loss shall occur when the Commissioner determines that the total of the taxes, interest on the mortgage debt, mortgage insurance premiums, hazard insurance premiums, and the expenses of maintenance and operation of the project (excluding depreciation) exceed the project income.

(2) The loan shall be secured by an instrument in a form approved by the Commissioner for use in the jurisdiction in which the project is located.

(3) The loan may bear interest at a rate agreed upon by the mortgagee and the mortgagor. Interest shall be payable in monthly installments on the principal then outstanding.

(4) The loan shall be limited to a term not exceeding the unexpired term of the original mortgage.

(b) Other operating loss loans. In addition to the insurance of loans to cover two-year operating losses under paragraph (a) of this section, the Commissioner may also insure any operating loss loan meets the following conditions:

(1) The existing project mortgage:

(i) Shall have been insured by the Commissioner at any time before or after the date of enactment of the Housing and Community Development Act of 1987;

(ii) Shall cover any property, other than a property upon which there is located a 1- to 4-family dwelling; and

(iii) Shall not cover a subsidized project. For purposes of this paragraph (b)(1)(iii), subsidized projects are:

(A) Projects insured under Section 236.

(B) Projects insured under the Section 221(d)(3) Below Market Interest Rate (BMIR) program.

(C) Insured projects with Rent Supplement contracts.

(D) Insured projects with Rental Assistance Payments (RAP).

(E) Insured projects with projectbased Section 8 assistance (e.g., new/ sub rehab, mod rehab, project-based certificates, LMSA, Property Disposition).

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

(i) 80 percent of the unreimbursed cash contributions made on or after March 18, 1987, by the project owner for the use of the project, to cover operat

ing losses (as defined in paragraph (a) of the section) incurred during any period of consecutive months (not exceeding 24 months) in the first 10 years after the date of completion of the project, as determined by the Commissioner; or

(ii) An amount which, when added to the outstanding indebtedness relating to the property, does not exceed the maximum amount insurable under section 234 of the Act.

(3) The loan shall be made within 10 years after the end of the period of consecutive months referred to in paragraph (b)(2) of this section.

(4) The project shall meet all applicable underwriting and other requirements of the Commissioner at the time the loan is to be made.

(5) Any loan insured under this paragraph (b) shall:

(i) Bear interest at a rate agreed upon by the mortgagor and mortgagee; (ii) Be secured in such manner as the Commissioner shall require;

(iii) Be limited to a term not exceeding the unexpired term of the original mortgage; and

(iv) Be insured under the same part of this chapter on the original mortgage.

in

(6) The Commissioner may provide insurance accordance with § 234.531(a) or under this paragraph (b), or under both paragraphs (a) and (b) of this section, in connection with an existing project mortgage, except that the Commissioner may not provide insurance under both paragraphs (a) and (b) of this section in connection with the same period of months referred to in paragraph (b)(2) of this section. (7) Where the Commissioner has already provided insurance under § 234.531(a), no more than one additional loan may be insured under this paragraph (b). Where no previous insurance has been provided under § 234.531(a), a maximum of two loans may be insured under this paragraph (b).

[58 FR 43077, Aug. 13, 1993]

§ 234.535 Adjusted mortgage amountrehabilitation projects.

In addition to the maximum mortgage amount limitations of §§ 234.525 and 234.530, a mortgage having a prin

cipal amount computed in compliance with the applicable provisions of this subpart, and which involves a project to be repaired or rehabilitated, shall be subject to the following additional limitations:

(a) Property held in fee. If the mortgagor is the fee simple owner of the project, the maximum mortgage amount shall not exceed 100 percent of the Commissioner's estimate of the cost of the proposed repairs or rehabilitation.

(b) Property subject to existing mortgage. If the mortgagor owns the project subject to an outstanding indebtedness, which is to be refinanced with part of the insured mortgage, the maximum mortgage amount shall not exceed the sum of:

(1) The Commissioner's estimate of the cost of the repair or rehabilitation; and

(2) Such portion of the outstanding indebtedness as does not exceed 90 percent of the Commissioner's estimate of the fair market value of such land and improvements prior to the repair or rehabilitation.

(c) Property to be acquired. If the project is to be acquired by the mortgagor and the purchase price is to be financed with a part of the insured mortgage, the maximum mortgage amount shall not exceed 90 percent of the sum of:

(1) The Commissioner's estimate of the cost of the repair or rehabilitation; and

(2) The actual purchase price of the land and improvements, but not in excess of the Commissioner's estimate of the fair market value of such land and improvements prior to the repair or rehabilitation.

§ 234.540 Reduced mortgage amountleaseholds.

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.

[41 FR 11287, Mar. 18, 1976]

§ 234.545 Prepayment privilege and prepayment charges.

(a) Prepayment privilege. The mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part upon any interest payment date, after giving to the mortgagee 30 days notice in writing in advance of its intention to prepay.

(b) Prepayment charge. The mortgage may contain a provision for such charge, in the event of prepayment of principal, as may be agreed upon between the mortgagor and the mortgagee. However, the mortgagor shall be permitted to prepay up to 15 percent of the original principal amount of the mortgage in any one calendar year without any prepayment charge. No prepayment charge shall be collected if prepayment results from either of the following:

(1) A payment requirement of the Commissioner.

(2) Prepayment of the project mortgage as part of a plan for committing the ownership of the project to family unit ownership.

§ 234.550 Late charge.

The mortgage may provide for the collection by the mortgagee of a late charge, not to exceed two cents for each dollar of each payment to interest and principal more than 15 days in arrears, to cover the extra expense involved in handling delinquent payments. Late charges shall be separately charged to and collected from the mortgagor and shall not be deducted from any aggregate monthly payment. § 234.555 Zoning, deed or building restrictions.

The project when constructed or rehabilitated shall not violate any material zoning or deed restrictions applicable to the project site, and shall comply with all applicable building and other governmental regulations.

§ 234.560 Supervision

sioner.

by Commis

(a) In general. All of the provisions of $207.19 of this chapter relating to requirements incident to insurance of advances as well as those concerning labor standards and prevailing wage requirements, apply to mortgages exe

cuted by eligible mortgagors under this subpart but paragraphs (a), (b), (e), (f), (g) and (h) of such §207.19 do not apply.

(b) Type of supervision. The Commissioner may regulate and restrict the mortgagor as long as the Commissioner is the insurer, holder or re-insurer of the mortgage. Such regulation or restriction may be in the form of a regulatory agreement, corporate charter or such other means as the Commissioner approves.

§ 234.565 Occupancy requirements.

(a) Family with children. The mortgagor shall certify under oath to the Commissioner that:

(1) In selecting tenants for the project, or in selling family units under the plan for apartment ownership, the mortgagor will not discriminate against any family because it includes children.

(2) The mortgagor will not sell the project while the mortgage insurance is in effect, unless the purchaser makes the certification required in paragraph (a)(1) of this section.

(b) Transient or hotel purposes. The mortgagor shall certify under oath to the Commissioner that, so long as the mortgage is insured by the Commissioner, the mortgagor will not rent, permit the rental or permit the offering for rental of the housing, or any part thereof, covered by such mortgage for transient or hotel purposes. For the purpose of this certificate, the term rental for transient or hotel purposes shall mean (1) rental for any period less than 30 days, or (2) any rental, if the occupants of the housing accommodations are provided customary hotel services such as room service for food and beverages, maid service, furnishing and laundering of linens, and bellboy service.

that disbursement shall be made only as directed by the Commissioner.

Subpart D-Contract Rights and Obligations-Projects

$234.751 Cross-reference.

(a) All of the provisions, except §207.258(b) of subpart B of this chapter, covering mortgages insured under section 207 of the National Housing Act shall apply to mortgages insured under section 234(d) of such Act.

(b) For the purposes of this subpart, all references in part 207 of this chapter to section 207 of the National Housing Act shall be construed to refer to section 234(d) of the act.

[36 FR 24628, Dec. 22, 1971, as amended at 50 FR 38787, Sept. 25, 1985]

Cross-reference.

235.2 Basic program outline.

235.3 Waivers.

235.5 Definitions used in this subpart. 235.9 Maximum interest rate.

235.10 Eligible mortgagors. Homeownership counseling.

235.11

235.12 Recapture of assistance payments. 235.13 Special requirements concerning citizenship or eligible immigration status. 235.15 Eligible types of dwellings.

235.16 Value of property after rehabilitation.

235.201

Cross-reference.

235.202 Amount of initial MIP.

235.204 Amount of annual MIP.

235.205 Deed in lieu of foreclosure. 235.206 Substitute mortgagors.

235.215 Method of paying insurance benefits. 235.220 Condition of property.

SPECIAL PROVISIONS APPLICABLE ONLY TO MORTGAGES INVOLVING CONDOMINIUM UNITS

235.221 Waived title objections.

235.225 Changes in plan of apartment ownership.

235.230 Condition of multifamily structure. 235.235 Certificate or statement of condition.

235.240 Assessment of taxes.

235.245 Certificate of tax assessment. 235.250 Cancellation of property insurance.

Subpart C-Assistance Payments-Homes for Lower Income Families

235.345 Term of Assistance Contract.

235.350 Mortgagor's required recertification. 235.355 Mortgagor's optional recertification.

235.515 Special certifications-family unit ownership.

235.520 Application, commitment, and inspection fees.

235.525 Eligible mortgagors.

235.530 Eligible types of property.

235.535 Maximum mortgage amount.
235.540 Maximum interest rate.
235.545 Application of payments.
235.550 Late charges.
235.555 Prepayment privileges.
235.560 Financial requirements.
235.565 Rental of housing units.

Subpart E-Contract Rights and Obligations-Rehabilitation Sales Projects

235.820 Amount of assistance payments. 235.825 Application of payments.

235.830 Mortgagee records.

235.835 Effect of assignment of mortgage. 235.999 Effect of amendments.

Subpart G-Servicing ResponsibilitiesHomes for Lower Income Families

235.1000 Cross-reference.
235.1001 Providing information.

Subpart H-Eligibility Requirements: Contract Rights and Obligations; Assistance Payments Contracts; Servicing Responsibilities-Refinancing Mortgages Under Section 235(r) of the National Housing Act

203.38 Location of dwelling.

203.42 Rental properties.

203.43 Eligibility of miscellaneous type mortgages.

203.431 Eligibility of mortgages on Hawaiian home lands pursuant to section 247 of the National Housing Act.

203.43j Eligibility of mortgages on Allegany Reservation of Seneca Nation of Indians. 203.44 Eligibility of open-end advances. 203.45 Eligibility of graduated payment mortgages.

203.46 Eligibility of modified graduated payment mortgages.

203.47 Eligiblity of growing equity mortgages.

203.49 Eligibility of adjustable rates mort

gages.

203.50 Eligibility of rehabilitation loans. 203.51 Applicability.

(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.

[41 FR 1172, Jan. 6, 1976]

EDITORIAL NOTE: For FEDERAL REGISTER Citations affecting §235.1, see the List of Sections Affected in the Finding Aids section of this volume.

§ 235.2 Basic program outline.

This part authorizes assistance to aid lower income families to acquire homeownership. After January 5, 1976, that assistance shall be granted only under subparts A, B and C in accordance with the following basic conditions as further described in those subparts.

(a) Assistance will be in the form of monthly payments by the Secretary to the mortgagee to reduce effective interest costs to a homeowner on an insured market rate home mortgage to as low as four percent if the homeowner cannot afford the full mortgage payment with 20 percent of his income.

(b) The amount of subsidy will vary according to the income of each homeowner and the total amount of the mortgage payment at the market rate of interest. Family income and mortgage limits are established for eligibility in each locality.

(c) Assistance will be limited to mortgagors who purchase for occupancy as a principal residence (as defined in §203.18(f) of this chapter) new or substantially rehabilitated single family or condominium units.