Code of Massachusetts Regulations
760 CMR - HOUSING AND LIVABLE COMMUNITIES, EXECUTIVE OFFICE OF
Title 760 CMR 60.00 - Community-based housing fund program
Section 60.04 - Type of Loans, Loan Terms, Loan Conditions

Universal Citation: 760 MA Code of Regs 760.60

Current through Register 1531, September 27, 2024

(1) Loan Types. Eligible Projects may receive CBH assistance in three areas: acquisition loans, construction/rehabilitation loans, and permanent loans. All loans will be structured as Deferred Payment Loans (DPL). Developers shall complete the Application process in accordance with the CBH Guidelines.

(2) Loan Terms. All loans under the CBH program shall be made upon the following terms and such other terms as are included in the CBH 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 approved by DHCD

(b) Loan Amount.
1. The amount of a CBH Loan shall be set by DHCD in accordance with the CBH Guidelines. A CBH Loan shall not exceed 50% of the Total Development Cost of the Eligible Project (or the portion of the Eligible Project eligible under the CBH Program);

2. DHCD may establish a maximum percentage of the Total Development Cost and dollar limits (per unit or per Eligible Project, or both) in the CBH Guidelines, to which the loan would also be subject.

(c) Loan Period. The original term of a CBH 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 DHCD, in consultation with EOHHS, shall have determined that there still exists a need for such housing, the Project continues to meet the CBH Program requirements and the requirements for an extension under the CBH Legislation, 760 CMR 60.00, the CBH Guidelines, and the CBH Loan documents for such loan, including the continuing applicability of the Land Use Restriction for the duration of the loan term, as so extended.

(d) Interest Rate. Interest rates for the Loans shall be fixed at rates determined by DHCD, in consultation with the Office of the Treasurer of the Commonwealth.

(e) Loan Payments. Because all CBH Loans are structured as DPLs, payments of principal and any applicable interest will be deferred for the loan period, unless either of the following occurs:
1. The Project and/or the borrower of the CBH Loan is in default of the terms of the CBH Loan; or

2. Except with respect to loans granted under the CBH 3 or CBH 4 Legislation, the Project supported by the CBH Loan has Gross Cash Receipts in any fiscal year that exceed its Gross Cash Expenditures by 105% or more, in which event within 45 days after the end of each Project's fiscal year, the borrower of the CBH Loan 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 60.04 shall be applied to the outstanding principal balance.

(f) Land Use Restriction. The Developer of the Eligible Project shall execute and record at the applicable Registry of Deeds (and/or Registry District of the Land Court) a Land Use Restriction. If the Developer is not the owner of the real property on which the Eligible Project is located, the owner shall also execute (or, in the discretion of DHCD or the Financial Intermediary, acknowledge and accept) the Land Use Restriction. The Land Use Restriction shall only be released:
1. upon:
a. payment in full of all amounts due under the CBH 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

b. the written determination by the Secretary of EOHHS that there is no longer a need to maintain the Project's use as Community-based Housing for PCEs; or

2. upon:
a. foreclosure of the 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 CBH mortgage loan at the time of loan closing, or to which the CBH mortgage loan has been duly subordinated; and

b. the written determination 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; provided, however that if the Secretary of EOHHS fails to notify the foreclosing mortgagee of the identity of such purchaser or manager by the later of 30 days after EOHHS has received notice of such foreclosure action, or 60 days prior to such foreclosure sale by the foreclosing mortgagee, the Land Use Restriction shall automatically be released if, within six months after the receipt by the Secretary of EOHHS of the foreclosure notice, the foreclosing mortgagee causes to be recorded in the applicable Registry of Deeds (and/or Registry District of the Land Court) a sworn affidavit by the foreclosing mortgagee certifying as to the Secretary's failure to meet such deadline, and the foreclosure deed to the property on which the Project is located.

(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 as are permitted by DHCD.

(h) Refinancing. A CBH Loan may be refinanced during the term of the Loan only subject to the prior written approval of DHCD and/or its Financial Intermediary.

(3) Repayment. As a condition of each CBH Loan 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 community based housing to the cost of the development through payments made by the state agency making the contract.

(4) Purchase Option and First Refusal Option. As a condition of each CBH Loan, DHCD shall be granted a purchase option and a first refusal option to purchase the Project, or if funded under the CBH 3 or CBH 4 Legislation, CBH Units, 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 CBH 1 or CBH 2 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 CBH Loan. Upon the expiration of the term of the affordability restrictions imposed in the Land Use Restriction for CBH Units developed with funds under the CBH 3 or CBH 4 Legislation, DHCD shall have an option to purchase the CBH Units from the Developer/owner at a price equal to the then-current appraised value of the CBH Units less the total outstanding balance of all principal, interest and any other charges attributable and payable under the CBH Loan. The appraised value of the Project shall be determined in the manner described in the CBH Legislation and in accordance with the CBH 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 CHB 1 or CBH 2 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 CHB 3 or CBH 4 Legislation wishes to sell, transfer or otherwise dispose of (transfer) CBH 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 CBH Units and the terms of any bona fide offer by a third-party to purchase the CBH 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 CBH 1 or CBH 2 Legislation, or only some, but not all of the CBH Units, for Projects funded under the CBH 3 Legislation or CBH 4 Legislation, the First Refusal Option shall remain in effect with respect to all remaining portions of the Project, or CBH 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 60.04(4)(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 60.04(4)(b) (and not less than 240 days after the 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).

(5) Application Process. Application procedures for CBH Loans are specified in the appropriate CBH Guidelines. DHCD reserves the right to hold competitive funding rounds for CBH Loans.

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