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$ 1100.57 Mortgage covenants.

The mortgage shall contain covenants relating to liens, property insurance, and use of property as prescribed in $8 207.9, 207.10 and 207.16 of this chapter. $ 1100.58 Racial restriction covenant.

Under the mortgage instrument, the mortgagor shall covenant that until the mortgage has been paid in full, or the contract of insurance otherwise terminated, he will not execute or file for record any instrument which imposes a restriction upon the sale or use of the mortgaged property on the basis of race, color, or creed. This covenant shall be binding upon the mortgagor and his assigns and shall provide that upon violation thereof, the mortgagee may, at its option, declare the unpaid balance of the mortgage immediately due and payable. $1100.60 Issuance of bonds secured by

trust indenture. All of the provisions of § 207.15 of this chapter apply to mortgages insured under this subpart. These provisions relate to the issuance of bonds secured by a trust indenture. $ 1100.62 Mortgage lien.

The mortgagor shall certify at the final endorsement of the mortgage for insurance as to each of the following:

(a) That the mortgage is the first lien upon and covers the entire project including the equipment financed with mortgage proceeds.

(b) That the property upon which the Improvement have been made or constructed, and the equipment financed with mortgage proceeds, are free and clear of all liens other than the insured mortgage and such other liens as may be approved by the Commissioner.

(c) That the certificate sets forth all unpaid obligations in connection with the mortgage transaction, the purchase of the mortgaged property, the construction or rehabilitation of the project or the purchase of the equipment financed with mortgage proceeds. $ 1100.65 Prepayment privilege, pre

payment and late charges. (a) Prepayment privilege. The mortgage indebtedness shall not be prepaid in full and the Commissioner's controls shall not be terminated unless the Commissioner gives his prior consent to such prepayment.

(b) Prepayment charge. The mortgage may contain a provision for such additional charge, in the event of prepayment of principal, as may be agreed upon between the mortgagor and the mortgagee. However, the mortgagor shall be permitted to prepay up to 15 percent of the original principal amount of the mortgage in any one calendar year without any such additional charge. Any reduction in the original principal amount of the mortgage resulting from the certification of cost requirements shall not be construed as a prepayment of the mortgage.

(c) Late charge. The mortgage may provide for the collection by the mortgagee of a late charge, not to exceed two cents for each dollar of each payment to interest or principal more than 15 days in arrears, to cover the expense involved in handling delinquent payments. Late charges shall be separately charged to and collected from the mortgagor and shall not be deducted from any aggregate monthly payment. (32 F.R. 11526, Aug. 10, 1967] § 1100.67 Insured advances—building

loan agreement. Prior to the initial endorsement of the mortgage for insurance, the mortgagor and the mortgagee shall execute a building loan agreement, approved by the Commissioner, setting forth the terms and conditions under which progress payments may be advanced during construction. To be covered by mortgage insurance, each progress payment shall be approved by the Commissioner. [34 F.R. 6982, Apr. 26, 1969)

WAGE STANDARDS f 1100.70 Prevailing wage requirements.

Any contract, subcontract, or building loan agreement executed for the performance of construction of the project shall contain provisions requiring compliance with all applicable regulations of the Secretary of Labor relating to the payment of prevailing wages. In addition, a requirement shall be included that each laborer or mechanic employed on the project receive compensation at a rate not less than one and one-half times his basic rate of pay for all work time, in excess of 8 hours during any workday or in excess of 40 hours during any workweek.

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§ 1100.72 Prevailing wage determina

tion. After the filing of the application for insurance and prior to the beginning of construction, the Commissioner shall obtain from the Secretary of Labor a determination as to the wages prevailing for the various classes of laborers and mechanics in the area where the project is to be constructed. § 1100.75 Ineligible contracts.

(a) Contracts relating to the construction of the project shall not be made with a general contractor or a subcontractor (or any firm, corporation, partnership, or association in which such contractor or subcontractor has a substantial interest), the name of which is on the ineligible list of contractors or subcontractors established by the Commissioner or by the Comptroller General under the applicable regulations of the Secretary of Labor.

(b) If the Commissioner determines that a contract has been made contrary to the requirements of paragraph (a) of this section and so notifies the mortgagee, the Commissioner may refuse to insure any subsequent advances of mortgage proceeds. § 1100.77 Wage certificate.

No advance under the mortgage shall be eligible for insurance unless there is filed with the application for such advance a wage certificate as required by the Commissioner. The certificate shall state that the laborers and mechanics employed in the construction of the project have been paid not less than the prevailing wages determined by the Secretary of Labor and any overtime wages at a rate not less than one and one-half times the basic rate of pay for all work time, in excess of 8 hours during any workday, or in excess of 40 hours during any workweek.

FUNDS AND FINANCES $ 1100.85 Funds and finances—deposits

and letters of credit. (a) Deposits. Where the Commissioner requires the mortgagor to make a deposit of cash or securities, such deposit shall be with the mortgagee or a depository acceptable to the mortgagee. The deposit shall be held by the mortgagee in a special account or by the depository under an appropriate agreement approved by the Commissioner.

(b) Letter of credit. Where a lett of credit is acceptable to the Commi sioner in lieu of deposit of cash or seci rities, the letter of credit shall be uncoj ditional and irrevocable. The letter credit shall be issued to the mortgag by à banking institution. The mor gagee shall be responsible to the Con missioner for collection under the lett of credit. In the event a demand f payment under the letter of credit is n immediately met, the mortgagee she forthwith provide a cash deposit equiv: lent to the undrawn balance of the lett of credit. $ 1100.87 Funds and finances offs

utilities and streets. The Commissioner shall require assu ance of completion of offsite public uti ities and streets in all cases, except whe a municipality or other public body h by agreement (acceptable to the Con missioner) agreed to install such uti ities and streets without cost to ti mortgagor. Where such assurance is r quired, it shall be either in the form a cash escrow deposit or the retenti of a specified amount of mortgage pr ceeds by the mortgagee. If a cash escro is used, it shall be deposited with tl mortgagee or with an acceptable trust or escrow agent designated by the mor gagee. If mortgage proceeds are use the mortgagee shall retain under tern approved by the Commissioner, rath than disburse at the initial closing of th mortgage, a portion of the mortgage pri ceeds allocated to land in the projet analysis. As additional assurance, th Commissioner may also require a suret company bond or bonds. [35 F.R. 13732, Aug. 28, 1970) $ 1100.90 Funds and finances-insure

advances—general requirements. (a) Establishment of funds. If th commitment provides for insurance advances during construction, the mort gagor shall, prior to initial endorsement make each of the following deposits:

(1) An amount determined by th Commissioner as sufficient (when adde to the proceeds of the insured mortgage to assure completion of the project an to pay the initial service charge, th carrying charges, and the legal and or ganization expenses incident to the proj ect. The deposit shall be in cash ani shall be held by the mortgagee unde an appropriate agreement, approved bs the Commissioner, requiring that prio

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to the advance of any mortgage money, all the cash be disbursed for work and material on the physical improvements, and for any other charges and expenses which are payable.

(2) An amount representing all fees and charges to be paid by the mortgagor in connection with financing which are in excess of the initial service charge and which have been approved by the Commissioner.

(b) Deposit and use of funds. Unless other arrangements acceptable to the Commissioner are made, the funds referred to in paragraph (a) of this section shall be subject to the provisions of $ 1100.85 (a).

(c) Letter of credit. The mortgagee may accept, in lieu of a cash deposit required by paragraph (a) (2) of this section, a letter of credit as provided in $ 1100.85(b). $ 1100.92 Funds and finances-insured

advances—working capital. (a) The amount of working capital, if any, required by the Commissioner to be deposited by the mortgagor with the mortgagee or in a depository satisfactory to the mortgagee and under its control, shall not exceed 2 percent of the original amount of the mortgage. Disbursement from such deposit shall be made only in a manner prescribed by the Commissioner.

(b) The mortgagee may accept, in lieu of a cash deposit required by paragraph (a) of this section, an unconditional irrevocable letter of credit issued to the mortgagee by a banking institution. In the event a demand under the letter of credit is not immediately met, the mortgagee shall forthwith provide cash equivalent to the undrawn balance thereunder. $ 1100.95 Funds and finances-insured

advances—assurance of completion. (a) In general. The mortgagor shall furnish assurance of completion of the project, in the form of a personal indemnity agreement, a surety company bond or bonds, a cash escrow deposit, or a letter of credit, as required by the Commissioner. The types of assurance to be furnished are as follows:

(1) Where the estimated cost of construction or rehabilitation is $200,000 or less, assurance will be accepted in the form of a personal indemnity agreement executed by the principal officers,

directors, stockholders, or partners or individuals operating as the general contractor.

(2) Where the estimated cost of construction or rehabilitation is more than $200,000 or where such cost less than $200,000 and personal indemnity agreement is not executed, assurance shall be by a surety company bond or bonds, a cash escrow deposit, or a letter of credit, the amount of which shall be prescribed by the Commissioner.

(b) Indemnity agreement and bond requirements. The personal indemnity agreement and the bonds shall be on forms approved by the Commissioner. The surety company executing a bond must be satisfactory to the Commissioner.

(c) Escrow deposit requirements. The escrow deposit shall consist of cash, securities of the United States, or securities which are fully guaranteed by the United States as to principal, except that FHA debentures may not be used for such purpose. The deposit shall meet the requirements of § 1100.86(a).

(d) Letter of credit requirements. The letter of credit shall meet the requirements of § 1100.85(b). (32 F.R. 6571, Apr. 28, 1967, as amended at 33 F.R. 15591, Oct. 22, 1968; 35 F.R. 6648, Apr. 25, 1970]

SUPERVISION OF MORTGAGOR 1100.100 Supervision of mortgagor

form of regulation. The Commissioner may regulate and restrict the mortgagor as long as the Commissioner is the insurer or reinsurer of the mortgage or while the Secretary is the holder of the mortgage. Such regulation or restriction may be in the form of a regulatory agreement, corporate charter or such other means as the Commissioner approves. $ 1100.102 Supervision of mortgagor

maintenance of project. The mortgagor shall maintain the project's grounds and buildings and the equipment financed with mortgage proceeds in good repair. It shall promptly complete such repairs and maintenance as the Commissioner considers necessary and required. $ 1100.105 Supervision of mortgagor

books and accounts. The books and accounts of the mortgagor relating to the operation of the physical facilities of the project (exclusive of the books and records relating to the group practice of medicine, dentistry, or optometry) shall be established and maintained in a manner satisfactory to the Commissioner. They shall be kept in accordance with the requirements of the Commissioner so long as the mortgage is insured by the Commissioner or the mortgage is held by the Secretary. The mortgagor shall file with the Commissioner such financial reports as the Commissioner may require. § 1100.107 Supervision of mortgagor

inspection of facilities by Commis

sioner. The mortgagor's property, equipment, buildings, plans, offices, apparatus, devices, books, contracts, records, documents, and papers relating to the operation of the physical facilities of the project (exclusive of the books and records relating to the group practice of medicine, dentistry or optometry) shall be subject to inspection and examination by the Commissioner or his duly authorized representative at all reasonable times. § 1100.110 Supervision of mortgagor

control over surplus cash. Surplus cash acquired by the mortgagor from the operation of the project may be used only for such specific purposes as may be approved by the Commissioner. The term "surplus cash" as used in this section shall mean the cash legally available and remaining after the payment and allocation of funds as follows:

(a) The payment of each of the following:

(1) Sums currently due under the terms of the mortgage or note insured by the Commissioner or held by the Secretary.

(2) Amounts required to be deposited in the Reserve Fund for Replacements.

(3) Outstanding obligations of the mortgagor arising out of the operation of the project other than those arising out of the mortgage indebtedness, unless funds for payment have been set aside or deferment of payment has been approved by the Commissioner.

(b) The allocation and placement in a separate account of an amount equal to the aggregate of all special funds required to be maintained by the project. $ 1100.112 Supervision of mortgagor

fund for replacements. The mortgagor shall deposit and maintain with the mortgagee a reserve

fund for replacements. The amoun and type of such fund and the condi tions under which it shall be accumu. lated, replenished, and used, shall bi specified in the regulatory agreement corporate charter, or in such other docu ment as the Commissioner may require. 8 1100.115 Rental of facilities.

Where the mortgagor rents the grouj practice facilities to a medical or denta group, the terms of the lease and thi amount of rental charge shall be sub ject to the approval of the Commissioner Provision shall be included in the least for an annual review of the rental charge and for adjustments to increase or de. crease such rental charge with the ap. proval of the Commissioner. The mort gagor shall make an annual report to the Commissioner as to its financial status and adjustments in the annual renta shall be made only with the approval of the Commissioner.

PROPERTY REQUIREMENTS 1100.120 Eligibility of property.

A mortgage to be eligible for insurance shall cover real estate in which the mort. gagor has one of the following interests:

(a) A fee simple title.

(b) A lease for not less than 99 years which is renewable.

(c) A lease having a term of not less than 75 years to run from the date the mortgage is executed.

(d) Alease executed by a governmental agency or an Indian or an Indian tribe for the maximum term consistent with the legal authority for the execution of such lease, provided that the term of any such lease shall run for a period of not less than 50 years from the date the mortgage is executed. $ 1100.122 Special property require

ments. The project shall be designed for use as a group practice facility which the Commissioner finds:

(a) Will be constructed in an economical manner.

(b) Will not be of elaborate or extravagant design or materials.

(c) Will provide adequate and suitable facilities for the group practice of medicine, optometry, or dentistry. § 1100.125 Zoning, deed or building re

strictions. The project when completed shall not violate any material zoning or deed restrictions applicable to the project site,

and shall comply with all applicable & 1100.145 Form of contract. building and other governmental regu

A cost-plus form of contract between lations and requirements.

the mortgagor and the general contrac$ 1100.127 Discrimination prohibited. tor shall be used unless it is established

to the Commissioner's satisfaction that Any contract or subcontract executed

such form is not required to protect his for the construction or rehabilitation of

interests and the interests of the mortthe project shall contain a provision that there shall be no discrimination against

gagor, in which case a lump sum contract any employee, or applicant for employ

may be used. ment because of race, color, creed, or $ 1100.147 Certificate of actual costs. national origin. Where the mortgagor

Upon completion of the project to the is the general contractor, the building

satisfaction of the Commissioner and loan agreement shall contain the same

prior to final endorsement, the mortgagor provision against discrimination.

shall submit a certificate showing the COST CERTIFICATION

actual costs of the project to the mort

gagor. The certificate shall be in a $1100.140 Certification of cost require

form prescribed by the Commissioner. ments. (a) Prior to initial endorsement of

$ 1100.150 Certificate of actual costs

general contractor's costs. the mortgage for insurance, the mortgagor, the mortgagee and the Commis- Upon completion of the project to the sioner shall enter into an agreement satisfaction of the Commissioner and approved by the Commissioner for the prior to final endorsement, the general purpose of limiting the outstanding contractor shall submit a certificate of principal balance of the mortgage, at the actual costs in a form prescribed by the time of final endorsement, to the statu- Commissioner. tory limitations based on the actual cost

$ 1100.152 Certificate of actual costs-of the project. The agreement shall re

subcontractor's costs. quire the mortgagor to do each of the following:

Where the subcontractor, material (1) Disclose its relationship including

supplier, or equivalent lessor have an any collateral agreements with the gen

identity of interest either with the morteral contractor, the subcontractor, and

gagor or the general contractor, the the suppliers.

Commissioner may require the mortga(2) Enter into a construction contract

gor to submit a certificate showing the with the general contractor in a form

actual cost of the labor, supplies, or meeting the requirements of $ 1100.145.

equipment furnished to the project by (3) Execute a certificate of actual

any one or all of such entities. The cercosts upon completion of the construc- tificate shall be in a form prescribed by ton.

the Commissioner. (4) Reduce the outstanding principal § 1100.155 Records. balance of the mortgage by applying thereto any excess of mortgage proceeds

The mortgagor shall keep and mainover statutory limitations based on ac

tain adequate records of all constructual costs.

tion costs, or other cost items not repre

senting work under the general contract $ 1100.142 Certificate as to subcontracts. and shall require the general contractor If the Commissioner determines that

to keep similar records. Upon request the mortgagor or any of its officers, di

by the Commissioner, such records, torectors, stockholders, partners, or bene

gether with any collateral agreements, ficiaries have an interest (financial or

shall be made available for examination. otherwise) in a subcontractor or ma- § 1100.157 Adjustment of cost----new terial supplier, the mortgagor shall construction. certify (at such times and in such form

In the case of new construction, in as may be prescribed by the Commis

order to give effect to land value, the agsioner prior to final endorsement of the

gregate amount shown in the certificate mortgage for insurance) that

the

of actual costs shall be adjusted, prior to amounts paid to such subcontractor or final endorsement, as follows: material supplier were not more than the (a) Land held in fee. Where the land rate being paid in the locality for simi- included in the mortgage security is lar type labor and materials.

owned in fee by the mortgagor, the Com

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