§ 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 healthcare facilities shall be subject to the following
terms and conditions:
(1) No application for a loan for a housing development or healthcare facility shall be
processed unless the applicant is a housing sponsor or healthcare facility sponsor
as defined in §â€‚42-55-3;
(2) The ratio of loan to total housing development or healthcare facility cost and the
amortization period of loans made under this chapter that 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 healthcare 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: (i) nonprofit housing sponsors shall not exceed one hundred
percent (100%) of the total housing development cost as determined by the corporation;
and (ii) other housing sponsors and healthcare 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 healthcare 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 healthcare facilities, the corporation
shall give consideration to:
(i) The availability of healthcare 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 healthcare facilities;
(iii) The regulations of the state to standards of construction and design and equipment
of healthcare 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 healthcare
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 healthcare facilities by a healthcare sponsor and the operation
thereof:
(i) To enter upon and inspect any housing development or housing project or healthcare
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 healthcare 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 healthcare
facility or the health, safety, and welfare of the occupants or users thereof and
to insure that the housing development or healthcare 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 healthcare facility manager, or
owner of a housing development or healthcare 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 subsection (9)(iv), 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 that 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 (1½) 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 §â€‚34-45-4, or could elect not to renew a Section 8 assistance contract under §â€‚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 (½%) 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
healthcare facilities and the supervision of housing sponsors or healthcare sponsors.