221.543

Advance amortization.

221.545 Development of property.

221.546 Commercial and community facilities.

221.559 Eligibility of miscellaneous type mortgagors.

221.559b Eligibility for insurance under

section 221(j) of mortgage financing purchase of existing project by cooperative.

221.560 Eligibility of refinanced mortgage. 221.575 Protection of work in process.

(b) For the purposes of this subpart, all references in Part 221 of this chapter to a rehabilitation sales mortgagor shall be construed to refer to a mortgagor under a mortgage insured pursuant to the provisions of this subpart.

[36 FR 24636, Dec. 22, 1971, as amended at 39 FR 12005, Apr. 2, 1974]

§ 235.505 Definition of “nonprofit mortgagor".

As used in this subpart, the term "nonprofit mortgagor" shall mean a corporation or association organized for purposes other than the making of profit or gain for itself or persons identified therewith and which the Commissioner finds is neither controlled by nor under the direction of persons or firms seeking to derive profit or gain therefrom. Such a mortgagor shall be subject to such regulation or supervision as to rents, charges and methods of operation as the Commissioner deems necessary to effectuate the purposes of this subpart.

§ 235.510 Application.

(a) An application for insurance of a mortgage on a project shall be submitted to the local FHA office by an approved mortgagee and by the sponsors of the project. Such application shall be on an approved FHA form.

(b) No application shall be considered unless the following requirements are met:

(1) All of the exhibits called for in the application are submitted to the Commissioner.

(2) The Commissioner has allocated to the project funds for assistance payments.

(3) Fees as required in § 235.520 are remitted.

Where the project is to involve the type of property described in § 235.530(c), the following certification shall be submitted with the application for insurance:

(a) Mortgagee's certificate. A certification by the mortgagee that the law of the jurisdiction will permit the project to be converted to a plan of apartment ownership which will meet the requirements of this part.

(b) Mortgagor's certificate. A certification by the mortgagor that it intends, upon completion of the project, to commit the ownership of the project to a plan of apartment owner

ship under which each family unit in the project will be eligible for financing under individual mortgages insured pursuant to § 235.1 et seq. The mortgagor shall also certify that it intends faithfully and diligently to make all reasonable effort to establish the plan of apartment ownership.

§ 235.520 Application, commitment, and inspection fees.

A combined application, commitment, and inspection fee in the amount of $40 per dwelling unit to be contained in the proposed project shall be paid with the filing of the application. A subsequent application for an increase in the number of units to be contained in the project shall be accompanied by a payment of an additional fee in the amount of $40 for each additional unit.

8 235.525 Eligible mortgagors.

A mortgage shall be executed by a mortgagor that is a nonprofit organization or a public body or agency and is approved by the Commissioner. Such mortgagor shall engage in the following undertaking:

(a) The purchase of housing and the rehabilitation of such housing, if it is deteriorating or substandard.

(b) The sale of such housing, under terms and conditions satisfactory to the Commissioner, to individuals or families meeting the income criteria prescribed for a mortgagor whose mortgage is insured under § 235.1 et seq.

8 235.530 Eligible types of property.

To be eligible for insurance, the property shall consist primarily of substandard or deteriorating housing which is to be rehabilitated, but may include one or more existing dwellings or units not requiring rehabilitation. Such property may be located on one or more tracts or parcels which may or may not be contiguous, and shall consist of one of the following types or a combination of such types:

(a) Four or more single-family or two-family dwellings which may be of detached, semidetached, or row construction.

(b) Four or more one-family units in a structure or structures for which a

plan of family unit ownership, approved by the Commissioner, is established or is to be established as required in § 235.515.

§ 235.535 Maximum mortgage amount.

(a) The mortgage shall involve a principal obligation not in excess of the Commissioner's estimate of the cost of any rehabilitation plus the lesser of either of the following:

(1) The actual purchase price of the land and improvements.

(2) The Commissioner's estimate of the value of the land and improvements prior to the rehabilitation.

(b) Reduced mortgage amount— leaseholds. In the event the mortgage is secured by a leasehold estate rather than a fee simple estate, the value or replacement cost of the property described in the mortgage shall be the value or replacement cost of the leasehold estate (as determined by the Commissioner) which shall in all cases be less than the value or replacement cost of the property in fee simple.

[36 FR 24636, Dec. 22, 1971, as amended at 41 FR 11287, Mar. 18, 1976]

§ 235.540 Maximum interest rate.

(a) On or after November 1, 1988, the loan shall bear interest at the rate agreed upon by the lender and the borrower, which rate shall not exceed 10.00 percent per annum, with the exception of applications submitted pursuant to feasibility letters, or outstanding conditional or firm commitments, issued prior to the effective date of the new rate. In these instances, applications will be processed at a rate not exceeding the applicable previous maximum rates, if the higher rate was previously agreed upon by the parties. Notwithstanding these exceptions, the application will be processed at the new lower rate if requested by the mortgagee.

(b) The amount of any increase approved by the Commissioner in the mortgage amount between initial and final endorsement in excess of that which the Commissioner had committed to insure at initial endorsement, shall bear interest at the rate agreed upon by the mortgagor and the mort

gagee which rate shall not exceed the greater of:

(1) The maximum interest rate established by the Secretary and in effect at the time the mortgage was initially endorsed,

(2) The maximum interest rate established by the Secretary and in effect at the time the application for a mortgage increase was received by the Commissioner, or

(3) The maximum interest rate established by the Secretary and in effect at the time the increase is approved by the Commissioner.

[40 FR 47106, Oct. 8, 1975, as amended at 40 FR 58134, Dec. 15, 1975; 53 FR 3366, Feb. 5, 1988; 53 FR 46084, Nov. 16, 1988]

§ 235.545 Application of payments.

(a) The mortgage shall provide that all amounts to be paid monthly by the mortgagor to the mortgagee shall be added together and the aggregate thereof shall be paid by the mortgagor upon each monthly payment date in a single payment. The mortgage shall further provide that such payment will be applied in the following order:

(1) Premium charges under the contract of insurance.

(2) Ground rents, taxes, special assessments and fire and other hazard insurance premiums.

(3) Interest on the mortgage.

(4) Amortization of the principal of the mortgage.

(b) Any deficiency in the amount of the monthly payment by the mortgagor shall constitute an event of default. The mortgage shall further provide for a grace period of 30 days, within which time the default must be cured.

§ 235.550 Late charges.

A late charge may be collected by the mortgagee for each payment to interest or principal more than 15 days in arrears, if provided in the mortgage, but such charges shall not exceed two cents for each dollar of the mortgagor's share of such payment. Such charge shall be separately charged to and collected from the mortgagor and shall not be deducted from any aggregate monthly payment. Such charge shall not be included in the assistance payment made by the Commissioner

to the mortgagee pursuant to § 235.801 et seq.

§ 235.555 Prepayment privileges.

(a) A mortgage indebtedness may be prepaid in full or in part only with the prior written approval of the Commissioner, except where the prepayment occurs as a result of selling all of the units in the project.

(b) The mortgagee shall not collect any charge for the prepayment of the mortgage in connection with the sale by the mortgagor of units in the project.

(c) If prepayments are made in any calendar year in excess of 15 percent of the original face amount of the mortgage and such prepayments are not made in connection with the sale of individual dwelling or family units, the mortgagee will be permitted to collect such reasonable charge on such excess as is agreed upon between the mortgagor and the mortgagee.

§ 235.560 Financial requirements.

All of the provisions of § 221.540 of this chapter, relating to the financial requirements where there is to be insurance of advances, shall apply except the working capital deposit prescribed in paragraph (a) of this section shall not be required.

8 235.565 Rental of housing units.

Pending the sale of the housing units in the project (or in the event the mortgagor is unable to sell any of such units), the mortgagor may rent or lease such units, with the approval of the Commissioner and under such terms and conditions as the Commissioner may require.

insured under section 235(j) of the National Housing Act except the following provisions:

Sec.

207.259 Insurance benefits. 207.262 No vested right in fund. [37 FR 8664, Apr. 29, 1972]

8 235.705 Forbearance relief.

(a) In a case where the mortgage is in default, the mortgagor and the mortgagee may enter into a forbearance agreement for the reduction or suspension of the mortgagor's regular mortgage payments for a specified period of time, if the Commissioner determines that the default was due to circumstances beyond the mortgagor's control and that the mortgage probably will be restored to good standing within a reasonable period of time. Such determination shall be evidenced by the Commissioner's written approval of the forbearance agreement.

(b) The time specified in § 207.258(a) of this chapter, within which a mortgagee shall give the Commissioner written notice of its intention to file an insurance claim, shall be suspended for the period of time specified in the forbearance agreement as long as the mortgagor complies with the requirements of such agreement.

(c) If the mortgagor fails to meet the requirements of a forbearance agreement or to cure the default under the mortgage at the expiration of the forbearance period, and such failure continues for a period of 30 days, the mortgagee shall notify the Commissioner of such failure. Within 45 days thereafter, unless a modification or extension of the forbearance agreement has been approved by the Commissioner, the mortgagee shall notify the Commissioner of its election to file an insurance claim and of its election to either assign the mortgage to the Commissioner or acquire and convey title to the property to the Commissioner. If the mortgage is assigned to the Commissioner, the special insurance benefits prescribed in § 235.715(b) shall be applicable.

8 235.710 Request by Commissioner for assignment of mortgage.

(a) The mortgagee shall, when requested by the Commissioner, assign to the Commissioner a mortgage on which assistance payments are being made pursuant to the provisions of § 235.801 et seq., regardless of the default status of such mortgage.

(b) If the mortgage is not in default when the Commissioner requests its assignment, the first day of the month following the Commissioner's request shall be considered the date of default. 8 235.715 Payment of insurance benefits.

All of the provisions of § 207.259 of this chapter relating to insurance benefits apply to multifamily project mortgages insured under this subpart, except as follows:

(a) Insurance claims shall be paid in cash unless the mortgagee files a written request for payment in debentures. If such a request is made, the claim shall be paid in debentures issued in multiples of $50, with any balance less than $50 to be paid in cash.

(b) When the mortgage is assigned to the Commissioner pursuant to § 235.710 or is assigned in a case where the mortgagor fails to comply with the requirements of a forbearance agreement approved by the Commissioner in accordance with the requirements of § 235.705 or is assigned in a case where the mortgagor fails to cure the default at the expiration of the forbearance period, the insurance benefits shall be paid in cash and shall be computed in accordance with § 207.259(b) of this chapter, except that in lieu of the allowance for debenture interest in § 207.259(b)(1)(iii) of this chapter, the cash payment shall include the amount of the unpaid accrued mortgage interest computed to the date the assignment of the mortgage to the Commissioner is filed for record. In addition, an amount shall be included equivalent to the debenture interest which would have been earned from the date the mortgage assignment was filed for record to the date the cash payment is made, except that when the mortgagee fails to meet any one of the appli

cable requirements of §§ 207.256, 207.258(b), and 235.705(c) of this chapter within the specified time and in a manner satisfactory to the Commissioner (or within such further time as the Commissioner may approve in writing), such amount shall be computed only to the date on which the particular action should have been taken or to which it was extended.

(c) Where the assignment of the mortgage is made pursuant to § 235.710 and the mortgage is not in default at the time of such assignment, the 1 percent deduction prescribed in § 207.259(b)(2)(iv) of this chapter shall not be applicable.

Subpart F-Assistance PaymentsRehabilitation Sales Projects

SOURCE: 36 FR 24643, Dec. 22, 1971, unless otherwise noted.

§ 235.801 Assistance payment contract.

This subpart shall constitute the assistance payment contract between the mortgagee and the Commissioner pursuant to section 235(j)(7) of the National Housing Act. The endorsement of the mortgage for insurance shall constitute the execution of the assistance payment contract with respect to the mortgage being insured.

8 235.805 Eligible mortgages.

Assistance payments pursuant to this subpart shall be made only in connection with a mortgage insured under Subparts D and E of this part.

8 235.810 Term of payments.

(a) The term for which assistance payments shall be made shall begin on the following dates:

(1) With respect to a mortgage involving insurance of advances, on the date of the Commissioner's final endorsement of the mortgage note for insurance, or such earlier date as may be established by the Commissioner.

(2) With respect to a mortgage insured upon completion, the date on which the Commissioner endorses the mortgage note for insurance.

(b) The term of the assistance payments shall end upon the occurrence of one of the following events:

(1) The termination of the contract of mortgage insurance.

(2) The Commissioner's receipt of the mortgagee's notice of intention to file an insurance claim pursuant to § 207.258(a) of this chapter. In the event the mortgagee fails to provide the Commissioner with such notice of intention within the time specified in § 207.258(a) of this chapter, the last day on which the Commissioner should have received the mortgagee's notice shall be deemed the date the Commissioner received such notice.

(3) At the discretion of the Commissioner, the mortgagor's failure to meet its obligations under the regulatory agreement it has entered into with the Commissioner.

(c) Upon the termination of the assistance payment contract, the payment due on the first of the month in which the termination occurs shall be the last payment to which the mortgagee shall be entitled.

(d) Where the term of assistance payments is ended pursuant to paragraph (b) (2) or (3) of this section, the contract for assistance payment may be reinstated by the Commissioner, in his discretion and on such conditions as he may prescribe. In the event of such reinstatement, assistance payments will be made to the mortgagee for those months during which such payments were suspended.

§ 235.815 Time of payments.

The assistance payment shall be due on the first day of each month following the beginning of the term, and shall be paid upon the receipt of a billing (on a form prescribed by the Commissioner) from the mortgagee or its servicer.

§ 235.820 Amount of assistance payments.

(a) The assistance payment to the mortgagee shall be the difference between the following:

(1) The monthly installment for principal, interest and mortgage insurance premium which the mortgagor is obligated to pay under the mortgage; and

(2) The monthly installment for principal and interest the mortgagor would be obligated to pay if the mort