Sec. 05.04.11.07. Loan Terms—General

A. For acquisition, construction, reconstruction, rehabilitation, and improvement loans, the Administration may lend up to an amount which does not exceed the lesser of:

(1) 75 percent of the appraised market value of the project; or

(2) The total cost of the project.

B. For loans to refinance existing debt, the Administration may lend up to an amount which does not exceed the lesser of:

(1) 75 percent of the appraised market value of the project; or

(2) The amount of eligible costs under Regulation .06D of this chapter.

C. By written determination, the Secretary may establish, from time to time, the maximum dollar amount of a loan which may be made to any project under the program.

D. Term.

(1) Loans for permanent financing of projects may be for a term not to exceed 30 years, except that if the Administration elects to fund the project initially from a source other than proceeds of revenue bonds, then the term may not exceed 31 years and 6 months.

(2) The term of construction loans may not exceed 2 years and shall be based upon the type and size of the project and the extent of proposed construction or rehabilitation.

E. Interest Rate. The Administration shall charge interest on the construction, rehabilitation, and permanent loans at a rate that, together with fees and charges by the Administration, covers the costs of issuance and interest that it pays on the revenue bonds or other obligations issued to raise the funds for loans and the allowable expenses of the Administration, including general operating expenses of the Department.

F. Liens.

(1) Loans shall be secured by a mortgage or deed of trust. The mortgage to the Administration shall be a first lien on:

(a) The land and improvements; or

(b) A leasehold interest in the land which extends at least 25 years beyond the term of the loan and a fee interest in the improvements.

(2) The Administration may permit subordinate liens for other loans made by the Department or other lenders.

G. Cross-Default and Cross-Collateralization. If two or more program loans are made to the same sponsor, the Administration may require loan documents to contain cross-default and cross-collateralization provisions applicable.

H. Assumption and Prepayment. Loans may not be assumed without the prior written approval of the Administration and the mortgage insurer. Loans may be prepaid to the extent permitted in the loan documents. Generally, loans may not be prepaid for at least 10 years following loan closing.

I. Payment.

(1) Sponsors shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term, except that if the term exceeds 30 years in accordance with §D of this regulation then, at the direction of the Administration, a sponsor may make initial payments of interest only for up to 18 months after the loan closing.

(2) In addition, the sponsor shall pay mortgage insurance premiums, any reserve for replacement deposits, and any operating reserve on a monthly or annual basis, as required by the Administration.

J. Late Charges and Other Fees. Sponsors shall pay any servicing fees, loan insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law.

K. Expense Escrows. The Administration shall require the sponsor to deposit monthly with the Administration 1/12 of the annual amount of real estate taxes and property insurance, unless the sponsor is not required to pay property taxes on the project and has acceptable blanket property insurance covering multiple properties.

L. Security Requirements. The Administration may require the following instruments or guarantees to secure its loans:

(1) For new construction or substantial rehabilitation projects:

(a) Payment and performance bonds shall be provided each in an amount equal to 100 percent of the contract price,

(b) Cash or an irrevocable letter of credit equal to 50 percent of the contract price,

(c) The completion assurance required by the mortgage insurer; and

(2) Such other sureties or guarantees of the loan as may be determined necessary by the Administration or the insurer.