[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR891.525]

[Page 200-202]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
  CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL 
 
PART 891_SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH DISABILITIES
--Table of Contents
 
      Subpart E_Loans for Housing for the Elderly and Persons with 
                              Disabilities
 
Sec. 891.525  Amount and terms of financing.

    (a) The amount of financing approved shall be the amount stated in 
the Notice of Section 202 Fund Reservation, including any increase 
approved by the field office prior to the final closing of a loan; 
provided, however, that the amount of financing provided shall not 
exceed the lesser of:
    (1) The dollar amounts stated in paragraphs (b) through (f) of this 
section; or
    (2) The total development cost of the project as determined by the 
field office.
    (b) For such part of the property or project attributable to 
dwelling use (excluding exterior land improvements, as defined by the 
Assistant Secretary) the maximum loan amount, depending on the number of 
bedrooms, may not exceed:
    (1) $28,032 per family unit without a bedroom.
    (2) $32,321 per family unit with one bedroom.
    (3) $38,979 per family unit with two bedrooms.
    (c) In order to compensate for the higher costs incident to 
construction of elevator type structures of sound standards of 
construction and design, the field office may increase the dollar 
limitations per family unit, as provided in paragraph (b) of this 
section, to not to exceed:
    (1) $29,500 per family unit without a bedroom.
    (2) $33,816 per family unit with one bedroom.
    (3) $41,120 per family unit with two bedrooms.
    (d) Reduced loan amount--leaseholds. In the event the loan is 
secured by a leasehold estate rather than a fee simple estate, the 
allowable cost of the property upon which the loan amount is based shall 
be reduced by the value of the leased fee.
    (e) Adjusted loan amount--rehabilitation projects. A loan amount 
that involves a project to be rehabilitated shall be subject to the 
following additional limitations:
    (1) Property held in fee. If the Borrower is the fee simple owner of 
the project not encumbered by a mortgage, the maximum loan amount shall 
not exceed 100 percent of the cost of the proposed rehabilitation.
    (2) Property subject to existing mortgage. If the Borrower owns the 
project subject to an outstanding indebtedness, which is to be 
refinanced with part of the Section 202 loan, the maximum loan amount 
shall not exceed the cost of rehabilitation plus such portion of the 
outstanding indebtedness as does not exceed the fair market value of 
such land and improvements prior to the rehabilitation, as determined by 
the field office.
    (3) Property to be acquired. If the project is to be acquired by the 
Borrower and the purchase price is to be financed with a part of the 
Section 202 loan, the maximum loan amount shall not exceed the cost of 
the rehabilitation plus such portion of the purchase price as does not 
exceed the fair market value of such land and improvements prior to the 
rehabilitation, as determined by the field office.
    (f) Increased Mortgage Limits--High Cost Areas. (1)(i) The Assistant 
Secretary may increase the dollar amount limitations in paragraphs (b) 
and (c) of this section:

[[Page 201]]

    (A) By not to exceed 110 percent in any geographical area in which 
the Assistant Secretary finds that cost levels so require; and
    (B) By not to exceed 140 percent where the Assistant Secretary 
determines it necessary on a project-by-project basis.
    (ii) In no case, however, may any such increase exceed 90 percent, 
where the Assistant Secretary determines that there is involved a 
mortgage purchased or to be purchased by the Government National 
Mortgage Association (GNMA) in implementing its Special Assistance 
Functions under section 305 of the National Housing Act (as section 305 
existed immediately before its repeal on November 30, 1983).
    (2) If the Assistant Secretary finds that because of high costs in 
Alaska, Guam, or Hawaii it is not feasible to construct dwellings 
without the sacrifice of sound standards of construction, design, and 
livability within the limitations of maximum loan amounts provided in 
this section, the principal amount of mortgages may be increased by such 
amounts as may be necessary to compensate for such costs, but not to 
exceed in any event the maximum, including high cost area increases, if 
any, otherwise applicable by more than one-half thereof.
    (g) Loan interest rate. Loans shall bear interest at a rate 
determined by HUD in accordance with this section.
    (1) Annual interest rate. Except as provided under paragraph (g)(2), 
loans shall bear interest at the rate in effect at the time the loan is 
made. The loan interest rate shall not exceed:
    (i) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 3-month period immediately 
preceding the fiscal year in which the loan is made (adjusted to the 
nearest one-eighth of one percent), plus an allowance to cover 
administrative costs and probable losses under the program; and
    (ii) Any applicable statutory ceiling on the loan interest rate 
including the allowance to cover administrative costs and probable 
losses.
    (2) Optional interest rate. The Borrower may elect an optional loan 
interest rate. To elect the optional rate, the Borrower must request 
that HUD determine the loan interest rate at the time of the Borrower's 
request for conditional or firm commitment for direct loan financing.
    (i) If the Borrower elects the optional loan interest rate, the loan 
interest rate shall not exceed:
    (A) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 3-month period immediately 
preceding the fiscal year in which the request for commitment is 
submitted (adjusted to the nearest one-eighth of one percent), plus an 
allowance to cover administrative costs and probable losses under the 
program;
    (B) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 1-month period immediately 
preceding the month in which the request for commitment is submitted 
(adjusted to the nearest one-eighth of one percent), plus an allowance 
to cover the administrative costs and probable losses under the program; 
and (C) Any applicable statutory ceiling on the loan interest rate 
including an allowance to cover administrative costs and probable losses 
under the program.
    (ii) The date of submission of a request for conditional or firm 
commitment is the date that the Borrower submits the complete and 
acceptable request to HUD. The date of the submission of a request for 
commitment will not be affected by any subsequent resubmission of the 
request by the Borrower or by any reprocessing of the request by HUD.
    (iii) The Borrower may withdraw its election of the optional 
interest rate at any time before initial loan closing. If the Borrower 
elected the optional interest rate with its request for conditional 
commitment and withdraws its election, the loan will bear interest at 
the rate determined under paragraph (g)(1) of this section, unless the 
Borrower elects an optional interest rate with its request for firm 
commitment. If the Borrower withdraws its election after the date of 
submission of its request for firm commitment, the loan will bear 
interest at the rate determined under paragraph (g)(1) of this section.

[[Page 202]]

    (iv) If initial loan closing has not occurred within 18 months after 
the Notice of Section 202 Fund Reservation is issued, the Borrower's 
election of the optional rate will be cancelled and the loan will bear 
interest at the rate determined under paragraph (g)(1) of this section.
    (3) Allowance for administrative costs and probable losses. For the 
purpose of computing the loan interest rate under paragraphs (g) (1) and 
(2) of this section, the allowance to cover administrative costs and 
probable losses under the program is one-fourth of one percent (.25%) 
per annum for both the construction and permanent loan periods.
    (h) Announcement of interest rates. (1) HUD will annually announce 
the loan interest rate determination under paragraph (g)(1) of this 
section by publishing notice of the rate in the Federal Register. The 
Federal Register notice will include a statement explaining the basis 
for the interest rate determination.
    (2) Upon the Borrower's request, HUD will provide available current 
information concerning the determination of the interest rate under 
paragraph (g)(2) of this section.
    (i) The loan shall be secured by a first mortgage on real estate in 
fee simple or long term leasehold. The mortgage shall be repayable 
during a term not to exceed 40 years and shall be subject to such terms 
and conditions as shall be determined by the Assistant Secretary.
    (j) In order to assure HUD of the Borrower's continued commitment to 
the development, management, and operation of the project, a minimum 
capital investment is required of Section 202 Borrowers of one-half of 
one percent (0.5%) of the mortgage amount committed to be disbursed, not 
to exceed the amount of $10,000. Section 106(b) loans made pursuant to 
section 106 of the Housing Act of 1968 may not be utilized to meet the 
minimum capital investment requirement. Such minimum capital investment 
shall be placed in escrow at the initial closing of the Section 202 loan 
and shall be held by HUD or other escrow agent acceptable to the field 
office for not less than a 3-year period from the date of initial 
occupancy and may be used for operating expenses or deficits as may be 
directed by the field office. Any unexpended balance remaining in the 
minimum capital investment account at the end of the escrow period shall 
be returned to the Borrower.