Mortgages

(1) Mortgage Form. The mortgage shall be executed on a form approved by the Agency. It shall be a first lien on the property, be consistent with Tennessee Law, and conform with the standards prescribed by the Agency, and qualified insurer when applicable. (2) Mortgage Provisions. The approved mortgage form shall provide for the following: (a) Late Charge. The mortgage may provide for the collection by the Agency or its servicing agent of a late charge, not to exceed 4 cents for each dollar of each monthly payment more than 15 days in arrears, to cover the extra expenses involved in handling delinquent payment. (b) Application of Payment. All monthly payments to be made by the mortgagor to the Agency or its servicing agent shall be added together and the entire aggregate amount thereof shall be paid by the mortgagor each month in a single payment. The Agency or its servicing agent shall apply the aggregate payment to the following items in the order set forth: 1. Taxes, special assessments, and property insurance premiums 2. Interest on the mortgage loan 3. Amortization of the principal of the loan Any deficiency in the amount of any aggregate monthly payment shall, unless made good by the mortgagor prior to, or on, the due date of the next aggregate payment, constitute a default under the mortgage. (c) Escrow Payments. In addition to the payment of the principal and interest, the borrower shall pay a one-twelfth (1/12) pro rata share of the annual real estate taxes, hazard insurance, and any other items the Agency deems appropriate. These payments shall be deposited in federally-insured depositories or in such other depositories insured by a deposit insurer approved by the Tennessee Commissioner of Insurance. (d) Prepayment Penalty. The Agency may establish a prepayment penalty which it deems satisfactory to protect the Agency’s financial obligations with respect to such principal prepayments pursuant to the Agency’s contractual arrangements with the purchasers and holders of its notes or bonds; provided, however, that any such prepayment penalty shall not be greater than the maximum amount provided therefor in the Agency’s mortgage loan commitment as to such housing unit issued to the person or family of low or moderate income intending to effect transfer of ownership of such housing unit. (e) Mortgage Insurance. Each mortgage shall provide that the mortgagor will furnish and continually maintain and pay for insurance or other guaranty on the mortgage. Such insurance or guaranty shall HOMEOWNERSHIP LOAN PROGRAM CHAPTER 0770-1-2 (Rule 0770-1-2-.07 continued) be written by qualified insurers as defined under Rule 0770—1—2—.03 (h) of these regulations, in amounts and on terms and conditions satisfactory to the Agency and must be maintained until the loan is repaid, or until such other time stipulated by the Agency. This requirement shall not apply to those qualified mortgagors who make a cash down payment of 25% or more in equity of the property based on its appraisal value or the sale price, whichever is the lesser amount. (f) Property Insurance. Each mortgage shall provide that the mortgagor will furnish and continually maintain and pay for property insurance on the home. Such insurance shall be written by companies, in amounts and on terms and conditions satisfactory to the Agency and the applicable insurer, and must be maintained until the loan is repaid. [See 0770—1—2—.13 (10).] Pro rata payments to keep the property insurance in force will be paid into an escrow account as provided for in 0770—1—2—.07 (1) (c). (g) The Agency may require an acceleration clause in the mortgage to become effective if the mortgagor ceases to use the residence as his or her principal residence as provided in Rule 0770—1—2—.04 (b). For purposes of this rule if the owner leases the residence it shall no longer be deemed to be used as a principal residence, execpt where the owner is still residing therein. (h) Additional Provisions. Such additional provisions necessary to protect the interest of the Agency may be included in its Rule of Practice by the Agency from time to time. (3) Maximum Mortgage Amount. No mortgage loan shall exceed 95% of the appraised value of the property or its sales price, whichever is lower; plus an amount equal to initial payments for taxes, property insurance, closing costs, other prepaid expenses and such other charges and fees as are approved by the Agency. The Executive Director shall determine and approve the amount of each mortgage loan on a case-by-case basis. The amount shall be based on the applicant’s ability to make the prescribed down payment and monthly payments, the applicant’s ability to receive mortgage insurance when applicable, and the value and condition of the home. The provisions of this subparagraph are further limited by the provisions of Rule 0770—1—2—.08 (1) (Mortgagor’s Minimum Investment).