Rhode Island Code of Regulations
Title 825 - Housing and Mortgage Finance Corporation
Chapter 30 - Rules Relative to Multifamily Loan Programs
Subchapter 00 - N/A
Part 1 - Rental Housing Production and Rehabilitation Program (825-RICR-30-00-1)
Section 825-RICR-30-00-1.7 - CERTAIN TERMS AND CONDITIONS OF LOANS; REQUIREMENTS AT INITIAL AND PERMANENT CLOSING

A. Loan Term. The term of each Mortgage Loan shall be established by the Corporation on a case by case basis but shall not, in any event, exceed a date forty (40) years from the due date of the first payment which commences the permanent amortization of the Mortgage Loan.

B. Interest Rate. The interest rate on Mortgage Loans shall be established by the Corporation from time to time and made available by Program Bulletin.

C. Loan to Value Ratio. The total principal indebtedness, excluding Targeted Loan Indebtedness, of a Housing Sponsor to the Corporation on any Development at the Initial Loan Closing shall not exceed 90% of the Appraised Value of the Development. To the extent permitted by the Act, the Corporation may, on a case by case basis, allow the total principal indebtedness to exceed said amount.

D. Equity Contribution Requirement. Unless otherwise determined by the Corporation in accordance with the Act, no Development shall be considered for financing unless the Housing Sponsor shall have contributed equity to the Development equal to not less than 10% of the Total Development Cost. The equity requirement may be satisfied by a contribution in cash or real property from whatever source, including proceeds of a loan or loans, as long as such loan or loans are subordinated to the Corporation's mortgage(s); provided, however, that no equity contributions of real property shall satisfy this requirement unless the Corporation shall have received an appraisal satisfactory to the Corporation respecting the value of such real estate by a certified, independent real estate appraiser approved by the Corporation. The cost of such appraisal shall be borne by the Housing Sponsor.

E. Calculation of Equity. At the time the Corporation makes the final advance under the Mortgage Loan, the Corporation shall determine the Housing Sponsor's Equity in the Housing Development in accordance with the Act and shall provide the Housing Sponsor with written notice of the Equity established within sixty (60) days of the date of the final advance. Except as otherwise provided in § 1.8 of this Part, the Equity established shall remain constant during the term of the Mortgage Loan.

F. Limitation of Return on Equity. Each year, the return on equity contributed by a Housing Sponsor shall be limited to not more than the average yield per annum on thirty (30) year United States Treasury Bonds for the immediately preceding calendar year plus 5% unless a lesser return is specified in the regulatory agreement for the development.

G. Working Capital/Latent Defects Reserve. For mortgage loans to finance new construction or rehabilitation, the Corporation may require a Housing Sponsor to create under the control of the Corporation, by cash or by irrevocable letter of credit, a fund equal to 2.5% of the Mortgage Loan to cover any deficiency in the construction or rehabilitation of the Development. Such fund shall be retained by the Corporation for a period of 12 months after the Final Closing to cover latent defects in the construction improvements, operating deficiencies, repairs and cost increases resulting from change orders.

H. Residual Receipt Account. Income in excess of the permitted return on equity shall be maintained by the Corporation in a Residual Receipt Account or such other accounts as may be required by the Corporation to insure the continued affordability and financial stability of the Development. The Corporation may require funds in the Residual Receipt Account to be used for maintenance and repairs to the Development at any time or times prior to repayment of all amounts due the Corporation under the loan documents to ensure that the Development will be maintained and operated in a fair, decent, safe and sanitary manner. All funds remaining in the Residual Receipt Account shall be the property of the Housing Sponsor upon payment in full of all amounts due under the loan documents unless otherwise provided for in the loan documents.