80-002 Code Vt. R. 80-140-002-X

Current through August, 2024

Section 80 140 002 - LOANS-MULTI FAMILY HOUSING SPONSORS

CHAPTER ONE SCOPE AND DEFINITIONS

Section 1 Scope

These rules are made and published pursuant to section 621(12) and 624(b) of the Vermont Housing Finance Agency Act, being No. 260 of 1973 (adjourned session), as amended, (the "Act") and relate to the providing of mortgage loans to qualified housing sponsors for the acquisition, construction and rehabilitation of multi-family developments primarily for occupancy by persons and families of low and moderate income.

Section 2 Definitions

All terms used herein and not otherwise defined shall have the same meanings as they have in the Act, as amended from time to time; provided, that no change in meaning resulting from an amendment to the Act shall be construed to affect adversely any action taken in reliance on the Act as it read prior to such amendment. Unless the context requires a different meaning, the following definitions shall apply.

1. "Agency" means the Vermont housing finance agency created by the Act.

2. "Bonds" means bonds, notes, or other obligations evidencing financial indebtedness of the Agency and issued pursuant to the Act.

3. "Code" means the federal Internal Revenue Code of 1986, as amended, including the regulations adopted thereunder from time to time, or, if applicable, the Internal Revenue Code of 1954, as amended, including the regulations adopted thereunder.

4. "Construction" means the creation or addition of new residential housing of the conversion of existing structures to residential housing;

5. "Land value" means the appraised value of the land as determined by an appraiser approved by the Agency; if purchased less than two years prior to the date of application the purchase price of the land or the appraised value, whichever is lower;

6. "Limited profit" refers to the basis of organization of a housing sponsor. A housing sponsor is organized on a limited profit basis if it organizational document, whether directly or by reference to a controlling agreement, imposes significant limitations on rental charges, builder's and developer's fees, the right of disposition of the sponsor's property and franchise, or other sources of profit as the Agency may determine on a case by case basis.

7. "Mortgage loan" means an interest-bearing obligation secured by a mortgage or note or bond within the meaning of the Act;

8. "Multi-Family development" means a residential housing development, including, without limitation, mobile home parks, containing dwelling units or mobile home lots intended for occupancy pursuant to leasehold estate or cooperative ownership by persons and families of low and moderate income as authorized by the Act, as from time to time amended.

9. "Persons and families of low and moderate income" includes persons and families so defined from time to time by the Agency for purposes of its multi-family programs, having due regard for changing economic conditions and the criteria set forth in 10 V.S.A. § 601(11).

10. "Regulatory agreement" means an agreement by and between the Agency and the mortgagor, to be executed at the closing of the mortgage loan, setting forth financial and management policies to be followed by the mortgagor in the operation of a multi-family development financed under the Act;

Section 3 Waivers

To the extent not required by the Act, the provisions of these rules may be waived by the Commissioners upon their determination that the application of such rules, in specific cases may result in undue hardship.

Section 4 Separability

If any word, phrase, sentence, paragraph, section or part of these rules is finally adjudge by a court of competent jurisdiction to be invalid, such judgement shall not affect, impair, or invalidate the remainder of these rules.

CHAPTER TWO QUALIFICATIONS OF HOUSING SPONSORS

Section 1 Eligible Housing Sponsors

No mortgage loan for a Multi-family development shall be made or disbursed until such time as the housing sponsor is an eligible sponsor. An eligible sponsor is a housing sponsor within the meaning of the Act that has obtained the Agency's approval of its organizational documents, including proposed or existing articles of incorporation, proposed or existing partnership agreement, joint venture agreement, trust agreement or other document of basic organization, and proposed amendments thereto, together with such other documents as the Agency may determine, in specific cases, are necessary in order to determine eligibility. The housing sponsor must have the ability and intention to maintain and operate the housing for the purpose for which the loan is made.

Section 2 Ownership or Control of Land

The housing sponsor must own the housing and related land, or hold an option to buy, or hold a fully marketable long-term lease.

CHAPTER THREE QUALIFICATIONS OF OCCUPANTS

Section 1 Occupancy

Initial occupancy in seventy-five per cent of the housing units in any multi-family development financed by the Agency shall be limits to persons and families of low and moderate income. The Agency may waive the requirements of this paragraph, provided that more than half of such units shall remain reserved for initial occupancy by persons and families of low and moderate income.

Where housing is proposed to be financed with the proceeds of bonds the interest on which is excludable from gross income under provisions of the Code, the Agency's contract with the housing sponsor shall include such additional restrictions on occupancy as the Agency deems necessary or desirable to assure compliance with the conditions of such exclusion.

CHAPTER FOUR FINANCING TERMS

Section 1 Amount and Terms of Mortgage Loans

The mortgage loan may be in an amount not to exceed the land value plus the value of the residential housing (exclusive of land) as determined by the Agency. Each loan will also be subject to the following additional requirements:

(a) For private nonprofit corporations and State or local public agencies the amount of the loan will be limited to the housing development cost or the security value of each project, whichever is less.

(b) For all other housing sponsors the amount of the loan will be limited to the housing development cost or the security value of the project, whichever is less. The applicant's contribution must be in the form of either cash or land or a combination of both.

(c) Each loan will be scheduled for payment within such period as may be necessary to assure that the loan will be adequately secured taking into account the probable depreciation of the security. The period of repayment will not exceed 40 years from the date the first payment is due.

Section 2 Financing Charges

The mortgage loan shall bear interest at a rate determined by the Agency. The interest rate shall be established by the Agency at the lowest level consistent with the Agency's cost of operation and its responsibilities to the holders of its bonds. In addition to such interest charges, the Agency may make and collect such fees and charges, including, but not limited to, reimbursement of the Agency's operating expenses, financing costs, service charges, insurance premiums and mortgage insurance premiums, as the Agency determines to be reasonable.

Section 3 Regulatory Agreement

Each mortgage loan to a housing sponsor for residential housing shall be subject to the a regulatory agreement between the Agency and the housing sponsor which will subject the housing sponsor and its principals or stockholders, if any, to limitations established by the Agency as to rental and other charges, builder's and developer's profits and fees, and the disposition of its property and franchise to the extent more restrictive limitation are not provided by the law under which the housing sponsor is incorporated or organized or by the Act; the regulatory agreement shall require the housing sponsor to submit financial reports and statements and establish certain funds and accounts, and shall specify the conditions under which disbursements may be made from those funds and accounts in order to maintain the security value of the project.

Significant limitations upon sources or amounts of revenue shall be deemed to constitute limitations upon profits and fees.

Section 4 Collateral Security

The Agency may require that mortgage loans to housing sponsors be additionally secured in such manner and in such amounts as the Agency shall determine to be necessary to assure the payment of the debt service thereon as it falls due.

CHAPTER FIVE APPLICATION PROCEDURES

Section 1 Preapplication Procedures

The Agency may provide staff services to assist a housing sponsor in complying with the requirements of the act and these rules and may establish a preapplication procedure.

Section 2 Application Procedures

With respect to each Multi-family development program instituted by the Agency, the Agency shall prepare instructions setting forth uniform procedures by which applications for loans shall be submitted and the contents thereof. Such procedures may include the establishment of deadlines for submission and the establishment of certain fees to cover reasonable costs of the Agency in reviewing the application.

Section 3

In addition to such other substantive requirements as the Agency may require in instructions distributed pursuant to paragraph 2, above, an application by a housing sponsor for a mortgage loan shall contain information with respect to:

(a) Eligibility of the housing sponsor, or with respect to the steps which have been taken by such sponsor to become eligible.

(b) The site of the proposed housing project, including location, dimensions, site plan, ownership, present zoning, present use and on-site utilities and streets, utility charges and liens or other charges on the land and all physical characteristics on or off-site which might affect construction or occupancy.

CHAPTER SIX PRELIMINARY APPROVAL

Section 1 Application Review Procedures

The Agency shall establish an orderly procedure for review of applications and may amend this procedure from time to time.

Section 2 Act 200

The Agency may require the applicant to demonstrate that the proposed development is consistent with the Agency's Act 200 Plan.

Section 3 Letter of Interest

If the housing sponsor is eligible and the multi-family development appears eligible in all respects, the Agency may issue a letter of interest to the housing sponsor. The letter of interest is not a commitment to finance and shall be conditional upon the availability of funds and the satisfactory completion of such further requirements as the agency may establish in each case. The letter of interest may be used by the housing sponsor in support of applications for operating subsidies, mortgage insurance, construction financing, or for other purposes with the consent of the Agency.

Section 4 Conditions to Issuance of Letter of Commitment to Finance

As preconditions to issuance of a Letter of Commitment, in the letter of interest or otherwise, the agency may impose such requirements as it deems appropriate including, without limitation:

(a) Payment of an earnest money deposit in an amount to be established by the Agency on a case by case basis. The charges toward which the earnest money deposit may be credited, and conditions of refundability, if any, will be determined by the Agency on a case by case basis.

(b) Delivery of the following documents:

(i) Copies of any proposal submitted for Section 8 housing assistance payments (or other rental subsidy) and evidence of approval by the Department of Housing and Urban Development or other source of subsidy;

(ii) Evidence of environmental review and approval under Act 250;

(iii) Evidence of all required local zoning and subdivision approvals;

(iv) Financing plan;

(v) Construction and operating budgets;

(vi) Any and all design and development drawings and specifications.

(vii) Certification of design quality and compliance with all applicable costs by the housing sponsor's architect.

(viii) The sponsor's organizational documents and internal authorizations pertaining to the multi-family development and the mortgage loan.

CHAPTER SEVEN COMMITMENT TO FINANCE

Section 1 Letter of Commitment to Finance

Upon satisfaction of the conditions established by the Agency for issuance of a Letter of Commitment, the Agency shall issue to the housing sponsor a Letter of Commitment to Finance. If it has made the determinations required by Section 625 of the Act, the Agency in particular cases may authorize the executive director to determine whether conditions established by the Agency for issuance of a Letter of Commitment have been fulfilled and to issue a Letter of Commitment upon such determination.

Section 2 Conditions of Closing; Sponsor Performance

As conditions of closing a mortgage loan, the Agency may require, in the Letter of Commitment to finance, such further preliminary performance by the housing sponsor as it deems appropriate, including, without limitation, the following:

(a) Submission of any documents that could have been requested as a condition of the Letter of Interest, and any appropriate updated versions thereof;

(b) E vidence of timely availability of all rental or other subsidies and all contributions of equity and/or non-Agency financing on which the construction and/or operating budgets depend;

(c) Submission of the construction schedule;

(d) Submission of satisfactory evidence of labor and material surety bonds and contractor's performance bonds posted by the contractor, or other security deemed by the Agency to constitute reasonable comparable security for the contractor's obligations;

(e) Commitment for ALTA form lender's policy of title insurance, insuring the mortgage securing the mortgage loan as a lien having priority consistent with the requirements of the Letter of Commitment, and in an amount at least equal to the maximum possible principal balance of the mortgage loan.

(f) Submission of all contracts, deed, and proposed deeds applicable to the acquisition, design, construction or rehabilitation, and operation of the multi-family development, in form and substance satisfactory to the Agency.

(g) Proof of satisfactory sponsor's casualty, worker's compensation, and public liability insurance during construction and during operation of the multi-family development.

(h) Proof of satisfactory contractor's insurance for motor vehicles, comprehensive general liability, and worker's compensation.

(i) Such opinions of counsel as may be appropriate to the case, including, by way of example, opinions as to due organization and authority of the sponsor, compliance with applicable securities laws, title to the multi-family development, sufficiency of governmental permits and approvals, and enforceability of the loan documents evidencing the mortgage loan.

(j) Such financial statements and certifications as the Executive Director may require.

Section 3 Conditions of Closing Issuance of Bonds

As a condition of closing a mortgage loan, the Agency may establish, in the Letter of Commitment to finance, the requirement that it be able to issue Bonds contemplated as the entire or partial source of funds for the mortgage loan.

Section 4 Conditions of Closing Payment of Fees

As a condition of closing a mortgage loan, the Agency may require, in the Letter of Commitment to finance, the payment of commitment fees, origination fees, and/or other fees and charges for reimbursement of the Agency's operating expenses, financing costs, service charges, insurance premiums, mortgage insurance premiums, and such other costs as the Agency determines to be reasonable. The Agency may require submission of a commitment fee at or before any loan closing.

CHAPTER EIGHT MAKING OF MORTGAGE LOANS

Section 1 Authorization of Mortgage Loans

No mortgage loan for a multi-family development shall be made until the Commissioners have received and reviewed the recommendation of the Executive Director relating to such loan and until the Commissioners have adopted a resolution approving such loan; which resolution shall include determinations that:

(1) The residential housings is primarily for occupancy by persons and families of low and moderate income;

(2) The acquisition, construction or rehabilitation costs incurred or to be incurred by the housing sponsor under agreement are for housing development costs within the meaning of the Act;

(3) There exists, or without the proposed residential housing there will exist, a shortage of decent, safe and sanitary housing at rentals or prices which persons and families of low or moderate income are able to afford within the general housing market area or there is a shortage of temporary transitional or emergency housing to be served by the proposed residential housing and that private enterprise and investment are unable, without assistance, to provide an adequate supply of the residential housing for occupancy by the persons or families; and

(4) The housing sponsor or sponsors undertaking the proposed housing development will maintain or increase the supply of well-planned, well-designed permanent, temporary transitional or emergency housing for persons or families of low and moderate income and that the sponsors are financially responsible persons or institutions.

Section 2 Closing of Mortgage Loans

After adoption of a resolution substantially in the form of paragraph 1 of this chapter, and after satisfaction of the conditions set forth in the Letter of Commitment, the Agency may close the mortgage loan.

Section 3 Evidence of Mortgage Loans

The Executive Director of the Agency shall not permit any disbursement of an approved mortgage loan until such loan is evidenced by a fully executed note or other evidence of indebtedness, a mortgage, and by such other instruments as the Executive Director may in specific cases deem necessary or appropriate.

Section 4 Representation by Counsel

The Agency shall be represented by counsel at the loan closing.

Section 5 Certificate of Completion and Escrow Account

In connection with the closing a permanent mortgage loan, the Agency may require a certificate of substantial completion. An escrow account shall be established for the deposit and disbursement of funds required to complete any work deferred beyond the effective date of the certificate of substantial completion due to seasonal or climatic factors, material shortages, labor disputes or other reasons beyond the control of the housing sponsor.

80-002 Code Vt. R. 80-140-002-X

Effective Date: June 1, 1985 (Secretary of State Rule Log # 85-31)
AMENDED: March 1, 1995 (Secretary of State Rule Log # 95-16)