New Jersey Administrative Code
Title 5 - COMMUNITY AFFAIRS
Chapter 80 - NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY
Subchapter 29 - INVESTMENT OF HOUSING PROJECT FUNDS
Section 5:80-29.1 - Permitted investments

Universal Citation: NJ Admin Code 5:80-29.1

Current through Register Vol. 56, No. 18, September 16, 2024

(a) Housing sponsors whose Agency mortgages are insured by HUD may, with prior Agency approval, invest available funds, including escrow funds, in taxable or tax-free investments permitted by HUD. To the extent that investment of specific project funds is not governed by HUD, the requirements in this subchapter as to projects subject to (b) below shall apply.

(b) Housing sponsors of all other projects, with prior Agency approval, may invest available funds, including escrow funds, in the following:

1. State of New Jersey general obligation bonds with a final maturity or average duration not to exceed seven years at the time of initial investment;

2. New Jersey Housing and Mortgage Finance Agency bonds, which shall be rated A or higher and with a final maturity or average duration not to exceed seven years at the time of initial investment;

3. Bonds of municipalities, instrumentalities or agencies of the State of New Jersey, which shall be rated A or higher and with a final maturity or average duration not to exceed seven years at the time of initial investment, and whose rating of A or higher has been confirmed within the past 12 months;

4. National municipal bond funds and New Jersey bond funds, each of which at the time of initial investment at least 80 percent of the bonds within the fund are rated A or higher or the funds' average credit quality rating is in the AA/Aa category or higher and whose ratings have been confirmed within the past 12 months. Additionally, the funds' average maturity or average duration at the time of initial investment shall not exceed seven years;

5. Interest-bearing instruments which are AAA/Aaa rated. These instruments are limited to U.S. Treasury Notes, U.S. Treasury Bills, U.S. Treasury Bonds, Federal National Mortgage Association direct debt obligations, Government National Mortgage Association direct debt obligations, and Federal Home Loan Mortgage Corporation direct debt obligations, each with a final maturity not to exceed seven years at the time of initial investment. Investments in mortgage pools of the aforementioned United States agencies are not permitted. Bond funds consisting of the instruments specified in this paragraph are limited to an average maturity or average duration not to exceed seven years at the time of initial investment;

6. Certificates of deposit with a final maturity not to exceed seven years at the time of initial investment, provided such certificates of deposit are insured in full by the Federal Deposit Insurance Corporation (FDIC);

7. Money market accounts and other bank accounts, provided such accounts are insured in full by the FDIC;

8. For projects that received Agency financing prior to August 15, 2011 and had project funds invested therein as of such date, the State of New Jersey Cash Management Fund or other similar common trust funds of which the New Jersey State Treasurer is custodian;

9. Securities and Exchange Commission-registered money market funds as defined by Rule 2a-7 under the Investment Company Act of 1940, 17 CFR § 270.2a-7, with a minimum $ 1 billion average asset size for the previous 12 months; and

10. Any other investment as permitted under (a) above.

(c) For all projects subject to (b) above, the investment of escrow funds constituting the repair and replacement reserve shall be further limited as follows:

1. Where the project's repair and replacement reserve balance is funded at a level of 50 percent or less of the amount required by the Agency, all investments shall be limited to those set forth in (b)7 through 9 above.

2. Where the project's repair and replacement reserve balance is funded at a level greater than 50 percent but less than 90 percent of the amount required by the Agency, and where 50 percent or more of the balance on hand is scheduled to be used within the next three years, at least 75 percent of investments shall be limited to those set forth in (b)7 through 9 above.

3. Where the project's repair and replacement reserve balance is funded at a level of 90 percent or greater of the amount required by the Agency, and where 50 percent or more of the balance on hand is scheduled to be used within the next three years, at least 50 percent of investments shall be limited to those set forth in (b)7 through 9 above.

4. Where the project's repair and replacement reserve balance is funded at a level greater than 50 percent but less than 90 percent of the amount required by the Agency, and where less than 50 percent of the balance on hand is scheduled to be used within the next three years, at least 25 percent of investments shall be limited to those set forth in (b)7 through 9 above.

5. Where the project's repair and replacement reserve balance is funded at a level of 90 percent or greater of the amount required by the Agency, and where less than 50 percent of the balance on hand is scheduled to be used within the next three years, at least 10 percent of investments shall be limited to those set forth in (b)7 through 9 above.

6. The determination of the level and scheduled use of repair and replacement reserve funds over the next three-year period shall be based on the most recent Agency-approved repair and replacement funding schedule.

(d) For all projects subject to (b) above, funds constituting tax escrow accounts, insurance escrow accounts, and escrow accounts consisting of residual receipts as defined at 5:80-30.1 shall be limited to those investments as set forth in (b)7 through 9 above.

(e) For all projects subject to (b) above, temporary escrow accounts, such as construction-related escrow accounts and working capital accounts, shall be limited to those investments as set forth in (b)7 through 9 above.

(f) For all projects subject to (b) above, at least 10 percent of investments of long-term escrow accounts, such as Development Cost Escrow (DCE), Community Development Escrow (CDE), Project Subsidy Reserve (PSR), and Reserve for Bonded Projects, shall be limited to those investments as set forth in (b)7 through 9 above.

(g) For all projects subject to (b) above, operating account funds may only be invested as set forth in (b)7 above, except that investments may be made as set forth in (b)1 through 6 and 9 and 10 above, where and only to the extent that funds in the operating account are available after payment of debt service, including any arrears and other operating expenses, and provided that all escrows are funded as required by the most recent Agency-approved project budget. Notwithstanding anything to the contrary in this subchapter, requests for investment of operating account funds may be made at any time by a housing sponsor to the director of the Agency's Property Management Division (Director) and shall not be subject to (m) below.

(h) Changes to escrow investments shall be limited to no more often than once annually.

(i) At loan closing, the housing sponsor shall complete an application for the investment of escrow account funds, which shall initially be limited to investments specified in (b)7 and 9 above, with the Agency's designated investment services firm. Housing sponsors of projects having already received Agency financing that seek to invest escrow funds to the extent permitted by this subchapter shall complete or have completed such application with the Agency's designated investment services firm. All required monthly escrow deposits shall thereafter be initially deposited into those fund(s) specified in (b)7 and 9 above.

(j) Once the Agency has approved a project's initial repair and replacement reserve funding schedule, the housing sponsor may submit a written request to the Director to invest escrow funds in investments specified in (b)1 through 6 and 10 above, as permitted by this subchapter. The project's escrow funds must be invested with the Agency's designated investment services firm, not in the New Jersey Cash Management Fund, at the time of such request in order for the request to be considered by the Agency. Agency staff shall determine, pursuant to the standards set forth in (b) through (h) above, the amounts of escrow funds which are the subject of the request that shall be limited to the investments set forth in (b)7 through 9 above, and shall determine whether the investments selected by the housing sponsor are permitted pursuant to (b) above.

(k) The rating designation in (b) above shall be from either Standard and Poor's or Moody's Investor Services.

(l) Agency staff, at the sponsors' written request, shall respond within 30 days after the complete request is received. The sponsors shall submit a certification that the investments requested are within the permissible investments listed in these rules.

(m) Investment of escrow funds shall be made by an Agency designated investment services firm, except as to permitted investments under (b)8 above, which shall be made by the Agency.

(n) Any transaction costs related to the investment of project funds will be the responsibility of the applicable housing sponsor.

(o) Neither the Agency nor its members, officers, agents, servants or employees shall be responsible for any loss in the value of, or to replace or replenish any account that has sustained a loss as the result of, a permitted investment.

Disclaimer: These regulations may not be the most recent version. New Jersey may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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