Visible Commencement Documentation
• STG Indemnity Agreement: Construction: You must receive a satisfactory affidavit and indemnity executed by both: (a) the owner, and (b) the general contractor, stating that:
(i) no labor, services or materials have been furnished or will be furnished to the site prior to the recording of the mortgage (required in order to document the absence of visible commencement), or
(ii) itemizing the labor, services and materials furnished to date and payments made to date (required if any has been furnished);
• Documented Inspection of Work/No Work: The status of the site - either absence of commencement of work or the work that has been performed, if any - must be documented by photographs and/or video of the entire site, with date and time stamps, immediately prior to the closing. If the mortgage is not filed for record on that date, you must conduct a supplemental inspection and documentation on the date of filing of the mortgage. In addition, you must annotate a survey of the site showing the location of the pictures and videos. This should be accompanied by a written statement from the person performing such filming, confirming the date, time and place of the documented inspection;
• Notice of Commencement: Require filing of instruments documenting construction commencement after recording of the mortgage (e.g., a "Notice of Commencement"), if customary;
• Other Affidavits: If your jurisdiction defines the commencement of construction based upon services that would not be disclosed by a site inspection (for example, in New Mexico), such as demolition, architectural, engineering, surveying or geological services, you must also confirm by affidavit that no such services have been performed.
• State-specific variations:
• Pennsylvania: Stipulations Against Liens (Residential construction of three stories or less only): If priority is to be based on the filing of a Stipulation (or Waiver) of Liens with the Prothonotary's Office, a date and time stamped copy of the Stipulation (in a form acceptable to the Company) must be provided to underwriting personnel along with date and time stamped photographic or video evidence of the absence of the commencement of construction of work as described above prior to the filing of the Stipulation. A copy of the contract between the owner and the general contractor should also be submitted to confirm the general contractor has waived its right to file a lien.
Financial Documentation and Indemnities
Documentation required from the owner/borrower:
• Current audited financial statements;
• STG Indemnity Agreement: Construction;
• Credit Enhancement (such as Letter of Credit, Escrow or Disbursement of Funds, Satisfactory Solvent Upstream Indemnitor, Statutory Bond; Unencumbered Equity);
• Judgment/lien search of owner/borrower
Documentation required from the general contractor:
• Current financial statements;
• STG Indemnity Agreement: Construction;
• Prospective Subordination Agreement subordinating the general contractor's existing and future mechanic's liens claims to the lien of the insured mortgage, to the extent permitted by law;
• Prospective waiver of right to file mechanic's liens, to the extent permitted by law;
• Judgment/lien search of general contractor.
Documentation required from the lender:
• Loan Commitment;
• Construction Loan/Credit Agreement and Promissory Notes and Exhibits;
• Budget and Related Schedules;
• Name of primary contact for disbursement oversight
• Copy of the construction contract;
• Project cost breakdown (budget), including land acquisition costs and hard and soft costs;
• Dollar amount and percentage of work: (i) performed to date, (ii) remaining to be performed, (iii) paid for to date; and (iv) dollar amount and percentage of funds remaining, including sources (i.e., equity and loan);
• List of all contractors, subcontractors and suppliers who have or will furnish labor, services or materials to the project, including addresses, telephone numbers and name of primary contact;
• All amounts billed, previously paid, and currently due to all such contractors, subcontractors and suppliers to date (including architects, engineers, surveyors, and demolition);
• Proof of payment of all work performed and materials delivered to date: lien waivers, paid bills and/or estoppel certificates, from the general contractor and all subcontractors and suppliers who have furnished labor, services or materials to a date immediately prior to the loan closing.
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