SUBCHAPTER M-HOMES FOR LOWER INCOME

FAMILIES

PART 235-MORTGAGE INSURANCE AND ASSISTANCE PAYMENTS FOR HOME OWNERSHIP AND PROJECT

REHABILITATION

Subpart A-Eligibility

Sec.

Require

203.42 203.43

ments-Homes for Lower Income Families

235.1 Incorporation by reference. 235.5 Definitions used in this subpart. Application and commitment extension fees.

235.7

235.10 235.15 235.20

235.22

235.25

235.30

235.35

235.40 235.45

Eligible mortgagors.

Eligible types of dwellings.

Requirements for family unit in condominium.

Mortgage provisions.

Maximum mortgage amount. Increased mortgage amount-high cost areas.

Mortgagor's investment.

Late charge.

Eligibility requirements for purchaser from rehabilitation sales project.

AUTHORITY: The provisions of this Part 235 issued under sec. 211, 52 Stat. 23, as amended, sec. 235, 82 Stat. 477, as amended; 12 U.S.C. 1715b, 1715z.

§ 235.1 Incorporation by reference.

(a) All of the provisions of Subpart A, Part 203 of this chapter concerning eligibility requirements of mortgages covering one- to four-family dwellings under section 203 of the National Housing Act apply to mortgages insured under section 235(i) of the National Housing Act, except the following provisions: Sec.

203.12 Application and commitment extension fees.

Certificate and contract regarding

use of dwelling for transient or hotel purposes.

Location of dwelling.

Rental properties.

Eligibility of miscellaneous type mortgages.

203.44 Eligibility of open-end advances. 203.50 through 203.102 Insured home improvement loans.

Amended: April 28, 1969

(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 235 of the Act. Amended: January 8, 1969

§ 235.5 Definitions used in this subpart. As used in this subpart, the following terms shall have the meaning indicated:

(a) "Adjusted annual income" means the annual family income remaining after making certain exclusions from gross annual income. The following items shall be excluded, in the order listed, from family gross annual income:

(1) 5 percent of such gross annual income, in lieu of amounts to be withheld (social security, retirement, health insurance, etc.).

(2) Any unusual income or temporary income, as defined by the Commissioner.

(3) The earnings of each minor in the family who is living with such family, plus the sum of $300 for each such

minor.

Amended: April 22, 1969

which is expected to be of long-continued and indefinite duration, substantially impedes his ability to live independently, and is of such a nature that his ability to live independently could be improved by more suitable housing conditions; or (3) a single person, 62 years of age or older.

(d) "Gross annual income" means the total income, before taxes and other deductions, received by all members of the mortgagor's household. There shall be included in this total income all wages, social security payments, retirement benefits, military and veteran's disability payments, unemployment benefits, welfare benefits, interest and dividend payments, and such other income items as the Commissioner considers appropriate.

Amended: April 22, 1969

(e) "Minor" means a person under the age of 21. As used in this subpart, minor shall not include a mortgagor or his spouse.

Amended: April 22, 1969

§ 235.7 Application and commitment extension fees.

All of the provisions of § 203.12 of this chapter, concerning application and commitment extension fees, apply to mortgages insured under this part, except that the mortgagee shall not be required to pay an application or a commitment extension fee where the dwelling or family unit involved is being released from a project mortgage which is insured at the time of the release under one of the parts of this chapter. Added: April 28, 1969

§ 235.10 Eligible mortgagors.

In order to be eligible under this subpart, the mortgagor shall have assets and an annual income within the limits prescribed by the Commissioner.

§ 235.15 Eligible types dwellings.

The mortgage shall involve one of the following types of dwellings:

(a) A single family dwelling, concerning which the application for insurance is approved by the Commissioner prior to the beginning of construction or prior to the beginning of rehabilitation.

(b) A two-family dwelling, one of the units of which is to be occupied by the owner, if the dwelling is purchased with the assistance of a nonprofit organization and is approved by the Commissioner prior to the beginning of substantial rehabilitation.

(c) A one-family unit in a condominium project (together with an undivided interest in the common areas and facilities serving the project) which is released from a multifamily project, the construction or substantial rehabilitation of which shall have been completed not more than 2 years prior to the filing of the application for assistance payments under Subpart C of this part. The family unit shall have had no previous occupant other than the mortgagor.

Amended: April 22, 1969

(d) An existing single family dwelling or a family unit in an existing condominium project which meets such standards as the Commissioner may prescribe and which is to be occupied by a mortgagor of one of the following types:

(1) A displaced family.

(2) A family that has been occupying low rent public housing.

(3) A family with five or more minor persons.

(e) A family unit in an existing project which is released from a multifamily project covered by a mortgage insured pursuant to § 236.1 et seq. or which is released from a multifamily project in which the housing owner has been receiving rent supplement payments pursuant to § 5.1 et seq. of this title.

(f) An existing single family dwelling or a family unit in an existing condominium project concerning which assistance payments have been made on behalf of the previous owner of the dwelling or family unit, if the previous owner was the mortgagor under a mortgage insured pursuant to § 235.45.

(g) An existing single family dwelling or a family unit in an existing condominium project which meets such standards as the Commissioner prescribes and concerning which an application for assistance payments is filed pursuant to § 235.301 et seq. and approved prior to July 1, 1971.

§ 235.20 Requirements for family unit in condominium.

Where the dwelling involved is a onefamily unit in a condominium project, the following additional requirements shall be met:

(a) FHA project financing. The project in which the family unit is located shall (except where it involves 11 or less units) have been financed with a mortgage which is or has been insured under any of the FHA multifamily housing programs other than sections 213(a) (1) and 213(a) (2) of the National Housing Act. Added: April 22, 1969

(b) Plan of apartment ownership. The project in which the family unit is located shall have been committed to a plan of apartment ownership by enabling deed, deed of constitution, public deed, or other recorded instrument which has been approved by the Commissioner and which is certified by the mortgagee as acceptable and binding within the jurisdiction where the project is located.

(c) Certificate by mortgagee. The mortgagee shall certify as to each of the following:

(1) That the individual deed for the family unit to be covered by an FHAinsured mortgage complies with all legal requirements of the jurisdiction and that ownership thereunder is subject to the plan of apartment ownership.

(2) That the mortgagor has good and marketable title to the family unit subject only to the mortgage which is a valid first lien on the property.

(3) That the family unit is assessed and subject to assessment for taxes pertaining to the unit.

(d) FHA controls for consumer and public interest. The Commissioner may require the execution of a regulatory agreement which shall be made applicable to any association of owners and to any subsequent owner of a family unit. The Commissioner may impose such additional conditions and provisions as he deems necessary for the protection of the consumer and public interest.

The mortgage shall contain a covenant by the mortgagor to pay the allocated share of the common expenses or assessments and charges by the Association of Owners as provided in the Plan of Apartment Ownership and a provision approved by the Commissioner by which the regulatory agreement is incorporated in and made a part of the mortgage.

(f) Definition of term "assessment". As used in the mortgage, the term "assessment", except where it refers to assessments and charges by the Association of Owners, shall mean special assessments by State or local governmental agencies, districts or other public taxing or assessing bodies. Amended: April 22, 1969

§ 235.22 Mortgage provisions.

(a) 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 with property standards prescribed by the Commissioner. The entire principal amount of the mortgage must have been disbursed to the mortgagor or to his creditors for his account and with his consent.

(b) Mortgage multiples. The mortgage shall involve a principal obligation in an amount of $100 or multiples thereof. A mortgage having a principal obligation not in excess of $15,000 and an amortization period of either 20, 25, 30, or 35 years may be in an amount of $50 or multiples thereof.

Amended: August 4, 1969

(c) Payments. The mortgage shall: (1) Come due on the first of the month.

(2) Have an amortization period of either 10, 15, 20, 25, 30, 35, or 40 years by providing for either 120, 180, 240, 300, 360, 420, or 480 monthly amortization payments.

(d) Maturity. (1) 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 case of any mortgagor, 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 and if each of the following requirements is met:

(i) The dwelling was approved for mortgage insurance by the Commissioner or by the Farmers Home Administration prior to the beginning of construction or approved for guaranty, insurance, or direct loan by the Administrator of Veterans' Affairs prior to such construction.

(ii) The dwelling was inspected by the Commissioner or by the Farmers Home Administration 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.

(2) No mortgage shall have a maturity exceeding three-quarters of the Commissioner's estimate of the remaining economic life of the building improvements. If this limitation results in a term of less than 15, 20, 25, 30, 35, or 40 years, the term shall be adjusted to the next lower 5-year period. Added: January 8, 1969 § 235.25

Maximum mortgage amount.

A mortgage shall not exceed the following:

(a) $15,000 for a single-family dwelling or a one-family unit in a condominlum project, except that such amount may be increased to $17,500 in the case of a family with five or more persons.

(b) $20,000 for a two-family dwelling.

§ 235.30 Increased mortgage amount— high cost areas.

In any geographical area where the Commissioner finds cost levels so require, the Commissioner may increase the dollar amount limitations set forth in § 235.25 to an amount not to exceed the following:

(a) $17,500 for a single family dwelling or a one-family unit in a condominium project, except that such amount may be increased to $20,000 in the case of a family with five or more persons. (b) $25,000 for a two-family dwelling.

§ 235.35 Mortgagor's investment.

(a) At the time a mortgage is insured, the mortgagor shall have paid on account of the property either of the following amounts:

(1) $200, if the mortgagor's adjusted annual income is not in excess of 135 percent of the maximum limits established in the area for initial occupancy in public housing dwellings.

(2) 3 percent of the Commissioner's estimate of the cost of acquisition, if the mortgagor's adjusted annual income exceeds 135 percent of the maximum limits established in the area for initial occupancy in public housing dwellings.

(b) The mortgagor's payment of the investment prescribed in paragraph (a) shall be in cash or its equivalent. This investment may be applied for the payment of closing costs and initial payments for taxes, hazard insurance premiums, mortgage insurance premiums, and other prepaid expenses.

§ 235.45 Eligibility requirements for purchaser from rehabilitation sales project.

(a) Except as provided in this section, all of the provisions of this subpart shall apply to the insurance under section 235 (j) (4) of the National Housing Act of a mortgage financing the purchase by a lower income person from a rehabilitation sales project of a single or twofamily dwelling or a family unit in a condominium project. The rehabilitation sales project shall be financed with a mortgage insured under either section 221(h)(1) of the National Housing Act or section 235(j) (1) of such Act.

(b) The mortgagee shall not be required to pay an application or commitment extension fee.

(c) 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 or family unit being purchased.

(2) It shall bear interest at the maximum rate permitted under § 203.20 at the time the commitment for insurance was issued for the project mortgage.

(3) It shall be limited to the term of the project mortgage remaining at the time of the purchase.

(d) The purchase price of the dwelling or family unit shall equal that portion of the unpaid balance of the project mortgage which is allocable to the dwelling or family unit plus such additional amount, not less than $200, as the Commissioner may determine to be reasonable. This additional amount may be paid in cash or its equivalent, and may be applied in whole or in part toward closing costs. It shall be paid by the mortgagor in lieu of the minimum investment prescribed in § 235.25.

(e) The mortgagor shall be required to have an annual income within the limits prescribed by the Commissioner, but the asset limits prescribed for mortgagors under mortgages insured pursuant to §§ 235.1 through 235.40 shall not be applicable.