Entity Expenses and Surplus Cash

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#7166 Closed public Multifamily Les Sparks
Customer Reply

Hi we have a client that owns an apartment building. They refinanced a conventional mortgage with a HUD mortgage, under Section 207, pursuant to Section 223(f).
At closing of the HUD mortgage they paid loan termination fees on the original mortgage. The prior accountant told the client these are entity expenses. Is this correct? I would think they are other financing costs.

Second question, same client refinanced on Oct 1 2016. The report is for the period October 1, 2016 to December 31, 2017. Do three Surplus Cash Calculations need to submitted? 12/31/16, 6/30/17 and 12/31/17?
Kathy Christensen

From Les Sparks:

I cannot really say whether they should be entity funds or not – that has never been clear. However, everyone treats these are transactions costs and they are all settled in the loan and no one ever treats these as entity. The only time the entity conversation comes up is when they pay in advance transaction costs form project funds before the loan. This is always treated by HUD as an entity item. So, the key is just to get the other closing and then everything washes out.

At that time the only real issue is whether the entity has to put more money in at closing. That must be entity money.

Les

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