ORCHARD ESTATES - SUBORDINATION AGREEMENT (GOVERNMENT ENTITY) (3).DOCX

Freddie Mac Loan Number: [TBD]
Property Name: Orchard Estates
SUBORDINATION AGREEMENT
(CME AND PORTFOLIO)
GOVERNMENTAL ENTITY
(Revised 5-25-2012)
THIS SUBORDINATION AGREEMENT (“Agreement”) is entered into this ___ day of
_____________, 2014, by and between (i) WALKER & DUNLOP, LLC, a limited liability
company organized and existing under the laws of the State of Delaware (“Senior Mortgagee”)
and (ii) MARICOPA COUNTY, by and through the Human Services Department, a political
subdivision duly organized and existing under the State of Arizona (“Subordinate Mortgagee”).
RECITALS
A. Orchard Estates Apartments Limited Partnership, a limited partnership organized under
the laws of the State of Arizona (“Borrower”) is the owner of certain land located in
Maricopa County, Arizona, described in Exhibit A hereto (“Land”). The Land is or will
be improved with a multifamily rental housing project (“Improvements”).
B. The Senior Mortgagee is making a loan to the Borrower in the original principal amount
of [$3,000,000.00] (“Senior Loan”) upon the terms and conditions of a certain
Multifamily Loan and Security Agreement dated ____________ __, 2014 between the
Senior Mortgagee and the Borrower (“Senior Loan Agreement”) in connection with the
Mortgaged Property. The Senior Loan is secured by a Multifamily Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing dated as of ___________
___, 2014 (“Senior Mortgage”) encumbering the Land, the Improvements and related
personal and other property described in the Senior Mortgage and defined therein as the
“Mortgaged Property.”
C. Pursuant to an Urban Maricopa County HOME Loan Agreement for the property known
as Orchard Estates, dated January 7, 2004 between the Subordinate Mortgagee and the
Borrower (“Subordinate Loan Agreement”) and recorded at 2004-0020142 in the
records of the County Recorder of Maricopa County, Arizona, the Subordinate
Mortgagee has made a loan to the Borrower in the original principal amount of
$300,000.00 (“Subordinate Loan”). The Subordinate Loan is evidenced and secured by
(as attached to the Subordinate Loan Agreement ), (i) a Promissory Note dated as of
November 26, 2003, and (ii) a Subordinate Deed of Trust dated as of November 26,
2003, and subsequently modified by First Modification Agreement, dated February 1,
2004 and recorded at 2004-1001163 in the records of the County Recorder of Maricopa
County, Arizona (collectively herein known as the “Subordinate Mortgage”)
encumbering all or a portion of the Mortgaged Property.
D. The Senior Mortgage will be recorded in the records of the County Recorder of Maricopa
County (“Recording Office”). The Subordinate Mortgage is recorded in the Recording
Office as an attachment to the Subordinate Loan Agreement, as set forth above.
Subordination Agreement (CME and Portfolio) – Governmental Entity

E. The execution and delivery of this Agreement is a condition of Senior Mortgagee’s
making of the Senior Loan.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. The following terms, when used in this Agreement (including, as
appropriate, when used in the above recitals), will have the following meanings.
(a) The terms “Condemnation,” “Imposition Deposits,” “Impositions,” “Leases,”
“Rents” and “Restoration,” as well as any term used in this Agreement and not
otherwise defined in this Agreement, will have the meanings given to those terms
in the Senior Loan Agreement.
(b) “Bankruptcy Proceeding” means any bankruptcy, reorganization, insolvency,
composition, restructuring, dissolution, liquidation, receivership, assignment for
the benefit of creditors, or custodianship action or proceeding under any federal or
state law with respect to the Borrower, any guarantor of any of the Senior
Indebtedness, any of their respective properties, or any of their respective
partners, members, officers, directors, or shareholders.
(c) “Borrower” means all persons or entities identified as “Borrower” in the first
Recital of this Agreement, together with their successors and assigns, and any
other person or entity who acquires title to the Mortgaged Property after the date
of this Agreement; provided that the term “Borrower” will not include the Senior
Mortgagee in the event that the Senior Mortgagee may acquire title to the
Mortgaged Property.
(d) “Casualty” means the occurrence of damage to or loss of all or any portion of the
Mortgaged Property by fire or other casualty.
(e) “Enforcement Action” means any of the following actions taken by or at the
direction of the Subordinate Mortgagee: the acceleration of all or any part of the
Subordinate Indebtedness, the advertising of or commencement of any foreclosure
or trustee’s sale proceedings, the exercise of any power of sale, the acceptance of
a deed or assignment in lieu of foreclosure or sale, the collecting of Rents, the
obtaining of or seeking of the appointment of a receiver, the seeking of default
interest, the taking of possession or control of any of the Mortgaged Property, the
commencement of any suit or other legal, administrative, or arbitration
proceeding based upon the Subordinate Note or any other of the Subordinate Loan
Documents, the exercising of any banker’s lien or rights of set-off or recoupment,
or the exercise of any other remedial action against the Borrower, any other party
liable for any of the Subordinate Indebtedness or obligated under any of the
Subordinate Loan Documents, the Regulatory Agreement, or the Mortgaged
Property. Specifically excluded from this definition are any and all actions by the
Subordinate Mortgagee to specifically enforce the Regulatory Agreement.
(f) “Enforcement Action Notice” means a written notice from the Subordinate
Mortgagee to the Senior Mortgagee, given following one or more Subordinate
Mortgage Default(s) and the expiration of any notice or cure periods provided for
such Subordinate Mortgage Default(s) in the Subordinate Loan Documents,
setting forth in reasonable detail the Subordinate Mortgage Default(s) and the
Enforcement Actions proposed to be taken by the Subordinate Mortgagee.
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(g) “Loss Proceeds” means all monies received or to be received under any
insurance policy, from any condemning authority, or from any other source, as a
result or any Condemnation or Casualty.
(h) “Regulatory Agreement” means the covenants and agreements of Borrower
relating to the HOME Program requirements set forth in Sections 8 and 22 of the
Subordinate Loan Agreement.
(i) “Senior Indebtedness” means the “Indebtedness” as defined in the Senior Loan
Agreement.
(j) “Senior Loan Documents” means the “Loan Documents” as defined in the
Senior Loan Agreement.
(k) “Senior Mortgage Default” means any act, failure to act, event, condition, or
occurrence which constitutes, or which with the giving of notice or the passage of
time, or both, would constitute, an “Event of Default” as defined in the Senior
Loan Agreement.
(l) “Senior Mortgagee” means the “Lender” as defined in the Senior Mortgage.
When any other person or entity becomes the legal holder of the Senior Note,
such other person or entity automatically will become the Senior Mortgagee.
(m) “Senior Note” means the promissory note or other evidence of the Senior
Indebtedness referred to in the Senior Loan Agreement and any replacement of
the Senior Note.
(n) “Subordinate Indebtedness” means all sums evidenced or secured or guaranteed
by, or otherwise due and payable to the Subordinate Mortgagee pursuant to, the
Subordinate Loan Documents.
(o) “Subordinate Loan Documents” means the Subordinate Mortgage evidenced by
a Promissory Note, dated as of November 26, 2003 (Subordinate Note) and
secured by a Subordinate Deed of Trust dated as of November 26, 2003, and
subsequently modified by First Modification Agreement, dated February 1, 2004
and recorded at 2004-1001163 in the records of the County Recorder of Maricopa
County, the Subordinate Note dated as of November 26, 2003 and recorded at
2004-0020142 in the records of the County Recorder of Maricopa County,
Arizona, the Subordinate Loan Agreement dated January 7, 2004 and recorded at
2004-0020142 in the records of the County Recorder of Maricopa County,
Arizona, and all other documents at any time evidencing, securing, guaranteeing,
or otherwise delivered in connection with the Subordinate Indebtedness, as the
same may be amended from time to time. Specifically excluded from this
definition is the Regulatory Agreement.
(p) “Subordinate Mortgage Default” means any act, failure to act, event, condition,
or occurrence which allows (but for any contrary provision of this Agreement), or
which with the giving of notice or the passage of time, or both, would allow (but
for any contrary provision of this Agreement), the Subordinate Mortgagee to take
an Enforcement Action.
(q) “Subordinate Mortgagee” means the person or entity named as such in the first
paragraph of this Agreement and any other person or entity who becomes the
legal holder of the Subordinate Note after the date of this Agreement.
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(r) “Subordinate Note” means the promissory note or other evidence of the
Subordinate Indebtedness referred to in the Subordinate Mortgage and any
replacement of the Subordinate Note.
(s) “Surplus Cash” means, with respect to any period, any revenues of the Borrower
remaining after paying, or setting aside funds for paying, all of the following:
(i) All sums due or currently required to be paid under the Senior Loan
Documents, including but not limited to any Imposition Deposits.
(ii) All deposits to any replacement reserve, completion/repair reserve or
other reserve or escrow required by the Senior Loan Documents that are
due or currently payable.
(iii) All reasonable operating expenses of the Mortgaged Property, including
but not limited to real estate taxes, insurance premiums, utilities, building
maintenance, painting and repairs, management fees, payroll,
administrative expenses, legal expenses and audit expenses (including any
developer fees payable with respect to the Mortgaged Property).
2. Subordination of Subordinate Indebtedness.
(a) The Subordinate Indebtedness is and will at all times continue to be subject and
subordinate in right of payment to the prior payment in full of the Senior
Indebtedness.
(b) Until the occurrence of a Senior Mortgage Default, the Subordinate Mortgagee
will be entitled to retain for its own account all payments made on account of the
principal of and interest on the Subordinate Indebtedness in accordance with the
requirements of the Subordinate Loan Documents; provided no such payment is
made more than 10 days in advance of the due date thereof and provided further
that no such payment exceeds 75% of then available Surplus Cash. However,
immediately upon the Subordinate Mortgagee’s receipt of notice or actual
knowledge of a Senior Mortgage Default, the Subordinate Mortgagee will not
accept any payments on account of the Subordinate Indebtedness, and the
provisions of Section 2(c) of this Agreement will apply. The Subordinate
Mortgagee acknowledges that a Subordinate Mortgage Default constitutes a
Senior Mortgage Default. Accordingly, upon the occurrence of a Subordinate
Mortgage Default, the Subordinate Mortgagee will be deemed to have actual
knowledge of a Senior Mortgage Default.
(c) If (i) the Subordinate Mortgagee receives any payment, property, or asset of any
kind or in any form on account of the Subordinate Indebtedness (including,
without limitation, any proceeds from any Enforcement Action) after a Senior
Mortgage Default of which the Subordinate Mortgagee has actual knowledge (or
is deemed to have actual knowledge as provided in 2(b) above) or has been given
notice, or (ii) the Subordinate Mortgagee receives, voluntarily or involuntarily, by
operation of law or otherwise, any payment, property, or asset in or in connection
with any Bankruptcy Proceeding, such payment, property, or asset will be
received and held in trust for the Senior Mortgagee. The Subordinate Mortgagee
will promptly remit, in kind and properly endorsed as necessary, all such
payments, properties, and assets to the Senior Mortgagee. The Senior Mortgagee
will apply any payment, asset, or property so received from the Subordinate
Mortgagee to the Senior Indebtedness in such order, amount (with respect to any
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asset or property other than immediately available funds), and manner as the
Senior Mortgagee will determine in its sole and absolute discretion.
(d) Without limiting the complete subordination of the Subordinate Indebtedness to
the payment in full of the Senior Indebtedness, in any Bankruptcy Proceeding,
upon any payment or distribution (whether in cash, property, securities, or
otherwise) to creditors (i) the Senior Indebtedness will first be paid in full in cash
before the Subordinate Mortgagee will be entitled to receive any payment or other
distribution on account of or in respect of the Subordinate Indebtedness, and (ii)
until all of the Senior Indebtedness is paid in full in cash, any payment or
distribution to which the Subordinate Mortgagee would be entitled but for this
Agreement (whether in cash, property, or other assets) will be made to the Senior
Mortgagee.
(e) The subordination of the Subordinate Indebtedness will continue in the event that
any payment under the Senior Loan Documents (whether by or on behalf of the
Borrower, as proceeds of security or enforcement of any right of set-off or
otherwise) is for any reason repaid or returned to the Borrower or its insolvent
estate, or avoided, set aside or required to be paid to the Borrower, a trustee,
receiver or other similar party under any bankruptcy, insolvency, receivership or
similar law. In such event, the Senior Indebtedness or part thereof originally
intended to be satisfied will be deemed to be reinstated and outstanding to the
extent of any repayment, return, or other action, as if such payment on account of
the Senior Indebtedness had not been made.
(f) In addition to the limitations set forth above, the Subordinate Mortgagee hereby
agrees that the Subordinate Indebtedness will be payable solely from 75% of
Surplus Cash while the Senior Indebtedness remains outstanding.
3. Subordination of Subordinate Loan Documents.
(a) Each of the Subordinate Loan Documents is, and will at all times remain, subject
and subordinate in all respects to the liens, terms, covenants, conditions,
operations, and effects of each of the Senior Loan Documents. The Regulatory
Agreement is and will remain senior in all respects to the Senior Loan
Documents.
(b) The subordination of the Subordinate Loan Documents and of the Subordinate
Indebtedness will apply and continue notwithstanding (i) the actual date and time
of execution, delivery, recording, filing or perfection of each of the Senior Loan
Documents and of each of the Subordinate Loan Documents, and (ii) the
availability of any collateral to the Senior Mortgagee, including the availability of
any collateral other than the Mortgaged Property.
(c) By reason of, and without in any way limiting, the full subordination of the
Subordinate Indebtedness and the Subordinate Loan Documents provided for in
this Agreement, all rights and claims of the Subordinate Mortgagee under the
Subordinate Loan Documents in or to the Mortgaged Property or any portion
thereof, the proceeds thereof, the Leases thereof, the Rents, issues and profits
therefrom, and the Loss Proceeds payable with respect thereto, are expressly
subject and subordinate in all respects to the rights and claims of the Senior
Mortgagee under the Senior Loan Documents in or to the Mortgaged Property or
any portion thereof, the proceeds thereof, the Leases thereof, the Rents, issues and
profits therefrom and the Loss Proceeds payable with respect thereto.
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(d) If the Subordinate Mortgagee, by indemnification, subrogation or otherwise, will
acquire any lien, estate, right or other interest in any of the Mortgaged Property,
that lien, estate, right or other interest will be fully subject and subordinate to the
receipt by the Senior Mortgagee of payment in full of the Senior Indebtedness,
and to the Senior Loan Documents, to the same extent as the Subordinate
Indebtedness and the Subordinate Loan Documents are subordinate pursuant to
this Agreement.
4. Additional Representations and Covenants.
(a) The Subordinate Mortgagee represents and warrants each of the following:
(i) The Subordinate Mortgagee is now the owner and holder of the
Subordinate Loan Documents and the Regulatory Agreement.
(ii) The Subordinate Loan Documents and the Regulatory Agreement are now
in full force and effect.
(iii) The Subordinate Loan Documents and the Regulatory Agreement have not
been modified or amended.
(iv) No Subordinate Mortgage Default has occurred.
(v) The current principal balance of the Subordinate Indebtedness is
$________.
(vi) No scheduled monthly payments under the Subordinate Note have been or
will be prepaid.
(vii) Other than the rights of the U.S. Department of Housing and Urban
Development (and associated federal and state enforcement agencies) to
enforce the Regulatory Agreement, none of the rights of the Subordinate
Mortgagee under any of the Subordinate Loan Documents are subject to
the rights of any third parties, by way of subrogation, indemnification or
otherwise.
(b) Without the prior written consent of the Senior Mortgagee in each instance, the
Subordinate Mortgagee will not do any of the following:
(i) Amend, modify, waive, extend, renew or replace any provision of any of
the Subordinate Loan Documents.
(ii) Pledge, assign, transfer, convey, or sell any interest in the Subordinate
Indebtedness or any of the Subordinate Loan Documents.
(iii) Accept any payment on account of the Subordinate Indebtedness other
than a regularly scheduled payment of interest or principal and interest
made not earlier than 10 days prior to the due date thereof, or as expressly
authorized in Section 4(i) below and not in excess of 75% of then
available Surplus Cash.
(iv) Take any action which has the effect of increasing the Subordinate
Indebtedness, other than such increases resulting from enforcement of the
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Regulatory Agreement, provided that any such increase shall be subject to
the terms of this Agreement.
(v) Appear in, defend or bring any action to protect the Subordinate
Mortgagee’s interest in the Mortgaged Property, except to enforce the
Regulatory Agreement.
(vi) Take any action concerning environmental matters affecting the
Mortgaged Property, except as may be set forth in the Regulatory
Agreement, in the event the Senior Mortgagee as failed to take action
under the Senior Loan Documents.
(c) The Subordinate Mortgagee will deliver to the Senior Mortgagee a copy of each
notice received or delivered by the Subordinate Mortgagee pursuant to the
Subordinate Loan Documents or in connection with the Subordinate Indebtedness,
simultaneously with the Subordinate Mortgagee’s delivery or receipt of such
notice. The Senior Mortgagee will deliver to the Subordinate Mortgagee in the
manner required in Section 5(b) a copy of each notice of a Senior Mortgage
Default delivered to the Borrower by the Senior Mortgagee. Neither giving nor
failing to give a notice to the Senior Mortgagee or Subordinate Mortgagee
pursuant to this Section 4(c) will affect the validity of any notice given by the
Senior Mortgagee or Subordinate Mortgagee to the Borrower, as between the
Borrower and such of the Senior Mortgagee or the Subordinate Mortgagee as
provided the notice to the Borrower.
(d) Without the prior written consent of the Senior Mortgagee in each instance, the
Subordinate Mortgagee will not commence, or join with any other creditor in
commencing, any Bankruptcy Proceeding. In the event of a Bankruptcy
Proceeding, the Subordinate Mortgagee will not vote affirmatively in favor of any
plan of reorganization or liquidation unless the Senior Mortgagee has also voted
affirmatively in favor of such plan. In the event of any Bankruptcy Proceeding,
the Subordinate Mortgagee will not contest the continued accrual of interest on
the Senior Indebtedness, in accordance with and at the rates specified in the
Senior Loan Documents, both for periods before and for periods after the
commencement of such Bankruptcy Proceedings.
(e) Whenever the Subordinate Loan Documents give the Subordinate Mortgagee
approval or consent rights with respect to any matter, and a right of approval or
consent with regard to the same or substantially the same matter is also granted to
the Senior Mortgagee pursuant to the Senior Loan Documents or otherwise, the
Senior Mortgagee’s approval or consent or failure to approve or consent, as the
case may be, will be binding on the Subordinate Mortgagee. None of the other
provisions of this Section 4 are intended to be in any way in limitation of the
provisions of this Section 4(e).
(f) All requirements pertaining to insurance under the Subordinate Loan Documents
(including requirements relating to amounts and types of coverages, deductibles
and special endorsements) will be deemed satisfied if the Borrower complies with
the insurance requirements under the Senior Loan Documents and of the Senior
Mortgagee. All original policies of insurance required pursuant to the Senior Loan
Documents will be held by the Senior Mortgagee. Nothing in this Section 4(f) will
preclude the Subordinate Mortgagee from requiring that it be named as a
mortgagee and loss payee, as its interest may appear, under all policies of
property damage insurance maintained by the Borrower with respect to the
Mortgaged Property, provided such action does not affect the priority of payment
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of Loss Proceeds, or that the Subordinate Mortgagee be named as an additional
insured under all policies of liability insurance maintained by the Borrower with
respect to the Mortgaged Property.
(g) In the event of a Condemnation or a Casualty, all of the following provisions will
apply:
(i) The rights of the Subordinate Mortgagee (under the Subordinate Loan
Documents or otherwise) to participate in any proceeding or action
relating to a Condemnation or a Casualty, or to participate or join in any
settlement of, or to adjust, any claims resulting from a Condemnation or a
Casualty, will be and remain subordinate in all respects to the Senior
Mortgagee’s rights under the Senior Loan Documents with respect thereto,
and the Subordinate Mortgagee will be bound by any settlement or
adjustment of a claim resulting from a Condemnation or a Casualty made
by the Senior Mortgagee.
(ii) All Loss Proceeds will be applied either to payment of the costs and
expenses of Restoration or to payment on account of the Senior
Indebtedness, as and in the manner determined by the Senior Mortgagee in
its sole discretion.
(iii) In the event the Senior Mortgagee applies or releases Loss Proceeds for
the purposes of Restoration of the Mortgaged Property, the Subordinate
Mortgagee will release for such purpose all of its right, title and interest, if
any, in and to such Loss Proceeds. If the Senior Mortgagee holds Loss
Proceeds, or monitors the disbursement thereof, the Subordinate
Mortgagee will not do so. Nothing contained in this Agreement will be
deemed to require the Senior Mortgagee to act for or on behalf of the
Subordinate Mortgagee in connection with any Restoration or to hold or
monitor any Loss Proceeds in trust for or otherwise on behalf of the
Subordinate Mortgagee, and all or any Loss Proceeds may be commingled
with any funds of the Senior Mortgagee.
(iv) If the Senior Mortgagee elects to apply Loss Proceeds to payment on
account of the Senior Indebtedness, and if the application of such Loss
Proceeds results in the payment in full of the entire Senior Indebtedness,
any remaining Loss Proceeds held by the Senior Mortgagee will be paid to
the Subordinate Mortgagee unless another party has asserted a claim to the
remaining Loss Proceeds.
(h) The Subordinate Mortgagee will enter into attornment and non-disturbance
agreements with all tenants under commercial or retail Leases, if any, to whom
the Senior Mortgagee has granted attornment and non-disturbance, on the same
terms and conditions given by the Senior Mortgagee.
(i) Except as provided in this Section 4(i), and regardless of any contrary provision in
the Subordinate Loan Documents, the Subordinate Mortgagee will not collect
payments for the purpose of escrowing for any cost or expense related to the
Mortgaged Property or for any portion of the Subordinate Indebtedness. However,
if the Senior Mortgagee is not collecting escrow payments for one or more
Impositions, the Subordinate Mortgagee may collect escrow payments for such
Impositions; provided that all payments so collected by the Subordinate
Mortgagee will be held in trust by the Subordinate Mortgagee to be applied only
to the payment of such Impositions.
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(j) Within 10 days after request by the Senior Mortgagee, the Subordinate Mortgagee
will furnish the Senior Mortgagee with a statement, duly acknowledged and
certified setting forth the then-current amount and terms of the Subordinate
Indebtedness, confirming that there exists no default under the Subordinate Loan
Documents (or describing any default that does exist), and certifying to such other
information with respect to the Subordinate Indebtedness as the Senior Mortgagee
may request.
(k) The Senior Mortgagee may amend, waive, postpone, extend, renew, replace,
reduce or otherwise modify any provisions of the Senior Loan Documents without
the necessity of obtaining the consent of or providing notice to the Subordinate
Mortgagee, and without affecting any of the provisions of this Agreement.
Notwithstanding the forgoing, Senior Mortgagee may not modify any provision of
the Senior Loan Documents that increases the Senior Indebtedness, except for
increases in the Senior Indebtedness that result from advances made by the Senior
Mortgagee to protect the security or lien priority of the Senior Mortgagee under
the Senior Loan Documents or to cure defaults under the Subordinate Loan
Documents.
(1) Within 20 days after request by the Subordinate Mortgagee, the Senior Mortgagee
will furnish the Subordinate Mortgagee with a statement setting forth the then-
current amount and terms of the Senior Indebtedness and confirming that there
exists no default under the Senior Loan Documents (or describing any default that
does exist).
5. Default Under Loan Documents.
(a) For a period of 90 days following delivery to the Senior Mortgagee of an
Enforcement Action Notice, the Senior Mortgagee will have the right to cure any
Subordinate Mortgage Default, provided if such Subordinate Mortgage Default is
a non-monetary default and is not capable of being cured within such 90-day
period and the Senior Mortgagee has commenced and is diligently pursuing such
cure to completion, the Senior Mortgagee will have such additional period of time
as may be required to cure such Subordinate Mortgage Default or until such time,
if ever, as the Senior Mortgagee (i) discontinues its pursuit of any cure and/or (ii)
delivers to the Subordinate Mortgagee the Senior Mortgagee’s written consent to
the Enforcement Action described in the Enforcement Action Notice. The Senior
Mortgagee will not have any obligation whatsoever to cure any Subordinate
Mortgage Default. The Senior Mortgagee will not be subrogated to the rights of
the Subordinate Mortgagee under the Subordinate Loan Documents by reason of
the Senior Mortgagee having cured any Subordinate Mortgage Default. However,
the Subordinate Mortgagee acknowledges that all amounts advanced or expended
by the Senior Mortgagee in accordance with the Senior Loan Documents or to cure
a Subordinate Mortgage Default will be added to and become a part of the Senior
Indebtedness and will be secured by the lien of the Senior Mortgage.
(b) The Senior Mortgagee will deliver to the Subordinate Mortgagee a copy of any
notice sent by the Senior Mortgagee to the Borrower of a Senior Mortgage Default
within 5 Business Days of sending such notice to the Borrower. Failure of the Senior
Mortgagee to send notice to the Subordinate Mortgagee will not prevent the exercise
of the Senior Mortgagee’s rights and remedies under the Senior Loan Documents.
The Subordinate Mortgagee will have the right, but not the obligation, to cure any
monetary Senior Mortgage Default within 30 days following the date of such notice;
provided, however, that the Senior Mortgagee will be entitled during such 30-day
period to continue to pursue its remedies under the Senior Loan Documents. The
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Subordinate Mortgagee may have up to 90 days from the date of the notice to cure a
non-monetary Senior Mortgage Default if, during such 90-day period, the
Subordinate Mortgagee keeps current all payments required by the Senior Loan
Documents. In the event that such a non-monetary Senior Mortgage Default creates
an unacceptable level of risk relative to the Mortgaged Property, or Senior
Mortgagee’s secured position relative to the Mortgaged Property, as determined by
the Senior Mortgagee in its sole discretion, then the Senior Mortgagee may exercise
during such 90-day period all available rights and remedies to protect and preserve
the Mortgaged Property and the Rents, revenues and other proceeds from the
Mortgaged Property. The Subordinate Mortgagee will not be subrogated to the rights
of the Senior Mortgagee under the Senior Loan Documents by reason of the
Subordinate Mortgagee having cured any Senior Mortgage Default. However, the
Senior Mortgagee acknowledges that all amounts paid by the Subordinate
Mortgagee to the Senior Mortgagee to cure a Senior Mortgage Default will be
deemed to have been advanced by the Subordinate Mortgagee pursuant to, and will
be secured by the lien of, the Subordinate Mortgage. Notwithstanding anything in
this Section 5(b) to the contrary, the Subordinate Mortgagee’s right to cure any
Senior Mortgage Default will terminate immediately upon the occurrence of any
Bankruptcy Proceeding.
(c) In the event of a Subordinate Mortgage Default, the Subordinate Mortgagee will
not commence any Enforcement Action until 90 days after the Subordinate
Mortgagee has delivered to the Senior Mortgagee an Enforcement Action Notice
with respect to such Enforcement Action, provided that during such 90-day period
or such longer period as provided in Section 5(a), the Subordinate Mortgagee will
be entitled to seek specific performance to enforce covenants and agreements of
the Borrower relating to income, rent, or affordability restrictions contained in the
Regulatory Agreement, subject to the Senior Mortgagee’s right to cure a
Subordinate Mortgage Default set forth in Section 5(a). Except with respect to
the specific performance of the Regulatory Agreement, the Subordinate
Mortgagee may not commence any Enforcement Action, including but not limited
to any foreclosure action under the Subordinate Loan Documents, until the earlier
of (i) the expiration of such 90-day period or such longer period as provided in
Section 5(a) or (ii) the delivery by the Senior Mortgagee to the Subordinate
Mortgagee of the Senior Mortgagee’s written consent to such Enforcement Action
by the Subordinate Mortgagee. The Subordinate Mortgagee acknowledges that the
Senior Mortgagee may grant or refuse consent to the Subordinate Mortgagee’s
Enforcement Action in the Senior Mortgagee’s sole and absolute discretion. At
the expiration of such 90-day period or such longer period as provided in Section
5(a) and, subject to the Senior Mortgagee’s right to cure set forth in Section 5(a),
Subordinate Mortgagee may commence any Enforcement Action. Any
Enforcement Action on the part of the Subordinate Mortgagee will be subject to
the provisions of this Agreement. The Subordinate Mortgagee acknowledges that
the provisions of this Section 5(c) are fair and reasonable under the
circumstances, that the Subordinate Mortgagee has received a substantial benefit
from the Senior Mortgagee having granted its consent to the Subordinate
Mortgage, and that the Senior Mortgagee would not have granted such consent
without the inclusion of these provisions in this Agreement.
(d) The Senior Mortgagee may pursue all rights and remedies available to it under the
Senior Loan Documents, at law, or in equity, regardless of any Enforcement
Action Notice or Enforcement Action by the Subordinate Mortgagee. No action or
failure to act on the part of the Senior Mortgagee in the event of a Subordinate
Mortgage Default or commencement of an Enforcement Action will constitute a
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waiver on the part of the Senior Mortgagee of any provision of the Senior Loan
Documents or this Agreement.
(e) In the event that the Enforcement Action taken by the Subordinate Mortgagee is
the appointment of a receiver for any of the Mortgaged Property, all of the Rents,
issues, profits and proceeds collected by the receiver will be paid and applied by
the receiver solely to and for the benefit of the Senior Mortgagee until the Senior
Indebtedness will have been paid in full.
(f) The Subordinate Mortgagee hereby expressly consents to and authorizes the
release by the Senior Mortgagee of all or any portion of the Mortgaged Property
from the lien, operation, and effect of the Senior Loan Documents. The
Subordinate Mortgagee hereby waives to the fullest extent permitted by law, all
equitable or other rights it may have (i) in connection with the release of all or any
portion of the Mortgaged Property, (ii) to require the separate sale of any portion
of the Mortgaged Property, (iii) to require the Senior Mortgagee to exhaust its
remedies against all or any portion of the Mortgaged Property or any combination
of portions of the Mortgaged Property or any other collateral for the Senior
Indebtedness, or (iv) to require the Senior Mortgagee to proceed against the
Borrower, any other party that may be liable for any of the Senior Indebtedness
(including any general partner of the Borrower if the Borrower is a partnership),
all or any portion of the Mortgaged Property or combination of portions of the
Mortgaged Property or any other collateral, before proceeding against all or such
portions or combination of portions of the Mortgaged Property as the Senior
Mortgagee determines. The Subordinate Mortgagee hereby expressly consents to
and authorizes, at the option of the Senior Mortgagee, the sale, either separately or
together, of all or any portion of the Mortgaged Property. The Subordinate
Mortgagee acknowledges that without notice to the Subordinate Mortgagee and
without affecting any of the provisions of this Agreement, the Senior Mortgagee
may (i) extend the time for or waive any payment or performance under the
Senior Loan Documents; (ii) modify or amend in any respect any provision of the
Senior Loan Documents; and (iii) modify, exchange, surrender, release and
otherwise deal with any additional collateral for the Senior Indebtedness.(g) . If
any party other than the Borrower (including the Senior Mortgagee) acquires title
to any of the Mortgaged Property pursuant to a foreclosure of, or trustee’s sale or
other exercise of any power of sale under, the Senior Mortgage conducted in
accordance with applicable law, the lien, operation, and effect of the Subordinate
Mortgage and other Subordinate Loan Documents automatically will terminate
with respect to such Mortgaged Property.
6. Miscellaneous Provisions.
(a) In the event of any conflict or inconsistency between the terms of the Subordinate
Loan Documents and the terms of this Agreement, the terms of this Agreement
will control.
(b) This Agreement will be binding upon and will inure to the benefit of the
respective legal successors and permitted assigns of the parties to this Agreement.
No other party will be entitled to any benefits under this Agreement, whether as a
third-party beneficiary or otherwise.
(c) This Agreement does not constitute an approval by the Senior Mortgagee of the
terms of the Subordinate Loan Documents.
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 11

(d) Each notice, request, demand, consent, approval or other communication
(collectively, “notices,” and singly, a “notice”) which is required or permitted to
be given pursuant to this Agreement will be in writing and will be deemed to have
been duly and sufficiently given if (i) personally delivered with proof of delivery
thereof (any notice so delivered will be deemed to have been received at the time
so delivered), or (ii) sent by a national overnight courier service (such as FedEx)
designating earliest available delivery (any notice so delivered will be deemed to
have been received on the next Business Day following receipt by the courier), or
(iii) sent by United States registered or certified mail, return receipt requested,
postage prepaid, at a post office regularly maintained by the United States Postal
Service (any notice so sent will be deemed to have been received on the date of
delivery as confirmed by the return receipt), addressed to the respective parties as
follows:
(i) Notices intended for the Senior Mortgagee will be addressed to:
Walker & Dunlop, LLC
7501 Wisconsin Avenue, Suite 1200E
Bethesda, Maryland 20814
(ii) Notices intended for the Subordinate Mortgagee will be addressed to:
Maricopa County Community Development
234 North Central, 3rd Floor
Phoenix, Arizona 85044
Any party, by notice given pursuant to this Section, may change the person or
persons and/or address or addresses, or designate an additional person or persons
or an additional address or addresses, for its notices, but notice of a change of
address will only be effective upon receipt. Neither party will refuse or reject
delivery of any notice given in accordance with this Section.
(e) Nothing in this Agreement or in any of the Senior Loan Documents or
Subordinate Loan Documents will be deemed to constitute the Senior Mortgagee
as a joint venturer or partner of the Subordinate Mortgagee.
(f) Upon notice from the Senior Mortgagee from time to time, the Subordinate
Mortgagee will execute and deliver such additional instruments and documents,
and will take such actions, as are required by the Senior Mortgagee in order to
further evidence or effectuate the provisions and intent of this Agreement.
(g) This Agreement will be governed by the laws of the State in which the Land is
located.
(h) If any one or more of the provisions contained in this Agreement, or any
application thereof, will be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein,
and any other application thereof, will not in any way be affected or impaired
thereby.
(i) The term of this Agreement will commence on the date of this Agreement and
will continue until the earliest to occur of the following events: (i) the payment of
all of the Senior Indebtedness; provided that this Agreement will be reinstated in
the event any payment on account of the Senior Indebtedness is avoided, set
aside, rescinded or repaid by the Senior Mortgagee as described in Section 2(e) of
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 12

this Agreement, (ii) the payment of all of the Subordinate Indebtedness other than
by reason of payments which the Subordinate Mortgagee is obligated to remit to
the Senior Mortgagee pursuant to this Agreement, (iii) the acquisition by the
Senior Mortgagee or by a third party purchaser, of title to the Mortgaged Property
pursuant to a foreclosure of, deed in lieu of foreclosure, or trustee’s sale or other
exercise of a power of sale or similar disposition under, the Senior Mortgage; or
(iv) with the prior written consent of the Senior Mortgagee, without limiting the
provisions of Section 5(d), the acquisition by the Subordinate Mortgagee of title
to the Mortgaged Property subject to the Senior Mortgage pursuant to a
foreclosure, or a deed in lieu of foreclosure, of (or the exercise of a power of sale
under) the Subordinate Mortgage.
(j) No failure or delay on the part of any party hereto in exercising any right, power
or remedy hereunder will operate as a waiver thereof, nor will any single or
partial exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under this
Agreement.
(k) Each party to this Agreement acknowledges that in the event any party fails to
comply with its obligations hereunder, the other parties will have all rights
available at law and in equity, including the right to obtain specific performance
of the obligations of such defaulting party and injunctive relief.
(l) Nothing in this Agreement is intended, nor will it be construed, to in any way
limit the exercise by the Subordinate Mortgagee of its governmental powers
(including but not limited to police, regulatory and taxing powers) with respect to
the Borrower or the Mortgaged Property to the same extent as if it were not a
party to this Agreement or the transactions contemplated by this Agreement.
(m) This Agreement may be assigned at any time by the Senior Mortgagee to any
subsequent holder of the Senior Note.
(n) This Agreement may be amended, changed, modified, altered or terminated only
by a written instrument or written instruments signed by the parties to this
Agreement.
(o) This Agreement may be executed in two or more counterparts, each of which will
be deemed an original but all of which together will constitute one and the same
instrument.
(p) Notice of A.R.S. 38-511-Cancellation. Notice is hereby given of the provisions of
A.R.S. § 38-511 as amended. By this reference, the provisions of said statute are
incorporated herein to the extent of their applicability to contracts of the nature of
this Subordination Agremeent under the laws of the state of Arizona.
[Signature and acknowledgment pages follow]
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 13

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and
year first above written.
SENIOR MORTGAGEE:
WALKER & DUNLOP, LLC, a Delaware limited
liability company
By:
Nancy Sexton
Senior Closing Officer
STATE OF ______________________
CITY/COUNTY OF _______________, to-wit:
The foregoing instrument was acknowledged before me in the above-stated jurisdiction
this _____ day of _______________, _______ by Nancy Sexton who is Senior Closing Officer
of Walker & Dunlop, LLC, a Delaware limited liability company, for and on behalf of the
limited liability company.
__________________________________________
Notary Public
My commission expires:
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 14

SUBORDINATE MORTGAGEE:
MARICOPA COUNTY, a political subdivision duly
organized and existing under the State of Arizona
By: __________________________________________
Chair, Board of Supervisors
STATE OF ______________________
CITY/COUNTY OF _______________, to-wit:
The foregoing instrument was acknowledged before me in the above-stated jurisdiction
this _____ day of _______________, _______ by ______________________ who is
___________________ of Maricopa County, a political subdivision by and through Maricopa
County Human Services Department, Community Development, for and on behalf of the
political subdivision.
__________________________________________
Notary Public
My commission expires:
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 15

CONSENT OF BORROWER
The Borrower hereby acknowledges receipt of a copy of this Subordination Agreement, dated
___________ ___, 2014, by and between WALKER & DUNLOP, LLC, a Delaware limited
liability company and MARICOPA COUNTY, by and through the Human Services
Department, a political subdivision duly organized and existing under the State of Arizona, and
consents to the agreement of the parties set forth in this Agreement.
ORCHARD ESTATES APARTMENTS
LIMITED PARTNERSHIP, an Arizona
limited partnership
By: Surprise Community Housing, Inc., an Arizona
corporation, its General Partner
By:___________________________________
Mark D. Breen
President
STATE OF ______________________
CITY/COUNTY OF _______________, to-wit:
The foregoing instrument was acknowledged before me in the above-stated jurisdiction
this _____ day of _______________, ______ by Mark D. Breen who is President of Surprise
Community Housing, Inc., an Arizona corporation, General Partner of Orchard Estates
Apartments Limited Partnership, an Arizona limited partnership, for and on behalf of the limited
partnership.
__________________________________________
Notary Public
My commission expires:
Subordination Agreement (CME and Portfolio) – Governmental Entity Page 16

EXHIBIT A
LEGAL DESCRIPTION
A parcel of land situate a portion of the Northwest quarter of Section 5,
Township 3 North, Range 1 West of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona, also being a part of Parcel 16, as
shown on the final plat of Map of Dedication for the “THE ORCHARDS-
AMENDED “ recorded in Book 588 of Maps, page 27, and Affidavit of
Correction recorded in Recording No. 2002-0746750 and Affidavit of
Correction recorded in Recording No. 2008-0578877, records of Maricopa
County, Arizona, described as follows:
COMMENCING at the Northwest corner of said Section 5, monumented by
a brass cap in a handhole, from which the West quarter corner of said Section
5, monument by a brass cap in a handhole, bears as a basis of bearings South
00 degrees 03 minutes 20 seconds West, a distance of 2,681.45 feet:
Thence South 00 degrees 03 minutes 20 seconds West along the Westerly
line of the Northwest quarter said Section 5, a distance of 1492.10 feet;
Thence South 89 degrees 01 minutes 12 seconds East along the centerline of Young
Street as shown on said final plat of Map
of Dedication, a distance of 510.49 feet;
Thence North 00 degrees 58 minutes 48 seconds East, a distance of 40.00 feet
to a point lying on the Southerly boundary of said parcel 16 and the Point of
Beginning;
Thence North 00 degrees 02 minutes 22 seconds West, along a line parallel with
and 396.11 feet Westerly of the Easterly line
of said Parcel 16, a distance of 710.13 feet to a point lying on the Northerly line of
said Parcel 16;
Thence North 89 degrees 58 minutes 08 seconds East along said Northerly line, a
distance of 366.11 feet;
Thence South 00 degrees 02minutes 22 seconds East along a line parallel with
and 30.00 feet Westerly of the Easterly line of said Parcel 16, a distance of
716.59 feet to a point lying on the Southerly line of said Parcel 16:
Thence North 89 degrees 01 minutes 12 seconds West along said Southerly line, a
distance of 366.16 feet to the Point of
Beginning;
Except that portion conveyed to Surprise Orchards Community Association, Inc.,
in instrument recorded in Recording No.
2007-0362807, more particularly described as follows:
Page A-1

A parcel of land situate a portion of the Northwest quarter of Section 5,
Township 3 North, Range 1 West of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona, also being a part of Parcel 16, as
shown on the final plat of Map of Dedication for the “THE ORCHARDS-
AMENDED “ recorded in Book 588 of Maps, page 27, and Affidavit of
Correction recorded in Recording No. 2002-0746750 and Affidavit of
Correction recorded in Recording No. 2008-0578877, records of Maricopa
County, Arizona, described as follows:
Thence North 00 degrees 02 minutes 22 seconds West, along a line parallel with
and 30.00 feet Westerly of the Easterly line
of said Parcel 16, a distance of 716.69 feet to a point lying on the Northerly line of
said Parcel 16;
Thence North 89 degrees 58 minutes 08 seconds East along said Northerly line, a
distance of 30.00 feet;
Thence South 00 degrees 02 minutes 22 seconds East along the Easterly line of said
Parcel 16, a distance of 717.12 feet to the
Southeast corner of said Parcel 16;
Thence North 89 degrees 01 minutes 12 seconds West along the Southerly line
of said Parcel 16, a distance of 30.00 feet to the Point of Beginning.
Page A-2