Current through Register 1531, September 27, 2024
(1)
Loan Types. Eligible
Projects may receive FCF assistance in three areas: acquisition loans,
construction/rehabilitation loans, and permanent loans. All FCF loans are structured
as Deferred Payment Loans (DPL). Developers shall complete the Application process
in accordance with the FCF Guidelines.
(2)
Loan Terms. All loans
under the FCF program shall be made upon the following terms and such other terms as
are included in the FCF Guidelines and/or DHCD's loan documents:
(a)
Loan Proceeds. The
proceeds of the loan shall be used solely for the development of the Eligible
Project permitted under the applicable FCF Legislation and approved by
DHCD.
(b)
Loan
Amount. The amount of any FCF loan granted under the Original FCF
Legislation shall not exceed 30% of the Total Development Cost of the Project, and
the amount of any FCF loan granted under the FCF 2, FCF 3, FCF 4, FCF 5, or FCF 6
Legislation shall not exceed 50% of the Total Development Cost of the Project;
provided, however, that DHCD may establish per-unit and per-Project dollar limits in
the FCF Guidelines to which the loan would also be subject.
(c)
Loan Period. The
original term of the loan shall be up to 30 years. At the maturity date, the term
may be extended for additional periods of up to ten years each at the discretion of
DHCD, with the consent of the owner, if the Project continues to meet the FCF
requirements and the requirements for an extension under the FCF Legislation, the
FCF Guidelines, and the loan documents for such loan have been satisfied (including,
with respect to loans granted under the FCF 2, FCF 3, FCF 4, FCF 5, or FCF 6
Legislation, DHCD's determination, in consultation with EOHHS, that there still
exists a need for the Community-based Housing, or with respect to loans granted
under the FCF 5 or FCF 6 Legislation, Supportive Housing, and that there is
continued funding available for the provision of services to the Project, and the
continuing applicability of the Land Use Restriction for the duration of the loan
term, as so extended).
(d)
Interest Rate. The interest rate shall be set by DHCD in
consultation with the Treasurer of the Commonwealth. To the extent required under
applicable versions of the FCF Legislation, the interest rate shall be equal to the
rate anticipated to be paid by the Commonwealth for bonds issued pursuant to the
applicable FCF Legislation.
(e)
Loan Payments. Because all FCF loans are structured as
DPLs, payments of principal and interest (if any) will be deferred for the loan
period unless:
1. a Project defaults on the terms
of the loan; or
2. except with respect
to loans granted under the FCF 5 Legislation or FCF 6 Legislation, a Project has
Gross Cash Receipts for a fiscal year exceeding Gross Cash Expenditures by 105% or
more, in which event within 45 days after the end of each Project's fiscal year, the
owner shall supply DHCD or the Financial Intermediary with the necessary financial
statements needed to determine the amount of payment necessary for the period.
All amounts paid pursuant to 760 CMR 19.04(2)(e) shall be applied
first to the payment of interest and costs, and then to
principal
(f)
Land Use Restriction. The Developer/owner of the Project
shall execute and record at the appropriate Registry of Deeds or Registry District
of the Land Court a Land Use Restriction. The Land Use Restriction shall only be
released:
1. upon payment in full of all amounts
due under the FCF loan (provided, however, that no prepayment shall be allowed under
the loan prior to the maturity date as defined in the promissory note for such loan,
as such maturity date may be extended from time to time); and if applicable, the
written determination by the Secretary of EOHHS, the Secretary of Administration and
Finance, and the Commissioner of DDS or DMH, as appropriate, that there is no longer
a need to maintain the Project's use as Community-based Housing or Supportive
Housing, as applicable, for Individuals with Mental Illness or Individuals with
Intellectual Disabilities; or
2. upon
foreclosure of the subject Project by the holder of a bona fide
first-priority mortgage; or, with DHCD's consent, a bona fide
mortgage that was senior to the lien of the FCF mortgage loan at the time of loan
closing, or to which the FCF mortgage loan has been duly subordinated; and if
applicable, a certification by the Secretary of EOHHS as to the inability of EOHHS
to locate a purchaser or manager for the Project who can maintain the Eligible Use
of the Project. The failure of the Secretary of EOHHS to locate such a purchaser or
manager and notify the foreclosing mortgagee of the identity of the buyer or
manager, within 60 days prior to such foreclosure sale by the foreclosing mortgagee,
shall be deemed to be a certification as described in the preceding sentence. The
recording of a sworn affidavit by the foreclosing mortgagee certifying as to the
failure to meet this deadline will release the Land Use Restriction, provided that
the foreclosure deed is recorded not more than six months after the receipt by the
Secretary of EOHHS of the foreclosure notice.
(g)
Mortgage Lien. The
loan shall be secured by a mortgage lien against the Project, which may be junior
only to such senior mortgage liens permitted by DHCD.
(h)
Refinancing of FCF
Loans. An FCF loan may be refinanced during the term of the loan only
subject to the prior written approval of DHCD.
(i)
Title Transfer
Agreement. A Title Transfer Agreement shall be required for each FCF
loan funded under the Original FCF and FCF 2 Legislation, unless one or more of the
following shall apply:
1. mortgage amortization
expenses for the Project are not paid directly or indirectly through reimbursements
or rates paid by the Commonwealth on behalf of Individuals with Mental Illness or
Individuals with Intellectual Disabilities who are residential clients of DDS or
DMH; or
2. where income for the Project
is from an agreement between the owner of the Project and DCAM, DDS or DMH, and the
agreement is:
a. for a term not to exceed five
years;
b. consistent with law governing
contracting for Community-based Housing services; and
c. consistent with the provisions of the FCF
Legislation.
A Land Use Restriction shall be duly recorded and/or registered, as
described in 760 CMR 19.04(2)(f), regardless of whether or not the Property is
subject to a Title Transfer Agreement, or qualifies for one of the foregoing
exceptions. When DCAM exercises the Commonwealth's right to take title to a Project
under a Title Transfer Agreement and the title is transferred, the Undersecretary of
DHCD may determine that the FCF loan has been satisfied in full, provided that the
loan is not in default.
(j)
Facilities Consolidation
Plan. All loans must be in accordance with the Facilities Consolidation
Plan.
(k)
EOAF
Approval. The Secretary of the Executive Office of Administration and
Finance must approve, in advance, all expenditures under the FCF
program.
(3)
Use
of FCF Loan Proceeds for Refinancing Outstanding Loans. FCF loans may
be made to refinance an outstanding mortgage loan to an Eligible Project if:
(a) the Eligible Project was in existence on or
before May 21, 1993, and the Eligible Project was purchased or developed in
accordance with the Report of the Special Commission for former residents of:
1. the Belchertown State School, or
2. the Norfolk Street Project in Cambridge,
Massachusetts; or
(b) the
Undersecretary of DHCD determines that the making of an FCF loan to the Eligible
Project will allow for a substantial change in the residential population, the
physical structure, or the service program such that the completed Project can be
considered a new Project.
(4)
Lease-purchase Agreement. In the case of Projects funded
under the Original FCF and FCF 2 Legislation, an FCF loan may be made to an Eligible
Project for which DCAM has agreed to enter into a Lease-purchase Agreement with the
provider of Community-based Housing for clients of DDS and DMH. The terms of the
Lease-purchase Agreement shall be as prescribed by DCAM, consistent with the FCF
Legislation and the provisions of
760 CMR 19.00. Requests for
assistance under the FCF program shall be subject to the underwriting and selection
requirements of DHCD. Of those FCF loans involving a Lease-purchase Agreement, 65%
of all Projects approved for clients of DDS must be for new construction, and 35%
must be for the acquisition and rehabilitation of existing structures. In addition,
20% of all Eligible Projects approved for clients of DMH must be for new
construction, and 80% must be for the acquisition and rehabilitation of existing
structures. In no event may the needs of the clients of DDS or DMH be compromised by
these selection criteria, nor may the cost of a successful Application be
uncompetitive with other proposals under consideration.
(5)
Grants. In addition
to Deferred Payment Loans, in the case of funding under the FCF 4, FCF 5, or FCF 6
Legislation, Eligible Projects may also receive FCF assistance in the form of grants
to provide Independent Integrated Housing for Low Income Households or Individuals
served by DMH whose adjusted income is less than or equal to 15% of Area Median
Income or write down building costs of Independent Integrated Housing or other
Community-based Housing for Low or Income Households or Individuals served by DMH
whose adjusted income is less than or equal to 15% of Area Median Income. Developers
shall complete the Application process in accordance with the FCF Guidelines. 760
CMR 19.04(2)(a), (b), (f), (j) and (k) shall apply to all such assistance.
(6)
Repayment. As a
condition of each FCF 3, FCF 4, FCF 5, or FCF 6 loan, or FCF 4, FCF 5, or FCF 6
Grant for an Eligible Project, the agreement for use of the affected property shall
provide for repayment to the commonwealth at the time of disposition of the property
in an amount equal to the commonwealth's proportional contribution from the
Facilities Consolidation Fund to the cost of the development through payments made
by the state agency making the contract.
(7)
Purchase Option and First Refusal
Option. As a condition of each FCF 3, FCF 4, FCF 5 and FCF 6 loan, and
each FCF 4, FCF 5, and FCF 6 grant, DHCD shall be granted a purchase option and a
first refusal option to purchase the Project, in accordance with the following
terms:
(a)
Purchase
Option. Upon the expiration of the term of the affordability
restrictions imposed in the Land Use Restriction for a Project funded under the FCF
3 or FCF 4 Legislation, DHCD shall have an option to purchase the Project from the
Developer/owner at a price equal to the then-current appraised value of the Project
less the total outstanding balance of all principal, interest and any other charges
payable under the FCF Loan. Upon the expiration of the term of the affordability
restrictions imposed in the Land Use Restriction for FCF Units developed with funds
under the FCF 5 or FCF 6 Legislation, DHCD shall have an option to purchase the FCF
Units from the Developer/owner at a price equal to the then-current appraised value
of the FCF Units less the total outstanding balance of all principal, interest and
any other charges attributable and payable under the FCF Loan. The appraised value
of the Project shall be determined in the manner described in the FCF Legislation
and in accordance with the FCF Guidelines and DHCD policies, as applicable. DHCD may
exercise the Purchase Option by sending notice to the Developer/owner of its
intention to exercise the Purchase Option by certified mail and recording/filing a
copy of such notice in the Registry of Deeds or Registry District of the Land Court
within 120 days after the expiration of the term of the affordability restrictions
imposed by the Land Use Restriction. If DHCD fails to exercise the Purchase Option
by such option exercise deadline, DHCD shall automatically be deemed to have waived
the Purchase Option, and such Purchase Option shall automatically
terminate.
(b)
First Refusal
Option. If at any time the Developer/owner of a Project funded under
the FCF 3 or FCF 4 Legislation wishes to sell, transfer or otherwise dispose of
(transfer) the Project, or any part thereof, prior to DHCD's exercise of the
Purchase Option, and receives a bona fide third-party offer for the
same, the Developer/owner shall send a notice to DHCD by regular and certified mail,
return receipt requested, setting forth the Developer/owner's intention to transfer
all or part of the Project and the terms of any bona fide offer by
a third-party to purchase the Project (or the applicable portion(s) thereof). If at
any time the Developer/owner of a Project funded under the FCF 5 or FCF 6
Legislation wishes to sell, transfer or otherwise dispose of (transfer) FCF Units,
prior to DHCD's exercise of the Purchase Option, and receives a bona
fide third-party offer for the same, the Developer/owner shall send a
notice to DHCD by regular and certified mail, return receipt requested, setting
forth the Developer/owner's intention to transfer all or some of the FCF Units and
the terms of any bona fide offer by a third party to purchase the
FCF Units. DHCD shall have the right to purchase the Project (or the portion(s)
thereof to which such offer relates) at the same price and on the same terms as
those contained in such offer. DHCD may exercise the First Refusal Option by sending
notice to the Developer/owner of its intention to exercise the First Refusal Option
by certified mail and recording/filing a copy of such notice in the Registry of
Deeds or Registry District of the Land Court within 120 days after its receipt of
the Developer/owner's notice. If DHCD fails to exercise the First Refusal Option by
such option exercise deadline, DHCD shall automatically be deemed to have waived the
First Refusal Option, and such First Refusal Option shall automatically terminate,
(but only with respect to the portion(s) of the property to which the third-party
offer relates); however, if the sale contemplated in the third-party offer is not
effected on the same terms and conditions as those contained in the offer, as
described in the Developer/owner's notice, within six months after DHCD's receipt of
the Developer/owner's notice, or if any of the material terms of such third-party
offer shall be revised, DHCD's First Refusal Option shall be revived. If a
Developer/owner's notice relates to a proposed transfer of only a portion of the
Project for Projects funded under the FCF 3 or FCF 4 Legislation, or only some but
not all of the FCF Units, for Projects funded under the FCF 5or FCF 6 Legislation,
the First Refusal Option shall remain in effect with respect to all remaining
portions of the Project or FCF Units, as applicable.
(c)
DHCD May Assign the Purchase
Option or the First Refusal Option to a Qualified Developer. A
Qualified Developer is a Developer who:
1. is a
Nonprofit Corporation;
2. has completed
an Application with respect to its proposed purchase of the Project, in the format
specified by DHCD (the Purchase Application) (DHCD will issue a "Notice of Project
Availability" that will include instructions for completing a Purchase Application
for this purpose);
3. has been selected
to purchase the Project based on DHCD's review and underwriting of the Purchase
Application;
4. agrees that upon
purchasing the Project, it will execute a Land Use Restriction providing for the
Project to remain a Project for a term of at least 40 years; and
5. provides any additional due diligence materials
not part of the Purchase Application that may be required by
DHCD.
(d) If DHCD exercises
the Purchase Option, DHCD or its assignee shall have 120 days after the expiration
of the option exercise deadline specified in 760 CMR 19.04(7)(a) (and not less than
240 days after the expiration of the term of the affordability restrictions imposed
by the Land Use Restriction) to purchase the Project. If DHCD exercises the First
Refusal Option, DHCD or its assignee shall have 120 days after the expiration of the
option exercise deadline specified in 760 CMR 19.04(7)(b) (and not less than 240
days after DHCD's receipt of the Developer/owner's notice) to purchase the Project.
Promptly upon request by DHCD or its assignee, the owner will provide DHCD or its
assignee with such due diligence material and such opportunity to inspect the
Project as would be reasonably required by a third-party purchaser. The date for the
acquisition closing under the Purchase Option or the First Refusal Option, as
applicable, may be extended by agreement of the parties and the agreed-upon
extension shall be recorded/filed in the Registry of Deeds or Registry District of
the Land Court.
DHCD or its assignee may extend the date for the acquisition closing
to a reasonable date, if it determines that additional time is needed due to delays
in closing preparations caused by the Developer/owner. After delivering notice of
its intent to exercise the Purchase Option or First Refusal Option, DHCD may at any
time terminate its exercise of the Purchase Option or the Right of First Refusal, in
its discretion, without incurring any damages or other liability, if it determines
it is not in the best interests of DHCD to effect the purchase, (but such
termination right shall apply to DHCD only, and not to any
assignee).
(8)
Application Process. DHCD shall specify application
procedures for FCF loans and grants in the FCF Guidelines. DHCD reserves the right
to hold competitive funding rounds for FCF loans and grants.
