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HomeMy WebLinkAboutAGR-7450.0.2 - MERCY HOUSING CALIFORNIA 107, L.P. - SUBORDINATION AGREEMENTRecorded in Official Records, Orange County Hugh Nguyen, Clerk-Recorder Commonwealth Land Title Company 11111111111 111111111 III I II NO FEE Q , 0, 2-R 0 0 1 5 9 6 5 7 0 $ * FREE RECORDING IN ACCORDANCE 2025000353305 12:48 pm 12/22/25 WITH CALIFORNIA GOVERNMENT 868 Ex12A S13 13 CODE SECTION 27383 and 27388.1. 0.00 0.00 0.00 0.00 36.00 0.00 0.00 0.00 0.00 0.00 RECORDING REQUESTED BY, AND WHEN RECORDED, MAIL TO: State of California Department of Housing and Community Development P. O. Box 952052 Sacramento, CA 94252-2052 Attn: Legal Affairs Division 20-NPLH-16208 9326OeSta-4'2 SUBORDINATION AGREEMENT NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AGREEMENT (the "Agreement") is dated as of December 18, 2025, for reference purposes only, and is entered into by and among the City of Orange, a municipal corporation of the State of California, (the "Junior Lienholder") and Mercy Housing California 107, L.P., a California limited partnership (the"Borrower"), and the Department of Housing and Community Development, a public agency of the State of California (the"Senior Lender"). RECITALS A. Borrower is the owner of the leasehold estate in that real property described in Exhibit A attached hereto and made a part hereof(the "Property"). The Borrower has acquired and is rehabilitating a 50-unit multifamily residential rental development on the Property (the Improvements"). The Property and the Improvements are sometimes referred to collectively as the "Development." B. The Junior Lienholder has made a loan to the Borrower in the principal sum of One Million Six Hundred Thousand and no/100 Dollars ($1,600,000.00) (the "Junior Lienholder Loan"). The Junior Lienholder Loan is evidenced by a certain promissory note (the "Junior Lienholder Note"), secured by a certain City Deed of Trust (the "Junior Lienholder Deed of Trust") recorded on December 30, 2022, as Instrument No. 2022000421218, in the Official Records of Orange County, California (the "Official Records"), which have subsequently also NPLH R3 Subord.Agrmt Page 1 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 entered into a certain Assignment of Rents and Leases recorded on December 30, 2022, as Instrument No. 2022000421219, in the Official Records, as additional security for the obligations secured by the Deed of Trust (the "Assignment of Rents and Leases"). The Junior Lienholder and Borrower have also entered into an Agreement Containing HOME Program Requirements, affecting the use of the Development, recorded on December 29, 2022, as Instrument No. 2022000421038, in the Official Records (the "Junior Lienholder Regulatory Agreement"). The Junior Lienholder and Borrower have also entered into an Agreement Containing Covenants, affecting the use of the Development, recorded on December 29, 2022, as Instrument No. 2022000421039, in the Official Records (the "Junior Lienholder Covenant Agreement"). (The Junior Lienholder Deed of Trust, the Assignment of Rents and Leases, and all other documents evidencing or securing the Junior Lienholder Loan, but not the Junior Lienholder Regulatory Agreement nor the Junior Lienholder Covenant Agreement, are collectively referred to herein as the "Junior Lienholder Documents.") C. In order to finance the development of the Improvements, the Senior Lender has agreed to loan the Borrower a sum not to exceed Five Million Six Hundred Forty-One Thousand Seven Hundred Twenty-Two and no/100 Dollars ($5,641,722.00), which comprises of a certain No Place Like Home ("NPLH") Competitive Loan, in the amount of Three Million Six Hundred Forty-One Thousand Seven Hundred Twenty-Two and no/100 Dollars ($3,641,722.00), and a certain NPLH Non-Competitive Loan, in the amount of Two Million and no/100 Dollars ($2,000,000.00) (the "NPLH Loan"), subject to the terms and conditions of: (i) a regulatory agreement restricting the use and occupancy of the Development and the income derived therefrom which shall be dated as of even date herewith and recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "NPLH Regulatory Agreement"), (ii) the Capitalized Operating Subsidy Reserve Agreement (the COSRA") if applicable, and (iii) other loan documents. The NPLH Loan will be evidenced by a promissory note (the "NPLH Note"), the repayment of which will be secured by, among other things, a deed of trust by Borrower as trustor, to Senior Lender as beneficiary recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "NPLH Deed of Trust") and by such other security as is identified in other loan documents. The NPLH Regulatory Agreement, the COSRA, the NPLH Note, the NPLH Deed of Trust and all other documents evidencing or securing the NPLH Loan are collectively referred to herein as the Senior Lender Documents." D. The Senior Lender is willing to make the NPLH Loan provided the Senior Lender Documents are liens, claims or charges upon the Development prior and superior to the Junior Lienholder Documents, and provided that the Junior Lienholder specifically and unconditionally subordinates and subjects the Junior Lienholder Documents to the liens, claims or charges of the Senior Lender Documents. AGREEMENT NPLH R3 Subord.Agrmt Page 2 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Senior Lender to make its NPLH Loan, it is hereby declared, understood and agreed as follows: 1. The Senior Lender Documents and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Development prior and superior to the Junior Lienholder Documents, and to all rights and privileges of the Junior Lienholder thereunder, but not the Junior Lienholder Regulatory Agreement nor the Junior Lienholder Covenant Agreement; and the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder, but not the Junior Regulatory Agreement nor the Junior Lienholder Covenant Agreement, are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the Senior Lender Documents. 2. This Agreement shall be the whole and only agreement with regard to the subordination of the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder, to the liens, claims or charges of the Senior Lender Documents, and this Agreement shall supersede and cancel any prior agreements to subordinate the claims, liens or charges of, but only insofar as would affect the priority between the claims, liens or charges of the Junior Lienholder Documents to the Senior Lender Documents including, but not limited to,those provisions, if any, contained in the Junior Lienholder Documents, which provide for the subordination of the lien or charge thereof to another lien or charge on the Property or the Improvements. 3. The Junior Lienholder declares, agrees and acknowledges that: a) The Junior Lienholder consents and approves (i) all provisions of the Senior Lender Documents, and (ii) all agreements among the Junior Lienholder, Borrower and Senior Lender for the disbursement of the proceeds of the NPLH Loan, including without limitation any loan escrow agreements which have been provided to the Junior Lienholder for review; b) The Senior Lender, in making disbursements of the NPLH Loan pursuant to the NPLH Note or any other agreement, is under no obligation or duty to, nor has the Senior Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Senior Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; c) That none of the execution,delivery or recordation of any of the Senior Lender NPLH R3 Subord.Agrmt Page 3 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 Documents, or the performance of any provision, condition, covenant or other term thereof, will conflict with or result in a breach of the Junior Lienholder Documents or the Junior Lienholder Note; and d) The Junior Lienholder intentionally and unconditionally waives, relinquishes, subjects and subordinates the claims, liens or charges upon the Development of the Junior Lienholder Documents, but not the Junior Lienholder Regulatory Agreement nor the Junior Lienholder Covenant Agreement, all present and future indebtedness and obligations secured thereby, in favor of the claims, liens or charges upon the Development of the Senior Lender Documents, and understands that in reliance upon, and in consideration of, this waiver, relinquishment, subjection, and subordination, the NPLH Loan and advances thereof are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. 4. Senior Lender hereby agrees, but only as a separate and independent covenant of the Senior Lender and not as a condition to the continued effectiveness of the covenants and agreements of the Borrower and the Junior Lienholder as set forth herein, as follows: a) Following a notice from the Senior Lender to the Borrower that a default or breach exists under the terms of the Senior Lender Documents and each of them, the Senior Lender shall promptly(but in no event later than the following business day)send a copy of such notice to the Junior Lienholder and the Junior Lienholder shall have the right, but not the obligation, to cure the default as follows: i) If the default is reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, the Junior Lienholder shall have such period to effect a cure prior to exercise of remedies by Senior Lender under the Senior Lender Documents, or such longer period of time as may be specified in the Senior Lender Documents. ii) If the default is such that it is not reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, or such longer period if so specified, and if the Junior Lienholder (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Junior Lienholder shall have such additional time as is determined by the Senior Lender, in its sole discretion, to be reasonably necessary to cure the default prior to exercise of any remedies by Senior Lender. NPLH R3 Subord.Agrmt Page 4 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 In no event shall Senior Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within ninety (90) days after the first notice of default is given, or such longer period of time as may be specified in the Senior Lender Documents. Nothing in this subparagraph (a) is intended to modify any covenant, term or condition contained in the Senior Lender Documents, including, without limitation, the covenant against creating or recording any liens or encumbrances against the Property without the prior written approval of the Senior Lender. b) The provisions of this paragraph 4 are intended to supplement, and not to limit, waive, modify or replace, those provisions of law pertaining to notice and cure rights of junior lenders including, without limitation, those set forth in California Civil Code sections 2924b and 2924c. 5. The Senior Lender would not make the NPLH Loan without this Agreement. 6. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8. In the event that any party to this Agreement brings an action to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys' fees as awarded by the court in such action. 9. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON (OR ENTITY) OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND TO THE EXTENT PERMITTED BY THE TERMS OF THIS AGREEMENT. Signatures follow on page 6 of this Subordination Agreement. The remainder of this page is blank.] NPLH R3 Subord.Agrmt Page 5 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above and agree to be bound hereby: JUNIOR LIENHOLDER: City of Orange, a municipal corporation of the State of California BY: NAME: Jarad L. Hildenbrand ITS: City Manager ATTEST: BY:` Pamela A. Co eman, City Clerk APPROVED AS TO FORM: BY:4aVe Na halie Adourian, City Attorney Io 10 NPLH R3 Subord.Agrmt Page,/of yI NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 w ' Prep:4414+7'2A25.(City of Orange) / r1/2074'Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189 A notary public or other officer completing this certificate verifies only the Identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy,or validity of that document. State of California 1 County of 0 rit 17 9 ei 1 On I1.--11 - 2025 before me, 6hrigt) IIe • WAItov) Notkr, PUb)iG) Date r Here Insert Name and Title of the Officer personally appeared I A rid L . H i I d e h b rit h d Namef Signel(af who proved to me on the basis of satisfactory evidence to be the person -whose nam )0:re subscribed to the within instrument and acknowlr•ed to me that a he/they executed the same in it her/their authorized capacity(ii s)',and that by e/ er/their signat re on the instrument the person , .r the entity upon behalf of which the person, acted,executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing Lr,'r. 4 CHRISTINE E.WALTON paragraph is true and correct. Notary Public•California I -_,*_ Orange County WITNESS myhand and official seal.Commission N 2446132 My Comm.Expires May 7,1021 r Y LDCIMSignature Place Notary Seal and/or Stamp Above Signature of Notary Public OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: er of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: Signer's Name: Corporate Officer-Title(s): 0 Corporate Officer-Title(s): Partner- 0 Limited 0 General 0 Partner- 0 Limited 0 General Individual 0 Attorn in Fact 0 Individual 0 Attorney in Fact Trustee G ian or Conservator 0 Trustee 0 Guardian or Conservator Other: Other: Signer is Representi Signer Is Representing: 2019 National Notary Association BORROWER: Mercy Housing California 107, L.P., a California limited partnership By: Mercy Housing California 107 LLC, a California limited liability company Its: General Partner By: Mercy Housing Calwest, a California nonprofit public benefit corporation Its: Sole Member/Manager By:Ul.g! etvvIf'o• Erika Villablanca, Vice President All signatures must be acknowledged] NPLH R3 Subord.Agrmt Page 7 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate Is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ss: COUNTY OF Los Angeles on December 19, 2025 before me, Marie Mansel a Notary Public, Insert name and title of the officer) personally appeared Erika Viliabianca who proved to me on the basis of satisfactory evidence to be the pe ne whose name are sub i ed to the within Instrument and acknowledged , e that he/ executed the same in his he their authorized capacity s), and that by his a /their signature(j on the instrument the person'), or the entity upon beh If of which the person acted, executed the Instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal.I MAR1E MAMSEI u p.ty,,i;; COMM.#2414040 zW ``4 ii i NOTARY PUBLIC•CALIFORNIA (') K' LOS ANGELES COUNTY l'"' 1 '`"`,_•:"% MY Comm.Expires August 27,2026 1 SIgnatur Kr l2/11O Seal) SENIOR LENDER: Department of Housing and Community Development, public ag cy of the State of California By: Anna Balan-Hodgkins, Closing Manager All signatures must be acknowledged.] NPLH R3 Subord.Agrmt Page 8 of 10 NOFA-Competitive NOFA of 10/23/20, Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the Individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Sacramento On December 18, 2025, before me, April V. Florez, a Notary Public insert name and title of the officer) personally appeared Anna Balan-Hodgkins who proved to me on the basis of satisfactory evidence to be the person(s)whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s)on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the Instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. APRIL V.FLOREZ WITNESS my hand and official seal. NotaryPublic-California z I'" ' c Sacramento County Commission p 2430129 My Comm.Expires Dec 11,2026 Signature i Seal) EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS: A LEASEHOLD AS CREATED BY THAT CERTAIN LEASE DATED DECEMBER 29, 2022, EXECUTED BY ST. JOSEPH COLLEGE OF ORANGE, A CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION, AS LESSOR, AND MERCY HOUSING CALIFORNIA 107, L.P., A CALIFORNIA LIMITED PARTNERSHIP, AS LESSEE, AS REFERENCED IN THE DOCUMENT ENTITLED MEMORANDUM OF AIR RIGHTS LEASE, WHICH WAS RECORDED DECEMBER 29, 2022 AS RECORDING NO. 2022000421033, OF OFFICIAL RECORDS, FOR THE TERM, UPON AND SUBJECT TO ALL THE PROVISIONS CONTAINED IN SAID DOCUMENT, AND IN SAID LEASE, AS TO PARCEL 2A; PARCEL 1: PARCEL A: THE BUILDING AND IMPROVEMENTS WITHIN THE AIRSPACE OF PARCEL 3 OF PARCEL MAP NO. 2019-166, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 411, PAGES 39 TO 44, INCLUSIVE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, WHICH BUILDING AND IMPROVEMENTS ARE AND SHALL REMAIN REAL PROPERTY. PARCEL B: RECIPROCAL EASEMENTS FOR INGRESS, EGRESS, SUPPORT, ENCROACHMENTS, AND UTILITIES AS GRANTED IN THE DOCUMENT ENTITLED RECIPROCAL EASEMENT AND MAINTENANCE AGREEMENT RECORDED DECEMBER 23, 2022 AS INSTRUMENT NO. 2022000416809, OF OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. PARCEL C: AN EASEMENT FOR VEHICULAR AND PEDESTRIAN INGRESS, EGRESS, PARKING UTILITIES AND RECREATION AS GRANTED IN THE DOCUMENT ENTITLED GRANT OF EASEMENT AND MAINTENANCE AGREEMENT RECORDED DECEMBER 23, 2022 AS INSTRUMENT NO. 2022000416808, OF OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. NPLH R3 Subord.Agrmt Page 9 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208 PARCEL 2: PARCEL A: PARCEL 3 OF PARCEL MAP NO. 2019-166, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 411, PAGES 39 TO 44, INCLUSIVE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT THEREFROM THE BUILDING AND IMPROVEMENTS WITHIN THE AIRSPACE OF PARCEL 3, WHICH BUILDING AND IMPROVEMENTS ARE AND SHALL REMAIN REAL PROPERTY. PARCEL B: RECIPROCAL EASEMENTS FOR INGRESS, EGRESS, SUPPORT, ENCROACHMENTS, AND UTILITIES AS GRANTED IN THE DOCUMENT ENTITLED RECIPROCAL EASEMENT AND MAINTENANCE AGREEMENT RECORDED DECEMBER 23, 2022 AS INSTRUMENT NO. 2022000416809, OF OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. PARCEL C: AN EASEMENT FOR VEHICULAR AND PEDESTRIAN INGRESS, EGRESS, PARKING UTILITIES AND RECREATION AS GRANTED IN THE DOCUMENT ENTITLED GRANT OF EASEMENT AND MAINTENANCE AGREEMENT RECORDED DECEMBER 23, 2022 AS INSTRUMENT NO. 2022000416808, OF OFFICIAL RECORDS, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. APN: 041-080-44 (PORTION); APN: 041-080-47 (PROPOSED) NPLH R3 Subord.Agrmt Page 10 of 10 NOFA-Competitive NOFA of 10/23/20; Noncomp NOFA of 8/15/18 amended on 10/30/18,amended on October 23,2020) Rev:3/12/2024 Prep: 12/17/2025(City of Orange) Dev:Villa St Joseph Assessor's Identification Number:041-080-44 and 041-080-47 Loan No.:20-NPLH-16208