f. Letters of Credit

A commercial letter of credit may be used in lieu of a cash escrow provided

·   the dollar amount of available credit is at least 1 1/2 times the estimated cost of the postponed work

·   a trust agreement describing the duties, obligations, and responsibilities is submitted (VA Form 26-1849 or 26-6378, as appropriate, may be used)

·   the letter of credit is irrevocable and a valid and binding obligation on the issuing bank and extends at least 6 months beyond the date for completion of improvements

·   a copy of the letter of credit and trust agreement is furnished to the appropriate VA office so a control can be maintained on the available credit, and

·   VA Form 26-1847 is completed indicating that the subject property is included in the section or subdivision covered by the letter of credit and trust agreement.

Note:  A letter of credit acceptable to HUD which conforms to the standards above is also acceptable to VA.  In such cases, the escrow agent or trustee must agree to keep VA informed of charges against the letter of credit.

g. Surety Bonds

Cash escrows are not required when the offsite improvements are to be installed by the builder, provided

·   a surety bond acceptable to the local government authority provides assurance of the builder’s obligation to install the offsite improvements

·   the amount of the bond is at least equal to the estimated cost of installing the offsite improvements

·   the local government provides VA evidence

-   that the offsite improvements will be installed without cost or assessment to the purchasers of the abutting properties, and

-   if the builder does not complete the improvements by a specified date, the local government authority will be responsible for their completion, with no cost or assessment to the purchasers of properties affected by the improvements, and

·   the local government has provided evidence that it will be responsible for continuous maintenance of the completed offsite improvements, and

·   the principal law officer of the local authority advises VA that the local authority is legally empowered to assume these obligations.