§ 13-23-117 — Insured mortgage loans

(a) The agency shall be empowered to make or participate in the making of insured mortgage loans to qualified sponsors, developers or builders of residential housing for lower and moderate income persons and families, and to lower and moderate income persons who are purchasers of residential housing when the financial assistance programs of this part become effective under § 13-23-114 . No insured mortgage loans available under this section shall be made for nonowner-occupied residential housing unless the sponsor, developer, builder or purchaser is a public housing agency, a public or private nonprofit corporation or other public or private nonprofit entity or a limited distribution entity, established or certified to do business under the laws of the state, and such public agency, corporation or entity has on file with the agency the salary schedule of its officers and employees or unless such residential housing shall be fully or partially occupied by residents assisted under a federal housing assistance program. However, the agency will not make or participate in the making of any insured mortgage loans until it has notified all qualified lenders that the insured mortgage loan program is in effect and that the agency is prepared to enter into working agreements with qualified lenders for the making of insured mortgage loans to qualified sponsors, developers, builders and purchasers; and it has determined that the insured mortgage loan is not otherwise available, totally or in part, from private qualified lenders upon reasonably equivalent terms and conditions. Except as provided herein, the agency may make such loans directly only after the agency has notified all qualified lenders with whom the agency has working agreements of a sponsor's, developer's, builder's, or purchaser's pending loan application and after a reasonable time from the date of notification, no qualified lender has agreed in writing with such qualified sponsor, developer, or builder or with such qualified purchaser to make an insured mortgage loan either as mortgagee, or as an agent for a mortgagee upon reasonably equivalent terms and conditions. (b) Any loan made at a reduced interest rate under this section to purchasers of owner-occupied residential housing shall not be assumed or in any way transferred to a subsequent purchaser of such owner-occupied residential housing unless such purchaser qualifies as a person or family of lower or moderate income under § 13-23-103 . Any loan made at a reduced rate under this section to sponsors, developers, builders and purchasers of nonowner-occupied residential housing shall not be assumed or in any way transferred to a subsequent purchaser of such residential housing unless such purchaser is a public housing agency, a public or private nonprofit corporation or other public or private nonprofit entity or a limited distribution entity, established or certified to do business under the laws of the state as hereinbefore provided in this section. Such loans made under this section to such public housing agencies, public or private nonprofit corporations or other public or private nonprofit entities, or limited distribution entities, may be made by the agency to such borrower directly when the agency has determined that the loan is not otherwise available, totally or in part, from qualified private lenders upon reasonably equivalent terms and conditions. (c) For purposes of this chapter, "limited distribution entity" means a corporation, trust, partnership, association, individual or other entity regulated by the agency as to the amount of distribution, retirement of capital investment, or redemption of stock or other ownership interest, in such a manner that any such distribution, retirement, or redemption will not exceed in any one (1) fiscal year ten percent (10%), or such lesser percentage as shall be prescribed by the rules and regulations of the agency, of such limited distribution entity's equity in a nonowner-occupied residential housing development. The limited distribution entity's equity in the development shall consist of the difference between the agency mortgage loan on the development and the total project cost. By regulation, the agency shall prescribe the categories of costs constituting "total project cost," including organizational expenses, land acquisition, plans and specifications, interest and financing charges paid during construction, construction costs, architects, engineering, legal and accounting fees, and a reasonable builder's profit and job overhead. A limited distribution entity's equity in a nonowner-occupied residential housing development shall be established by the agency resolution approving the mortgage loan. For the purposes of this subsection (c), that equity shall remain constant during the life of the agency mortgage loan on such housing development, except for additional equity investment made by the limited distribution entity after agency approval. Should the limited distribution entity accumulate earned surplus in addition to such maintenance and replacement reserves as the agency may require in excess of ten percent (10%) of the first full year's proposed annual rent roll, the agency may direct that the development's rents be reduced to the extent necessary to lower the earned surplus accumulation to the ten percent (10%) (or such lesser percent as the agency shall have prescribed by its rules and regulations) return on equity factor established at the granting of the agency mortgage loan. (d) Owner-occupied dwellings shall include one (1) to four (4) family units occupied in whole or in part by the owners, as well as units constructed or existing under the Horizontal Property Act, compiled in title 66, chapter 27. (e) When allocating funds for loans on new homes, the agency shall attempt to give priority to homes which incorporate energy conserving design and construction, and which include solar heating systems and solar hot water heaters.

Legislative History

Acts 1973, ch. 241, § 7; 1974, ch. 702, § 5; 1975, ch. 320, § 3; 1977, ch. 483, § 4; 1979, ch. 442, § 9; T.C.A., § 13-2317.