Sec. 05.06.06.07. Eligible Mortgage Loans

A. Mortgage loans shall meet the general eligibility requirements of this regulation.

B. Security.

(1) Mortgage loans shall be secured by a first lien against the mortgaged property.

(2) Mortgage loans insured by the Fund shall be secured by real property that meets the requirements of the Fund.

(3) Escrow accounts for payment of taxes, insurance, condominium fees, or other customary expenses related to the first mortgage loan, as applicable, shall be satisfactory to the Fund.

C. Types of Ownership.

(1) The borrower's interest may be either in fee simple or subject to a freely transferable ground rent leasehold with terms acceptable to the Fund.

(2) A leasehold mortgage shall have a remaining lease term of not less than the mortgage term plus 10 years. The leasehold estate shall be redeemable either by law or by negotiated agreements.

D. Mortgage Terms.

(1) Mortgages may not exceed a term of 40 years unless the Secretary, by written determination for a particular loan or category of loans, agrees to a term exceeding 40 years.

(2) Long-term mortgages shall contain amortization provisions approved by the Fund, including the complete amortization of the mortgage in monthly installments over a specific time period.

(3) Mortgages shall bear interest at the rate agreed upon by the lender and the borrower, and committed upon by the Fund.

(4) Mortgage terms or principal balance due on an insured mortgage may not be modified without prior written approval of the Fund.

(5) Mortgages shall conform to the required documentation and eligibility criteria required by the Fund under the mortgage insurance program for which insurance is being requested.