Sec. 05.05.01.18. Additional Requirements for Certain Loans

A. Capital assistance loans shall meet the following additional requirements:

(1) Loans shall be secured by a mortgage lien, which may be subordinate to other mortgage liens; and

(2) The Department shall require the sponsor to provide a standard American Land Title Association Loan Policy, or other form of title policy acceptable to the Department and the Office of the Attorney General, for an amount equal to the maximum principal amount of the loan:

(a) Insuring the Department;

(b) Evidencing that title to the improvements and the real property on which the improvements are located on the date of closing is vested in the sponsor; and

(c) Containing only standard exceptions and encumbrances approved by the Department.

B. Operating Assistance Loans.

(1) Security. The loans shall be made subject to either:

(a) The terms of a loan and security agreement, which need not be recorded; or

(b) A recorded mortgage lien which may be subordinate to other mortgage liens.

(2) Investment Account. Loan funds disbursed subject to a loan and security agreement shall be deposited into an interest-bearing account for the benefit of the project and shall be invested, reinvested, and disbursed in accordance with the terms of an agreement between the sponsor and the Department. The Department shall maintain control over the investment account.

(3) Insurance. At the discretion of the Department, a project receiving an operating assistance loan is not required to satisfy the insurance provisions of Regulation .15 of this chapter.

C. Deferred Payment Loans.

(1) Amount of Deferred Payments. The Department may defer payments of principal or interest, or both, in the Department’s discretion, to the minimum extent necessary based on:

(a) The sponsor’s ability to repay the loan and the financial feasibility and viability of the project;

(b) Conformance with the requirements of the terms and conditions of any prior mortgage or deed of trust; or

(c) Such additional provisions related to deferred payment loans established in the Program Guide.

(2) Repayment of Deferred Loans.

(a) The loan documents shall provide for repayment of deferred amounts at the maturity date or at any earlier date established by the Department, or upon any default, sale, or other transfer of the project, or sale or other transfer of any interest in the project. The Department may, but need not, charge interest on deferred interest.

(b) The Department may, in its discretion, require sponsors who receive bridge loans and who receive and syndicate an allocation of federal low-income housing tax credits or historic investment tax credits to share a portion of the proceeds of the syndication of the tax credits with the Department to repay deferred interest or pay all or a portion of the principal amount of the loan.