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Multifamily Document Reform Implementation Frequently Asked Questions

Guide for Opinion of Borrower's Counsel, Instructions, and Exhibit A

(If you have additional questions about this document, please submit it to MultifamilyDocumentReview@hud.gov)

 

  1. The Instructions to Guide for Opinion of Borrower’s Counsel raises a significant issue for Borrower’s counsel.   The Instructions, page 9,  refer to Liens,  Confirmation (e), which states “….”Borrower’s Counsel must confirm that there are no liens or encumbrances against the Mortgaged Property regardless of an argument that, at the time of closing, there may be liens that have actually not been released even though the title company has received funds and/or release documents to do so and intends to process the release after the closing.   Except in cases involving the insurance of secondary loans, HUD is only authorized to insure first mortgages; consequently, there cannot be any liens and encumbrances on the Mortgage Property when HUD endorses the Note for insurance.  Confirmation (e) must not be changed.”

       It is my view that no attorney can make this representation when a project is being refinanced or even when a development loan is being closed if there is an existing land loan of record.   No existing lender will permit the release of its mortgage lien until it is unconditionally entitled to and has received a payoff of its loan.   Thus, until the HUD closing has occurred and the funds are disbursed by the title company, the prior mortgage lien will remain of record.   Thus, if Borrower’s Counsel must deliver an opinion in advance of the disbursement of the funds, Counsel can’t make the representation required in confirmation (e).  If counsel’s opinion is tendered into escrow, with the opinion to be “delivered” to HUD only in the event that closing occurs, funds are wired by the title company and the necessary releases are then recorded, this procedure would satisfy the requirements of the Instructions.  Borrower’s counsel and title companies routinely rely upon this procedure when issuing opinions or lender’s policies of title insurance.    The foregoing suggested procedure of holding the opinion in “escrow” pending disbursement of funds and recording of releases, however, is inconsistent with the existing closing process where  opinion letters are delivered to HUD at the closing table and before initial endorsement occurs. Only after initial endorsement are funds then wired.  Counsel is thus precluded from making the representations expected by HUD.

    The only solution to this problem appears to be HUD’s consent to modify the language of the opinion regarding confirmation (e).  This is in direct contravention of the instructions, however.  How does Borrower’s counsel resolve this issue?

  1. Should he or she only opine as to zoning in paragraph 6 if a zoning endorsement is not included in the title policy?
  1. Since we will not be collecting the Lender's Certificate in refinance deals, do we need to ask borrower's counsel to opine as to usury laws? 
  1. In Paragraph 5(iii), borrower's counsel is uncomfortable opining to the enforceability of all payments provided in HUD's regulations. He reads this paragraph as requiring his opinion that all payments under the Security Instrument, Note and HUD Regulations are enforceable. We would like clarification on why the parenthetical "and HUD's Regulations" is included. Does it refer to all payments under the regulations or only those included in the Security Instrument and Note? Alternatively, does 5(iii) merely serve as a severability provision whereby the payment obligations under the Security Instrument, Note and regulation survive the unenforceability of other provisions? If this is the intention, then the borrower's counsel would not be opining to enforceability at all but only to the severability of unenforceable provisions.
  1. Editorial Correction to paragraph 5(iii) of the Guide for Opinion of Counsel which should read "program obligations" rather than "HUD's regulations".

  1. The new Mortgagor's Attorney's Opinion provides the following definition of "Public Entity Agreement": All documents executed by Borrower and any State or local government entity pertaining to development of the Property." In the context of a (d)(4), would this definition include LIHTC LURAs and LURAs between state agencies and borrowers related to CDBG funding? LIHTCs and CDBG funding "pertain to the development" of the property, but outside counsel argue that since the LURAs generally contain post-development asset management requirements, and don't affect any physical development work done at the project site, they should not be identified as "Public Entity Agreements" in the Opinion. Is outside counsel right on this one?
  1. (2/16/2012)
    I am closing a Section 241(a) supplemental loan.  The original project was constructed many years ago with tax-exempt bond financing and low income tax credits, and currently has a Tax Regulatory Agreement and a LIHTC LURA recorded against the project.  The Section 241(a) supplemental loan is the only financing for the renovations being performed at this time.  Does the Borrower's counsel, pursuant to Sec. 3.8(H) of the Closing Guide, have to include opinion No. 10 from form HUD-91725M regarding conflicts between HUD loan documents and the bond documents, or is that needed only when the bonds are being issued concurrently with the closing of the current FHA-insured loan?  Similarly, does Lender's counsel have to include an opinion letter pursuant to Sec. 3.8(G) of the Closing Guide regarding the tax regulatory agreement that is still recorded and encumbering the property?
  1. (2/16/2012)
    Tax Exempt Bonds are being fully redeemed/paid off at closing for a FHA insured loan pursuant to Section 223(a)(7).  The Declaration of Restrictive Covenants remains of record.  Will HUD need to get a bond counsel's opinion?  Please note, one of the problems with requiring bond counsel's opinion after the bonds have been redeemed is that, if the bonds are no longer outstanding, there is no bond trustee anymore so there is no one out there to hire an attorney to write the opinion.  Will HUD need a Lender's Attorney Opinion in this situation?  If so, is there language that HUD must require or a template we can provide to the attorney?
  1. (2/29/2012)
    Here is my problem with the new attorney opinion format.  It carries forward the existing confirmation in subparagraph (e) that to our knowledge there are no liens or encumbrances of record that are not disclosed on the title policy.  In the past we always assumed this did not apply to the lien(s) of the existing loan(s) that are being paid off.  For obvious reasons, these liens are not released of record until after the closing.  The Guide to the new attorney opinion in discussing subparagraph (s) specifically singles out the lien(s) of the existing loan(s) that are being paid off as a lien we are confirming that is not of record.  We cannot make this representation at least in California where such liens are released of record generally well after closing.  There is no reason for HUD to insist on this confirmation from Borrower's counsel.  First, payment of the existing loan discharges the debt and makes the lien unenforceable.  Second, the title policy gives HUD and the new lender specific coverage against loss with respect to these liens.  California has adopted specific legislation to deal with this issue by providing the trustee on the existing deeds of trust being paid off must release the lien of record within 30 days of payment.  If the trustee does not do this the existing lender or any title insurance company can release the lien of record.  See California Civil Code Sections 2941(c)(10-3).  It makes no sense to place Borrower's counsel in a "Catch 22" position of either giving a knowingly false certification or refusing to give an opinion at all in which case no loans can close in this state.
  1. 5/7/2012
    Should the UCC search report be included in the list of documents reviewed? The Closing Guide states that the results of the UCC search should be attached with any disclosed litigation. However, I do not see where there is a reference to the UCC search in either the Opinion or the Borrower's Certification.  
  1. 5/18/2012
    Is it permissible for specific required opinions (e.g., the zoning opinion in paragraph 6 or the "duly organized" opinion in paragraph 1 where the entity was organized by another firm in a jurisdiction other than the property jurisdiction) to be provided by delivery of a separate opinion issued directly to HUD by the firm with first-hand expertise and knowledge, provided such separate opinion satisfies the otherwise-applicable requirements of the HUD opinion form and the instructions? Is it permissible for the paragraph 10 opinion to be satisfied through a direct opinion issued to HUD by the bond counsel or other counsel for the third party source, provided such separate opinion satisfies the otherwise-applicable requirements of the HUD opinion form and the instructions?
  1. 6/13/2012
    Is it possible to reorder the litany of documents in the Borrower's Opinion so they follow the same order in the checklists? This would greatly speed up the review process.
  1. 6/25/2012
    Borrower's counsel has requested to serve as both title agent and borrower's counsel on a refinance transaction. However, counsel is concerned that confirmation (c) and confirmation (d) would not permit them to act as such, unless they could add language to the effect that they are acting as borrower's counsel and title agent with respect to fees charged in confirmation (c) and disclosing that they are acting as title agent in confirmation (d). I would assume that this is permissible given adequate disclosure to HUD and HUD approval as there isn't an identity of interest with the borrower or the lender. Additionally, it would seem to lower costs for the borrower rather than having to engage outside counsel to sign the opinion.
  1. 6/29/2012
    Borrower's Counsel argues that, in paragraph 7, Counsel must add the word "material" in (i) to modify "default" because the Certification on which Counsel relies uses the word material. However, although the Guide for Opinion does rely upon the Certification, it also relies on Counsel's knowledge. Is the Guide for Opinion language intentionally broader than the Borrower's Certification? Paragraph 7 of the Guide for Opinion of Borrower's Counsel reads as follows: "Based solely on (a) our [my] knowledge and (b) the Certification of Borrower, the execution and delivery of the Loan documents shall not: (i) cause Borrower to be in violation of, or constitute a default under the provisions of any agreement to which Borrower is a party or by which Borrower is bound. . . ." Paragraph 4 of Exhibit A to Opinion of Borrower's Counsel reads: "The execution and delivery of the Loan Documents as defined in the Opinion Letter to which this is attached will not (i) cause Borrower to be in violation of or constitute a material default under the provisions of any agreement to which Borrower is a party or by which Borrower is bound. . . ."
  1. 08/01/2012
    On the Borrower's Attorney's Opinion, the following is listed as one of the items to be reviewed: "II. A search conducted by ______ dated {DATE INSERTED MUST BE WITHIN THIRTY (30) DAYS OF THE DATE OF THIS OPINION} of the public records of the federal District Court and State and local courts in: (i) the jurisdiction where the Property is located, (ii) the jurisdictions(s) where Borrower is located and does business; and (iii) the jurisdiction where the general partner, managing member, or similar person or entity is organized (Docket Search)." In regards to item (iii), then the manager of the borrower entity is a single "warm-bodied" person, can this section be deleted? if not, what jurisdiction do you want searched?
  1. 9/06/2012
    The response published on June 25, 2012, which states that borrower's counsel may also serve as title agent seems to contradict the instructions in the opinion letter with regards to identify of interest: "The attorney signing the Opinion cannot have an identify of interest with any party to the transaction. No waivers are possible in such instance. In instances where other members of the firm have an interest in Borrower or another entity involved in the transaction, such interest must be disclosed. HUD field counsel must decide if the interest is acceptable based upon a legal opinion interpreting the ethics rules of the applicable bar and the identity of interest must also be administratively acceptable to HUD. It is unacceptable for counsel to lender to represent Borrower in whole or in part or to provide all or a part of the Opinion."
  1.  1/2/2013
    I am working on a project in which a request has come up to amend the owner's attorney opinion. In our old opinion, we included an assumption regarding title to property, which has now been removed from the new
    91721M [Editorial Comment: this should be 91725M]. Old language is as follows: "(1) The Mortgagor has title or other interest in each item of (i) real and (ii) tangible and intangible personal property ("Personalty") comprising the Property in which a security interest is purported to be granted under the Loan Documents [and, where Personalty is to be acquired after the date hereof, a security interest is created under the after-acquired property clause of the Security Agreement]."The attorney for the owner would like to know 1) if they can add this back in;
    2) the reasoning behind taking this out of the revised opinion in the first place; and 3) make sure that if he signs the opinion without that language, it is not HUD's intention to have him opine as to the perfection of the lien.
  1.  1/06/2014
    The Guide for Opinion of Borrower's Counsel (HUD-91725M), as well as several of the other Multifamily documents, contains the following Warning language: "Any person who knowingly presents a false, fictitious, or fraudulent statement or claim in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development is subject to criminal penalties, civil liability, and administrative sanctions."  Is it HUD's intention that this language should be included in the final opinion rendered by Borrower's counsel?  We have received feedback from attorneys that this language is not appropriate for a legal opinion.
  1. 04/09/2014
    In light of the fact that 2.11 M. (previously in the 2011 MAP Closing Guide) was removed from the 2013 MAPClosing Guide and the only guidance currently left in the new 2013 MAP Closing Guide appears to be in 3.7 B, it has been concluded by most HUD field offices that we have worked with that the scope of the UCC search should be limited to the Borrower and the scope of the litigation search should cover the Borrower and its controlling entity or individual such as the general partner or managing member. The searches shall be performed in the property jurisdiction and all jurisdictions where the above entities or individuals are organized or located. One recent HUD office indicated that the July 2011 FAQ [question number 1 and published on 7/20/11] supersedes the 2013 Revised MAP closing guide. Could you please provide updated clarification to that guidance? 
  1. 04/23/2014
  1. 06/18/2014
    Paragraph 10 on Page 11 of the Guide for Opinion of Borrower’s Counsel (Form HUD-91725M) provides the following "as applicable" opinion: "[10. {USE IN CASES INVOLVING TAXABLE OR TAX EXEMPT BOND FINANCING AND ANY OTHER FINANCINGS WHERE A THIRD PARTY SOURCE IS INVOLVED} Based solely on the opinion of ____________________ {INSERT BOND COUNSEL OR COUNSEL RENDERING OPINION IN THIRD PARTY SOURCE TRANSACTIONS}, dated as of the date hereof and attached hereto as Exhibit ___, to the extent that any of the provisions of the Source Documents are inconsistent with any of the provisions of the Loan Documents or Supporting Documents, the provisions of the Loan Documents or Supporting Documents shall govern.]" This requirement is clarified to some extent in the Instructions to Guide for Opinion of Borrower’s Counsel (Form HUD-91725M-INST): "10. This Paragraph has been modified to clarify that taxable as well as tax-exempt bond financing is covered and that other third-party source of funds financings are also covered." Is it accurate to conclude from such instructions that any financing from a third-party source requires (a) the inclusion of Paragraph 10 in the Opinion of Borrower’s Counsel, and (b) a supplemental opinion that provides the basis for such opinion? If so, what does HUD expect such supplemental opinion to opine on? If not, what does HUD consider to constitute "financings where a third party source is involved" for purposes of the Opinion of Borrower’s Counsel? Please note that the Federal Housing Administration Multifamily Program Closing Guide (Rev. April 2013) discusses the criteria for supplemental opinions with regard to tax-exempt bond financing and low-income housing tax credit financing (see, for instance, Sections 2.9.B(D), 3.8.E & F, 3.9.B and the various checklists in Section 4), but not (to my knowledge) the criteria with regard to third-party sources of funds.

 

 

 

 

 

1.  In the Borrower’s Certificate, what is the required scope of litigation and UCC searches?  Which jurisdictions, property state office and foreign state of incorporation?  Clarify what needs to be covered and who needs to be covered in a lit search? Is Borrower or General Partner?

Broad searches are required and must cover the Borrower and its controlling entity or individual such as the general partner or managing member.  The searches shall be performed in the property jurisdiction and all jurisdictions where the above entities or individuals are organized or located.

The preceding answer is no longer in effect; please see the most recent
version of the FHA Multifamily Program Closing Guide for current requirements for litigation docket and UCC searches in the multifamily programs.

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2. What is meant by “side-deal” in the Attorney Opinion?  See page 12.

For the purposes of the Attorney's Opinion, a side-deal is an oral or written agreement between the Borrower and another party affecting the transaction, which agreement amends or is inconsistent with the terms of the closing Documents.  Any such side agreement must be  disclosed.  Examples may include indemnification or guarantee agreements or profit sharing agreements.  Note, however, that agreements relating solely to the operation of the Project, such as laundry contracts, that do not alter the terms of the Documents and are not inconsistent with the terms of the Documents, are not considered side-deals for purposes of the Attorney's Opinion.

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3. Is there a conflict in confirming no liens in refinance projects?

No. There is not a conflict. So long as confirmation (e) is not modified, there is no problem with Borrower’s Counsel delivering its signed Opinion to HUD, for HUD to hold in trust or escrow pending the closing of the transaction to be released when HUD releases the endorsed Note. In instances where documents must be filed by the title company prior to recording the Security Instrument, the title company must provide gap title coverage insuring that the Security Instrument and lien position from the date of closing, not recordation.

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4. Should he or she only opine as to zoning in paragraph 6 if a zoning endorsement is not included in the title policy?

Yes. Since the language of the attorney's opinion says that the paragraph should be included if there is no zoning requirement, it is okay to omit the language if a zoning endorsement is required.

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5. Since we will not be collecting the Lender's Certificate in refinance deals, do we need to ask borrower's counsel to opine as to usury laws?

In refinance deals, the Request for Endorsement takes the place of the Lender's Certificate. There is no need to ask Borrower's counsel to opine as to usury laws since the Lender certifies in Section D.13 of the Request for Endorsement that the transaction does not violate usury laws.

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6. It appears that a letter from a local official relating to zoning is preferred for evidence of zoning compliance. Since the Closing Guide seems to indicate that the zoning endorsement is in fact preferred, can the attorney rely on that endorsement instead of a letter from an official?

Yes, the closing attorney may rely on a zoning endorsement rather than a letter from a local official. In fact, the zoning endorsement is preferred (note that although the Instructions speak to the acceptability of a zoning letter or certificate, Section 6 of the Guide for Opinion of Counsel states that such certificate may be attached IF a zoning endorsement is unavailable) or cost prohibitive.

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7. In Paragraph 5(iii), borrower's counsel is uncomfortable opining to the enforceability of all payments provided in HUD's regulations. He reads this paragraph as requiring his opinion that all payments under the Security Instrument, Note and HUD Regulations are enforceable. We would like clarification on why the parenthetical "and HUD's Regulations" is included. Does it refer to all payments under the regulations or only those included in the Security Instrument and Note? Alternatively, does 5(iii) merely serve as a severability provision whereby the payment obligations under the Security Instrument, Note and regulation survive the unenforceability of other provisions? If this is the intention, then the borrower's counsel would not be opining to enforceability at all but only to the severability of unenforceable provisions.

The provisions in question did not change from the prior form opinion. Borrower's counsel is required to provide the opinion without altering or qualifying the language in paragraph 5. Borrower's counsel is opining to the enforceability of payments under the Security Instrument, Note, and HUD's regulations and the survival of these obligations after other provisions are deemed unenforceable and are severed. HUD's regulations refer to payment obligations pursuant to any applicable HUD Program Obligations as defined in the Security Instrument. The phrase "HUD's regulations" is a typo and will be changed to "Program Obligations" to be consistent with the other documents.

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8. Editorial Correction to paragraph 5(iii) of the Guide for Opinion of Counsel which should read "programobligations" rather than "HUD's regulations".

In the revised Multifamily Guide for the Borrower's Counsel Opinion, paragraph 5(iii), the phrase "HUD's Regulations" is used instead of the phrase that we use in the other documents, "Program Obligations." This is a scrivener's error and will be corrected in the document published on HUDclips.

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9. The new Mortgagor's Attorney's Opinion provides the following definition of "Public Entity Agreement": All documents executed by Borrower and any State or local government entity pertaining to development of the Property." In the context of a (d)(4), would this definition include LIHTC LURAs and LURAs between state agencies and borrowers related to CDBG funding? LIHTCs and CDBG funding "pertain to the development" of the property, but outside counsel argue that since the LURAs generally contain post-development asset management requirements, and don't affect any physical development work done at the project site, they should not be identified as "Public Entity Agreements" in the Opinion. Is outside counsel right on this one?

Outside counsel is incorrect; the definition of “Public Entity Agreement” is meant to be broadly interpreted and to pertain to any agreements, including those associated with financing, executed in condition with the development of the project. Since the term is used only in the context of assuring that there are no current defaults of any Public Entity Agreements, and the attorney may rely exclusively upon the Borrower’s Certificate and the attorney’s actual knowledge, this broad interpretation of the term should not cause concern.

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10. (2/16/2012)
I am closing a Section 241(a) supplemental loan.  The original project was constructed many years ago with tax-exempt bond financing and low income tax credits, and currently has a Tax Regulatory Agreement and a LIHTC LURA recorded against the project.  The Section 241(a) supplemental loan is the only financing for the renovations being performed at this time.  Does the Borrower's counsel, pursuant to Sec. 3.8(H) of the Closing Guide, have to include opinion No. 10 from form HUD-91725M regarding conflicts between HUD loan documents and the bond documents, or is that needed only when the bonds are being issued concurrently with the closing of the current FHA-insured loan?  Similarly, does Lender's counsel have to include an opinion letter pursuant to Sec. 3.8(G) of the Closing Guide regarding the tax regulatory agreement that is still recorded and encumbering the property?

Yes, Borrower's counsel should opine as to both the fact that there are no conflicts between the loan documents and the bond documents and that the tax regulatory agreement remains in place. 
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11. (2/16/2012)
Tax Exempt Bonds are being fully redeemed/paid off at closing for a FHA insured loan pursuant to Section 223(a)(7).  The Declaration of Restrictive Covenants remains of record.  Will HUD need to get a bond counsel's opinion?  Please note, one of the problems with requiring bond counsel's opinion after the bonds have been redeemed is that, if the bonds are no longer outstanding, there is no bond trustee anymore so there is no one out there to hire an attorney to write the opinion.  Will HUD need a Lender's Attorney Opinion in this situation?  If so, is there language that HUD must require or a template we can provide to the attorney?

No, an opinion from bond counsel is not required nor is an opinion from lender’s attorney.

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12. (2/29/2012)
Here is my problem with the new attorney opinion format.  It carries forward the existing confirmation in subparagraph (e) that to our knowledge there are no liens or encumbrances of record that are not disclosed on the title policy.  In the past we always assumed this did not apply to the lien(s) of the existing loan(s) that are being paid off.  For obvious reasons, these liens are not released of record until after the closing.  The Guide to the new attorney opinion in discussing subparagraph (s) specifically singles out the lien(s) of the existing loan(s) that are being paid off as a lien we are confirming that is not of record.  We cannot make this representation at least in California where such liens are released of record generally well after closing.  There is no reason for HUD to insist on this confirmation from Borrower's counsel.  First, payment of the existing loan discharges the debt and makes the lien unenforceable.  Second, the title policy gives HUD and the new lender specific coverage against loss with respect to these liens.  California has adopted specific legislation to deal with this issue by providing the trustee on the existing deeds of trust being paid off must release the lien of record within 30 days of payment.  If the trustee does not do this the existing lender or any title insurance company can release the lien of record.  See California Civil Code Sections 2941(c)(10-3).  It makes no sense to place Borrower's counsel in a "Catch 22" position of either giving a knowingly false certification or refusing to give an opinion at all in which case no loans can close in this state.

When the attorney makes the certification contained in subsection (e), he or she certifies that the old loan has been repaid and there are no enforceable liens against the property.  As indicated in the question, payment of the loan discharges the debt and renders the lien unenforceable in California.  When that event occurs, there are no liens or encumbrances against the property that would be listed in title.  Payment of the old loan occurs on the day of closing and enables the attorney to provide the required certification.  In fact, attorneys often do not deliver their opinions or indicate the documents are held in escrow until funds are wired to repay the existing debt.   It is understood that a satisfaction of deed of trust or mortgage will be filed in the weeks following closing as required by state law.

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13. (5/7/2012
Should the UCC search report be included in the list of documents reviewed? The Closing Guide states that the results of the UCC search should be attached with any disclosed litigation. However, I do not see where there is a reference to the UCC search in either the Opinion or the Borrower's Certification.
 

No. The UCC search report need not be included in the list of documents reviewed. Appropriate
certifications and/or representations and warranties concerning the UCC collateral are contained in the Lender’s Certificate and Request for Endorsement.
 

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14. (5/18/2012
Is it permissible for specific required opinions (e.g., the zoning opinion in paragraph 6 or the "duly organized" opinion in paragraph 1 where the entity was organized by another firm in a jurisdiction other than the property jurisdiction) to be provided by delivery of a separate opinion issued directly to HUD by the firm with first-hand expertise and knowledge, provided such separate opinion satisfies the otherwise-applicable requirements of the HUD opinion form and the instructions? Is it permissible for the paragraph 10 opinion to be satisfied through a direct opinion issued to HUD by the bond counsel or other counsel for the third party source, provided such separate opinion satisfies the otherwise-applicable requirements of the HUD opinion form and the instructions? 

As discussed in the section headed “Acceptability of Counsel” in the Instructions to Guide for Opinion of Borrower’s Counsel, circumstances may arise where an additional attorney or law firm separate from Borrower’s Counsel is needed to provide one of the required opinions in the Opinion of Borrower’s Counsel. In such situations, provided that the additional attorney or law firm is not engaged by Borrower’s Counsel, this opinion may be delivered directly to HUD (and Lender or Lender’s counsel, if applicable) by the attorney or firm providing the opinion, further provided the separate opinion satisfies the requirements of the Guide for Opinion of Borrower’s Counsel and related Instructions. Note that this situation is different than instances where Borrower’s Counsel engages a separate attorney or law firm to issue an opinion on a subject matter, which separate opinion is relied upon by Borrower’s Counsel in issuing the Opinion. As the paragraph headed “Reliance on Other Opinions” in the Instructions indicates, Borrower’s Counsel must specifically reference and attach such separate reliance opinions to the Opinion of Borrower’s Counsel. 

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15. 6/13/2012
Is it possible to reorder the litany of documents in the Borrower's Opinion so they follow the same order in the checklists? This would greatly speed up the review process.

The list of documents in the Opinion should not be reordered. If it is necessary to facilitate the review process, the list of documents in the closing checklists may be reordered. 

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16. 6/25/2012
Borrower's counsel has requested to serve as both title agent and borrower's counsel on a refinance transaction. However, counsel is concerned that confirmation (c) and confirmation (d) would not permit them to act as such, unless they could add language to the effect that they are acting as borrower's counsel and title agent with respect to fees charged in confirmation (c) and disclosing that they are acting as title agent in confirmation (d). I would assume that this is permissible given adequate disclosure to HUD and HUD approval as there isn't an identity of interest with the borrower or the lender. Additionally, it would seem to lower costs for the borrower rather than having to engage outside counsel to sign the opinion.

It may be permissible for an attorney to serve as both title agent and borrower’s counsel, provided that such an arrangement comports with state and local law and the state bar’s guidelines for professional conduct and is otherwise acceptable to HUD. Requests for deal-specific changes to the Guide for the Opinion of Counsel will be considered on a case-by-case basis. A request to modify the Opinion should be made to field counsel, who will make a recommendation to HQ based on applicable law and the particulars of the transaction in question.

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17. 6/29/2012
Borrower's Counsel argues that, in paragraph 7, Counsel must add the word "material" in (i) to modify "default" because the Certification on which Counsel relies uses the word material. However, although the Guide for Opinion does rely upon the Certification, it also relies on Counsel's knowledge. Is the Guide for Opinion language intentionally broader than the Borrower's Certification? Paragraph 7 of the Guide for Opinion of Borrower's Counsel reads as follows: "Based solely on (a) our [my] knowledge and (b) the Certification of Borrower, the execution and delivery of the Loan documents shall not: (i) cause Borrower to be in violation of, or constitute a default under the provisions of any agreement to which Borrower is a party or by which Borrower is bound. . . ." Paragraph 4 of Exhibit A to Opinion of Borrower's Counsel reads: "The execution and delivery of the Loan Documents as defined in the Opinion Letter to which this is attached will not (i) cause Borrower to be in violation of or constitute a material default under the provisions of any agreement to which Borrower is a party or by which Borrower is bound. . . ."

Opinion 7 of the Opinion of Borrower’s Counsel may not be amended to change “default” to “material default.” Note that this difference in language between the Opinion and the Certification of Borrower existed in the old form of these documents prior to Multifamily Document Reform. HUD will consider the suggested revision when the documents next go through Paperwork Reduction Act clearance.

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18. 8/01/2012
On the Borrower's Attorney's Opinion, the following is listed as one of the items to be reviewed: "II. A search conducted by ______ dated {DATE INSERTED MUST BE WITHIN THIRTY (30) DAYS OF THE DATE OF THIS OPINION} of the public records of the federal District Court and State and local courts in: (i) the jurisdiction where the Property is located, (ii) the jurisdictions(s) where Borrower is located and does business; and (iii) the jurisdiction where the general partner, managing member, or similar person or entity is organized (Docket Search)." In regards to item (iii), then the manager of the borrower entity is a single "warm-bodied" person, can this section be deleted? if not, what jurisdiction do you want searched?

Yes. Borrower's Counsel may strike through clause (iii) where the general partner, managing member, or similar person or entity is a natural person.

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19. 9/06/2012
The response published on June 25, 2012, which states that borrower's counsel may also serve as title agent seems to contradict the instructions in the opinion letter with regards to identify of interest: "The attorney signing the Opinion cannot have an identify of interest with any party to the transaction. No waivers are possible in such instance. In instances where other members of the firm have an interest in Borrower or another entity involved in the transaction, such interest must be disclosed. HUD field counsel must decide if the interest is acceptable based upon a legal opinion interpreting the ethics rules of the applicable bar and the identity of interest must also be administratively acceptable to HUD. It is unacceptable for counsel to lender to represent Borrower in whole or in part or to provide all or a part of the Opinion."

The multifamily guidance on identities of interest does not address the relationship in question (borrower’s counsel acting as title agent). We are aware of certain jurisdictions (and at least one HUD office) where this is a long-standing practice, and others where this practice is disfavored or not allowed. We suggest approaching this issue on a case-by-case basis consistent with the June 25, 2012
response.

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20. 1/2/2013
I am working on a project in which a request has come up to amend the owner's attorney opinion. In our old opinion, we included an assumption regarding title to property, which has now been removed from the new 91721M [Editorial Comment: this should be 91725M]. Old language is as follows: "(1) The Mortgagor has title or
other interest in each item of (i) real and (ii) tangible and intangible personal property ("Personalty") comprising the Property in which a security interest is purported to be granted under the Loan Documents [and, where Personalty is to be acquired after the date hereof, a security interest is created under the after-acquired property clause of the Security Agreement]."The attorney for the owner would like to know 1) if they can add this back in;
2) the reasoning behind taking this out of the revised opinion in the first place; and 3) make sure that if he signs the opinion without that language, it is not HUD's intention to have him opine as to the perfection of the lien.

No. The old language may not be added back into the Mortgagor’s attorney opinion. HUD looks to
the Mortgagee to insure that the collateral is properly secured. The Mortgagee may require additional
documentation from the Mortgagor or Mortgagor’s counsel.

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21. 1/6/2014
 The Guide for Opinion of Borrower's Counsel (HUD-91725M), as well as several of the other Multifamily documents, contains the following Warning language: "Any person who knowingly presents a false, fictitious, or fraudulent statement or claim in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development is subject to criminal penalties, civil liability, and administrative sanctions."  Is it HUD's intention that this language should be included in the final opinion rendered by Borrower's counsel?  We have received feedback from attorneys that this language is not appropriate for a legal opinion.

 Yes, it is HUD’s intention that the warning language at the end of the Guide for Opinion of Borrower’s Counsel actually be included in the final opinion given for a closing.  As the result of similar comments received during the notice and comment period for the multifamily closing documents on the form Opinion prior to its adoption in 2011, recognizing the unique nature of some components of a legal opinion in contrast to factual matters contained in other closing documents, HUD added the following language to the Opinion Instructions:  “This [warning] language is not intended to apply to matters of professional legal judgment exercised by Borrower’s Counsel.”  HUD’s position with respect to requiring the warning language as well as the language in the Instructions has not changed since this time.

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22. 4/09/2014
 In light of the fact that 2.11 M. (previously in the 2011 MAP Closing Guide) was removed from the 2013 MAPClosing Guide and the only guidance currently left in the new 2013 MAP Closing Guide appears to be in 3.7 B, it has been concluded by most HUD field offices that we have worked with that the scope of the UCC search should be limited to the Borrower and the scope of the litigation search should cover the Borrower and its controlling entity or individual such as the general partner or managing member. The searches shall be performed in the property jurisdiction and all jurisdictions where the above entities or individuals are organized or located. One recent HUD office indicated that the July 2011 FAQ [question number 1 and published on 7/20/11] supersedes the 2013 Revised MAP closing guide. Could you please provide updated clarification to that guidance?

 Broad searches are required and must cover the Borrower and its controlling entity or individual such as the general partner or managing member.  The searches shall be performed in the property jurisdiction and all jurisdictions where the above entities or individuals are organized or located.

The preceding answer is no longer in effect; please see the most recent
version of the FHA Multifamily Program Closing Guide for current requirements for litigation docket and UCC searches in the multifamily programs.

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23. 4/23/2014
 Exhibit A Borrower's Cert (91725-M-CERT) requires the Borrower to sign twice.  Why isn't it sufficient to have the Borrower sign once, after the "Each signatory below hereby certifies . . ." statement?

HUD currently is engaged the Paperwork Reduction Act process for revision of the multifamily closing documents and will take this comment into consideration. Thank you for bringing this issue to the committee’s attention

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24. 6/18/2014
 Paragraph 10 on Page 11 of the Guide for Opinion of Borrower’s Counsel (Form HUD-91725M) provides the following "as applicable" opinion: "[10. {USE IN CASES INVOLVING TAXABLE OR TAX EXEMPT BOND FINANCING AND ANY OTHER FINANCINGS WHERE A THIRD PARTY SOURCE IS INVOLVED} Based solely on the opinion of ____________________ {INSERT BOND COUNSEL OR COUNSEL RENDERING OPINION IN THIRD PARTY SOURCE TRANSACTIONS}, dated as of the date hereof and attached hereto as Exhibit ___, to the extent that any of the provisions of the Source Documents are inconsistent with any of the provisions of the Loan Documents or Supporting Documents, the provisions of the Loan Documents or Supporting Documents shall govern.]" This requirement is clarified to some extent in the Instructions to Guide for Opinion of Borrower’s Counsel (Form HUD-91725M-INST): "10. This Paragraph has been modified to clarify that taxable as well as tax-exempt bond financing is covered and that other third-party source of funds financings are also covered." Is it accurate to conclude from such instructions that any financing from a third-party source requires (a) the inclusion of Paragraph 10 in the Opinion of Borrower’s Counsel, and (b) a supplemental opinion that provides the basis for such opinion? If so, what does HUD expect such supplemental opinion to opine on? If not, what does HUD consider to constitute "financings where a third party source is involved" for purposes of the Opinion of Borrower’s Counsel? Please note that the Federal Housing Administration Multifamily Program Closing Guide (Rev. April 2013) discusses the criteria for supplemental opinions with regard to tax-exempt bond financing and low-income housing tax credit financing (see, for instance, Sections 2.9.B(D), 3.8.E & F, 3.9.B and the various checklists in Section 4), but not (to my knowledge) the criteria with regard to third-party sources of funds.

No, the inclusion of paragraph 10 and requirement for a supporting legal opinion is only required when the FHA-insured Loan is funded from the following sources: (1) bonds; (2) LIHTCs or (3) other third-party financing. Neither paragraph U nor 10 of the Opinion of Borrower’s Counsel cover secondary or subordinate financing transactions.

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