Sec. 05.06.01.16. Property Improvement and Energy Loans

A. Property improvement loans or energy loans made or purchased by the Community Development Administration under its Home and Energy Loan Program, or by any other public agency mortgagee operating a similar program, the proceeds of which are to be used for the general improvement or rehabilitation of any multifamily project or for energy-conserving improvements to any multifamily project, may be insured by the Fund under the requirements of this section instead of Regulation .08B-----D of this chapter.

B. The loans shall be secured by a first or second mortgage upon the land and improvements.

C. The maximum amount of the total of any mortgage loan to be insured and the then outstanding balance of any existing prior liens on the multifamily project may not exceed 85 percent of the property's appraised value as of completion of the improvements. The insurance coverage may be 100 percent of the mortgage loan to be insured.

D. The total amount of liens on the property, including the mortgage loan to be insured, may not exceed 25 percent of the amount in the multifamily reserve.

E. In the case of loans secured by a second mortgage, the:

(1) Fund shall examine any existing first mortgage and shall determine that the lender of the first mortgage meets the requirements of Regulation .06A of this chapter or, if the first lender is an individual or individuals, that the lender is financially responsible and has evidenced responsible management of the mortgage;

(2) Proposed second lender shall determine whether the first mortgage contains any restrictions upon second mortgages, and, if the first mortgage prohibits second mortgages or the first mortgage requires the mortgagor of the second borrower to obtain approval of the first lender before executing a second mortgage, the borrower shall obtain, in form and substance satisfactory to the Fund, a waiver of any prohibition against second mortgages or the approval by the first lender of the second mortgage;

(3) Borrower shall agree, and the first mortgage shall permit or the first lender shall agree, that:

(a) The Fund may have an opportunity to cure any defaults under the first mortgage, and

(b) Any defaults that the Fund is unable to cure shall be suspended, if the Fund keeps current any payments due under the first mortgage;

(4) Fund shall determine whether the borrower has made all payments of principal, interest, and escrows for expenses, if applicable, in compliance with the terms and conditions of the first mortgage;

(5) Borrower shall notify the first lender of the existence of the second mortgage, and the borrower and the first lender shall agree in writing to notify the second lender of any events of default under the first mortgage by the borrower; and

(6) Fund may not insure any loan if the first mortgage requires a mandatory payment before full amortization unless the:

(a) Loan to be insured has a term less than the remaining term of the first mortgage, and

(b) Fund determines, in its sole discretion, that the requirement of the mandatory payment does not jeopardize the borrower's ability to repay in full the second mortgage.