As used in the regulations in this part the term:

(a) "Act" means the National Housing Act, as amended.

(b) "Administration" means the Federal Housing Administration.

(c) "Commissioner" means the Federal Housing Commissioner or his duly authorized representative.

(d) "Contract of Insurance" includes all of the provisions of the regulations in this part and of the applicable provisions of the Act.

(e) "Insured" means a financial institution holding a Contract of Insurance under Title I of the act.

(f) "Loan" means an advance of funds or credit or the purchase of an obligation evidenced by a note.

(f-1) "Direct loan" means a loan applied for by and disbursed directly to the borrower or borrowers where:

(1) The credit application, signed by the borrower or borrowers, is filled out by:

(i) The borrower or borrowers; or

(ii) A maker of the note other than a borrower; or

(iii) A person acting at the direction of a borrower who has no financial interest, directly or indirectly, in the contract for the repair, alteration or improvement of the borrower's property; and

(2) The proceeds are delivered directly to such borrower or borrowers without the intervention or participation of an intermediary in any manner in such disbursement other than a maker of the note.

(f-2) "Dealer loan" means a loan where an intermediary, having a financial interest in the contract for the repair, alteration, or improvement of the borrower's property, intervenes or participates in the application for or disbursement of the loan.

(g) "Note" includes a note, bond, mortgage, or other evidence of indebtedness.

(h) "Payment" includes a deposit to an account or fund which represents the full or partial repayment of a loan.

(i) "Borrower" means one who applies for and receives a loan in reliance upon the provisions of the Act and who has an interest of at least onethird in one of the following types of ownership in the property to be improved:

(1) A fee title, or

(2) A life estate, or

(3) A fee title or life estate subject to a mortgage, deed of trust, or other lien securing a debt, or

(4) A mutually binding contract for the purchase of the property where the borrower is rightfully in possession and the purchase price is payable in installments.

(5) A lease having a fixed term, expiring not less than six calendar months after the maturity of the loan, provided the lessor indicates in writing his consent to the making of the improvements and procurement of the loan.

The borrower or borrowers shall have at least one-third of one of such interests in the property to be improved.

(j) "Class 1(a) loan" means a loan, other than a loan defined in paragraph (k) of this section as a "Class 1(b) loan," which is for the purpose of financing the repair, alteration, or improvement of an existing structure or

(1) Loans having a principal amount exclusive of financing charges, of $600 or less.

of the real property in connection therewith, exclusive of the building of new structures.

(k) "Class 1(b) loan" means a loan is made for the purpose of financing the alteration, repair, improvement, or conversion of an existing structure used or to be used as an apartment house or a dwelling for two or more families which structure is not owned by a corporation.

(1) "Class 2(a) loan" means a loan which is for the purpose of financing the construction of a new structure which is to be used exclusively for other than residential or agricultural purposes: Provided, That nothing in this paragraph shall prevent the temporary use of such a structure for residential purposes while the borrower constructs a new dwelling to replace a previous dwelling, which he occupied as an owner or a tenant, which was destroyed or damaged to such an extent that reconstruction is required as a result of a flood, fire, earthquake, storm or other catastrophe which the President, pursuant to section 2(a) of Pub. L. 875, approved September 30, 1950 has determined to be a major disaster and the Credit Application is filed within one year from the date of such determination.

(m) "Class 2(b) loan" means a loan which is for the purpose of financing the construction of a new structure for use in whole or in part for agricultural purposes, exclusive of residential purposes.

(n) "Class 1 loan" includes both "Class 1(a)" and "Class 1(b)" loans as defined in paragraphs (j) and (k) of this section.

(o) "Class 2 loan" includes both "Class 2(a)" and "Class 2(b)" loans as defined in paragraphs (1) and (m) of this section.

(p) "Existing structure" means a residential structure completed and occupied at least 90 days prior to the application for the Title I loan or a structure for other than residential purposes which was a completed building with a distinctive functional use prior to the application for the Title I loan, Provided, That the requirement with respect to the period of occupancy and completion of a new residential structure shall not apply to:

(2) Residential structures which have been damaged in a disaster which the President, pursuant to section 2(a) of Pub. L. 875, approved September 30 1950, has determined to be a major disaster.

(3) Loans which are for the purpose of financing the construction of civil defense shelters.

§ 201.2 Eligible notes.

(a) Validity. The note shall bear the genuine signature of the borrower as maker, shall be valid and enforceable against the borrower or borrowers as defined in § 201.1(i), and shall be complete and regular on its face. The signatures of all parties to the note must be genuine. If the note is executed for and on behalf of a corporation or in a representative capacity, the note must create a binding obligation of the principal.

(b) Acceleration clause. The note shall contain a provision for acceleration of maturity, either automatic or at the option of the holder, in the event of default in the payment of any installment upon the due date thereof.

(c) Payments. The note shall be payable in equal installments falling due monthly or every 2 weeks, unless a different payment schedule is approved by the Commissioner. The first payment shall be due no later than 2 months from the date of the note. Where the borrower has an irregular flow of income, the note may be payable at intervals corresponding with the borrower's flow of income, and in such instance, the first payment shall fall due no later than 1 year from the date of the note with subsequent payments to be made at least once a year. The note may provide for a first or final payment in an amount other than the regular installment. In such instance, the installment shall not be less than one-half nor more than 11⁄2 times the amount of the regular installment.

(d) Maturity-(1) Minimum. The note shall not have a final maturity of less than 6 calendar months from the date of the note.

(2) Maximum maturity. The maximum permissible maturity of a note evidencing:

(i) A Class 1(a) loan is 15 years and 32 days from the date of the note.

(A) A Class 1(b) or 2(a) loan is 15 years and 32 days.

(ii) A Class 2(b) loan is 12 years and 32 days from the date of the note, except that if a Class 2(b) loan is secured by a first mortgage, first deed of trust, or other security instrument constituting a first lien upon the improved property, the loan may have a final maturity not in excess of 15 years and 32 days from the date of the note.

(iii) A combination of any of the above classes of loans shall be no greater than the maximum maturity governing that component part of the loan having the shortest maturity if made alone.

(e) Late charges. The note may provide for a late charge, not to exceed 5 cents for each $1.00 of each installment more than 10 days in arrears. No late charge on a past due installment may be accrued in excess of $5.00. In lieu of late charges, notes may provide for interest on past due installments at a rate not in excess of the contract rate in the jurisdiction in which the note is drawn. The borrower must be billed for the penalties collected as such, and evidence of such billing must be in the file if claim is made under the Contract of Insurance.

(f) Secured notes. Loans in excess of $7,500, exclusive of financing charges, shall be secured by a recorded lien upon the improved property.

(Sec. 7(d), 79 Stat. 670 (42 U.S.C. 3535(d)); sec. 2, 48 Stat. 1246 (12 U.S.C. 1703), as amended)

[36 FR 24493, Dec. 22, 1971, as amended at 37 FR 210, Jan. 7, 1972; 39 FR 32432, Sept. 6, 1974; 42 FR 57431, Nov. 2, 1977; 44 FR 55002, Sept. 24, 1979]

§ 201.3 Maximum amount of loans.

(a) Class 1(a) loan. A Class 1(a) loan shall not involve a principal amount, exclusive of financing charges, in excess of $15,000.

(b) Class 1(b) loan. A Class 1(b) loan shall not involve a principal amount, exclusive of financing charges, in excess of $7,500 per dwelling unit in

the improved structure and shall not exceed $37,500.

(c) Class 2 loans. A Class 2 loan shall not involve a principal amount, exclusive of financing charges, in excess of $15,000.

(d) Outstanding aggregate loan balance. No loan shall be made which will result in an outstanding aggregate loan balance with respect to the same property or structure exceeding the dollar amount limitation prescribed in this section for the type of loan involved. If more than one type or class of loan is involved, the total outstanding aggregate loan balance as to one structure or property shall not exceed the dollar amount limitation prescribed in this section for the type or class of loan having the larger permissible maximum amount.

(Sec. 7(d), 79 Stat. 670 (42 U.S.C. 3535(d)); sec. 2, 48 Stat. 1246 (12 U.S.C. 1703), as amended)

[36 FR 24493, Dec. 22, 1971, as amended at 39 FR 32432, Sept. 6, 1974; 42 FR 57431, Nov. 2, 1977; 44 FR 55002, Sept. 24, 1979]

§ 201.4 Financing charges.

(a) Maximum financing charges. The maximum permissible financing charge exclusive of fees and charges as provided by paragraph (b) of this section which may be directly or indirectly paid to, or collected by, the insured in connection with the loan transaction, shall not exceed 17.00 percent annual rate. No points or discounts of any kind may be assessed or collected in connection with the loan transaction. Finance charges for individual loans shall be made in accordance with tables of calculation issued by the Commissioner.

(b) Permissible additional charges. If the insured takes security in the nature of a real estate mortgage, deed of trust, conditional sales contract, chattel mortgage, mechanic's lien, or other security device for the purpose of securing the payment of eligible loans, the insured may collect from the borrower, in addition to the maximum permissible financing charge as provided in paragraph (a) of this section, the following expenses actually incurred by the insured in connection with the transaction: Recording or