(1) Mortgage Form. The mortgage shall be
executed on a form approved by the Agency. It shall be a first lien on the
property, be consistent with Tennessee Law, and conform with the standards
prescribed by the Agency, and qualified insurer when applicable.
(2) Mortgage Provisions. The approved
mortgage form shall provide for the following:
(a) Late Charge. The mortgage may provide for
the collection by the Agency or its servicing agent of a late charge, not to
exceed 4 cents for each dollar of each monthly payment more than 15 days in
arrears, to cover the extra expenses involved in handling delinquent
payment.
(b) Application of
Payment. All monthly payments to be made by the mortgagor to the Agency or its
servicing agent shall be added together and the entire aggregate amount thereof
shall be paid by the mortgagor each month in a single payment. The Agency or
its servicing agent shall apply the aggregate payment to the following items in
the order set forth:
1. Taxes, special
assessments, and property insurance premiums
2. Interest on the mortgage loan
3. Amortization of the principal of the loan
Any deficiency in the amount of any aggregate monthly payment
shall, unless made good by the mortgagor prior to, or on, the due date of the
next aggregate payment, constitute a default under the mortgage.
(c) Escrow Payments. In
addition to the payment of the principal and interest, the borrower shall pay a
one-twelfth (1/12) pro rata share of the annual real estate taxes, hazard
insurance, and any other items the Agency deems appropriate. These payments
shall be deposited in federally-insured depositories or in such other
depositories insured by a deposit insurer approved by the Tennessee
Commissioner of Insurance.
(d)
Prepayment Penalty. The Agency may establish a prepayment penalty which it
deems satisfactory to protect the Agency's financial obligations with respect
to such principal prepayments pursuant to the Agency's contractual arrangements
with the purchasers and holders of its notes or bonds; provided, however, that
any such prepayment penalty shall not be greater than the maximum amount
provided therefor in the Agency's mortgage loan commitment as to such housing
unit issued to the person or family of low or moderate income intending to
effect transfer of ownership of such housing unit.
(e) Mortgage Insurance. Each mortgage shall
provide that the mortgagor will furnish and continually maintain and pay for
insurance or other guaranty on the mortgage. Such insurance or guaranty shall
be written by qualified insurers as defined under Rule 0770-1-2-.03(h) of these
regulations, in amounts and on terms and conditions satisfactory to the Agency
and must be maintained until the loan is repaid, or until such other time
stipulated by the Agency. This requirement shall not apply to those qualified
mortgagors who make a cash down payment of 25% of more in equity of the
property based on its appraisal value or the sale price, whichever is the
lesser amount.
(f) Property
Insurance. Each mortgage shall provide that the mortgagor will furnish and
continually maintain and pay for property insurance on the home. Such insurance
shall be written by companies, in amounts and on terms and conditions
satisfactory to the Agency and the applicable insurer, and must be maintained
until the loan is repaid. [See 0770-1-2-.13(10).] Pro rata payments to keep the
property insurance in force will be paid into an escrow account as provided for
in 0770-1-2-.07(1) (c).
(g) The
Agency may require an acceleration clause in the mortgage to become effective
if the mortgagor ceases to use the residence as his or her principal residence
as provided in Rule 0770-1-2-.04(b). For purposes of this rule if the owner
leases the residence it shall no longer be deemed to be used as a principal
residence, execpt where the owner is still residing therein.
(h) Additional Provisions. Such additional
provisions necessary to protect the interest of the Agency may be included in
its Rule of Practice by the Agency from time to time.
(3) Maximum Mortgage Amount. No mortgage loan
shall exceed 95% of the appraised value of the property or its sales price,
whichever is lower; plus an amount equal to initial payments for taxes,
property insurance, closing costs, other prepaid expenses and such other
charges and fees as are approved by the Agency. The Executive Director shall
determine and approve the amount of each mortgage loan on a case-by-case basis.
The amount shall be based on the applicant's ability to make the prescribed
down payment and monthly payments, the applicant's ability to receive mortgage
insurance when applicable, and the value and condition of the home. The
provisions of this subparagraph are further limited by the provisions of Rule
0770-1-2-.08(1) (Mortgagor's Minimum Investment).
