Sec. 05.05.05.12. Terms and Conditions — Repayment

A. Conditional Repayment Obligation. Except as provided in §B of this regulation, a repayment of principal or interest on the capital assistance is not required unless the project ceases to be owned by the sponsor or operated in accordance with the requirements of the Act and this chapter and the terms and conditions of the capital assistance documents.

B. If necessary to comply with, or receive the benefit of, federal or other financial assistance, capital assistance provided under the program may be made available as a deferred payment loan repayable on the later of:

(1) The sale of the project;

(2) The failure of the sponsor to operate the project for the benefit of households of lower income in accordance with the agreements between the Department and the local government; or

(3) A maturity date set by the Department.

C. Amounts Due upon Sale of Project.

(1) If a project or any interest in it is sold or transferred by the sponsor, other than to a local government or local government entity in accordance with Regulations .09 and .10 of this chapter, or to another eligible borrower approved by the Department, the sponsor shall pay to the Department the principal amount of the financing, plus simple interest, if any, at the rate set forth in the capital assistance documents.

(2) The capital assistance documents may require that the sponsor or the Department apply any proceeds of the sale of a project or any other loan repayment funds plus all sums held in any project accounts to the housing needs of low-income and moderate-income persons.

D. Amounts Due upon Default.

(1) In the event of default, the Department has the right to accelerate the indebtedness, and the amounts set forth in §C(1) of this regulation shall then be due and payable by the owner.

(2) The Department shall have the right to demand a deed in lieu of foreclosure, or to foreclose, if the financing is secured by a mortgage or deed of trust.

(3) An obligation to repay the financing under the Program is secured only by the project property or other security device acceptable to the Department, and a deficiency judgment against the owner may not be sought or obtained following foreclosure.

(4) A local government is not required to pledge its faith or credit for the repayment of capital assistance.

E. Voluntary Repayment. A sponsor may voluntarily repay Program financial assistance at any time if the sponsor complies with the following requirements:

(1) If the financing was made with State bond proceeds, provides the Department with an opinion of bond counsel, prior to or simultaneously with the voluntary prepayment, that the prepayment does not adversely affect the interest of the bondholders under the pertinent State bonds and the State’s bond counsel for the bonds agrees;

(2) Provides written notice to each tenant residing in the project which describes the impact of the prepayment on the tenant and, if applicable, any assistance to which the tenant is entitled;

(3) Provides notice of the prepayment to the Department, the political subdivision, if not an owner of the project, the local public housing authority, if any and if not an owner of the project, and any parties registered with the Department;

(4) Offer a right of first purchase to the Department, the political subdivision, if not an owner of the project, the local public housing authority, if any and if not an owner of the project, and any interested parties registered with the Department;

(5) Provides a lease extension for at least 1 year following the notice of the prospective prepayment action to each tenant residing in an assisted unit;

(6) Makes relocation assistance payments to each tenant in an amount determined by the Department;

(7) Provides 3-year lease extensions or payments equal to 3 months rent to 20 percent of the tenants who live in assisted units and qualify as senior citizens, disabled, or households with minors; and

(8) Complies with any procedural requirements of the Department with respect to the right of first purchase, the relocation payments, and lease extensions.