Les,

I posed the question to my client with a 223(f) project (market rate, non-subsidized) about whether they sought permission from HUD for the PPP loan that they were awarded directly to the project. I’m not really calling into question their eligibility for the loan, as they have the employees set up as direct employees of the project and not the management company.  Strictly from the standpoint of assessing whether this would be an unauthorized loan under HUD’s subordinate financing rules, it appeared that this loan would technically be a compliance violation. However, the client responded to my inquiry today with the response included in the attachment to this message.  I’d previously seen HUD’s communication that these would be subject to HUD’s subordinate financing rules, but under their regulatory agreement (HUD-92466M (06/18)), it does seem indicate that they should seek HUD permission to enter into any “contract, agreement or arrangement to borrow funds or finance any purchase or incur any liability,  director or contingent, other than for Reasonable Operating Expenses.” Since the mortgaged property isn’t conveyed under the PPP loan, and the loan is for payroll (a “Reasonable Operating Expense”), would the regulatory agreement not then allow them to enter into this loan without seeking approval?