[Code of Federal Regulations]

[Title 24, Volume 4]

[Revised as of April 1, 2006]

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.



[[Page 201]]



    (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:

    (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;



[[Page 202]]



    (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.

    (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.