Exhibit B to Subpart E of Part 1944 - Guide Letter For Use in Informing Interim Lender of FmHA or Its Successor Agency Under Public Law 103-354's Commitment

(Name and Address of Private Lender) Dear Mr./Ms.: (For Organizations)

Reference is made to a request from the

(Smith Housing Assoc.) through (John Smith), its President, for interim financing from your firm to construct a housing facility at the interest rate and terms and conditions agreed upon as reflected in the attached letter. (For Individuals)

Reference is made to a request for

(John Jones) for interim financing from your firm to construct a rental housing facility at the interest rate and terms and conditions agreed upon as reflected in the attached letter.

This letter is to confirm certain understandings on behalf of the Farmers Home Administration (FmHA) or its successor agency under Public Law 103-354.

Final drawings, specifications and all other contract documents have been prepared and approved, and the applicant is prepared to start construction. The applicant and FmHA or its successor agency under Public Law 103-354 have determined that the conditions of loan closing can be met. Funds have been obligated for the project.

FmHA or its successor agency under Public Law 103-354 has required the applicant to deposit $____ with your firm to be used before any interim loan funds. The applicant has proposed and FmHA or its successor agency under Public Law 103-354 has agreed that you may first advance any applicant funds on deposit, and then advance the proceeds of the interim loan in accordance with the terms and conditions stated in your attached letter to pay for construction and other authorized and legally eligible expenses incurred by the applicant. It is understood, however, that advances of both the applicant's funds and the interim loan funds will be made only upon presentation of proper statements and partial payment estimates proposed by the builder and approved for payment by the consulting architect, applicant and FmHA or its successor agency under Public Law 103-354 servicing official.

We have scheduled the FmHA or its successor agency under Public Law 103-354 loan to be closed when construction to be financed with loan funds is substantially complete in accordance with the FmHA or its successor agency under Public Law 103-354 approved (contract documents), drawings and specifications, (except for minor punch list items), and the applicant provides evidence and a signed certification indicating that there are no unpaid obligations outstanding in connection with the project. At that time, funds not exceeding the FmHA or its successor agency under Public Law 103-354 loan amount will be available to pay off the amount of loan advances your lending institution has made for authorized approved purposes, including accrued interest to the date of closing.

FmHA or its successor agency under Public Law 103-354 cannot provide you with an unconditional letter of commitment guaranteeing FmHA or its successor agency under Public Law 103-354 loan closing. Factors such as noncompletion, default, unacceptable workmanship and marked deviation from approved drawings and specifications could prevent the FmHA or its successor agency under Public Law 103-354 loan from being closed.

These problems can be minimized by making a thorough review of the [contract documents] 1 and drawings and specifications, evaluating the qualifications and past performance of the builder, and obtaining an adequate corporate surety bond guaranteeing both payment and performance. If the builder is unable to provide a surety bond, we suggest that your lending institution consider making advances for partial payments to the builder [in accordance with the provisions of the construction contract] 1 based upon no less than 60 percent and no more than 90 percent of the value of acceptable work in place, less the aggregate of previous payments.

The following are additional safeguards to help assure FmHA or its successor agency under Public Law 103-354 loan closing:

1. We invite you or your representatives to accompany FmHA or its successor agency under Public Law 103-354 personnel during construction inspections so that at least three or four joint inspections at critical points during construction, including the final inspection, can be made to help assure that construction is proceeding in accordance with the FmHA or its successor agency under Public Law 103-354 approved drawings and specifications.

2. FmHA or its successor agency under Public Law 103-354 will maintain its commitment in the amount of the obligated loan funds for a reasonable period of time after the expiration of any specified completion dates provided work on the project is progressing satisfactorily and any identified problems have been resolved.

3. FmHA or its successor agency under Public Law 103-354 will not arbitrarily abandon your lending institution in the event of default. If the contractor defaults, FmHA or its successor agency under Public Law 103-354 will attempt to provide financial assistance to the applicant in accordance with our administrative procedures and lending requirements if a new contractor can complete the project for a total cost within the security value of the project. If this is not possible or if the FmHA or its successor agency under Public Law 103-354 loan applicant becomes unable or unwilling to continue with the project, FmHA or its successor agency under Public Law 103-354 will attempt to provide financial assistance to any eligible applicant (subject to the availability of funds, our administrative procedures, and our lending requirements) to purchase the completed project from your lending institution.

4. FmHA or its successor agency under Public Law 103-354 is aware that circumstances such as subsurface ground conditions and change orders necessitated by required changes in the work to be performed may cause cost increases after FmHA or its successor agency under Public Law 103-354 loan approval and the obligation of FmHA or its successor agency under Public Law 103-354 loan funds. When justified, FmHA or its successor agency under Public Law 103-354 may make subsequent loans when necessary to help cover the eligible costs, provided additional loan funds are available, the change orders were approved by FmHA or its successor agency under Public Law 103-354, the increased costs are legitimate and are for authorized loan purposes, and the total cost of the project is within its security value.

Your assistance to the applicant is appreciated. Sincerely, State Director