§ 200.168 Other requirements for a Property Improvement loan.

The note or other evidence of the obligation taken by the insured must be valid and enforceable against the borrower and must be payable in installments. The borrower must have either a fee title, life estate, a purchaser's interest in a land contract, or a lease having a fixed term expiring not less than six calendar months after the maturity of the loan. The fee title or life estate may be subject to a mortgage or other lien. The regulations provide maximum maturity and maximum amounts for loans of various classes and sets forth maximum financing charges and certain items which are considered ineligible for loans.

§ 200.169 Direct borrower loans.

The Property Improvement loan may be initiated by a borrower who gives his credit application directly to a lender. The proceeds of a loan thus made are delivered directly to such borrower without the intervention or participation of a dealer or other intermediary.

§ 200.170 Loan through a dealer.

Also eligible as Property Improvement loans are dealer-originated cases where the dealer or contractor first obtains a credit application for the loan from the borrower and, after completing the work, has a note and completion certificate signed by the borrower. The dealer presents these documents to the lender and receives the proceeds of the loan, after the lender determines that the transaction is eligible for insurance. The Federal Housing Administration does not approve dealers for participation in the Property Improvement loan program. This is a responsibility of the lender which by investigation must determine that the dealer is reliable, financially responsible and qualified to perform satisfactorily the work to be financed and is equipped to extend proper service to the customer. The lender also makes the initial determination that the transaction is or is not insurable.

§ 200.172 Disbursement of proceeds to dealer.

In connection with all loans not made directly to the borrower, the lender must have investigated and approved the dealer and have in its possession, properly signed and dated:

(a) Completion certificate signed by borrower indicating work or materials have been satisfactorily completed or delivered by dealer.

(b) Copy of dealer's contract or sales agreement signed by borrower and dealer describing the type and extent of improvements to be made and the material to be used.

(c) Borrower's authorization certificate, if note is payable to lender.

§ 200.173 Disbursement of proceeds to borrower.

The lender may disburse the proceeds of the note directly to the borrower by cash, by check or money order drawn solely in favor of the borrower, or by crediting the borrower's account. In such transactions, the dealer does not participate in the disbursement in any manner and the borrower, has complete control of the funds at all times.

REPORT AND RESERVE

§ 200.174 Report of loans.

Within 31 days after the loan is made or the note is purchased from the dealer the lender submits to the Federal Housing Administration individual reports setting forth on a prescribed form the details of each transaction. This information, including the name of the borrower, the location of the property, the amount of loan ad

vanced, the finance charges, the date of the note, and the terms of payment is the basis for computing the insurance premium which will be due and payable by the lender and is the official record of the transaction with the Administration. This report results in the automatic insurance of the loan as soon as the required insurance premium is paid.

§ 200.175 Insurance charge.

The regulations provide for an annual insurance charge based on a fractional percentage of the net proceeds of each loan reported for insurance. The lender is billed once a month on all loans reported for insurance during the previous period the receipt of which have been acknowledged by the Commissioner.

§ 200.176 Insurance reserves.

For each lender holding a contract of insurance, there is established by the Federal Housing Administration a general insurance reserve the amount of which is based upon the number of loans the institution reports for insurance during certain periods. For each eligible loan reported by a lender and accepted for insurance, 10 percent of the net proceeds of the loan is credited to the lenders' insurance reserve. The cumulative credits to the insurance reserve for each lender thus equals 10 percent of the net amount advanced by it on all eligible loans and affords insurance against losses on its overall lending operation.

CLAIMS FOR REIMBURSEMENT FOR Loss

the provisions of the National Housing Act and the regulations.

§ 200.178 Amount of claim.

(a) After it has been determined that the loan and the lender's claim for loss are eligible, the lender is reimbursed by a United States Treasury check for 90 percent of the loss sustained on the defaulted obligation. In addition, the lender may be reimbursed as provided by the regulations for a certain proportion of attorney's fees and uncollected court costs arising out of efforts to collect the note.

(b) If the claim is disapproved the lender is notified of the basis of such disapproval, with return to it of the insurance premium and all related papers and documents. Appeal for reconsideration of disapproval may be had by addressing a written request to Headquarters Office in Washington,

D.C.

§ 200.179

Establishment of account.

The moneys derived from premium charges and all moneys collected as fees of any kind in connection with insurance of financial institutions, and all moneys derived from the sale, collection, disposition, or compromise of any debt, contract, claim, property or security assigned or held by the Commissioner are deposited in an account in the Treasury of the United States, which account is available for defraying the operating expenses of the Federal Housing Administration in connection with insurance of financial institutions and any amounts in such account which are not needed for such purpose are available for the payment of claims in connection with the insurance granted under the statute.

Subpart G-Official Records[Reserved]

Subpart H-Participation and Compliance Requirements

AUTHORITY: Sec. 7(d), Dept. of HUD Act, 79 Stat. 670, (42 U.S.C. 3535(d)); and the National Housing Act, 48 Stat. 1246 as amended (42 U.S.C. 1701, et seq.).

SOURCE: 45 FR 54199, Aug. 14, 1980, unless otherwise noted.

PREVIOUS PARTICIPATION REVIEW AND

CLEARANCE PROCEDURE

§ 200.210 Policy.

It is the Department's policy that participants in its housing programs be responsible individuals and organizations who will honor their legal, financial and contractual obligations. Accordingly, uniform standards are established in this part for approval, disapproval, or withholding of action on principals in projects based upon their past performance as well as other aspects of their records.

§ 200.213 Applicability of procedure.

The Previous Participation Review and Clearance procedure set forth in this part is administered by the Assistant Secretary for Housing-Federal Housing Commissioner and is applicable to all principals and to their:

(a) Projects already financed or which are proposed to be financed with a mortgage insured under the National Housing Act and projects subject to a mortgage held by the Secretary under that Act or projects acquired by the Secretary under that Act (FHA projects);

(b) Projects financed or to be financed with direct loans or projects acquired by the Secretary pursuant to Section 202 of the Housing Act of 1959 (Housing for the Elderly and Handicapped);

(c) Projects in which 20% or more of the units now receive or will receive a subsidy in the form of:

(1) Interest reduction payments under Section 236 of the National Housing Act;

(2) Rent Supplement payments under Section 101 of the Housing and Urban Development Act of 1965,

(3) Housing assistance payments under Section 8 of the United States Housing Act of 1937 (with the exception of the programs described in 24 CFR Part 882, which are the Section 8 Existing Housing and Moderate Rehabilitation programs);

(d) Public Housing projects financed or to be financed or modernized under the United States Housing Act of 1937; and

(e) Sales of projects by the Secretary.

§ 200.215 Definitions.

(a)Affiliate. Any person or business concern that directly or indirectly controls policy of a principal or has the power to do so is an affiliate. Persons and business concerns controlled by the same third party are also affiliates.

(b) Felony. A felony is any offense punishable by imprisonment for a term exceeding one year, but does not include any offense classified as a misdemeanor under the laws of a State and punishable by a term of imprisonment of two years or less.

(c) Packager or Consultant. A person or firm that furnishes or proposes to furnish advisory services in connection with the financing or construction of a project and the related HUD requirements. Such services may include, but are not limited to, the selection and negotiation of contracts with a general contractor, architect, attorney or management agent.

(d) Participation Control Officer. (See § 200.224)

(e) Principal. (1) An individual, joint venture, partnership, corporation, trust, nonprofit association or any other public or private entity proposing to participate, or participating, in a project as sponsor, owner, prime contractor, Turnkey Developer, management agent, packager, or consultant and architects and attorneys who have any interest in the project other than an arms-length fee arrangement for professional services.

(2) The term principal also includes (i) any affiliates of a principal; (ii) if the principal is a partnership, all general partners, and each limited partner having a 25 percent or more interest in the partnership; (iii) if the principal is a public or private corporation or governmental entity; the President, VicePresident, Secretary and Treasurer and any other executive officers who are directly responsible to the Board of Directors, or the equivalent thereof; all the directors; and each stockholder having a 10 percent or more interest. (3) Specifically excepted from this definition of a principal are: (i) Parties whose sole interest is that of purchaser or owner of less than five individual unit(s) in the same condominium or

cooperative development; (ii) parties whose sole interest is that of a tenant; and (iii) Public Housing Agencies.

(f) Project. A project is: (1) Five or more residential units covered by a single mortgage, loan or contract of assistance; (2) a hospital, group practice facility or nursing home; (3) cooperative and condominium developments; and (4) a subdivision being developed and financed with a mortgage under Title X of the National Housing Act. (g) Review Committee. §§ 200.224 and 200.93)

(See

§ 200.217 Filing of previous participation certificate on prescribed form.

(a) A previous participation certificate on a form prescribed by the Assistant Secretary of Housing-Federal Housing Commissioner shall be completed by every principal in each of the following transactions and shall be filed with HUD at the times specified herein:

(1) Projects to be financed with mortgages insured under the National Housing Act (FHA)-With an Application for a Site Appraisal and Market Analysis Letter, Feasibility Letter, Conditional Commitment for Mortgage Insurance, or Firm Commitment for Mortgage Insurance, whichever Application is first filed;

(2) Projects to be financed pursuant to Section 202 of the Housing Act of 1959 (Elderly and Handicapped) With the Application for a Fund Reservation;

(3) Public housing projects to be financed pursuant to the United States Housing Act of 1937;

(i) The developer and prime contractor-With the Turnkey proposal or Conventional Construction Bid;

(ii) All other Principals-Prior to selection;

(4) Projects in which 20% or more of the units are to receive a subsidy as described under § 200.213(c)-With the first request for a reservation of funds for assistance payments;

(5) Purchase of a project subject to a mortgage insured or held by the Secretary-With the Application for Transfer of Physical Assets;

(6) Purchase of a Secretary-owned project-With the Bid to Purchase;

(7) Proposed substitution or addition of a principal, such as management agents or partners or proposed participation in a different capacity from that previously approved for the same project-Prior to the date that the proposed action or transfer is to become final; and

(8) Proposed acquisition by existing limited partner or stockholder of additional interest resulting in a total interest of at least 25 percent or 10 percent, respectively-Prior to the proposed acquisition.

(b) Certificates are not required for interests acquired by inheritance or by Court decree.

§ 200.218 Who must certify and sign.

All principals must certify and sign the certificate personally as to their individual record and are responsible for its timely filing with the HUD Area Office in whose jurisdiction the project or proposal is located except:

(a) When a corporation is a principal all its officers, directors and principal stockholders need not individually sign, certify nor file the certificate when they all have the same record. When their previous participation records are the same the officer authorized to sign for the corporation will list on the certificate the full names for all such principals connected with the corporation who do not elect to sign. Those principals who have a separate participation record outside that of their corporation must certify, sign and file. The objective is full disclo

sure.

(b) The Participation Control Officer is authorized to waive the requirement for signatures for good cause in cases where he finds that adequate provision has been made for full disclosure, and the signature is thereafter provided.

§ 200.219 Content of certification.

(a) Each principal who executes the certificate certifies that:

(1) The certificate contains a listing of every assisted or insured project of HUD, Farmers Home Administration and State or local government housing finance agencies in which the principal has been or is now a principal;

(2) For a period beginning 10 years prior to the date of the certificate under review and except as shown on the certificate; (i) no mortgage on a project listed has ever been in default nor has mortgage relief been given; (ii) there have been no defaults or noncompliances under any conventional construction contract or Turnkey contract of sale in connection with a public housing project; (iii) there are no known unresolved findings raised as a result of HUD audits, management reviews or other governmental investigations; (iv) there has been no suspension or termination of payments under any HUD assistance contract attributable to the fault or negligence of principal; (v) the principal has not been convicted of a felony (See definitions § 200.215(b)) and is not presently the subject of a complaint or indictment charging a felony; (vi) the principal has not been suspended, debarred, or otherwise stricted by any Department or Agency of the Federal Government or of a State Government from doing business with such Department or Agency; (vii) the principal has not defaulted on an obligation covered by a surety or performance bond, and has not been the subject of a Claim under an employee fidelity bond;

re

(3) The principal has listed all parties who are known to him to be principals under § 200.215(e)(2);

(4) The principal is not a HUD employee or a member of an employee's immediate household as defined by HUD's Standards of Conduct in 24 CFR 0.735-205(c);

(5) Except as shown on the certificate under review, the principal is not a participant (i) in a HUD assisted or insured project on which construction, as of the date of said certificate, has stopped for a period in excess of twenty days or; (ii) in an insured project on which construction, as of the date of said certificate, has been substantially completed for more than 90 days and documents for closing, including cost certification, have not been filed with HUD;

(b) The project owner shall certify that he has also listed all other parties who are principals under

§ 200.215(e)(1);

(c) If a principal cannot certify as to any items under paragraphs (a) and (b) of this section, such items may be deleted from the face of the certificate and a full explanation of the reason for the deletion, signed by the principal, may be attached to the certificate for HUD's review, evaluation and determination;

(d) Each principal who executes the certificate must also certify that said principal is not a Member of Congress or a Resident Commissioner.

§ 200.222 Certification of previous record on basis of a master list.

A principal may avoid repetitious listings by providing HUD with a complete master list, acceptable to the Participation Control Officer, of all projects in which the principal has participated. Where such a list has been provided, the principal may submit a certificate which refers to the master list and which supplements it by the addition of all information required under § 200.219 with respect to occurrences since the date of the master list (including subsequent occurrences with respect to the projects on the master list as well as subsequent projects). Partners, corporate officers, directors and stockholders may likewise refer to and thereby incorporate their firm's master list when they certify.

§ 200.224 Multifamily

Participation Review Committee and Participation Control Officer.

The membership and authority of the Multifamily Participation Review Committee (hereinafter referred to as the Review Committee) are set forth in § 200.93. A majority of the members of the Review Committee shall constitute a quorum. The Executive Secretary of the Review Committee shall be the Participation Control Officer under this part and shall serve under the administrative supervision of the Director of the Participation and Compliance Division, who acts as Participation Control Officer in his absence.