________________

By______________________

_________________________
Print Name and Title

________________________
Print Name and Title

DEPOSITORY INSTITUTION:
________________________
By______________________
________________________
Print Name and Title

Attachment: Exhibit “A”

Warning:
I/We, the undersigned, certify under penalty of perjury that the information provided above is true and correct.
WARNING: Anyone who knowingly submits a false claim or makes a false statement is subject to criminal
and/or civil penalties, including confinement for up to 5 years, fines, and civil and administrative penalties.
(18 U.S.C. §§ 287, 1001, 1010, 1012, 1014; 31 U.S.C. §3729, 3802)

Escrow Agreement for Working Capital

Form 92412-CA 06/13

EXHIBIT “A”
Form of Letter of Credit

Escrow Agreement for Working Capital

Form 92412-CA 06/13