Man Shi, the real issues is not necessarily the 2% ownership interest alone.  It could be common ownership or other reasons.  So although the 2% is certainly a factor and tends to point be towards an IOI relationship, there could be other, more significant areas also. 

In this case, absent any other information, it appears to me the contractor is required to cost certify.

Les

The following is from the current version of the MAP Guide – Handbook 4430

13.6 Entities That Must Cost Certify

A.    The borrower must certify under all programs, except where HUD has determined at the time of issuance of the Firm Commitment that the insured mortgage under: a) Section 221(d)/220/231 new construction/substantial rehabilitation is 80% or less of replacement cost and the project is will benefit from LIHTC, Historic Tax Credits or New Market Tax Credits, or b) Section 207/223(f) refinance is 80% or less of value.

B.    When the borrower is required to cost certify, the Contractor must also cost certify when:

1. The Contractor has an identity of interest with the mortgagor, whether such identity of interest existed or developed before or after the initial closing (for insured advances projects) or issuance of the Firm Commitment (for insurance upon completion projects); and/or
2. The Contractor used the Construction Contract-Cost Plus, Form HUD-92442M, whether or not any identity of interest with the borrower existed or developed.

From: AHACPA Support <support@ahacpa.org>
Sent: Friday, October 4, 2019 6:04 PM
To: les@ahacpa.org
Subject: Cost Certificate, related party