Sec. 05.04.09.07. Loan Terms — General

A. Maximum Loan Amount. A program loan when aggregated with any other debt secured by the group home may not exceed the lesser of:

(1) Either:

(a) 100 percent of the appraised value of the property after modification, for program loans secured by a first mortgage or subordinate to another loan made or insured by the Department or one of its units;or

(b) 95 percent of the appraised value of the property after modification, for program loans secured by a mortgage which is subordinate to debt not made or insured by the Department or one of its units;

(2) The sum of the purchase price of the property, the closing costs, and the costs of any modification;

(3) The sum of the land acquisition, the costs of construction, and any closing costs; or

(4) A maximum house price set periodically by the program for the region where the property is located, unless the Department's Housing Finance Review Committee approves an exception on the following basis:

(a) There are no other reasonably acceptable properties available within the cost limit; or

(b) The property is larger than the usual group home financed by the program and will serve more than three individuals with special housing needs.

B. Interest Rate.

(1) The interest rate to be charged on a loan shall not exceed an annual rate of 7 percent except as provided in §B(4) of this regulation.

(2) The interest rate to be charged on a loan may be as low as zero percent in exceptional circumstances, as determined by the Department.

(3) The interest rate for each loan shall be established by the Department, after taking into consideration the:

(a) Annual income of the individuals or families expected to reside in the group home; and

(b) Amount of income from operating the group home available to repay the loan with interest after payment of the cost of operating the group home and payment of debt service on any prior mortgage secured by the group home.

(4) If the annual income of the individuals or families occupying the group home changes so that the borrower no longer would qualify for the interest rate, the Department may increase the interest rate on the loan to a rate that would be permitted given the annual income of the individuals up to the prevailing conventional interest rate.

C. Loan Term.

(1) The term of each permanent loan may not exceed 40 years and shall be based upon the borrower's ability to repay.

(2) The term of each construction loan may not exceed 1 year unless the Program determines a longer term is necessary based upon the size or scope of the project.

D. Periodic Payment. Except for deferred payment loans, periodic payments shall be charged and applied first to escrows, when applicable, second to interest, and third to principal.

E. Late Charge. Late charges, as permitted by law, may be imposed.

F. Security for Loans.

(1) Program loans shall be secured by a mortgage or deed of trust, in the form required by the Department, which shall be recorded in the land records applicable to the property. Except as provided in §F(2) of this regulation, the Department shall have a first position lien on the project property.

(2) A program loan may be secured by a subordinate lien mortgage or deed of trust if the borrower complies with Regulation .09 of this chapter and either:

(a) Obtains:

(i) Private financing for a portion of the project costs; and

(ii) Any required consent of the superior mortgagee; or

(b) Receives a loan under:

(i) A federal program, other than the federal Section 202 Program, which requires a first mortgage or deed of trust; or

(ii) The Department's Special Housing Opportunities Program.

(3) Loans may not be subordinate to loans made under the Federal Section 202 Program.

(4) Liens subordinate to the loan may be placed on the property provided that the Department and any superior mortgagee give any required consents.

G. Change of Borrower Eligibility. If at any time at least 51 percent of the individuals or families residing in the group home are not persons of lower income or if the borrower ceases to satisfy the requirements of Regulation .04 or Regulation .11 of this chapter, the Department may, in accordance with the terms of the loan documents between the Department and the borrower, either:

(1) Increase the interest rate up to the then prevailing conventional mortgage rate; or

(2) Accelerate the payment of the entire principal and interest due under the loan.

H. Change of Ownership. If at any time during the term of the loan the borrower sells, ceases to own, assigns, transfers, or otherwise disposes of all or any part of the group home or the borrower's interest in the group home without the Department’s prior written consent, the Department, in accordance with the terms of the loan documents between the Department and the borrower, may accelerate the payment of the entire principal and interest due under the loan.

I. Escrow Account. The borrower shall make periodic escrow payments to the Department or its agent to ensure payment when due of any annual real estate taxes, ground rent, property insurance premiums, and, when appropriate, other items for which payments are required by the Department. Interest need not be paid to borrowers on escrowed monies. The Department may waive this requirement under any of the following circumstances:

(1) Such amounts are paid in escrow to a superior mortgagee;

(2) With respect to insurance premiums, the Department has adequate evidence that the borrower and the project are sufficiently covered under a blanket policy then in effect held by the borrower; or

(3) The Department has consented in writing to waive this requirement.