Section 266.305 - HFAs accepting less than 50 percent of risk(a)Underwriting standards. The underwriting standards and loan terms and conditions of any HFA electing to take less than 50 percent of the risk on certain projects are subject to review, modification, and approval by HUD in accordance with § 266.100(b) . These HFAs may assume 25 percent or 10 percent of the risk depending upon the loan-to-replacement-cost or loan-to-value ratios of the projects to be insured as specified in § 266.100(b)(2)(i) and (ii) . Large loans, as defined by HUD for its insured multifamily mortgage programs, require prior approval by the Commissioner.(b)HFA responsibilities. The HFA is responsible for the performance of all functions except those HUD-retained functions specified in § 266.210 and 266.225(e) . After acceptance of an application for a loan to be insured under this part, the HFA must:(1) Determine that a market for the project exists, taking into consideration any comments from the local HUD office relative to the potential adverse impact the project will have on existing or proposed Federally insured and assisted projects in the area;(2) Establish the maximum insurable mortgage, and review plans and specifications for compliance with HFA standards as approved by HUD;(3) Arrange for the performance of an environmental review in accordance with § 266.217 ;(4) Determine the acceptability of the proposed mortgagor and management agent;(5) Approve the Affirmative Fair Housing Marketing Plan, required by § 266.215(a) ; and(6) Make any other determinations necessary to ensure acceptability of the proposed project.(c)HUD-retained reviews. After positive completion of the HUD-retained reviews specified in § 266.210(a) and (b) , the local HUD office will issue a firm approval letter.(d)Inspections and other reviews. The HFA is responsible for inspections during construction, processing and approving advances of mortgage proceeds during construction, review and approval of cost certification, and closing of the loan.(e)Endorsement of mortgage note for insurance. So long as the HFA is in good standing, and absent fraud or material misrepresentation on the part of the HFA, the Commissioner or designee will endorse the mortgage note for insurance upon presentation by the HFA of the Closing Docket and certifications required in § 266.420(b) , subject to HUD's right to adjust under § 266.417 .59 FR 62524, Dec. 5, 1994, as amended at 85 FR 83443 , Dec. 22, 2020