TITLE 42
State Affairs and Government
CHAPTER 42-55
Rhode Island Housing and Mortgage Finance Corporation
SECTION 42-55-9
§ 42-55-9 Terms and conditions of loans.
Mortgage and other loans made by the corporation to housing sponsors of
multi-family residential housing units or health care facilities shall be
subject to the following terms and conditions:
(1) No application for a loan for a housing development or
health care facility shall be processed unless the applicant is a housing
sponsor or health care facility sponsor as defined in § 42-55-3;
(2) The ratio of loan to total housing development or health
care facility cost and the amortization period of loans made under this chapter
which are insured by any agency or instrumentality of the United States
government shall be governed by the mortgage insurance commitment for each
housing development or health care facility; but in no event shall the
amortization period exceed fifty (50) years; in the case of a mortgage loan not
insured by an agency or instrumentality of the United States government, the
amount of the loan to: (1) nonprofit housing sponsors shall not exceed one
hundred percent (100%) of the total housing development cost as determined by
the corporation; and (2) other housing sponsors and health care sponsors shall
not exceed ninety-five percent (95%) of the total development cost as
determined by the corporation, and the amortization period of the loan shall be
determined in accordance with regulations formulated and published by the
corporation, but in no event shall the amortization period exceed fifty (50)
years;
(3) A loan made under this chapter may be prepaid to maturity
after a period of years as determined by the rules and regulations of the
corporation, provided the corporation finds that the prepayment of the loan
will not result in a material escalation of rents charged to the persons and
families of low and moderate income occupying the housing development or
charges to the persons using the health care facilities;
(4) The corporation shall have authority to set from time to
time the interest rates at which it shall make loans and commitments. The
interest rates shall be established by the corporation at the lowest level
consistent with the corporation's cost of operation and its responsibilities to
the holders of its bonds, bond anticipation notes and other obligations. In
addition to these interest charges, the corporation may make and collect those
fees and charges, including, but not limited to, reimbursement of the
corporation's financing costs, service charges, insurance premiums, and
mortgage insurance premiums, that the corporation determines to be reasonable;
(5) In considering any application for a loan to finance a
housing development or housing project, the corporation shall determine that
the housing developments will be well planned and well designed; and shall also
give consideration to:
(i) The comparative need for housing for persons and families
of low and moderate income in the area to be served by the proposed development;
(ii) The ability of the applicant sponsor to construct,
operate, manage, and maintain the proposed housing development;
(iii) The existence of zoning or other regulations to
adequately protect the proposed housing development against detrimental future
uses which could cause undue depreciation in the value of the development;
(iv) The existence of federal and statewide housing, land
use, and pollution abatement plans and programs;
(v) A detailed plan of security proposed for the safety of
the inhabitants of any development hereinafter constructed within the city of
Providence;
(6) In considering any application for a loan to finance
health care facilities, the corporation shall give consideration to:
(i) The availability of health care facilities presently
located or to locate in the area;
(ii) The ability of the sponsor to meet the health needs of
the inhabitants of the area and to operate, manage, and maintain the proposed
health care facilities;
(iii) The regulations of the state to standards of
construction and design and equipment of health care facilities of the type
proposed to be financed;
(7) Each mortgage loan shall contain the terms and provisions
and be in a form approved by the corporation. The corporation may require the
housing sponsor or health care sponsor receiving a loan or its contractor to
execute any other assurances and guarantees that the corporation may deem
necessary, including without limitation, payment and performance bonds, and
letters of credit;
(8) Each loan shall be subject to an agreement between the
corporation and the housing sponsor which will subject the sponsor and its
principals or stockholders, if any, to limitations established by the
corporation as to rentals and other charges, builders' and developers' profits
and fees, and the disposition of its property and franchise to the extent more
restrictive limitations are not provided by the law under which the borrower is
incorporated or organized or by this chapter;
(9) As a condition of the loan, the corporation shall have
the power at all times during the construction or rehabilitation of a housing
development or housing project by a housing sponsor or of health care
facilities by a health care sponsor and the operation thereof:
(i) To enter upon and inspect any housing development or
housing project or health care facility, including all parts thereof, for the
purpose of investigating the physical and financial condition thereof, and its
construction, rehabilitation, operation, management, and maintenance, and to
examine all books and records of the housing sponsor or health care sponsor
with respect to capitalization, income and other related matters and to make
any charges that may be required to cover the cost of those inspections and
examinations;
(ii) To order any alterations, changes or repairs that may be
necessary to protect the security of its investment in a housing development,
housing project, or health care facility or the health, safety, and welfare of
the occupants or users thereof and to insure that the housing development or
health care facility is, or has been, constructed or rehabilitated in
conformity with all applicable federal, state, and local building codes;
(iii) To order any managing agent, housing development or
health care facility manager, or owner of a housing development or health care
facility, or sponsors of these, to do those acts that may be necessary to
comply with the provisions of all applicable laws, ordinances, or building
codes or any rule or regulation of the corporation or the terms of any
agreement concerning the development or facilities or to refrain from doing any
acts in violation thereof, and in this regard the corporation shall be a proper
party to file a complaint and to prosecute any violations of law, ordinances,
or building codes as set forth herein;
(iv) A housing sponsor may not make distributions of income
or earnings from a housing development or housing project financed by the
corporation in any one year in excess of six percent (6%) (or a higher or lower
percent as shall be prescribed by the rules and regulations of the corporation)
of the housing sponsor's equity in the development, nor shall any of the
principals or stockholders of the housing sponsor at any time earn, accept or
receive a return greater than six percent (6%) per annum (or a higher or lower
percent as shall be prescribed by the rules and regulations of the corporation)
of his or her investment in any housing development financed by the
corporation. The sponsor's equity in a housing development shall consist of the
difference between the corporation assisted mortgage loan and the total housing
development cost. With respect to every housing development assisted by the
provisions of this chapter the corporation shall, pursuant to regulations
adopted by it, establish the sponsor's equity at the time of the making of the
final mortgage advance and, for the purposes of this subdivision, that figure
shall remain constant during the life of the corporation's mortgage on the
development;
Notwithstanding the above, the corporation shall allow
existing project owners to withdraw a rate of return on redefined equity
provided the corporation finds that the project is "stable and financially
secure". Properties meeting this definition would have healthy finances and
reserves and be in good condition, as determined by the corporation; provided,
however, no project owner of a housing development financed by the corporation
may apply for redefinition until fifteen (15) years from the date of financing.
In addition, the following requirements must occur:
(A) There is no deferred maintenance as determined by the
corporation.
(B) There are no major repairs or replacements (three
thousand dollars ($3,000) or more) anticipated or required for the coming year
which would reduce the reserve accounts below required levels.
(C) All operating expenses have been paid within thirty (30)
days of their due date.
(D) Operating account balance equals one month's total
operating expenses.
(E) The development has sustained ninety-five percent (95%)
or greater economic occupancy for the prior twenty-four (24) consecutive months
and has a current waiting list equal to at least one and one-half (1 1/2) times
the annual turnover for the two (2) preceding years.
(F) The mortgage has not been delinquent for the preceding
twenty-four (24) months.
(G) Reasonable reserve account balances.
(H) The owner agrees to limit future rent increases to the
amount needed to pay all annual operating expenses including return on equity
and maintaining reserves at five thousand dollars ($5,000) per unit or twenty
percent (20%) of the outstanding mortgage.
(I) The owner agrees to maintain the housing affordable to
persons of low and moderate income for (a) a minimum of twenty (20) years from
the date that owner could prepay a mortgage securing a development, as that
term is defined in § 34-45-4, or could elect not to renew a Section 8
assistance contract under § 34-45-5 or (b) twenty (20) years from the
maturity date of a note evidencing indebtedness to the corporation which is
secured by a housing development.
Not-for-profit sponsors shall be eligible to receive
unlimited annual cash flow, subject to the above criteria, up to the cumulative
amount of their initial equity investment. Subsequent annual cash flow may be
distributed provided the distributions are restricted to low and moderate
income housing related expenditures.
Equity would be redefined by either capitalizing the annual
cash flow using corporation-approved appraisal practices or by the difference
between the fair market value of the housing project using corporation approved
appraisal practices less the unpaid principal balance of any outstanding
mortgage loans, whichever is greater.
Equity would be subject to recalculation every five (5)
years, or more frequently at the corporation's discretion.
The corporation shall receive a one-time fee equal to
one-half percent (1/2%) of the outstanding mortgage for redefining equity. This
will be an eligible operating expense. The fee may be waived by the corporation
in whole or in part.
(v) Whenever any housing sponsor accumulates an earned
surplus, in addition to the reserves the corporation may require for
maintenance, operation, and replacement, in excess of ten percent (10%) of the
initial annual rent roll for the housing development, rents in the housing
development shall be reduced to the extent necessary to lower the earned
surplus accumulation to that ten percent (10%) figure in the following fiscal
year. Every five (5) years the housing sponsor may seek the approval of the
corporation for increases in those reserves. To the extent warranted the
corporation may grant that approval if in its judgment there have been
increased price levels or unusual maintenance and repayment requirements;
(vi) The corporation may provide by rules and regulations for
the terms and conditions of mortgage loans to housing sponsors of single family
residential housing units or health care facilities and the supervision of
housing sponsors or health care sponsors.
History of Section.
(P.L. 1973, ch. 262, § 1; P.L. 1975, ch. 128, § 3; P.L. 1981, ch.
214, § 1; P.L. 1987, ch. 287, § 1; P.L. 1989, ch. 226, § 1; P.L.
1990, ch. 431, § 3; P.L. 1993, ch. 422, § 12.)