[Code of Federal Regulations]

[Title 7, Volume 15]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 7CFR3560.68]



[Page 494]

 

                          TITLE 7--AGRICULTURE

 

     CHAPTER XXXV--RURAL HOUSING SERVICE, DEPARTMENT OF AGRICULTURE

 

PART 3560_DIRECT MULTI-FAMILY HOUSING LOANS AND GRANTS--Table of Contents

 

               Subpart B_Direct Loan and Grant Origination

 

Sec. 3560.68  Permitted return on investment (ROI).



    (a) Permitted return. Borrowers operating on a limited profit basis 

will be permitted a return not to exceed 8 percent of their required 

initial investment determined at the time of loan approval in accordance 

with Sec. 3560.63(c).

    (b) Calculation of permitted return. The permitted return will be 

based on the borrower's contributions from their own resources, which, 

when added to the Agency loan amount and all sources of funding or 

financing, do not exceed the security value of the MFH project as 

specified in Sec. 3560.63(a).

    (1) Proceeds received by the borrower from the syndication of low-

income housing tax credit and contributed to the MFH project may be 

considered funds from the borrower's own resources for the portion of 

the proceeds which exceeds:

    (i) The allowable developer's fee determined by the state agency 

administering the low-income housing tax credit, and

    (ii) The borrower's expected contribution to the transaction, as 

determined by the state agency administering the low-income housing tax 

credit.

    (2) A building site contributed by the borrower will be appraised by 

the Agency to determine its market value. A return may not be allowed on 

the amount above the equity contribution required by Sec. 3560.63(c) if 

the market value as determined by the Agency, when added to the loan and 

grant amounts from all sources, exceeds the security value of the MFH 

project as specified in Sec. 3560.63(a).

    (c) Return on additional investment. The initial investment may 

exceed the equity contribution required by Sec. 3560.63(c) and a return 

allowed on the investment if the additional return does not increase 

basic rents and rental assistance costs above what basic rents and 

rental assistance costs would have been with the Agency financing 95 or 

97 percent of the total development cost.

    (d) Compensation to nonprofit organizations. Although nonprofit 

organizations are not eligible to take a return on investment, with 

prior Agency approval, cooperatives and nonprofit organizations may use 

housing project funds to pay asset management expenses directly 

attributable to ownership responsibilities, as described in Sec. 

3560.303(b)(1)(ii).