Section 19.04 - Types of Loans and Grants and Their Terms and Conditions(1)Loan Types. Eligible Projects may receive FCF assistance in three areas: acquisition loans, construction/rehabilitation loans, and permanent loans. All FCF loans are structured as Deferred Payment Loans (DPL). Developers shall complete the Application process in accordance with the FCF Guidelines.(2)Loan Terms. All loans under the FCF program shall be made upon the following terms and such other terms as are included in the FCF Guidelines and/or DHCD's loan documents: (a)Loan Proceeds. The proceeds of the loan shall be used solely for the development of the Eligible Project permitted under the applicable FCF Legislation and approved by DHCD.(b)Loan Amount. The amount of any FCF loan granted under the Original FCF Legislation shall not exceed 30% of the Total Development Cost of the Project, and the amount of any FCF loan granted under the FCF 2, FCF 3, FCF 4, FCF 5, or FCF 6 Legislation shall not exceed 50% of the Total Development Cost of the Project; provided, however, that DHCD may establish per-unit and per-Project dollar limits in the FCF Guidelines to which the loan would also be subject.(c)Loan Period. The original term of the loan shall be up to 30 years. At the maturity date, the term may be extended for additional periods of up to ten years each at the discretion of DHCD, with the consent of the owner, if the Project continues to meet the FCF requirements and the requirements for an extension under the FCF Legislation, the FCF Guidelines, and the loan documents for such loan have been satisfied (including, with respect to loans granted under the FCF 2, FCF 3, FCF 4, FCF 5, or FCF 6 Legislation, DHCD's determination, in consultation with EOHHS, that there still exists a need for the Community-based Housing, or with respect to loans granted under the FCF 5 or FCF 6 Legislation, Supportive Housing, and that there is continued funding available for the provision of services to the Project, and the continuing applicability of the Land Use Restriction for the duration of the loan term, as so extended).(d)Interest Rate. The interest rate shall be set by DHCD in consultation with the Treasurer of the Commonwealth. To the extent required under applicable versions of the FCF Legislation, the interest rate shall be equal to the rate anticipated to be paid by the Commonwealth for bonds issued pursuant to the applicable FCF Legislation.(e)Loan Payments. Because all FCF loans are structured as DPLs, payments of principal and interest (if any) will be deferred for the loan period unless: 1. a Project defaults on the terms of the loan; or2. except with respect to loans granted under the FCF 5 Legislation or FCF 6 Legislation, a Project has Gross Cash Receipts for a fiscal year exceeding Gross Cash Expenditures by 105% or more, in which event within 45 days after the end of each Project's fiscal year, the owner shall supply DHCD or the Financial Intermediary with the necessary financial statements needed to determine the amount of payment necessary for the period. All amounts paid pursuant to 760 CMR 19.04(2)(e) shall be applied first to the payment of interest and costs, and then to principal
(f)Land Use Restriction. The Developer/owner of the Project shall execute and record at the appropriate Registry of Deeds or Registry District of the Land Court a Land Use Restriction. The Land Use Restriction shall only be released:1. upon payment in full of all amounts due under the FCF loan (provided, however, that no prepayment shall be allowed under the loan prior to the maturity date as defined in the promissory note for such loan, as such maturity date may be extended from time to time); and if applicable, the written determination by the Secretary of EOHHS, the Secretary of Administration and Finance, and the Commissioner of DDS or DMH, as appropriate, that there is no longer a need to maintain the Project's use as Community-based Housing or Supportive Housing, as applicable, for Individuals with Mental Illness or Individuals with Intellectual Disabilities; or2. upon foreclosure of the subject Project by the holder of a bona fide first-priority mortgage; or, with DHCD's consent, a bona fide mortgage that was senior to the lien of the FCF mortgage loan at the time of loan closing, or to which the FCF mortgage loan has been duly subordinated; and if applicable, a certification by the Secretary of EOHHS as to the inability of EOHHS to locate a purchaser or manager for the Project who can maintain the Eligible Use of the Project. The failure of the Secretary of EOHHS to locate such a purchaser or manager and notify the foreclosing mortgagee of the identity of the buyer or manager, within 60 days prior to such foreclosure sale by the foreclosing mortgagee, shall be deemed to be a certification as described in the preceding sentence. The recording of a sworn affidavit by the foreclosing mortgagee certifying as to the failure to meet this deadline will release the Land Use Restriction, provided that the foreclosure deed is recorded not more than six months after the receipt by the Secretary of EOHHS of the foreclosure notice.(g)Mortgage Lien. The loan shall be secured by a mortgage lien against the Project, which may be junior only to such senior mortgage liens permitted by DHCD.(h)Refinancing of FCF Loans. An FCF loan may be refinanced during the term of the loan only subject to the prior written approval of DHCD.(i)Title Transfer Agreement. A Title Transfer Agreement shall be required for each FCF loan funded under the Original FCF and FCF 2 Legislation, unless one or more of the following shall apply:1. mortgage amortization expenses for the Project are not paid directly or indirectly through reimbursements or rates paid by the Commonwealth on behalf of Individuals with Mental Illness or Individuals with Intellectual Disabilities who are residential clients of DDS or DMH; or2. where income for the Project is from an agreement between the owner of the Project and DCAM, DDS or DMH, and the agreement is:a. for a term not to exceed five years;b. consistent with law governing contracting for Community-based Housing services; andc. consistent with the provisions of the FCF Legislation. A Land Use Restriction shall be duly recorded and/or registered, as described in 760 CMR 19.04(2)(f), regardless of whether or not the Property is subject to a Title Transfer Agreement, or qualifies for one of the foregoing exceptions. When DCAM exercises the Commonwealth's right to take title to a Project under a Title Transfer Agreement and the title is transferred, the Undersecretary of DHCD may determine that the FCF loan has been satisfied in full, provided that the loan is not in default.
(j)Facilities Consolidation Plan. All loans must be in accordance with the Facilities Consolidation Plan.(k)EOAF Approval. The Secretary of the Executive Office of Administration and Finance must approve, in advance, all expenditures under the FCF program.(3)Use of FCF Loan Proceeds for Refinancing Outstanding Loans. FCF loans may be made to refinance an outstanding mortgage loan to an Eligible Project if: (a) the Eligible Project was in existence on or before May 21, 1993, and the Eligible Project was purchased or developed in accordance with the Report of the Special Commission for former residents of: 1. the Belchertown State School, or2. the Norfolk Street Project in Cambridge, Massachusetts; or(b) the Undersecretary of DHCD determines that the making of an FCF loan to the Eligible Project will allow for a substantial change in the residential population, the physical structure, or the service program such that the completed Project can be considered a new Project.(4)Lease-purchase Agreement. In the case of Projects funded under the Original FCF and FCF 2 Legislation, an FCF loan may be made to an Eligible Project for which DCAM has agreed to enter into a Lease-purchase Agreement with the provider of Community-based Housing for clients of DDS and DMH. The terms of the Lease-purchase Agreement shall be as prescribed by DCAM, consistent with the FCF Legislation and the provisions of 760 CMR 19.00. Requests for assistance under the FCF program shall be subject to the underwriting and selection requirements of DHCD. Of those FCF loans involving a Lease-purchase Agreement, 65% of all Projects approved for clients of DDS must be for new construction, and 35% must be for the acquisition and rehabilitation of existing structures. In addition, 20% of all Eligible Projects approved for clients of DMH must be for new construction, and 80% must be for the acquisition and rehabilitation of existing structures. In no event may the needs of the clients of DDS or DMH be compromised by these selection criteria, nor may the cost of a successful Application be uncompetitive with other proposals under consideration.(5)Grants. In addition to Deferred Payment Loans, in the case of funding under the FCF 4, FCF 5, or FCF 6 Legislation, Eligible Projects may also receive FCF assistance in the form of grants to provide Independent Integrated Housing for Low Income Households or Individuals served by DMH whose adjusted income is less than or equal to 15% of Area Median Income or write down building costs of Independent Integrated Housing or other Community-based Housing for Low or Income Households or Individuals served by DMH whose adjusted income is less than or equal to 15% of Area Median Income. Developers shall complete the Application process in accordance with the FCF Guidelines. 760 CMR 19.04(2)(a), (b), (f), (j) and (k) shall apply to all such assistance.(6)Repayment. As a condition of each FCF 3, FCF 4, FCF 5, or FCF 6 loan, or FCF 4, FCF 5, or FCF 6 Grant for an Eligible Project, the agreement for use of the affected property shall provide for repayment to the commonwealth at the time of disposition of the property in an amount equal to the commonwealth's proportional contribution from the Facilities Consolidation Fund to the cost of the development through payments made by the state agency making the contract.(7)Purchase Option and First Refusal Option. As a condition of each FCF 3, FCF 4, FCF 5 and FCF 6 loan, and each FCF 4, FCF 5, and FCF 6 grant, DHCD shall be granted a purchase option and a first refusal option to purchase the Project, in accordance with the following terms: (a)Purchase Option. Upon the expiration of the term of the affordability restrictions imposed in the Land Use Restriction for a Project funded under the FCF 3 or FCF 4 Legislation, DHCD shall have an option to purchase the Project from the Developer/owner at a price equal to the then-current appraised value of the Project less the total outstanding balance of all principal, interest and any other charges payable under the FCF Loan. Upon the expiration of the term of the affordability restrictions imposed in the Land Use Restriction for FCF Units developed with funds under the FCF 5 or FCF 6 Legislation, DHCD shall have an option to purchase the FCF Units from the Developer/owner at a price equal to the then-current appraised value of the FCF Units less the total outstanding balance of all principal, interest and any other charges attributable and payable under the FCF Loan. The appraised value of the Project shall be determined in the manner described in the FCF Legislation and in accordance with the FCF Guidelines and DHCD policies, as applicable. DHCD may exercise the Purchase Option by sending notice to the Developer/owner of its intention to exercise the Purchase Option by certified mail and recording/filing a copy of such notice in the Registry of Deeds or Registry District of the Land Court within 120 days after the expiration of the term of the affordability restrictions imposed by the Land Use Restriction. If DHCD fails to exercise the Purchase Option by such option exercise deadline, DHCD shall automatically be deemed to have waived the Purchase Option, and such Purchase Option shall automatically terminate.(b)First Refusal Option. If at any time the Developer/owner of a Project funded under the FCF 3 or FCF 4 Legislation wishes to sell, transfer or otherwise dispose of (transfer) the Project, or any part thereof, prior to DHCD's exercise of the Purchase Option, and receives a bona fide third-party offer for the same, the Developer/owner shall send a notice to DHCD by regular and certified mail, return receipt requested, setting forth the Developer/owner's intention to transfer all or part of the Project and the terms of any bona fide offer by a third-party to purchase the Project (or the applicable portion(s) thereof). If at any time the Developer/owner of a Project funded under the FCF 5 or FCF 6 Legislation wishes to sell, transfer or otherwise dispose of (transfer) FCF Units, prior to DHCD's exercise of the Purchase Option, and receives a bona fide third-party offer for the same, the Developer/owner shall send a notice to DHCD by regular and certified mail, return receipt requested, setting forth the Developer/owner's intention to transfer all or some of the FCF Units and the terms of any bona fide offer by a third party to purchase the FCF Units. DHCD shall have the right to purchase the Project (or the portion(s) thereof to which such offer relates) at the same price and on the same terms as those contained in such offer. DHCD may exercise the First Refusal Option by sending notice to the Developer/owner of its intention to exercise the First Refusal Option by certified mail and recording/filing a copy of such notice in the Registry of Deeds or Registry District of the Land Court within 120 days after its receipt of the Developer/owner's notice. If DHCD fails to exercise the First Refusal Option by such option exercise deadline, DHCD shall automatically be deemed to have waived the First Refusal Option, and such First Refusal Option shall automatically terminate, (but only with respect to the portion(s) of the property to which the third-party offer relates); however, if the sale contemplated in the third-party offer is not effected on the same terms and conditions as those contained in the offer, as described in the Developer/owner's notice, within six months after DHCD's receipt of the Developer/owner's notice, or if any of the material terms of such third-party offer shall be revised, DHCD's First Refusal Option shall be revived. If a Developer/owner's notice relates to a proposed transfer of only a portion of the Project for Projects funded under the FCF 3 or FCF 4 Legislation, or only some but not all of the FCF Units, for Projects funded under the FCF 5or FCF 6 Legislation, the First Refusal Option shall remain in effect with respect to all remaining portions of the Project or FCF Units, as applicable.(c)DHCD May Assign the Purchase Option or the First Refusal Option to a Qualified Developer. A Qualified Developer is a Developer who:1. is a Nonprofit Corporation;2. has completed an Application with respect to its proposed purchase of the Project, in the format specified by DHCD (the Purchase Application) (DHCD will issue a "Notice of Project Availability" that will include instructions for completing a Purchase Application for this purpose);3. has been selected to purchase the Project based on DHCD's review and underwriting of the Purchase Application;4. agrees that upon purchasing the Project, it will execute a Land Use Restriction providing for the Project to remain a Project for a term of at least 40 years; and5. provides any additional due diligence materials not part of the Purchase Application that may be required by DHCD.(d) If DHCD exercises the Purchase Option, DHCD or its assignee shall have 120 days after the expiration of the option exercise deadline specified in 760 CMR 19.04(7)(a) (and not less than 240 days after the expiration of the term of the affordability restrictions imposed by the Land Use Restriction) to purchase the Project. If DHCD exercises the First Refusal Option, DHCD or its assignee shall have 120 days after the expiration of the option exercise deadline specified in 760 CMR 19.04(7)(b) (and not less than 240 days after DHCD's receipt of the Developer/owner's notice) to purchase the Project. Promptly upon request by DHCD or its assignee, the owner will provide DHCD or its assignee with such due diligence material and such opportunity to inspect the Project as would be reasonably required by a third-party purchaser. The date for the acquisition closing under the Purchase Option or the First Refusal Option, as applicable, may be extended by agreement of the parties and the agreed-upon extension shall be recorded/filed in the Registry of Deeds or Registry District of the Land Court. DHCD or its assignee may extend the date for the acquisition closing to a reasonable date, if it determines that additional time is needed due to delays in closing preparations caused by the Developer/owner. After delivering notice of its intent to exercise the Purchase Option or First Refusal Option, DHCD may at any time terminate its exercise of the Purchase Option or the Right of First Refusal, in its discretion, without incurring any damages or other liability, if it determines it is not in the best interests of DHCD to effect the purchase, (but such termination right shall apply to DHCD only, and not to any assignee).
(8)Application Process. DHCD shall specify application procedures for FCF loans and grants in the FCF Guidelines. DHCD reserves the right to hold competitive funding rounds for FCF loans and grants.Amended by Mass Register Issue 1275, eff. 12/5/2014.Amended by Mass Register Issue 1407, eff. 12/27/2019.