purpose of limiting the outstanding principal balance of the mortgage, at the time of final endorsement, to the statutory limitations based on the actual cost of the project. The agreement shall require the mortgagor to do each of the following:

(1) Disclose its relationship including any collateral agreements with the general contractor, the subcontractor, and the suppliers.

(2) Enter into a construction contract with the general contractor in a form meeting the requirements of § 1100.145.

(3) Execute a certificate of actual costs upon completion of the construction.

(4) Reduce the outstanding principal balance of the mortgage by applying thereto any excess of mortgage proceeds over statutory limitations based on actual costs.

§ 1100.142 Certificate as to subcontracts.

If the Commissioner determines that the mortgagor or any of its officers, directors, stockholders, partners, or beneficiaries have an interest (financial or otherwise) in a subcontractor or material supplier, the mortgagor shall certify (at such times and in such form as may be prescribed by the Commissioner prior to final endorsement of the mortgage for insurance) that the amounts paid to such subcontractor or material supplier were not more than the rate being paid in the locality for similar type labor and materials.

§ 1100.145 Form of contract.

A cost-plus form of contract between the mortgagor and the general contractor shall be used unless it is established to the Commissioner's satisfaction that such form is not required to protect his interests and the interests of the mortgagor, in which case a lump sum contract may be used.

contractor shall submit a certificate of actual costs in a form prescribed by the Commissioner.

§ 1100.152

Certificate of actual costssubcontractor's costs.

Where the subcontractor, material supplier, or equivalent lessor have an identity of interest either with the mortgagor or the general contractor, the Commissioner may require the mortgagor to submit a certificate showing the actual cost of the labor, supplies, or equipment furnished to the project by any one or all of such entities. The certificate shall be in a form prescribed by the Commissioner.

§ 1100.155 Records.

The mortgagor shall keep and maintain adequate records of all construction costs, or other cost items not representing work under the general contract and shall require the general contractor to keep similar records. Upon request by the Commissioner, such records, together with any collateral agreements, shall be made available for examination. § 1100.157 Adjustment of cost-new

construction.

In the case of new construction, in order to give effect to land value, the aggregate amount shown in the certificate of actual costs shall be adjusted, prior to final endorsement, as follows:

(a) Land held in fee. Where the land included in the mortgage security is owned in fee by the mortgagor, the Commissioner's estimate of the fair market value of such land prior to the beginning of construction shall be added to the total cost shown in the certificate.

(b) Land held under leasehold. Where the land included in the mortgage security is held by the mortgagor under a leasehold, the expense of acquiring the leasehold may be added to the aggregate amount shown in the certificate of actual costs. The amount added shall be limited to the Commissioner's estimate, prior to the beginning of construction, of the fair market value of the leasehold or other interest. § 1100.160

Adjustment of cost-reha

bilitation.

In the case of repair or rehabilitation, in order to give effect to land value, the aggregate amount shown in the certificate of actual costs shall be adjusted, prior to final endorsement, as follows:

(a) Property already owned. Where no part of the proceeds of the mortgage

If the principal amount of the mortgage exceeds the total shown by the certificate of actual costs, after adjustment as provided in §§ 1100.157 and 1100.160, the mortgage shall be reduced by the amount of such excess prior to final insurance endorsement.

§ 1100.165 Effect of agreement.

Any agreement, undertaking, statement, or certification required by the Commissioner in connection with the certificate of actual costs shall specifically state that it has been made, presented, and delivered for the purpose of influencing an official action of the Commissioner and that it may be relied upon as a true statement of the facts contained therein. § 1100.167

able.

Cost certification incontest

Upon the Commissioner's approval of the mortgagor's certification of actual costs, such certification shall be final and incontestable, except for fraud or material misrepresentation on the part of the mortgagor.

In order for the mortgaged property to be eligible for insurance, the Commissioner shall determine that marketable title thereto is vested in the mortgagor as of the date the mortgage is filed for record. The title evidence shall be examined by the Commissioner and the original endorsement of the credit instrument for insurance shall be evidence of its acceptability.

§ 1100.182 Title evidence.

Upon insurance of the mortgage, the mortgagee shall furnish a survey to the Commissioner which is satisfactory to him, and a policy of title insurance, as provided in paragraph (a) of this section. If, for reasons the Commissioner deems satisfactory, title insurance cannot be furnished under paragraph (a) of this section, the mortgagee shall furnish evidence of title in accordance with paragraphs (b) or (c) of this section, as the Commissioner may require. Any survey, policy of title insurance, or evidence of title required under this section shall be furnished without expense to the Commissioner. The types of title evidence are:

(a) A title insurance policy, issued by a company and in a form satisfactory to the Commissioner. The policy shall name as the insureds the mortgagee and the Secretary as their respective interests may appear. The title policy shall provide that, upon acquisition of title by the mortgagee or the Secretary, it shall become an owner's policy protecting the mortgagee or the Secretary, as the case may be.

(b) An abstract of title satisfactory to the Commissioner, prepared by an abstract company or individual engaged in the business of preparing abstracts of title, accompanied by a legal opinion satisfactory to the Commission as to the quality of such title, signed by an attorney at law experienced in the examination of titles.

(c) A Torrens or similar title certificate.

Part

1500 General procedural provisions.

1520 Low-rent housing program.

§ 1500.3

Claims cognizable under the Federal Tort Claims Act.

(a) The PHA will give consideration to claims brought under the Federal Tort Claims Act, as amended (28 U.S.C.A. Sections 2671-2680), if such claims meet all of the following conditions:

(1) They are for $2,500 or less;

(2) They are for injury or loss of property or personal injury or death;

(3) They result from the negligent or wrongful act or omission of an employee of the PHA acting within the scope of his employment;

(4) The PHA, if a private person, would be liable for the claim under the law of the place where the act or omission occurred.

(b) The following types of claims are excepted from the Federal Tort Claims Act by Section 421 (28 U.S.C.A. Section 2680) of that act and will not be considered by the PHA:

(1) Any claim based upon an act or omission of an employee, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid;