Sec. 05.05.01.27. Loan Closing and Processing

A. Initial Loan Closing. The sponsor shall furnish to the Department and its counsel satisfactory evidence of compliance with the terms and conditions of the loan before the closing of the loan. When all procedures and requirements are completed, a closing shall be arranged by counsel to the Department.

B. Loan Documents. The Department shall prescribe or approve the form and content of all documents, which may include a note, deed of trust, regulatory agreement, and other instruments that the Department may require to evidence or secure the loan or enforce the requirements of the Act or this chapter. The loan documents shall be executed at the loan closing.

C. Early Start.

(1) Construction or rehabilitation undertaken by the sponsor before the closing of the loan is at the risk of the sponsor, and does not bind or obligate the Department to make the loan.

(2) In certain circumstances and upon the request of a sponsor who has applied for a loan which has been approved by the Secretary, the Program may issue an early start letter which sets forth the conditions under which the Program may authorize the beginning of construction or rehabilitation of a project before the closing of the Department’s loan.

(3) The early start approval letter sets forth various conditions, such as receipt by the Program of acceptable plans and specifications or scope of work and evidence of the availability of acceptable assurance of completion, which shall be complied with before beginning construction or rehabilitation. If the conditions are complied with and the Program approves the beginning of construction or rehabilitation, then, when the loan is closed, loan proceeds shall be used to reimburse the sponsor, as specified in the loan closing documents, for the approved costs incurred before loan closing.

D. Construction or Rehabilitation Period Disbursement. The Department shall:

(1) Conduct regular on-site inspections of the construction or rehabilitation; and

(2) Make loan disbursements on the basis of work in place plus materials acceptably stored on site, less a retention of 10 percent or any other amount required by the loan documents.

E. Disbursement. Loan funds shall be held by the Department and disbursed in accordance with a draw schedule approved by the Department before initial closing. The draw schedule, which may be revised at the discretion of the Department during construction, shall be based upon completion of specified items or a percentage of rehabilitation work. Payment of draws shall be requested by the sponsor and approved by the Department based on completed work. Loan funds may be withheld if there is any arrearage of interest payments or escrows required by the loan documents.

F. Final Closing. A final closing of the loan shall be arranged after completion of the rehabilitation or construction and cost certification, if required, according to the procedures and documentation required by the Department.