Sec. 05.04.06.06. Loan Terms and Requirements — General

A. Interest Rate.

(1) The interest rate to be paid on each loan may not be more than private lending rates for comparable loans.

(2) Interest rates and repayment terms for each loan shall be set by the Department or the local administrator, as applicable, based upon the owner's ability to pay, in accordance with underwriting criteria set by the Department.

B. Maximum Loan Amount. Except for deferred payment loans in Regulation .07 of this chapter, loans for residential buildings and child care centers may not exceed an amount which, when added to any prior debts secured by the property, would equal 100 percent of the market value of the building and property after rehabilitation, in the estimation of the Department or the local administrator, as applicable.

C. Term. The term of a loan may not exceed 30 years from the date of completion of the lead hazard reduction work and shall be based upon the amount of the loan, expected economic life of the rehabilitated building, and the borrower's ability to repay.

D. Periodic Payment. Except for deferred payment loans described in Regulation .07 of this chapter, loans shall be repaid on a periodic basis, with payments applied first to expenses when applicable, then to interest, and then to principal.

E. Late Charges. Late charges may be imposed as permitted by law.

F. Insurance.

(1) Hazard Insurance. The owner of the building shall maintain fire and extended coverage insurance at the owner's expense in an amount not less than the sum of the loan and any other indebtedness secured by the building, up to the value of the improvements. The hazard insurance policy shall:

(a) Be written by companies authorized to transact business in the State;

(b) Be in force on or before the date of the loan closing;

(c) Name the Department as insured and as loss payee as its interest may appear in a standard mortgagee endorsement attached to or printed in the policy; and

(d) Contain terms and coverage satisfactory to the Department.

(2) Flood Insurance. If a building is in a 100-year flood plain, as designated by the Federal Emergency Management Agency:

(a) The building shall be covered by a flood insurance policy, naming the Department as beneficiary, in an amount not less than the sum of the loan and any other indebtedness secured by the building; and

(b) The flood insurance policy may not be terminated without the Department's prior written consent.

G. Appraisals. At the discretion of the Program Director or the local administrator, a borrower may be required to obtain an appraisal in a form and manner acceptable to the Department from an acceptable independent fee appraiser showing the building's value before and after the proposed rehabilitation.

H. Loan Administration Fee. The Department or the local administrator may charge a loan administration fee in an amount acceptable to the Department.

I. Change of Ownership. A borrower may not sell, cease to own, assign, transfer, dispose of, or lease all or any part of the property during the loan term, without the prior written consent of the Department, except as permitted by federal law.

J. Default. Remedies upon loan default shall be exercised in the discretion of the Department and may be one or more of the remedies provided in the loan documents or by law, such as:

(1) Adjustments to the interest rate of the loan upward or downward;

(2) Conversion of a deferred payment loan to a loan that suspends terms of deferral and requires periodic payments;

(3) Suspension or debarment from the Department's programs;

(4) Foreclosure;

(5) Accepting a deed instead of foreclosure;

(6) Appointment of a receiver;

(7) Modification of loan terms to facilitate repayment; and

(8) Other legal action which protects the Department's interest.