Mortgage Loan Commitment Procedure

(1) The Agency Board shall review each such analysis and recommendation, and if it determines that the application meets the requirements of the Act and these Rules and Regulations, and is consistent with the Agency’s Rules of Practice, design standards and evaluation factors, it may authorize a commitment for an Agency mortgage loan to the housing sponsor with respect to the proposed housing development. An Agency mortgage loan commitment may be issued for a term not to exceed ninety (90) days, subject to extension of such term by the Agency for good cause shown. (2) An Agency mortgage loan shall not be authorized unless the Agency Board by Resolution shall find that: (a) there exists within the general housing market area to be served by the proposed housing development, a shortage of decent, safe and sanitary housing at rental rates which persons and families of low and moderate income can afford, (b) private enterprise and investment have been unable, without assistance, to provide the needed decent, safe and sanitary housing at rentals which persons or families of low and moderate income can afford and that in accordance with T.C.A. §§13—23—116 and 13—23—117 qualified lenders are unable or unwilling to provide sufficient mortgage financing for residential housing for occupancy by such persons or families, (c) the housing sponsor undertaking the proposed housing development in the State of Tennessee will supply well-planned, well-designed housing of which at least twenty percent (20%) of the dwelling units will be for persons or families of low and moderate income and that such housing sponsor is financially responsible, (d) the proposed housing development will be of public use and benefit, and (e) the proposed housing development will be undertaken within the authority conferred by the Act upon the Agency and the housing sponsor. (3) As provided in T.C.A. §§13—23—116 and 13—23—117, as amended, the Resolution of the Agency Board approv- ing an Agenty mortgage loan to a limited profit housing sponsor shall establish the total project costs, the equity contribution of the limited profit sponsor and the maximum permissible annual percentage distribution, retirement, or stock redemption by the limited profit sponsor. The Agency Board may upon proper request made by the limited profit sponsor later amend the maximum permissible annual percentage distribution to allow up to the statutory limitations if initally set less than the statutory maximum. Loans that the Agency makes or participates to limited profits pursuant to T.C.A. §§13—23—116 and 13—23—117, as amended by Chapter 320 of the Public Acts of 1975, the cost included in ‘‘total project costs’’ for a specific housing developments shall be established in the financial analysis attached to the Commitment Resolution as provided in rule 0770—1—4—.03 (5) of these regulations. The categories of costs allowable for inclusion in ‘‘total project costs’’ for such loan will be more particularly described in the Agency’s Rules of Practice for the Rental Housing Loan Program, established pursuant to rule 0770—1—1—.02 of these regulations. (4) Any payment to a person or entity who is a principal, stockholder or holder of a beneficial interest in such limited profit housing sponsor shall not be deemed a ‘‘distribution’’ or ‘‘return’’ to such person or entity if the funds with which such payment is made are funds paid or contributed to such limited profit housing RENTAL HOUSING LOAN PROGRAM CHAPTER 0770—1—4 sponsor by persons or entities purchasing a beneficial interest in such limited profit housing sponsor. All funds paid or contributed to a limited profit housing sponsor by persons or entities purchasing a beneficial interest in such sponsor shall be held by the Agency in a completion assurance escrow and distributed to the holder of a beneficial interest in such sponsor only in accordance with the Agency’s building and loan agreement. In the event of a proposed retirement of any capital investment in, or redemption of any stock of, such limited profit housing sponsor, as a result of a proposed sale or assignment of the capital investment or stock of a principal, stockholder or holder of a beneficial interest in such limited profit housing sponsor, or of a proposed sale or assignment of such housing developments, the terms and conditions of such proposed retirement or redemption as aforesaid shall be reviewed by the Executive Director to assure compliance with the second sentence of the second paragraph of T.C.A. §13—23— 117. Such transferee shall assume the responsibilities, duties and obligations of the transferor pursuant to the Regulatory, Completion Assurance, and Working Capital Agreements with the Agency. Such review and approval shall be for the purpose of ensuring the continuing capitalization and stability of such limited profit housing sponsor and evaluating the impact of such proposed transaction on the economic stability of such housing developments and on the rents to be charged to the occupants thereof. Approval by the Executive Director shall not be withheld unreasonably, and shall not be withheld solely because the proposed retirement or redemption results in a return to a principal stockholder or holder of a beneficial interest in such limited profit housing sponsor in excess of the maximum annual rate otherwise applicable to the making of distributions or the receipt of return, if such excess arises by reason of: (a) reduction of the principal amount of the Agency mortgage loan by amortization or similar causes, or (b) the sale or disposition of any assets of the limited profit housing sponsor, to the extent that such excess can be attributed to any increase in market value of any real property or tangible personal property accruing during the period the assets were owned and held by the limited profit housing sponsor. (5) The Resolution authorizing the Agency mortgage loan commitment, or the Agency mortgage loan commitment issued by the Executive Director pursuant to a Resolution, shall include such conditions as the Agency considers appropri- ate with respect to the commencement of construction of the proposed housing development, the marketing and occupancy of such housing development, a schedule of the use and disbursement, and repayment of the Agency mortgage loan authorized, and all other matters related to the development, construction and operation of the proposed housing development. Each loan commitment shall contain a condition that the general contractor deliver at the initial loan closing in form and substance acceptable to the Executive Director, a labor and material bond in favor of the housing sponsor as well as a performance bond with corporate surety in favor of the housing sponsor and the Agency as dual obligees. The amount of each of the foregoing bonds shall be in amount established by the Agency Resolution. In lieu of the foregoing bonds, the Agency may determine to accept a completion assurance agreement, together with an unconditional, irrevocable Letter of Credit issued in favor of the Agency by a commercial bank acceptable to the Agency. Such Resolution or Agency mortgage loan commitment may include a financial analysis of the proposed housing development, which establishes the initial schedule of rents and the approved initial budget for operation of the housing development.