(b) An urban renewal area (as defined in Title I of the Housing Act of 1949, as amended), or

(c) The area of an urban renewal project assisted under section 111 of the Housing Act of 1949, as amended, providing for redevelopment or rehabilitation of urban areas made necessary as the result of a disaster, or

(d) An area in which a program of concentrated code enforcement activities is being carried out pursuant to section 117 of the Housing Act of 1949;

or

(e) An area in which concentrated housing, physical development, and public service activities are being or will be carried out in a coordinated manner, pursuant to a locally developed strategy for neighborhood improvement, conservation or preservation. The locally developed strategy shall:

(1) Provide for a combination of physical improvements, necessary public facilities and services, housing programs, private investment and citizen selfhelp activities appropriate to the needs of the area;

(2) Coordinate public and private development efforts; and

(3) Provide sufficient resources to produce substantial long-term improvements in the area within a reasonable period of time, taking into account the severity of the area's problems.

[36 FR 24573, Dec. 22, 1971, as amended at 48 FR 35394, Aug. 4, 1983; 49 FR 11161, Mar. 26, 1984]

$220.10 Certificate by Secretary to Commissioner or Designation by Secretary.

(a) Urban renewal area. No mortgage may be insured in an area described in §220.5 (a), (b) or (c) until a redevelopment or urban renewal plan has been approved for the area by the governing body of the locality involved and by the Secretary for Housing and Urban Development, and the Secretary has certified to the Commissioner that:

(1) The redevelopment plan or the urban renewal plan conforms to a general plan for the locality as a whole, and

(2) There exists the necessary authority and financial capacity to assure the

completion of such redevelopment or urban renewal plan, or

(3) There exists an urban renewal plan as required for projects assisted under section 111 of the Housing Act of 1949, as amended, which plan conforms to definite local objectives respecting appropriate land uses, improved traffic, public transportation, public utilities, recreational and community facilities and other public improvements, and there exists the necessary authority and financial capacity to insure completion of such urban renewal plan.

(b) Area with concentrated activities. No mortgage may be insured in an area described in §220.5(e) until the Secretary has designated the area as meeting the requirements of that section.

[48 FR 35395, Aug. 4, 1983, and 49 FR 11161, Mar. 26, 1984]

§ 220.15 Standards and conditions of acceptability.

The mortgaged property shall meet such standards and conditions as the Commissioner shall prescribe to establish the acceptability of such property for mortgage insurance. These shall include standards and conditions designed to restore the quality of the area to a condition which would justify mortgage insurance.

§220.20 Dwelling units on property.

At the time the mortgage is insured, there shall be located on the mortgaged property a dwelling designed principally for residential use by not more than 11 families. Such dwellings may be connected with other dwellings by a party wall or otherwise. Any such dwelling located in an area described in §220.5 (a), (b) or (c) shall be constructed or rehabilitated in accordance with an urban renewal plan approved by the Secretary.

[48 FR 35395, Aug. 4, 1983, and 49 FR 11161, Mar. 26, 1984]

ceed $9,165 for each additional unit in excess of four.

[45 FR 76389, Nov. 18, 1980]

§220.30 Maximum

mortgage amounts-loan-to-value limitation.

(a) Mortgagors of principal or secondary residences. A mortgage executed by a mortgagor who is to occupy the dwelling as a principal residence or as a secondary residence (as these terms are defined in paragraph (d) of this section) may not exceed the following:

(1) New construction—principal residences-prior approval. If the mortgage covers a dwelling that is to be occupied as a principal residence and the dwelling was approved for mortgage insurance before the beginning of construction, the sum of the following percentages of the Commissioner's estimate of the replacement cost of the property as of the date the mortgage is accepted for insurance:

(i) 97 percent of the first $25,000 of such value (100 percent of $25,000 of such value or the sum of such value not in excess of $25,000 and the items of prepaid expense approved by the Commissioner, minus $200, whichever appraisal amount or sum is the lesser, in the case of a mortgagor qualifying as a veteran) and

(ii) 95 percent of such estimate in excess of $25,000.

(2) New construction—principal residences-no prior approval. If the mortgage covers a new dwelling under construction that is to be occupied as a principal residence and that is approved for mortgage insurance after the beginning of construction, 90 percent of the Commissioner's estimate of the replacement cost of the property as of the date the mortgage is accepted for insurance.

(3) Existing construction—principal residences-prior approval. If the mortgage covers an existing dwelling that is to be occupied as a principal residence and that was approved for mortgage insurance before the beginning of construction, or the construction of which has been completed for more than one year, the sum of the Commissioner's estimate of the cost of repair or rehabilitation, plus the Commissioner's estimate of the value of the property be

fore rehabilitation, in the following percentages:

(1) 97 percent of the first $25,000 of the sum of such estimates (100 percent of $25,000 of the sum of such estimates or an amount derived by adding to the sum of such estimates not in excess of $25,000 the items of prepaid expense approved by the Commissioner and deducting $200, whichever appraisal amount or total amount is the lesser, in the case of a mortgagor qualifying as a veteran).

(ii) 95 percent of such estimates in excess of $25,000.

(iii) 80 percent (85 percent in the case of a mortgagor qualifying as a veteran) of the sum of such estimates in excess of $35,000.

(4) Existing construction—principal residences-no prior approval. If the mortgage covers an existing dwelling that is to be occupied as a principal residence and that was not approved for mortgage insurance before the beginning of construction, and the construction of which has been completed less than one year, 90 percent of the sum of the Commissioner's estimate of the cost of repair or rehabilitation, plus the Commissioner's estimate of the value of the property before rehabilitation.

(5) Secondary residences. If the mortgage covers a dwelling that is to be occupied as a secondary residence, 85 percent of:

(1) The Commissioner's estimate of the replacement cost of the property as of the date the mortgage is accepted for insurance, in the case of a mortgage covering a newly constructed dwelling.

(ii) The sum of the Commissioner's estimate of the cost of repair or rehabilitation, plus the Commissioner's estimate of the value of the property before rehabilitation, in the case of a mortgage covering an existing dwelling.

(6) Refinancing. In a case under paragraph (a)(3), (a)(4), or (a)(5)(ii) of this section that involves the refinancing of existing indebtedness, the sum of the following:

(i) The estimated cost of repair and rehabilitation.

(ii) The amount (as determined by the Commissioner) required to refi

nance the existing indebtedness secured by the property.

(iii) Any existing indebtedness (as determined by the Commissioner) incurred in connection with improving, repairing, or rehabilitating the property.

(b) Veteran qualifications. The special veteran terms provided in paragraph (a) of this section shall only be applicable to a mortgage covering a single family dwelling executed by a mortgagor who submits to the Commissioner one of the following certifications:

(1) A certification issued by the Secretary of Defense establishing that the veteran performed extra hazardous service while serving in the armed forces for a period of less than 90 days;

or

(2) A Certificate or Eligibility from the Department of Veterans Affairs establishing that the person served 90 days or more on active duty in the armed forces (U.S. Army, Navy, Marine Corps, Air Force, Coast Guard, the Army Reserve, the Naval Reserve, the Marine Corps Reserve, the Air Force Reserve, the Coast Guard Reserve, the National Guard of the United States, or the Air National Guard of the United States); that he or she enlisted before September 8, 1980; and that he or she was discharged or released under conditions other than dishonorable (a copy of the veteran's discharge papers or Form DD-214 shall be submitted with the certificate); or

(3) A Certificate of Eligibility from the Department of Veterans Affairs establishing that the person:

(i)(A) Originally enlisted in a regular component of the armed forces after September 7, 1980; or entered on active duty after October 16, 1981, and he or she had previously completed a period of active duty of at least 24 months or been discharged or released from active duty under 10 U.S.C. 1171; and

(B) Has completed, since enlistment or entering on active duty, either:

(1) Twenty-four months or continuous active duty, or the full period for which he or she was called or ordered to active duty, whichever is shorter; or (2) Any other period of active duty if he or she was discharged or released from duty under 10 U.S.C. 1171 or 1173; was discharged or released from duty

for disability incurred or aggravated in the line of duty; or has a disability which the Department of Veterans Affairs has determined to be compensable under 38 U.S.C. Ch. 11; and

(ii) Was discharged or released under conditions other than dishonorable (a copy of the veteran's discharge papers or Form DD-214 shall be submitted with the certification).

(c) Mortgagors of dwellings that are not principal or secondary residences. A mortgage executed by an eligible nonoccupant mortgagor (as that term is defined in paragraph (d) of this section) may not exceed (1) the Commissioner's estimate for the appropriate loan type under paragraphs (a) (1) through (4) of this section or (2) the amount specified in paragraph (a)(6) of this section.

(d) Definitions. As used in this section:

(1) Principal residence means the dwelling where the mortgagor (i) maintains (or will maintain) his or her permanent place of abode and (ii) typically spends (or will spend the majority of the calendar year. A person may have only one principal residence at any one time.

(2) Secondary residence means a dwelling: (i) Where the mortgagor maintains or will maintain a part-time place of abode and typically spends (or will spend) less than a majority of the calendar year; (ii) which is not a vacation home; and (iii) which the Commissioner has determined to be eligible for insurance in order to avoid undue hardship to the mortgagor. A person may have only one secondary residence at a time.

(3) Eligible non-occupant mortgagor means a mortgagor (or co-mortgagor, as appropriate) who is not to occupy the dwelling as a principal residence or a secondary residence and who is

(i) A public entity, as provided in section 214 of the Act; or any other State of local government or a agency thereof;

(ii) A private nonprofit organization that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 and intends to seek or lease the mortgaged property to low or moderate-income persons, as determined by the Secretary; (4) [Reserved]

(5) Undue hardship means that affordable housing which meets the needs of the mortgagor is not available for lease, or within reasonable commuting distance from place of residence to place of employment.

(6) Vacation home means a dwelling that is used primarily for recreational purposes and enjoyment, and that is not a primary or secondary residence.

(e) Applicability. Paragraphs (a), (c), and (d) of this section apply as provided in 24 CFR 203.51 of this chapter.

[36 FR 24573, Dec. 22, 1971, as amended at 39 FR 32433, Sept. 6, 1974; 42 FR 57435, Nov. 2, 1977; 52 FR 5534, Feb. 25, 1987; 54 FR 39595, Sept. 27, 1989; 55 FR 34807, Aug. 24, 1990; 58 FR 41005, July 30, 1993]

$220.35 Mortgagor's minimum investment.

At the time the mortgage is insured the mortgagor shall have paid on account of the property at least 3 percent of the Commissioner's estimate of the cost of acquisition, or such larger amount as the Commissioner may determine, in cash or its equivalent.

$220.40 Rental properties.

(a) A mortgage on property upon which there is a dwelling to be rented by the mortgagor, shall not be eligible for insurance of said property is a part 507of, or adjacent or contiguous to a project, subdivision or group of similar rental properties which involve twelve or more dwelling units if the mortgagor has any financial interest in said properties.

(b) No two-, three-, or four-family dwelling nor single-family dwelling, if it is a part of a group of five of more single family dwellings held by the same mortgagor or any part or unit thereof, shall be rented or offered for rent for transient or hotel purposes, as defined in §203.16 of this chapter, so long as such dwelling is subject to any insured mortgage.

(c) The provisions of paragraph (a) of this section shall not apply where the Commissioner determines that the application of such provisions would substantially interfere with the repair and rehabilitation of a subdivision or group of existing properties.

$220.45 Certificates of appraisal and replacement amounts.

All of the provisions of §203.15 of this chapter apply to mortgages insured under this subpart except that with respect to mortgages meeting the requirements of §220.21(a)(1), the application for insurance must be accompanied by an agreement satisfactory to the Commissioner executed by the seller, builder or such other person as required by the Commissioner whereby such person agrees that prior to any sale of the dwelling such person will deliver to the purchaser of the property a written statement acceptable to the Commissioner setting forth the amount of the Commissioner's estimate of the replacement cost of the property.

203.45 Eligibility of graduated payment mortgages.

203.46 Eligibility of modified graduated payment mortgages.

203.50 Eligibility of rehabilitation loans.

(b) References to mortgage in part 203 shall be construed to refer to loan in §§ 220.100 et seq.

(c) For purposes of §§ 220.100 et seq., outstanding indebtedness relating to the property means the total outstanding amount of unsecured obligations of the borrower incurred in connection with improving, repairing or maintaining the property and outstanding mortgages or obligations constituting liens on the title to the property to be improved.

[45 FR 33967, May 21, 1980, as amended at 45 FR 76389, Nov. 18, 1980; 53 FR 8883, Mar. 18, 1988]

§ 220.101 Mortgage provisions.

(a) The lender shall present for insurance a note and security instrument in a form meeting the requirements of the Commissioner. The Commissioner may prescribe a complete note and security instrument. For each case in which the Commissioner does not prescribe a complete note and security instrument, the Commissioner shall require specific language in the note and security instrument which shall be uniform for every note and security instrument, and may also descirbe the language or substance of additional provisions for all notes and security instruments as well as the language or substance of additional provisions for use only in particular jurisdictions or for particular programs. Each note and security instrument shall also contain any additional provisions necessary to create a valid and enforceable secure debt under the laws of the jurisdiction in which the property is located.

(b) The loan shall:

(1) Come due on the first of the month.

(2) Involve a principal obligation in multiples of $50.

(3) Have an amortization of either 5, 7, 10, 12, 15, 17, or 20 years by providing for either 60, 84, 120, 144, 180, 204, or 240 monthly amortization payments.

(4) Provide for payments to interest and principal to begin not later than the first day of the month following 60

days from the date the lender's certificate on the commitment was executed.

(c) The loan shall have a maturity satisfactory to the Commissioner not less than five nor more than 20 years from the date of the beginning of amortization.

(d) Prior to endorsement, the entire principal amount of the loan shall have been disbursed to the borrower or to his or her creditors for his or her account and with his or her consent.

[36 FR 24573, Dec. 22, 1971, as amended at 49 FR 21320, May 21, 1984; 53 FR 34283, Sept. 6, 1988]

§ 220.102 Maximum amount.

(a) The principal amount of the loan shall not exceed:

(1) The Commissioner's estimate of the cost of improvements, $40,000 or $12,000 per family unit, whichever is the lesser; or

(2) An amount which, when added to any outstanding indebtedness related to the property, creates a total outstanding indebtedness which does not exceed the limits prescribed in §§ 220.25 and 220.30 for mortgages on properties other than new construction; or

(3) Where the proceeds are to be used for the purpose indicated in § 220.105(a)(2), an amount which when added to the aggregate principal balance of any outstanding insured home improvement loans which were obtained for the purposes indicated in §220.105(a)(2), creates an aggregate indebtedness for such purposes of not to exceed $12,000.

(b) In any geographical area where the Commissioner finds the cost levels so require, he may increase by not to exceed 45 percent the $12,000 per family unit limitation set forth in paragraphs (a) (1) and (3) of this section.

§ 220.103 Type and location of property.

The property to be improved shall:

(a) Constitute real property located within the United States, Puerto Rico, Guam, the Trust Territory of the Pacific Islands, American Samoa, or the Virgin Islands.

(b) Contain an existing structure or structures.