203.17 Mortgage provisions.

203.18 Maximum mortgage amount.

203.18a Solar energy systems.

203.18b Increased mortgage amount.

203.19 Mortgagor's minimum investment.

203.28 Economic soundness of project.

203.40 Location of property.

203.42 Rental properties.

203.45 Eligibility of graduated payment mortgages.

203.46 Eligibility of modified graduated payment mortgages.

203.50 Eligibility of rehabilitation loans.

(b) For the purposes of this subpart all references in Part 203 of this chapter to section 203 of the Act shall be construed to refer to section 221 of the Act.

(Sec. 211 of the National Housing Act (12 U.S.C. 1709, 1715))

[36 FR 24587, Dec. 22, 1971, as amended at 41 FR 42949, Sept. 29, 1976; 44 FR 46836, Aug. 9, 1979; 45 FR 76389, Nov. 18, 1980]

§ 221.3 Definition of displaced family.

As used in this subpart, the term "displaced family" shall mean a family displaced from an urban renewal area, or as a result of governmental action, or as a result of a disaster determined by the President to be a major disaster.

§ 221.5 Mortgage form.

The mortgage shall be executed upon a form approved by the Commissioner for use in the jurisdiction in which the property covered by the mortgage is situated and shall be a first lien upon property that conforms

A mortgage executed by a mortgagor who is an occupant of the property shall not exceed:

(a) $31,000 for a one-family residence, except that such amount may be increased to $36,000 in the case of a family with five or more persons.

(b) $35,000 for a two-family residence.

(c) $48,600 for a three-family residence.

(d) $59,400 for a four-family residence.

(Sec. 7(d), Department of Housing and Urban Development Act (42 U.S.C. 3535(d))) [42 FR 57435, Nov. 2, 1977]

In any geographical area where the Commissioner finds cost levels so require, the Commissioner may increase the dollar amount limitations set forth in § 221.10 to amounts not to exceed:

(a) $36,000 for a one-family residence, except that such amount may be increased to $42,000 in the case of a family with five or more persons.

(b) $45,000 for a two-family residence.

(c) $57,600 for a three-family residence.

(d) $68,400 for a four-family residence.

(Sec. 7(d), Department of Housing and Urban Development Act (42 U.S.C. 3535(d))) [39 FR 32433, Sept. 6, 1974, as amended at 42 FR 57435, Nov. 2, 1977]

the mortgage amount shall be limited as follows:

(a) Occupant mortgagors. (1) When the mortgagor is the occupant of the property, the mortgage shall not exceed:

(i) The Commissioner's estimate of the appraised value of the property as of the date the mortgage is accepted for insurance, where repair and rehabilitation is not involved; or

(ii) In the case of rehabilitation, the amount of the mortgage shall not exceed the sum of the estimated cost of repair and rehabilitation and the Commissioner's estimate of the value of the property before repair and rehabilitation.

(2) The limitations in paragraph (a)(1) of this section are applicable only if the mortgage covers a dwelling which:

(i) Was approved for mortgage insurance prior to the beginning of construction, or

(ii) Was approved for guaranty, insurance, or a direct loan by the Administrator of Veterans Affairs prior to the beginning of construction, or

(iii) Was completed more than one year prior to the date of the application for mortgage insurance, or

(iv) Is covered by a consumer protection or warranty plan acceptable to the Secretary and satisfies all requirements which would have been applicable if such dwelling had been approved for mortgage insurance prior to the beginning of construction.

(3) If the conditions of paragraph (a)(2) are not met, the amount of the mortgage shall not exceed 90 percent of the amount computed under paragraph (a)(1) of this section.

(b) Nonoccupant mortgagors. If the property is to be built or acquired and rehabilitated for sale and the insured mortgage financing is required to facilitate the construction or the repair or rehabilitation of the dwelling and provide financing pending the subsequent sale thereof to a qualified owner-occupant, 85 percent of the amount computed under paragraph (a) or 85 percent of the value of the property, whichever is the lesser, as of the date the mortgage is accepted for insurance, if the mortgagor is not the occupant.

§ 221.30 Maturity of mortgage.

(a) The mortgage shall provide for complete amortization not to exceed 30 years from the date of the beginning of amortization of the mortgage, except that such maturity may be 35 or 40 years in the following instances:

(1) In the case of a displaced family, if it is determined by the Commissioner that the mortgagor is not able to make the required payments under a mortgage having a shorter amortization period.

(2) In the case of any other mortgagor, if it is determined by the Commissioner that the mortgagor is an owner occupant of the property and is not able to make the required payments under a mortgage having a shorter amortization period, and the dwelling:

(i) Was approved for mortgage insurance by the Commissioner prior to the beginning of construction or approved for guaranty, insurance, or direct loan by the Administrator of Veterans' Affairs prior to such amortization; and

(ii) Was inspected by the FHA and found to have been completed in compliance with the terms of the FHA commitment, or inspected by the VA and found to have been completed in compliance with the terms of the VA Certificate of Reasonable Value.

(b) No mortgage shall have a maturity exceeding three-quarters of the Commissioner's estimate of the remaining economic life of the building improvements.

(a) At the time the mortgage on a single-family dwelling is insured, a mortgagor other than a mortgagor qualifying as a displaced family shall have paid in cash or its equivalent at least 3 percent of the Commissioner's estimate of the acquisition cost of the property.

(b) At the time the mortgage on a two-, three-, or four-family dwelling is insured, a mortgagor other than a mortgagor qualifying as a displaced family shall have paid in cash or its equivalent at least the minimum amount required pursuant to the loanto-value limitations as set forth below. (1) Loan-to-value limitation-approval prior to construction. If the mortgage covers a dwelling approved for mortgage insurance prior to the beginning of construction, or if the mortgage covers a dwelling which was completed more than 1 year preceding

proval. A loan-to-value limita90 percent of the appraised I the property as of the date tgage is accepted for insurance ired if the dwelling does not he requirements contained in aph (b)(1) of this section.

- mortgagor qualifying as a disfamily shall have paid in cash equivalent on account of the rty, at the time the mortgage is ed, not less than:

Two hundred dollars for a onely dwelling;

O Four hundred dollars for a twoily dwelling;

6) Six hundred dollars for a threenily dwelling;

4) Eight hundred dollars for a fourmily dwelling.

ec. 7(d), Department of Housing and ban Development Act (42 U.S.C. 3535(d))) 7 FR 23161, Oct. 31, 1972, as amended at O FR 32433, Sept. 6, 1974; 42 FR 57435, ov. 2, 1977]

221.54 Inclusion of closing costs and expenses in cash payment.

The mortgagor's required minimum investment may include amounts covering settlement costs, initial payments for taxes, hazard insurance premiums, mortgage insurance premiums, and other prepaid expenses as approved by the Commissioner.

§ 221.55 Deferred sale of properties.

A mortgagor under a mortgage covering a one-family dwelling may, subject to such terms and conditions as the Commissioner may prescribe, be permitted to sell the property to a displaced person on a deferred payment basis, to provide for the accumulation of the required cash payment.

INSURANCE UNDER 221(h)

§ 221.60 Eligibility requirements for low income homeowners.

(a) Application of subpart to section 221(h). Except as provided in this section, all of the provisions of this subpart shall apply to the insurance of a home mortgage under section 221(h) of the National Housing Act.

(b) Definitions. As used in this section, the following terms shall have the meaning indicated:

(1) “Single family dwelling" includes a two family dwelling in which one of the units is occupied by the owner.

(2) "Assessment," when used in a mortgage covering a one family unit in a condominium project (except where the term refers to assessments and charges by the association of owners) means special assessments by state or local governmental agencies, districts, or other public taxing or assessing bodies

(c) Types of transactions. The mortgage shall involve one of the following types of transactions:

(1) The financing of the purchase of a rehabilitated single family dwelling or a rehabilitated one family unit in a . condominium project from a nonprofit mortgagor by a low income purchaser.

(2) The rehabilitation or improvement and refinancing of a single family dwelling owned and occupied by a mortgagor who has purchased the dwelling from a nonprofit organization that is engaged in purchasing, rehabilitating and selling substandard housing.

(d) [Reserved]

(e) Income qualifications. To qualify under this section, the mortgagor's income shall be approved by the Commissioner as meeting the requirements of section 221(h) of the Act.

(f) Maximum mortgage amount. The mortgage shall involve a principal obligation in an amount not exceeding that portion of the unpaid balance of the project mortgage which is allocable to the dwelling being purchased.

(g) Mortgage maturity. The mortgage shall be limited to a term not exceeding the term of the project mortgage remaining at the time of the purchase.

80-068 0-81--23

(h) Mortgagor's minimum investment. At the time the mortgage is insured, the mortgagor shall have paid on account of property at the time of purchase or at the time of rehabilitation or improvement and refinancing, as applicable, not less than $200 (in cash or its equivalent) all or any part of which may be applied in payment of closing costs.

(i) Mortgage interest rate. (1) The mortgage shall initially bear interest at the rate of 1 percent, 2 percent or 3 percent per annum depending upon the income of the mortgagor. The 3 percent interest rate shall apply if 20 percent of the mortgagor's annual family income is sufficient to make mortgage payments of principal, interest, taxes, and insurance at the 3 percent rate. If 20 percent of the mortgagor's annual family income is insufficient to make such mortgage payments at the 3 percent rate, but is sufficient to make such payments at a 2 percent rate, then the interest rate shall initially be 2 percent per annum. If 20 percent of the mortgagor's annual family income is insufficient to make such mortgage payments at 2 percent, then the interest rate shall initially be 1 percent per annum.

(2) The mortgage shall provide that if the initial interest rate is set at 1 percent, the rate will be increased to 2 percent when the mortgagee determines that 20 percent of the family income of the mortgagor is sufficient to make mortgage payments of principal, interest, taxes, and insurance at the 2 percent rate, and to 3 percent when the mortgagee determines that 20 percent of the mortgagor's income is sufficient to make such mortgage payments at the 3 percent rate. The mortgage shall also provide for comparable increase to a 3 percent interest rate if the mortgage initially bears interest at 2 percent.

(3) The mortgage shall provide that if the rate of interest is increased, such rate shall not thereafter be decreased.

(4) In determining the mortgagor's family income, for the purpose of the 20 percent requirement specified in paragraph (i)(1) of this section, there shall be deducted an amount equal to $300 for each person under 21 who is a

member of the immediate family at living with such family; and the ear ings of the person under 21 shall n be included in family income.

(j) Interest rate increase-disco, tinuance of occupancy. The mortga shall provide that if the mortgag does not continue to occupy the pro erty, the interest rate shall increase t the maximum rate in effect under th subpart at the time the commitmer for insurance was issued on the pr ject mortgage (where the mortgage f nances the purchase of the propert from a nonprofit mortgagor) or on th individual mortgage (where the mort gage finances the rehabilitation or im provement and refinancing of pro perty owned by the mortgagor). If the property is sold to one of the following purchasers, the increase in interest rate shall not be required:

(1) A nonprofit organization which has been engaged in purchasing and rehabilitating deteriorating and substandard housing with financing provided pursuant to section 221(h) of the National Housing Act, except that the sale must be to the same nonprofit organization from which the unit was purchased if the mortgage finances such purchase.

(2) A public housing agency under the U.S. Housing Act of 1937 having jurisdiction over the area where the dwelling is located.

(3) A low income purchaser meeting the income requirements of section 221(h) of the Act.

(k) Mortgage requirements-pur chase from nonprofit. Where the mortgage is financing the purchase of the property from a nonprofit mortgagor, the mortgage shall comply with each of the following requirements:

(1) It shall involve a principal obligation in an amount not exceeding that portion of the unpaid balance of the project mortgage which is allocable to the dwelling being purchased.

(2) It shall be limited to a term not exceeding the term of project mortgage remaining at the time of the pur. chase.

(1) Property requirements—purchase of condominium unit. Where the property being purchased from a nonprofit mortgagor involves a one-family unit in a condominium project, the fol