FHA/HUD | 2026-11-01

HUD Completion Assurance Needs a Deposit-to-Release Map

HUD-92450M ties the contractor's assurance to cash or a qualifying letter of credit, lender control, HUD-approved disbursements, and a 2.5% latent-defects holdback.

HUD's current forms page identifies HUD-92450M, Completion Assurance Agreement, for transactions with firm commitments issued on or after April 1, 2026. HUD's Multifamily Closing Guide describes the agreement as an alternative to performance and payment surety bonds for assuring project completion. The borrower, lender, and contractor execute the agreement, and the contractor funds its obligations through a cash deposit or letter of credit.

At or before initial endorsement of the Note, the contractor must place the Completion Assurance Fund with the lender or, if the lender elects, a satisfactory depository institution. The deposit remains under the lender's or its assignee's control. A letter of credit must be unconditional and irrevocable, issued to the lender, attached as Exhibit A, and issued by a bank whose rating and letter duration comply with Program Obligations.

The contractor must complete the project free of liens by the Project Substantial Completion Deadline and remedy covered latent defects. Its completion and latent-defect liability is not limited to the deposit amount. Disbursement of the deposit is at HUD's sole discretion; a construction-period release requires the lender's determination and HUD's prior written approval, while the fund may also address contractor default, overpayment, or performance costs.

The remaining completion deposit may be returned only after final endorsement and provision of compliant latent-defects assurance equal to 2.5% of the Construction Contract. The form delays release of the remaining latent-defects deposit until the latest applicable 15-month measuring period has passed and all latent defects are corrected to HUD's satisfaction. A closing map should track the deposit amount and form, issuer and expiration, Exhibit A, control party, completion deadline, disbursement approvals, final endorsement, replacement assurance, and release dates. This note is informational only and is not legal advice for any specific transaction.