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 by the qualified insurer when applicable subject to the following: (a) When loans are funded in cases where Agency bond proceeds are used, all respective portions of the loan shall be forwarded to the Agency or its closing agent. The Agency thereafter shall make a loan secured by a first mortgage. The first mortgage shall be evidenced by a deed of trust and a note. The note shall list, at the bottom of said note, the names of the participants and the respective amounts of their contributions. All money loaned at 0 (zero) percent interest shall be repaid in equal installments over the term of the loan. (b) When loans are funded, in cases where Agency bond proceeds are not used, the private lender will make a first mortgage. The first mortgage shall be evidenced by a deed of trust and a note. The note shall list at the bottom of said note the names of the participants and the respective amounts of their contributions. All money loaned at 0 (zero) percent interest shall be repaid in equal installments over the term of the loan. (2) Mortgage Provisions. The approved mortgage form shall provide the following: (a) Late charge. The mortgage may provide for the collection by the Agency or its servicing agent a late charge, not to exceed 4 cents for each dollar of each monthly payment more than 15 days past the due date, to cover the extra expenses involved in handling the delinquent payment. (b) Servicing Fee. After computation of principal, interest and escrow payments, the loan payment shall be in- creased by a reasonable fee sufficient to cover the cost of servicing the loan. HOMEOWNERSHIP PROGRAM CHAPTER 0770—4—2 (c) 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. (d) Escrow Payments. In addition to the payment of the principal and interest, the borrower shall pay a one-twelfth (1/12) pro rate 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. (e) 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 contrac- tual arrangements with the purchasers and holders of its notes or bonds; provided, however, that any prepay- ment penalty shall not be greater than the maximum amount provided therefore in the Agency’s mortgage loan commitment as to such housing unit. (f) 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 be written by qualified insurers as defined in 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 as may be 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 sales price, which ever is the lesser amount. (g) 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. Pro rata payments to keep the property insurance in force will be paid into an escrow account. (h) 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. For purposes of this rule if the owner leases the residence it shall not longer be deemed to be used as a principal residence, except where the owner is still residing therein. (i) Additional Provisions. Such additional provisions necessary to protect the interest of the Agency may be included in its Rules of Practice by the Agency from time to time.