760 C.M.R. 23.04 – Type of Loans, Loan Terms, Loan Conditions, Other Financial Assistance

(1) Loan Types. Eligible Projects may receive HIF loans in three areas: acquisition loans, construction/rehabilitation loans, and permanent loans. All loans will be structured as Deferred Payment Loans (DPL). Developers shall complete the application process in accordance with the appropriate HIF Program Guidelines.
(2) Loan Terms. All loans under the HIF program shall be made upon the following terms and such other terms as are included in the HIF Program Guidelines and/or DHCD’s loan documents:
1. (a) Loan Proceeds. the proceeds of the loan shall be used solely for the development of the Eligible Project approved by DHCD.
2. (b) Loan Amount.
  1. 1. the amount of a HIF I loan shall be set by DHCD according to the HIF Program Guidelines; the amount of a HIF II loan shall not exceed 30% of the Total Development Cost of the Project; the amount of a HIF III loan shall not exceed 50% of the Total Development Cost of the Project; and the amount of a HIF IV, or HIF V loan shall not exceed 50% of the Total Development Cost of the Project (except that a HIF IVor HIF V loan for a shelter for survivors of domestic abuse may not exceed the lesser of 80% of the Total Development Cost or $2.5 million); 760 CMR 23.04(2)(b)1. shall not apply to M.G.L. c. 121E loans.
  2. 2. DHCD may establish a maximum percentage of the Total Development Cost and dollar limits (per unit or per Eligible Project, or both) in the HIF Program Guidelines, to which the loan would also be subject.
3. (c) Loan Period.
  1. 1. the original term of a HIF I loan shall be up to 40 years. At the maturity date, the term may be extended at the discretion of DHCD with the consent of the owner if the Project continues to meet the HIF requirements.
  2. 2. the original term of a HIF II, HIF III, HIF IV, HIF V, or M.G.L. c. 121E loan shall be up to 30 years. At the maturity date, the term may be extended for additional periods of up to ten years each at the discretion of DHCD, with the consent of the own er, if the Project continues to meet the HIF affordability requirements, as applicable, and the requirements for an extension under the applicable HIF Legislation, the HIF Program Guidelines, and the loan documents for such loan have been satisfied.
4. (d) Interest Rate. interest rates for the loans shall be fixed at rates determined by DHCD, in consultation with the Office of the Treasurer of the Commonwealth.
5. (e) Loan Payments. because all HIF loans are structured as DPLs, principal and interest payments will be deferred for the loan period unless any of the following occurs:
  1. 1. Projects funded under HIF I have Gross Cash Receipts for a fiscal year exceeding Gross Cash Expenditures by 115%; or
  2. 2. Projects funded under HIF II, HIF III, HIF IV, or HIF V have Gross Cash Receipts for a fiscal year exceeding Gross Cash Expenditures by 105%; or
  3. 3. Projects funded under any of the HIF Legislation default on the terms of the loan; 760 CMR 23.04(2)(e) shall not apply to M.G.L. c. 121E loans. Within 45 days after the end of each Project's fiscal year, the owner shall supply DHCD
or the Financial Intermediary with the necessary financial statements needed to determine the amount of payment necessary for the period; all amounts paid pursuant to 760 CMR 23.04(2)(e) will be applied first to the payment of interest and then to principal. (f) Land Use Restriction. the Developer/owner of the Project shall execute and record at the appropriate Registry of Deeds or Registry District of the Land Court, or both, a Land Use Restriction. The Land Use Restriction shall only be released:
1. 1. upon payment in full of all amounts due under the HIFloan (provided, however, that no prepayment shall be allowed under the loan prior to the maturity date as defined in the promissory note for such loan; or
2. 2. upon foreclosure of the subject Project by the holder of a bona fide first-priority mortgage; or, with DHCD's consent, a bona fide mortgage that was senior to the lien of the HIF mortgage loan at the time of loan closing, or to which the HIF mortgage loan has been duly subordinated.
1. (g) Mortgage Lien. the loan shall be secured by a mortgage lien against the Project, which may be junior only to such senior mortgage liens as are permitted by DHCD.
2. (h) Refinancing. A HIF loan may be refinanced during the term of the loan only with the prior written approval of DHCD.
(3) Refinancing Existing HIF Loan with Subsequent HIF Loan. HIF II loans may be made to refinance HIF I Projects in existence before January 14, 1994 and which meet additional eligibility criteria in the HIF II Guidelines. HIF III loans may be made to refinance HIF I Projects or HIF II Projects in existence before promulgation of the HIF III regulations and which meet additional eligibility criteria in the appropriate HIF Program Guidelines. HIF IV or HIF V loans may be made to refinance HIF I or HIF II Projects in existence prior to July 31, 2002 and which meet additional eligibility criteria in the appropriate HIF Program Guidelines.
(4) In addition to Deferred Payment Loans, Eligible Projects under M.G.L. c. 121E may also receive assistance in the form of capital grants, subsidies, or mortgage insurance guarantees and other credit enhancements, in the minimum amount required for a Financially Feasible Project. Developers shall complete the application process for such assistance in accordance with the appropriate HIF Program Guidelines. 760 CMR 23.04(2)(a), (b), (f), and (h) shall apply to all such assistance. DHCD may provide assistance in the form of a capital grant, subsidy, or mortgage insurance guarantee or other credit enhancement where it finds that such form of assistance is reasonable necessary to meet the requirements of other financing sources for the Project.
(5) Purchase Option and First Refusal Option. As a condition of each HIF IV or HIF V loan, or loan or other assistance provided under M.G.L. c. 121E, DHCD shall be granted a purchase option and a first refusal option to purchase the Project, in accordance with the following terms:
1. (a) Purchase Option. Upon the expiration of the term of the affordability restrictions imposed in the Land Use Restriction for a Project, DHCD shall have an option to purchase the Project from the Developer/owner at a price equal to the then-current appraised value of the Project less the total outstanding balance of all principal, interest and any other charges payable under the HIF IV or HIF V loan or, in the case of M.G.L. c. 121E, less any remaining obligations of the Developer/owner under any other form of HIF financial assistance. The appraised value of the Project shall be determined in the manner described in the HIF IV or HIF V Legislation or M.G.L. c. 121E, as applicable, and in accordance with the HIF Program Guidelines and DHCD policies, as applicable. DHCD may exercise the Purchase Option by sending notice to the Developer/owner of its intention to exercise the Purchase Option by certified mail and recording/filing a copy of such notice in the Registry of Deeds or Registry District of the Land Court within 120 days after the expiration of the term of the affordability restrictions imposed by the Land Use Restriction. If DHCD fails to exercise the Purchase Option by such option exercise deadline, DHCD shall automatically be deemed to have waived the Purchase Option, and such Purchase Option shall automatically terminate.
2. (b) First Refusal Option. If at any time the Developer/owner of a Project wishes to sell, transfer or otherwise dispose of (transfer) the Project, or any part thereof, prior to DHCD’s exercise of the Purchase Option, and receives a bona fide third-party offer for the same, the Developer/owner shall send a notice to DHCD by regular and certified mail, return receipt requested, setting forth the Developer/owner’s intention to transfer all or part of the Project and the terms of any bona fide offer by a third party to purchase the Project (or the applicable portion(s) thereof). DHCD shall have the right to purchase the Project (or the portion(s) thereof to which such offer relates) at the same price and on the same terms as those contained in such offer. DHCD may exercise the First Refusal Option by sending notice to the Developer/owner of its intention to exercise the First Refusal Option by certified mail and recording/filing a copy of such notice in the Registry of Deeds or Registry District of the Land Court within 120 days after its receipt of the Developer/owner’s notice. If DHCD fails to exercise the First Refusal Option by such option exercise deadline, DHCD shall automatically be deemed to have waived the First Refusal Option, and such First Refusal Option shall automatically terminate (but only with respect to the portion(s) of the Property to which the third-party offer relates); however, if the sale contemplated in the third-party offer is not effected on the same terms and conditions as those contained in the offer, as described in the Developer/owner’s notice, within six months after DHCD’s receipt of the Developer/owner’s notice, or if any of the material terms of such third-party offer shall be revised, DHCD’s First Refusal Option shall be revived. If a Developer/owner’s notice relates to a proposed transfer of only a portion of the Project, the First Refusal Option shall remain in effect with respect to all remaining portions of the Project.
3. (c) DHCD may Assign the Purchase Option or the First Refusal Option to a Qualified Developer. A Qualified Developer is a developer who:
  1. 1. is a Non-profit Corporation or is a Local Housing Authority ;
  2. 2. has completed an application with respect to its proposed purchase of the Project, in the format specified by DHCD (the “Purchase Application”) (DHCD will issue a “Notice of Project Availability” that will include instructions for completing a Purchase Application for this purpose);
  3. 3. has been selected to purchase the Project based on DHCD’s review and underwriting of the Purchase Application;
  4. 4. agrees that upon purchasing the Project, it will execute a Land Use Restriction providing for the Project to remain an Eligible Project for a term of at least 40 years; and
  5. 5. provides any additional due diligence materials not part of the Purchase Application that may be required by DHCD
4. (d) If DHCD exercises the Purchase Option, DHCD or its assignee shall have 120 days after the expiration of the option exercise deadline specified in 760 CMR 23.04(4)(a) (and not less than 240 days after the expiration of the term of the affordability restrictions imposed by the Land Use Restriction) to purchase the Project. If DHCD exercises the First Refusal Option, DHCD or its assignee shall have 120 days after the expiration of the option exercise deadline specified in 760 CMR 23.04(4)(b) (and not less than 240 days after the DHCD’s receipt of the Developer/owner’s notice) to purchase the Project. Promptly upon request by DHCD or its assignee, the owner will provide DHCD or its assignee with such due diligence material and such opportunity to inspect the Project as would be reasonably required by a third-party purchaser. The date for the acquisition closing under the Purchase Option or the First Refusal Option, as applicable, may be extended by agreement of the parties and the agreed-upon extension shall be recorded/filed in the Registry of Deeds or Registry District of the Land Court. DHCD or its assignee may extend the date for the acquisition closing to a reasonable date, if it determines that additional time is needed due to delays in closing preparations caused by the Developer/owner. After delivering notice of its intent to exercise the Purchase Option or First Refusal Option, DHCD may at any time terminate its exercise of the Purchase Option or the Right of First Refusal, in its discretion, without incurring any damages or other liability, if it determines it is not in the best interests of DHCD to effect the purchase (but such termination right shall apply to DHCD only, and not to any assignee).
5. (e) DHCD or its assignee may purchase or otherwise acquire the Project only for the purposes of preserving or providing affordable housing, which shall include a requirement that the Project remain affordable for a term of at least 40 years.
(6) Application Process. Application procedures for HIF loans and, as applicable other assistance, are specified in the appropriate HIF Program Guidelines. DHCD reserves the right to hold competitive funding rounds for HIF loans and, as applicable, other assistance.