The mortgage shall contain covenants relating to liens, property insurance, and use of property as prescribed in §§ 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 De 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 construcion or rehabilitation of the project or he purchase of the equipment financed with mortgage proceeds.

1100.65 Prepayment privilege, prepayment and late charges.

(a) Prepayment privilege. The mortage indebtedness shall not be prepaid in ull and the Commissioner's controls hall not be terminated unless the Commissioner gives his prior consent to such prepayment.

§ 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.

50-047-71-34

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.

(b) Letter of credit. Where a lett of credit is acceptable to the Commi sioner in lieu of deposit of cash or sec rities, the letter of credit shall be unco ditional and irrevocable. The letter credit shall be issued to the mortgag by a 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 sha forthwith provide a cash deposit equiv lent to the undrawn balance of the lett of credit.

§ 1100.87

Funds and finances-offsi 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 t 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 t 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 pr ceeds allocated to land in the proje 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 endorsemen 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 and shall be held by the mortgagee unde an appropriate agreement, approved by the Commissioner, requiring that prio

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 is less than $200,000 and a 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 (exclu

sive 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 Commissioner.

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 mortgagorfund 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 b specified in the regulatory agreement corporate charter, or in such other docu ment as the Commissioner may require. § 1100.115 Rental of facilities.

Where the mortgagor rents the group practice facilities to a medical or denta group, the terms of the lease and th amount of rental charge shall be sub ject to the approval of the Commissioner Provision shall be included in the leas for an annual review of the rental charg 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 statu 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 mortgagor 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) A lease 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 restrictions.

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

(a) Prior to initial endorsement of e mortgage for insurance, the mortgar, the mortgagee and the Commisner shall enter into an agreement proved by the Commissioner for the rpose of limiting the outstanding incipal balance of the mortgage, at the ne of final endorsement, to the statuy limitations based on the actual cost the project. The agreement shall reire the mortgagor to do each of the lowing:

(1) Disclose its relationship including y collateral agreements with the genal contractor, the subcontractor, and e suppliers.

(2) Enter into a construction contract th the general contractor in a form eting the requirements of § 1100.145. (3) Execute a certificate of actual sts upon completion of the construc

n.

(4) Reduce the outstanding principal lance of the mortgage by applying ereto any excess of mortgage proceeds er statutory limitations based on acal costs.

100.142 Certificate as to subcontracts. If the Commissioner determines that e mortgagor or any of its officers, dictors, stockholders, partners, or beneiaries have an interest (financial or herwise) in a subcontractor or marial supplier, the mortgagor shall rtify (at such times and in such form may be prescribed by the Commisner prior to final endorsement of the ortgage for insurance) that the mounts paid to such subcontractor or aterial supplier were not more than the te being paid in the locality for simir type labor and materials.

A cost-plus form of contract between the mortgagor and the general contractor shall be used unless it is established to the Commissioner's satisfaction that such form is not required to protect his interests and the interests of the mortgagor, in which case a lump sum contract may be used.

§ 1100.147 Certificate of actual costs.

Upon completion of the project to the satisfaction of the Commissioner and prior to final endorsement, the mortgagor shall submit a certificate showing the actual costs of the project to the mortgagor. The certificate shall be in a form prescribed by the Commissioner. § 1100.150 Certificate of actual costsgeneral contractor's costs.

Upon completion of the project to the satisfaction of the Commissioner and prior to final endorsement, the general contractor shall submit a certificate of actual costs in a form prescribed by the Commissioner.

§ 1100.152

Certificate of actual costssubcontractor's costs.

Where the subcontractor, material supplier, or equivalent lessor have an identity of interest either with the mortgagor or the general contractor, the Commissioner may require the mortgagor to submit a certificate showing the actual cost of the labor, supplies, or equipment furnished to the project by any one or all of such entities. The certificate shall be in a form prescribed by the Commissioner.

§ 1100.155 Records.

The mortgagor shall keep and maintain adequate records of all construction costs, or other cost items not representing work under the general contract and shall require the general contractor to keep similar records. Upon request by the Commissioner, such records, together with any collateral agreements, shall be made available for examination. § 1100.157 Adjustment of cost-new

construction.

In the case of new construction, in order to give effect to land value, the aggregate amount shown in the certificate of actual costs shall be adjusted, prior to final endorsement, as follows:

(a) Land held in fee. Where the land included in the mortgage security is owned in fee by the mortgagor, the Com