Sec.

Subpart B-Contract Rights and Obligations

1100.251 Incorporation by reference.

AUTHORITY: The provisions of this Part 1100 issued under sec. 1101, 80 Stat. 1255, 1274; 12 U.S.C. 1749aaa-1 et seq.

SOURCE: The provisions of this Part 1100 appear at 32 F.R. 6571, Apr. 28, 1967, unless otherwise noted.

Subpart A-Eligibility Requirements DEFINITIONS

§ 1100.1 Definitions.

As used in this subpart, the term:

(a) "Act", "Commissioner", "mortgagor", and "mortgagee" shall have the same meaning as prescribed in § 207.251 of this chapter.

(b) "Group practice facility" means an establishment designed for operation primarily by a medical or dental group which provides preventive, diagnostic, and treatment services to ambulatory patients under the professional supervision of persons licensed to practice dentistry, medicine, or optometry in the State.

(c) "Group practice unit” means a private nonprofit organization of one of the following types:

(1) An organization which undertakes to provide (directly or through arrangements with a medical or dental group) complete dental, medical, or optometric care, or any combination thereof. It may also provide health insurance to members or subscribers on a group practice prepayment basis.

(2) An organization established for the purpose of providing dental, medical, or optometric care or for performing functions related to such care through arrangements for the use of the group practice facility by a medical or dental group.

(d) "Medical or dental group" means a partnership or other association of persons licensed to practice dentistry, medicine, or optometry in the State who. as their principal professional activity and as a group responsibility, engage in the coordinated practice of their profession in one or more group practice facilities. The group shall share common overhead expenses, shall jointly establish medical and other records, and shall jointly use substantial portions of the equipment and the services of professional, technical, and administrative

staffs. It shall be composed of such types of professional personnel and shall make available such health services as may be required to meet the standards prescribed by the Commissioner.

(e) "Mortgage" means such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate under the laws of the State in which the real estate is located, together with any credit instrument or instruments secured thereby. The mortgage may be in the form of one or more trust mortgages or mortgage indentures or deeds of trust securing notes, bonds, or other credit instruments; and by the same instrument or by a separate instrument, it may create a security interest in initial equipment whether or not the equipment is attached to the realty.

(f) "Nonprofit organization” means a corporation, association, foundation, trust, or other organization no part of the net earnings of which may lawfully inure to the benefit of any private shareholder or individual. The provision by a nonprofit organization of personal health services to members or subscribers or their dependents under a plan which may also provide for other services or insurance benefits, shall not make the organization ineligible under this defini

(c) Commitment-(1) Conditions of commitment. Upon approval of an application for insurance, a commitment shall be issued by the Commissioner setting forth the terms and conditions upon which the mortgage will be insured.

(2) Types of commitments. The commitment may provide for the insurance of advances of mortgage money made during construction or may provide for the insurance of the mortgage after completion of the improvements.

(3) Term of commitment. (i) If the commitment fee is paid as required, a commitment shall have a term which is determined as follows:

(a) A commitment to insure advances shall be effective for a period of not more than 180 days from the date of issuance. (b) A commitment to insure upon completion shall be effective for a designated term within which the mortgagor is required to begin construction, and if construction is begun as required, the commitment shall be effective for such additional period, estimated by the Commissioner, as will allow for completion of construction.

(ii) The term of a commitment may be extended in such manner as the Commissioner may, from time to time, prescribe.

(iii) If the payment of a commitment fee is not received by the Commissioner within 30 days after the date of issuance of a commitment, the commitment shall expire on the 30th day.

(d) Commitment fee. A commitment fee which, when added to the application fee, will aggregate $3 per thousand dollars of the face amount of the mortgage set forth in the commitment, shall be paid within 30 days after the date of the commitment.

(e) Inspection fee. The commitment may provide for the payment of an inspection fee in an amount not to exceed $5 per thousand dollars of the commitment. If an inspection fee is required, it shall be paid as follows:

(1) If the case involves the insurance of advances, it shall be paid at the time of initial endorsement.

(2) If the case involves insurance upon completion, it shall be paid prior to the date construction is begun.

(f) Fees on increases—(1) Increase in commitment prior to endorsement. Upon an application, filed prior to initial endorsement (or prior to endorsement in a case involving insurance upon completion), for an increase in the amount of an outstanding commitment, an addi

tional application fee of $1.50 per thousand dollars computed upon the amount of the increase requested shall accompany the application. Any increase in the amount of a commitment shall be subject to the payment of an additional commitment fee which, when added to the additional application fee, will aggregate $3 per thousand dollars of the amount of the increase. The additional commitment fee shall be paid within 30 days after the date of the issuance of the amended commitment. If the additional commitment fee is not paid within 30 days, the commitment for the increased amount will expire and the previous commitment will be reinstated. If an inspection fee was required in the original commitment, an additional inspection fee shall be paid in an amount not to exceed $5 per thousand dollars of the amount of increase in commitment. Where insurance of advances are involved, the additional inspection fee shall be paid at the time of initial endorsement. Where insurance upon completion is involved, the additional inspection fee shall be paid prior to the date construction is begun or if construction has begun, it shall be paid with the application for increase.

(2) Increase in mortgage between initial and final endorsement. Upon an application, filed between initial and final endorsement, for an increase in the amount of the mortgage, either by amendment or by substitution of a new mortgage, an additional application fee of $1.50 per thousand dollars computed on the amount of the increase requested shall accompany the application. The approval of any increase in the amount of the mortgage shall be subject to the payment of an additional commitment fee which, when added to the additional application fee, will aggregate $3 per thousand dollars of the amount of the increase granted. If an inspection fee was required in the original commitment, an additional inspection fee shall be paid in an amount not to exceed $5 per thousand dollars of the amount of the increase granted. The additional commitment and inspection fees shall be paid within 30 days after the increase is granted.

(3) Loan to cover operating losses. In connection with a loan to cover operating losses during the first two years following completion of the project, a combined application and commitment fee of $3 per

thousand dollars of the amount of the loan applied for shall be submitted with the application for the commitment. No inspection fee shall be required.

(g) Reopening of expired commitments. An expired commitment may be reopened if a request for reopening is received by the Commissioner within 90 days of the expiration of the commitment. The reopening request shall be accompanied by a fee of 50 cents per thousand dollars of the amount of the expired commitment. A commitment which has expired because of failure to pay the commitment fee may be reopened only upon payment of the commitment fee and the reopening fee. If the reopening request is not received by the Commissioner within the required 90-day period, a new application, accompanied by an application fee, must be submitted. If a commitment for an increased amount has expired because of failure to pay an additional commitment fee based on the amount of the increase, the reopening fee shall be computed on the basis of the amount of the commitment increase rather than on the amount of the original commitment.

(h) Transfer fee. Upon application for approval of a case involving the transfer of physical assets or involving the substitution of mortgagors, a transfer fee of 50 cents per thousand dollars shall be paid on the original face amount of the mortgage.

(i) Refund of fees. If an application is rejected before it is assigned for processing, or in such other instances as the Commissioner may determine, the entire application fee or any portion thereof may be returned to the applicant. Commitment, inspection and reopening fees may be refunded, in whole or in part, if it is determined by the Commissioner that there is a lack of need for the hous ing or that the construction or financing of the project has been prevented because of condemnation proceedings or other type of legal action taken by a governmental body or public agency, or in such other instances as the Commissioner may determine. A transfer fee may be refunded only in such instances as the Commissioner may determine.

[34 F.R. 17518, Oct. 30, 1969, as amended at 35 F.R. 6648, Apr. 25, 1970]

§ 1100.11 Maximum fees and charges by mortgagee.

The mortgagee may collect from the mortgagor the amount of the fees pro

vided for in this subpart. The mortgagee may also collect from the mortgagor an initial service charge in an amount not to exceed 2 percent of the original principal amount of the mortgage to reimburse the mortgagee for the cost of closing the transaction. Any additional charges or fees collected from the mortgagor shall be subject to prior approval of the Commissioner.

[34 F.R. 17519, Oct. 30, 1969]

§ 1100.12 Unavailability of conventional financing.

The application for insurance shall be accompanied by such evidence as the Commissioner may require to establish that the mortagagor or sponsor has been unable to obtain an uninsured mortgage loan for financing the proposed project with terms comparable to those prescribed in §§ 1100.30 through 1100.50 for a mortgage insured under this subpart. § 1100.15 Extension of commitment.

When the mortgagee has failed to take action within the period of time required in order to prevent the expiration of a commitment or in order to reopen an expired commitment, the Commissioner may extend such period and may retroactively reinstate or reopen such commitment.

ELIGIBLE MORTGAGORS

§ 1100.20 Eligible mortgagors.

In order to be eligible as a mortgagor under this subpart, the applicant shall establish to the satisfaction of the Commissioner that it qualifies as a group practice unit as that term is defined in § 1100.1(c).

ELIGIBLE MORTGAGEES

§ 1100.25 Qualifications for lenders.

The provisions of §§ 203.1 through 203.4 of this chapter and §§ 203.6 through 203.9 of this chapter shall govern the eligibility, qualifications and requirements of mortgagees under this subpart. MAXIMUM MORTGAGE AMOUNTS

gage shall involve a principal obligation not in excess of 90 percent of the Commissioner's estimate of the replacement cost of the property when construction or rehabilitation is completed. The cost of the property may include the land and proposed physical improvements, equipment, utilities within the boundaries of the property, architect's fees, taxes, and interest accruing during construction, and other miscellaneous charges approved by the Commissioner as incident to the construction or rehabilitation. [35 F.R. 289, Jan. 8, 1970]

§ 1100.35 Adjusted mortgage amount— rehabilitation projects.

In addition to meeting the dollar and loan-to-value limitations set forth in §§ 1100.30 and 1100.32, a mortgage financing the rehabilitation of existing improvements shall be subject to the following additional limitations:

(a) Property held unencumbered. If the mortgagor is the fee simple owner of the property and the ownership is not encumbered by an outstanding indebtedness, the mortgage shall not exceed 100 percent of the Commissioner's estimate of the cost of the proposed rehabilitation. (b) Property subject to existing mortgage. If the mortgagor owns the property subject to an outstanding indebtedness, which is to be refinanced with part of the insured mortgage, the mortgage shall not exceed the total of the following:

(1) The Commissioner's estimate of the cost of rehabilitation, plus

(2) Such portion of the outstanding indebtedness as does not exceed 90 percent of the Commissioner's estimate of the fair market value of such land and improvements prior to rehabilitation.

(c) Property to be acquired. If the property is to be acquired by the mortgagor and the purchase price is to be financed with a part of the insured mortgage, the mortgage shall not exceed 90 percent of the total of the following: (1) The Commissioner's estimate of the cost of rehabilitation, plus

(2) The actual purchase price of the land and improvements or the Commissioner's estimate (prior to rehabilitation) of the fair market value of such land and improvements, whichever is the lesser. § 1100.37 Reduced mortgage amount— leaseholds.

If the mortgage is on a leasehold estate rather than a fee simple holding, the

maximum mortgage amount based upon the limitations of this part is subject to reduction by an amount equal to the capitalized value of the ground rent.

§ 1100.38 Loans to cover 2-year operating loss.

(a) Operating loss determination. When the Commissioner determines that an operating loss has occurred during the first 2 years following completion of the project, he may, in his discretion, accept for insurance under this part, a loan to cover such loss. For the purposes of this section, an operating loss shall occur when the Commissioner determines that the total of the taxes, interest on the mortgage debt, mortgage insurance premiums, hazard insurance premiums, and the expense of maintenance and operation of the project (excluding depreciation) exceeds the project income.

(b) Security instrument. The loan shall be secured by an instrument in a form approved by the Commissioner for use in the jurisdiction in which the project is located.

(c) Maximum interest rate. The loan may bear interest at such rate as may be agreed upon by the mortgagee and the mortgagor, but in no case shall such rate exceed the rate in effect under § 1100.45 on the date the commitment is issued. Interest shall be payable in monthly installments on the principal then outstanding.

(d) Maturity. The loan shall be limited to a term not exceeding the unexpired term of the original mortgage. [33 F.R. 11169, Aug. 7, 1968]

§ 1100.40 Mortgage provisions.

All of the provisions of § 207.3 of this chapter apply to mortgages insured under this subpart. These provisions prescribe the mortgage form and the obligation of the mortgagee for disbursing the mortgage proceeds.

(1) Letters issued by the Secretary before December 2, 1970 inviting submission of an application for commitment.

(2) Applications for commitment received by the Secretary before December 2, 1970.

(b) Interest shall be payable in monthly installments on the principal amount of the mortgage outstanding on the due date of each installment.

(Sec. 1104, 80 Stat. 1275; 12 U.S.C. 1749aaa-3) [33 F.R. 7082, May 11, 1968, as amended at 35 F.R. 18524, Dec. 5, 1970]

§ 1100.47 Maximum mortgage maturity.

The mortgage shall have a maturity not to exceed 25 years from the date of the beginning of amortization of the mortgage, and shall contain amortization or sinking fund provisions satisfactory to the Commissioner.

[33 FR 11170, Aug. 7, 1968]

§ 1100.50 Payment requirements.

The mortgage shall provide for payments on the first day of each month on account of interest and for payments to principal in accordance with an amortization plan or sinking fund provisions agreed upon by the mortgagor, the mortgagee and the Commissioner.

§ 1100.52 Application of payments.

All payments to be made by the mortgagor to the mortgagee shall be added together and the aggregate amount thereof shall be paid by the mortgagor each month in a single payment. The mortgagee shall apply each payment received to the following items in the order set forth:

(a) Premium charges under the contract of insurance.

(b) Ground rents, taxes, special assessments, and fire and other hazard insurance premiums.

(c) Interest on the mortgage. (d) Amortization of the principal of the mortgage.

§ 1100.55 Accumulation of accruals.

All of the provisions of § 207.12 of this chapter apply to mortgages insured under this subpart. These provisions relate to payments to be made by the mortgagor to be accumulated by the mortgagee for paying the annual mortgage insurance premium, ground rents, taxes, water rates, special assessments, and fire and other hazard insurance premiums.