Current through Register Vol. 56, No. 18, September 16, 2024
(a) Prepayment of the mortgage loan made by
the Agency is prohibited, except as permitted in (b) below.
(b) Prepayment of the Agency mortgage loan
will be permitted, with the prior written approval of the Agency's Executive
Director, Deputy Executive Director, Chief Financial Officer, or Chief of Legal
and Regulatory Affairs, provided all of the following conditions are met:
1. Sponsors of projects may prepay the
mortgage at any time following the 15-year period following the date of the
mortgage closing. However, any such prepayment shall be conditioned upon the
housing sponsor's agreement that: the Agency policies on tax, insurance, and
repair and replacement reserves; the provisions of N.J.S.A. 55:14K-7b; and the
statutory provisions at
N.J.S.A.
55:14K-1et seq., and the corresponding rules
under this chapter regarding tenant income eligibility, tenant selection, rent
increases, certification/recertification of income, affirmative fair housing
marketing, transfer of ownership interests, and return on equity (except as
modified by (b)7 below) shall continue to be applicable in their entirety to
the sponsor, project and tenants residing therein until the original expiration
date of the original mortgage loan. Such prepayment shall also be conditioned
upon the agreement of the sponsor to pay the servicing fees and charges
currently being paid by the sponsor under the mortgage documents, through the
remainder of the original mortgage term, in order to cover the administrative
costs of the Agency in monitoring the statutory and regulatory controls that
will continue to apply to the project. The Agency may require housing sponsors
to execute a deed restriction or other appropriate agreement upon prepayment
whereby the sponsor acknowledges the continuing statutory and regulatory
control of the Agency and its obligation to pay fees and charges determined by
the Agency.
2. Any repairs or
improvements pursuant to
N.J.A.C.
5:80-5.4(d) must be made
prior to prepayment or an amount sufficient to fund such repairs or
improvements must be paid into an Agency-controlled escrow account or
Agency-approved construction funding account upon prepayment.
3. All fees and charges due the Agency must
be paid prior to prepayment.
4. All
supplemental financing on the project provided by the Agency or other State
agency must be prepaid, unless prohibited by the terms of that supplemental
financing or by (c) below or any other applicable law or regulation.
5. After prepayment, in implementing the
provisions of
N.J.S.A.
55:14K-7.b, the Agency will require the
following:
i. Submission of an annual
budget;
ii. Submission of annual
audited financial statements;
iii.
Annual physical inspections conducted by the Agency.
6. The Agency reserves the right to implement
any of the additional provisions of N.J.S.A. 55:14K-7b, if determined by the
Agency to be needed to preserve the financial viability of the project or its
status as a low-and moderate-income project, to maintain the physical condition
of the project or to help ensure the safety and well-being of the tenants
residing at the project.
7. After
prepayment, return on equity rules at N.J.A.C. 5:80-3 shall continue until the
expiration of the original mortgage term or until the owner funds an operating
reserve account, whichever is sooner. Upon funding of an operating reserve
account, return on equity rules shall terminate. The operating reserve shall be
equal to three months of operating expenses (for senior citizen projects) or
six months of operating expenses (for family projects), which includes debt
service and reserve payments. The three/six months of operating expenses shall
be calculated based on the Agency-approved annual budget. Once established,
interest earned on a fully-funded operating reserve account may be withdrawn by
the owner upon written request to and verification by the Agency that the
account is fully-funded. If the operating reserve is thereafter used, return on
equity rules shall be reinstituted until the operating reserve is again
fully-funded. The determination of a fully-funded operating account after its
initial establishment shall be based on the Agency-approved budget in effect at
the time the project first established the operating reserve account.
8. Additional mortgage financing placed on
the project upon prepayment, or otherwise during the Agency's continued
statutory and regulatory oversight period pursuant to (b)1 above, shall be
subject to Agency staff's prior determination of continued project financial
feasibility throughout the remainder of such period.
(c) Notwithstanding (b) above, prepayment
shall not be approved or permitted in cases that would:
1. Cause the Agency to be in default under
its obligations to the bondholders of the bonds issued to finance the
project;
2. Jeopardize the
continuing tax exempt status of the bonds; or
3
. Reduce or terminate subsidies to the project such as HUD Section
8 or Section 236, unless a reduction or termination is imposed by HUD or other
issuing authority and results in a renewal of the subsidy or in a new subsidy
to the project that will be sufficient to maintain the financial viability of
the project through the end of the original mortgage term.
(d) Upon prepayment of the Agency mortgage as
provided in (b) above, the Agency will endorse the mortgage for cancellation so
the Sponsor may cancel it of record. In addition, upon prepayment, the
statutory and regulatory controls of the Agency at
55:14K-1 et seq. and this chapter
shall terminate for the Housing Sponsor and project, except for those preserved
by (b)1 above. The termination of the Agency's statutory and regulatory
controls shall not affect the requirements, restrictions and obligations of
Housing Sponsors as mandated by N.J.S.A. 55:16-1 et seq. or any other
applicable statute under which the corporate entity of the Housing Sponsor was
created.
(e) The provisions of this
section regarding prepayment shall not apply to projects financed under the
Agency's New Jersey Urban Multi-Family Production Program (JUMPP).
(f) The provisions of this section that
impose conditions on prepayment regarding Agency policies on the insurance and
repair and replacement reserves, the provisions of N.J.S.A. 55:14K-7b, and the
regulations on transfer of ownership interests and return on equity shall not
be applicable to projects financed between October 15, 1990 and January 17,
1995.
(g) All prepayment requests
shall be accompanied by a non-refundable processing fee of $ 5,000 payable to
the Agency, except that such prepayment processing fee shall not be applicable
where the prepayment is to occur simultaneously with a transfer of ownership
necessitating a full review as set forth in this subchapter.
