266.410—Mortgage provisions.
(a) Form.
The mortgage and note must be executed on a form approved by the HFA for use in the jurisdiction in which the property is located.
(c) First lien.
The mortgage must be a single first lien on property that has first priority for payment and that conforms with property standards prescribed by the HFA.
(d) Single asset mortgagor.
The mortgage must require that the mortgagor is a single asset mortgagor.
(e) Amortization.
The mortgage must provide for complete amortization (i.e., regularly amortizing) over the term of the mortgage.
(f) Use restrictions.
The mortgage must contain a covenant prohibiting the use of the property for any purpose other than the purpose intended on the day the mortgage was executed. The conversion of a project from rental to cooperative is not a “change in use” as that term is employed in the mortgage since the property will continue to have a residential use both before and after conversion.
(g) Hazard insurance.
The mortgage must contain a covenant, acceptable to the HFA, that binds the mortgagor to keep the property insured by one or more standard policies for fire and other hazards stipulated by the HFA. A standard mortgagee clause making loss payable to the HFA must be included in the mortgage. The HFA is responsible for assuring that insurance is maintained in force and in the amount required by this paragraph and the mortgage. The HFA must ensure that the insurance coverage is in an amount that will comply with the coinsurance clause applicable to the location and character of the property, but not less than 80 percent of the actual cash value of the insurable improvements and equipment. If the mortgagor does not obtain the required insurance, the HFA must do so and assess the mortgagor for such costs. These insurance requirements apply as long as the HFA retains an interest in the project and final claim settlement has not been completed or the contract of insurance has not been otherwise terminated.
(h) Modification of terms.
The mortgage must contain a covenant requiring that, in the event that the HFA and owner agree to a modification of the terms of the mortgage (e.g., to reflect a reduction of the interest rate if reductions are realized in the underlying bond rates for the project), Section 8 rents would be reduced in accordance with HUD guidelines.
(i) Regulatory Agreement.
The mortgage must contain a provision incorporating the Regulatory Agreement by reference.