as provided in paragraph (a) of this section, of:

(1) The date on which such right first accrued, and

(2) The outstanding principal balance of the mortgage on the first day of the month following the date on which such right first accrued.

(c) The liability for payment of mortgage insurance premiums shall begin on and be computed from the first day of the month following the date on which the right to compute interest at the higher rate shall have first accrued.

[36 FR 24587, Dec. 22, 1971, as amended at 37 FR 8663, Apr. 29, 1972]

$221.275 Method of paying insurance benefits.

If the application for insurance benefits is acceptable to the Commissioner, all of the insurance claim shall be paid in cash unless the mortgagee files a written request with the application for payment in debentures. If such a request is made, all of the claim shall be paid by issuing debentures and by making a cash payment adjusting any differences between the total amount of the claim and the amount of the debentures issued.

§221.280 Waived title objections.

(a) General provisions. All of the provisions of § 203.389 of this chapter (relating to the waiver by the Commissioner of objections to title) shall apply to mortgages insured under this subpart, with the exception of mortgages involving condominium units.

(b) Provisions applicable to condominium units. Where the mortgage involves a condominium unit, the Commissioner shall not object to title by reason of the following matters:

(1) Violations of a restriction based on race, color, or creed, even where such restriction provides for a penalty of reversion or forfeiture of title or a lien for liquidated damage.

(2) Easements for public utilities along one or more of the property lines, provided the exercise of the rights thereunder do not interfere with any of the buildings or improvements located on the subject property.

(3) Encroachments on the subject property by improvements on adjoining

(a) When a family unit is conveyed or a mortgage is assigned to the Commissioner, the family unit and the common areas and facilities (including restricted common areas and facilities) designated for the particular unit shall be undamaged by fire, earthquake, tornado, or boiler explosion, except if the property has been damaged, either of the following actions shall be taken:

(1) The property may be repaired prior to its conveyance or prior to the assignment of the mortgage to the Commissioner.

(2) With the prior approval of the Commissioner, the property may be conveyed or the mortgage assigned to the Commissioner without repairing the damage. In such instances, the Commissioner shall deduct from the insurance benefits either his estimate of the decrease in value of the family unit or the amount of any insurance recovery received by the mortgagee, whichever is the greater.

(b) If the property has been damaged by fire and such property was not covered by fire insurance at the time of the damage, the mortgagee may convey the property or assign the mortgage to the Commissioner without deduction from the insurance benefits for any loss occasioned by such fire if the following conditions are met:

(1) The property shall have been covered by fire insurance at the time the mortgage was insured.

(2) The fire insurance shall have been later cancelled or renewal shall have been refused by the insuring company.

(3) The mortgagee shall have notified the Commissioner within 30 days (or within such further time as the Commissioner may approve) of the cancellation of the fire insurance or of the refusal of the insuring company to renew the fire insurance. This notification shall have been accompanied by a certification of the mortgagee that diligent efforts were made, but it was unable to obtain fire insurance coverage at reasonably competitive rates and that it will continue its efforts to obtain adequate fire insurance coverage at competitive rates.

§ 221.310 Assessment of taxes.

When a family unit is conveyed to the Commissioner or a mortgage is assigned to the Commissioner, the unit shall be assessed and subject to assessment for taxes pertaining only to that unit.

§ 221.315 Certificate of tax assessment.

The mortgagee shall certify, as of the date of filing for record of the deed or assignment of the mortgage to the Commissioner, that the family unit is assessed and subject to assessment for taxes pertaining to that unit.

§ 221.320 Certificate or statement of condition.

(a) At the time of the assignment of the mortgage or conveyance of the property to the Commissioner, the mortgagee shall, as of the date of the filing for record of the deed or assignment,

(1) Certify that the conditions of §221.305(a) have been met; or

(a) An application for the issuance of a site appraisal and market analysis (SAMA) letter must be submitted by the project sponsor. An application for a conditional or firm commitment for insurance of a mortgage on a project shall be submitted by an approved mortgagee and by the sponsor of such project. Such application shall be submitted to the local HUD field office on FHA approved forms.

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

(1) All of the exhibits required by the application form are submitted to the Commissioner.

(2) In a case involving a mortgage which is to bear interest at the below market rate provided in §221.518(b), the Commissioner shall have issued a memorandum evidencing allocation of funds to the proposed project.

(c) An applicant may initially elect to submit an application for a SAMA letter, a conditional commitment or a firm commitment depending upon the completeness of the drawings, specifications and other required exhibits.

[39 FR 12003, Apr. 2, 1974, as amended at 40 FR 22829, May 27, 1975]

FEES

§ 221.503 Application fees.

(a) Application fee-SAMA letter. An application fee of $1.00 per thousand dollars of the requested mortgage amount shall accompany the application for a SAMA letter.

(b) Application fee-conditional commitment. An application-commitment fee of $1 per thousand dollars of the requested mortgage amount shall accompany the application for conditional commitment in cases in which the application fee for an unexpired SAMA letter has been collected. A fee of $2 per one thousand dollars of the requested mortgage amount shall accompany the application for conditional commitment in cases in which the SAMA application fee has been paid but the SAMA letter has expired or in cases in which a SAMA application fee has not been paid.

(c) Application fee-firm commitment. An application for firm commitment shall be accompanied by an application-commitment fee which, when added to prior fees received in connection with applications for a SAMA letter or a conditional commitment, will aggregate $3 per thousand dollars of the requested mortgage amount to be insured.

[39 FR 12003, Apr. 2, 1974]

§ 221.504 Rejection of an application.

A significant deviation in an application from the terms or findings arrived at in an earlier stage, as evidenced by the SAMA letter or conditional commitment, shall be grounds for rejection of an application for conditional or firm commitment, respectively. The fees paid to such date shall be considered as having been earned notwithstanding such rejection.

[39 FR 12003, Apr. 2, 1974]

§221.505 Inspection fee.

The firm commitment may provide for the payment of an inspection fee in an amount not to exceed $5 per thousand dollars of the commitment. If an inspection fee is required, it shall be paid as follows:

(a) If the case involves the insurance of advances, it shall be paid at the time of initial endorsement.

(b) If the case involves insurance upon completion, it shall be paid prior to the date construction is begun.

$221.506 Fees on increases.

(a) Fees on increases (1) Increase in firm commitment prior to endorsement. An application, filed prior to initial endorsement (or prior to endorsement in a case involving insurance upon completion), for an increase in the amount of an outstanding firm commitment shall be accompanied by a combined additional application and commitment fee. This combined additional fee shall be in an amount which will aggregate $3 per thousand dollars of the amount of the requested increase. If an inspection fee was required in the original commitment, an additional inspection fee shall be paid in an amount computed at the same dollar rate per thousand dollars of the amount of increase in commitment as was used for the inspection fee required in the original commitment. When insurance of advances is involved, the additional inspection fee shall be paid at the time of initial endorsement. When insurance upon completion is involved, the additional inspection fee shall be paid prior to the date construction is begun or if construction has begun, it shall be paid with the application for increase.

(b) Increase in mortgage between initial and final endorsement. Upon an application, filed between initial and final endorsement, for an increase in the amount of the mortgage, either by amendment or by substitution of a new mortgage, a combined additional application and commitment fee shall accompany the application. This combined additional fee shall be in an amount which will aggregate $3 per thousand dollars of the amount of the increase requested. If an inspection fee was required in the original commitment, an additional inspection fee shall accompany the application in an amount not to exceed $5 per thousand Idollars of the amount of the increase requested.

(c) Loan to cover operating losses. In connection with a loan to cover operating losses occurring during the first 2

157-081 0-95-3

$221.506b Transfer fee.

Upon application for approval of a case involving the transfer of physical assets or involving the substitution of mortgagor, a transfer fee of 50 cents per thousand dollars shall be paid on the original face amount of the mortgage.

8221.507 Refund of fees.

If the amount of the commitment issued, or increase in mortgage granted is less than the amount applied for, the Commissioner shall refund the excess amount of the application and commitment fees submitted by the applicant. If an application is rejected before it is assigned for processing, or in such other instances as the Commissioner may determine, the entire application and commitment fees or any portion thereof may be returned to the applicant. Commitment, inspection, and reopening fees may be refunded, in whole or in part, if it is determined by the Commissioner that there is a lack of need for the housing or that the construction or financing of the project has been prevented because of condemnation proceedings or other legal action taken by a governmental body or public agency, or in such other instances as the Commissioner may determine. A transfer fee may be refunded only in such instances as the Commissioner may determine.

$221.508 Maximum fees and charges by mortgagee.

The mortgagee may collect from the mortgagor the amount of the fees provided for in this subpart. The mortgagee may also collect from the mortgagor an initial service charge in an amount not to exceed 2 percent of the original principal amount of the mortgage, to reimburse the mortgagee for the cost of closing the transaction. Any additional charges or fees collected from the mortgagor shall be subject to prior approval of the Commissioner.

§ 221.508a Fees not required.

The payment of an application, commitment, inspection, or reopening fee shall not be required in connection with the insurance of a mortgage involving the sale by the Secretary of any property acquired under any section or title of the Act.

[41 FR 14861, Apr. 8, 1976]

SAMA LETTER AND COMMITMENT

$221.509 Effect and term of SAMA letter, conditional and firm commitment.

(a) Effect of SAMA letter, conditional and firm commitment—(1) SAMA letter. The issuance of a SAMA letter indicates completion of the site appraisal and market analysis stage to determine initial acceptability of the site and recognition of a specific market need. The SAMA letter is not a commitment to insure a mortgage for the proposed project and does not bind the Commissioner to issue a firm commitment to insure. The SAMA letter precedes the later submission of acceptable plans and specifications for the proposed project, and is limited to advising the applicant as to the following determinations of the Commissioner, which shall not be changed to the detriment of an applicant, if the application for a commitment is received before expiration of the SAMA letter:

(i) The land value fully improved (with offsite improvements installed).

(ii) The acceptability of the proposed project site, the proposed composition, number and size of the units and the market for the number of proposed units. Where the application is not ac

ceptable as submitted, but can be made acceptable by a change in the number, size or composition of the units, the SAMA letter may establish the specific lesser number of units which would be acceptable and any acceptable alternative plan for the composition and size of units.

(iii) The acceptability of the unit rents proposed. Where rent levels are unacceptable, the SAMA letter may establish specific rents which are acceptable.

(iv) The applicable land use intensity number, from which may be determined the maximum floor area and minimum recreational, parking, living and open space area acceptable to the Commissioner for the proposed project.

(2) Conditional commitment. The issuance of a conditional commitment indicates completion of technical processing involving the estimated cost of the project, the "as is" value of the site, the detailed estimates of operating expenses and taxes, the supportable cost, the financial and credit capacity of the sponsorship, financial requirements and the mortgage amount.

(3) Firm commitment and types of firm commitment. The issuance of a firm commitment evidences the Commissioner's approval of the application for insurance and sets forth the terms and conditions upon which the mortgage will be insured. The firm commitment may provide for the insurance of advances of mortgage money made during construction or may provide for the insurance of the mortgage upon completion of the improvements.

(b) Term of SAMA letter, conditional commitment and firm commitment-(1) SAMA letter. A SAMA letter shall be effective for whatever term is specified in the letter.

(2) Conditional commitment. A conditional commitment shall be effective for whatever term is specified in the text of the commitment.

(3) Firm commitment—(i) Insurance of advances: A firm commitment to insure advances shall be effective for a period of not more than 60 days from the date of issuance.

(ii) Insurance upon completion: A firm commitment to insure upon completion shall be effective for a designated term within which the mortga

gor is required to begin construction, and, if construction is begun as required, the commitment shall be effective for such additional period as the Commissioner estimates is necessary for the completion of construction and for obtaining sustaining occupancy.

(iii) The term of either a SAMA letter, or conditional or firm commitment may be extended in such manner as the Commissioner may prescribe.

(c) Reopening of expired commitments. An expired commitment may be reopened if a request for reopening is received by the Commissioner within 90 days of the expiration of the commitment. The reopening request shall be accompanied by a fee of 50 cents per thousand dollars of the amount of the expired commitment. If the reopening request is not received by the Commissioner within the required 90-day period, a new application, accompanied by an application fee, must be submitted.

[39 FR 12004, Apr. 2, 1974, as amended at 40 FR 22829, May 27, 1975]

ELIGIBLE MORTGAGORS $221.510 Eligible mortgagors.

A mortgage shall be executed by a mortgagor meeting the following qualifications:

(a) Nonprofit, builder-seller, and rehabilitation sales mortgagors. (1) The nonprofit mortgagor shall be 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 in no manner controlled by nor under the direction of persons or firms seeking to derive profit or gain therefrom. Such a mortgagor shall be regulated or supervised under federal or state laws or by political subdivisions of states or agencies thereof, or the Federal Housing Commissioner, as to rents, charges, and methods of operation. The regulation or supervision of the mortgagor shall be in such manner as, in the opinion of the Commissioner, will effectuate the purposes of this subpart.

(2) The builder-seller mortgagor shall be a special type of mortgagor approved by the Commissioner which is organized: