Sec. 05.05.01.05. Eligible Uses

A. Loan funds may be used for:

(1) Capital assistance loans to sponsors for financing development costs of projects;

(2) Loans to finance acquisition only of existing or completed:

(a) Vacant projects; or

(b) Occupied projects, if:

(i) The rental units are not occupied before acquisition or rehabilitation by households of limited income;

(ii) The number of units to be subject to income restrictions will be increased substantially;

(iii) Existing income limits will be reduced from current levels;

(iv) Units have been condemned or cited for code violations and the tenants are likely to be subject to displacement; or

(v) Any existing federal capital or operating subsidies will be lost without financing through the Program;

(3) Operating assistance loans to sponsors for existing or completed income-restricted projects including:

(a) Buy down of the interest rate on a conventional permanent loan;

(b) Payments of principal and interest on superior mortgage liens;

(c) Maintenance and repair costs;

(d) Property taxes;

(e) Hazard and liability insurance premiums;

(f) Utilities;

(g) Permits and licenses;

(h) Reasonable management fees and expenses as determined by the Department;

(i) Rent subsidies;

(j) Closing costs;

(k) Department administrative expenses; and

(l) Other project operating expenses or fees approved by the Department;

(4) Acquisition by the Department of a completed project or the land for a project, and subsequent transfer of the project or land, or both, to a sponsor;

(5) Purchase or lease by the Department of a project and, after construction or rehabilitation by the Department, sale or transfer of the project to a sponsor upon terms or conditions which make it economically feasible for the sponsor to rent to households of limited income; or

(6) Bridge loans.

B. Loan funds may not be used for:

(1) Work-out financing for troubled projects;

(2) Refinancing of existing debt;

(3) Financing for a project for which the application is received after:

(a) Acquisition;

(b) Assumption by the sponsor of the liability for the costs of acquisition or rehabilitation; or

(c) Completion of rehabilitation intended to be financed in whole or in part by the loan;

(4) Financing only minor improvements which are not required to make the housing decent, safe, and sanitary in accordance with applicable State and local codes;

(5) Transaction costs and fees associated with the offering and syndication of a project; or

(6) Developer fees.