24 C.F.R. PART 232—MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES
Title 24 - Housing and Urban Development
Authority: 12 U.S.C. 1715b, 1715w; 42 U.S.C. 3535(d).
Source: 36 FR 24618, Dec. 22, 1971, unless otherwise noted.
Source: 61 FR 14406, Apr. 1, 1996, unless otherwise noted.
The requirements set forth in 24 CFR part 200, subpart A, apply to multifamily project mortgages insured under section 232 of the National Housing Act (12 U.S.C. 1715w), as amended. The Commissioner shall not insure any mortgage under this part unless the facility is regulated by the State, municipality or other political subdivision in which the facility is or is to be located, and the appropriate agency for such jurisdiction provides a license, certificate or other assurances the Commissioner considers necessary, that the facility complies with any applicable State or local standards and requirements for such facility. Not less than one full bathroom must be provided for every four residents of a board and care home or assisted living facility, and bathroom access from any bedroom or sleeping area must not pass through a public corridor or area. (a) All of the provisions, except §207.258b, of part 207, subpart B of this chapter relating to mortgages insured under section 207 of the National Housing Act, apply to mortgages insured under section 232 of the Act. (b) For the purposes of this subpart all references in part 207 of this chapter to section 207 of the Act shall be construed to refer to section 232 of the Act. [36 FR 24618, Dec. 22, 1971, as amended at 50 FR 38787, Sept. 25, 1985] All of the definitions contained in §232.1 shall apply to this subpart. In addition, as used in this part, the following term shall have the meaning indicated: (a) Contract of insurance means the agreement evidenced by the Commissioner's insurance endorsement and includes the provisions of this subpart and of the Act. Source: 39 FR 28966, Aug. 12, 1974, unless otherwise noted.
In addition to the definitions contained in subpart A, incorporated herein by reference, the following terms, as used in §§232.500 et seq., shall have the meaning indicated: (a) Insured loan means a loan insured by the endorsement of the credit instrument by the Commissioner. (b) Insurance premium means the loan insurance premium paid by the financial institution to the Commissioner in consideration of the contract of insurance. (c)(1) Fire safety equipment means equipment that is purchased, installed, and maintained in a nursing home, intermediate care facility, assisted living facility, or board and care home and that meets the following standards for the applicable occupancy: (i) The Life Safety Code of the National Fire Protection Association (any edition after 1966); or (ii) A standard mandated by a State, under the provisions of section 1616(e) of the Social Security Act; or (iii) Any appropriate requirement approved by the Secretary of Health and Human Services for providers of services under title XVIII or title XIX of the Social Security Act. (2) In addition to those requirements approved by the Secretary of Health and Human Services as necessary for the appropriate level of occupancy, fire safety equipment may also include fire safety-related improvements that are not mandatory under the requirements of the Secretary of Health and Human Services, but which the Secretary of Health and Human Services considers acceptable and reasonable for protection against the hazards of fire and which the borrower agrees to install. (3) For the purposes of this definition, the terms nursing home and intermediate care facility shall include those facilities designated as skilled nursing facilities or intermediate care facilities by the Department of Health and Human Services. (d) Fire safety loan means any form of secured or unsecured obligation determined by the Commissioner to be eligible for insurance under this subpart and, in the case of an assisted living facility or a board and care home, made with respect to such a home located in a State which the Secretary has determined is in compliance with the provisions of section 1616(e) of the Social Security Act. (e) Equipment cost means the reasonable cost of fire safety equipment fully installed as estimated by the Secretary of Health and Human Services and as determined by the Commissioner. (f) Insured loan maturity means the date on which the loan indebtedness would be extinguished if paid in accordance with periodic payments provided for in the loan instrument or instruments. (g) Approved lender means a financial institution or other mortgagee approved by the Commissioner as eligible for insurance under section 2 of the National Housing Act, or a mortgagee approved under section 203(b)(1) of the National Housing Act. [39 FR 28966, Aug. 12, 1974, as amended at 50 FR 37522, Sept. 16, 1985; 59 FR 61228, Nov. 29, 1994] (a) Prior approval. An application for insurance of a fire safety loan under this part shall be considered only in connection with a proposal which has been approved by the Secretary of Health and Human Services, or his designee, based upon (1) his determination of need for such equipment to be installed in the facility as a condition for participation for providers of services under title XVIII and title XIX of the Social Security Act, and (2) his determination that upon installation of such equipment the project will meet the fire safety requirements prescribed by the Secretary of HHS for participation under titles XVIII and XIX of the Social Security Act, and (3) his judgment that the cost estimate for purchase and installation of the equipment is a reasonable cost estimate. (b) Filing of application. An application for insurance of a fire safety loan for a nursing home, intermediate care facility, assisted living facility or board and care home shall be submitted on an approved HUD form by an approved lender and by the owners of the project to the local HUD office. (c) Application fee. An application fee of $2.00 per thousand dollars of the amount of the fire safety loan applied for shall accompany the application. The minimum application fee shall be $50.00. [39 FR 28966, Aug. 12, 1974, as amended at 50 FR 37523, Sept. 16, 1985; 59 FR 61228, Nov. 29, 1994] (a) Issuance 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 fire safety loan will be insured. (b) Type of commitment. The commitment will provide for the insurance of the loan after satisfactory completion of installation of the fire safety equipment, as determined by the Secretary of HHS. (c) Term of commitment. (1) If the commitment fee is paid as required, a commitment shall have a term within which the borrower is required to begin construction, and if construction is begun as required, for such additional period as the Commissioner deems necessary for satisfactory completion of installation. (2) The term of a commitment may be extended in such manner as the Commissioner may prescribe. (d) Commitment fee. A commitment fee which, when added to the application fee, will aggregate $4.00 per thousand of the amount of the fire safety loan (with a minimum total of $50.00 for both fees) set forth in the commitment, and shall be paid prior to issuance of the commitment. (e) Reopening of expired commitments. An expired commitment may be reopened if a request for reopening is received by the Commissioner within 10 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. If the reopening request is not received by the Commissioner within the required 10-day period, a new application, accompanied by the required application and commitment fee, must be submitted. (f) Increase in commitment prior to endorsement. An application, filed prior to endorsement, for an increase in the amount of an outstanding firm commitment shall be accompanied by a combined additional application and commitment fee. The combined additional fee shall be in an amount which will aggregate $4.00 per thousand dollars of the amount of the requested increase. If an inspection fee was required in the original commitment, an additional inspection fee shall be paid in an amount computed at the same dollar rate per thousand dollars of the amount of increase in commitment as was used for the inspection fee required in the original commitment. The additional inspection fee shall be paid prior to the date installation of fire safety equipment, is begun or, if installation has begun, it shall be paid with the application for increase. If the amount of the commitment issued or an increase in loan prior to endorsement is less than the amount applied for, the Commissioner shall refund the excess amount of the application and commitment fees submitted by the applicant. If an application is rejected before it is assigned for processing, or in such other instances as the Commissioner may determine, the entire application and commitment fees or any portion thereof may be returned to the applicant. Commitment and reopening fees may be refunded, in whole or in part, if it is determined by the Commissioner that the installation of fire safety equipment for the project has been prevented because of condemnation proceedings or other legal action taken by a governmental body or public agency, or in such other instances as the Commissioner may determine. The lender may collect from the borrower the amount of the fees provided for in this subpart. The lender may also collect from the borrower an initial service charge in an amount not to exceed one and one-half of one percent of the original principal amount of the loan to reimburse the lender for the cost of originating and closing the transaction. Any additional charges shall be subject to the prior approval of the Commissioner. The commitment shall provide for the payment of an inspection fee in an amount not to exceed $5.00 per thousand dollars of the commitment. The minimum inspection fee shall be $50.00 paid prior to the date construction is begun: Provided, however, That in no case shall the combined total of the fees provided for in §§232.505, 232.510 of this section exceed one percent of the original principal face amount of the loan. The lender shall present for insurance a note and security instrument, if required, on forms approved by the Commissioner for use in the jurisdiction in which the property to be improved is located. At the time of endorsement for insurance of the note by the Commissioner, the entire principal amount of the note shall have been disbursed to the borrower or to his creditors for his account and with his consent. The loan shall involve a principal obligation in multiples of $100, and the minimum principal obligation shall be $10,000. [40 FR 4908, Feb. 3, 1975] (a) Monthly payments. The loan shall provide for monthly payments on the first day of each month on account of interest and principal and shall provide for payment in accordance with the amortization plan as agreed upon by the borrower, the lender and the Commissioner. (b) Amortization period. (1) The loan shall have an amortization of either 5, 10, or 15 years by providing for either 60, 120, or 180 monthly amortization payments. No fire safety loan shall have an amortization period in excess of 15 years unless the amount of the loan exceeds $50,000.00, in which event the amortization period may be increased to 20 years, with a provision for 240 monthly amortization payments. (2) In any event, the loan shall have a maturity satisfactory to the Commissioner of not less than 5 or more than 20 years from the date of the beginning of amortization or the Commissioner's estimate of the remaining economic life of the structure, whichever is the lesser. (3) The Commissioner shall establish the date of the first payment to the principal. (a) The security instrument shall contain a covenant against the creation by the borrower of additional liens against the property superior or inferior to the lien of such instrument, except with the prior approval of the Commissioner. (b) The covenant required under paragraph (a) of this section shall not apply where a lien inferior to the lien of the insured mortgage is given in favor of a Federal, State or local governmental agency or instrumentality under such circumstances as may be approved by the Commissioner, provided the source of funds for repayment of the inferior lien is limited to surplus cash or residual receipts. [36 FR 24641, Dec. 22, 1971, as amended at 48 FR 35393, Aug. 4, 1983; 49 FR 12215, Mar. 29, 1984] The security instrument shall provide for payments by the borrower to the lender on each interest payment date of an amount sufficient to accumulate in the hands of the lender one payment period prior to its due date the next annual insurance premium payable by the lender to the Commissioner. The security instrument shall cover the entire property included in the project, shall be a lien on the real property of the project under the laws of the jurisdiction in which the project is located, and may be junior to such prior liens or mortgages indebtedness as the Commissioner may approve. The Commissioner may from time to time require such other security, in lieu of, or in addition to, a lien on real property as he may prescribe. (a) The loan shall bear interest at the rate agreed upon by the lender and the borrower. (b) Interest shall be payable in monthly installments on the principal amount of the loan outstanding on the due date of each installment. [39 FR 28966, Aug. 12, 1974, as amended at 53 FR 3366, Feb. 5, 1988; 53 FR 8885, Mar. 18, 1988] The principal amount of the loan shall not exceed the lower of the Commissioner's estimate of the cost of the fire safety equipment, including the cost of installation, or the amount supported by the residual income, which is the amount of net income remaining after payment of all existing debt service requirements and deduction of the proprietary earnings, as determined by the Commissioner. The cost of installation may include the cost of such other work to be performed on the project necessary to meet the requirements of the Secretary of Health and Human Services and the Commissioner to enhance the fire safety of the project, and such costs incidental to installation as may be approved by the Commissioner. [40 FR 4908, Feb. 3, 1975] The Commissioner shall indicate his insurance of the loan by endorsing the credit instrument and identifying the section of the Act and regulations under which the loan is insured and the date of insurance, subject to the presentation and approval by him of the following: (a) Certification of full disbursement of loan proceeds as provided for in §232.530. (b) Certification of costs as required by §232.610. (c) Statement by the Secretary of Health and Human Services that the fire safety equipment noted in the determination required by §232.620 has been satisfactorily installed. (a) The security instrument shall provide that all monthly payments to be made by the borrower shall be added together and this aggregate amount shall be paid by the borrower upon each monthly payment date in a single payment. The lender shall apply the payment to the following items in the order set forth: (1) Premium charges under the contract of insurance; (2) Interest on the loan; (3) Amortization of the principal of the loan; (b) Any deficiency in the amount of any monthly payments required under paragraph (a) of this section shall constitute an event of default and the loan shall further provide for a grace period of 30 days within which time the default must be cured. The security instrument shall contain a provision permitting prepayment of the loan in whole or in part upon any interest payment date after giving to the lender 30 days' advance written notice and it may contain a provision, with the approval of the Commissioner, for a reasonable charge in the event of prepayment. A mortgagee may not require, as a condition of providing a loan secured by a mortgage insured under this subpart, that the principal amount of the mortgage exceed a minimum amount established by the mortgagee. [53 FR 8885, Mar. 18, 1988] (a) A loan to be eligible for insurance shall be on real estate held: (1) In fee simple; or (2) On the interest of the lessee under a lease for not less than ninety-nine years which is renewable; or (3) Under a lease having a period of not less than “twenty-five” years to run from the date the loan is executed. (b) The property constituting security for the loan transaction must be held by an eligible borrower as herein defined and must at the time the loan is insured be free and clear of all liens other than those specifically approved by the Commissioner. [39 FR 28966, Aug. 12, 1974; 39 FR 30349, Aug. 22, 1974] After October 30, 1992, each occupied room must include at least one battery-operated or hard-wired smoke detector in proper working condition. If the room is occupied by hearing-impaired persons, the smoke detector must have an alarm system designed for hearing-impaired persons, unless the smoke alarm is connected to a central alarm system that is monitored on a 24-hour basis, or otherwise meets industry standards. [57 FR 33850, July 30, 1992] In order for the property which is to be the security for a loan to be insured under this subpart to be eligible for insurance, the Commissioner shall determine that the title to the property is vested in the borrower as of the date the security instrument is filed for record. The title evidence will be examined by the Commissioner and the endorsement of the credit instrument for insurance shall be evidence of its acceptability. The lender, without expense to the Commissioner, shall furnish to the Commissioner a policy of title insurance, or if the lender is unable to furnish a policy for reasons satisfactory to the Commissioner, the lender, without expense to the Commissioner, shall furnish an abstract of title. The following are the requirements covering the title insurance and abstract of title: (a) The policy of title insurance shall be issued by a company, and in a form, satisfactory to the Commissioner. The policy shall name as the insureds the lender and the Secretary of Housing and Urban Development, as their respective interests may appear. The policy shall provide that upon acquisition of title by the lender or the Secretary, the policy of title insurance will continue to provide the same coverage as the original policy, and will run to the lender or the Secretary, as the case may be. (b) The abstract of title shall be satisfactory to the Commissioner, prepared by an abstract title company or an individual engaged in the business of preparing abstracts of title, accompanied by a legal opinion satisfactory to the Commissioner, as to the quality of such title, signed by an attorney at law experienced in the examination of titles. [39 FR 28966, Aug. 12, 1974, as amended at 58 FR 34216, June 24, 1993] (a) The contract between the mortgagor and the general contractor may be in the form of either a lump sum contract or a cost plus contract. Either form of contract shall include the cost of fire safety equipment, its installation, and such other work to be performed by the contractor as necessary to meet the requirements of the Secretary of Health and Human Services and the Commissioner. A lump sum contract shall provide for the payment of a specified amount. A cost plus contract shall provide for the payment of the contractor's actual cost of compliance with the requirements of the contract, plus such allowance for overhead and profit as may be approved by the Commissioner and shall provide that the total cost under the contract shall not exceed an upset price as approved by the Commissioner. (b) If agreed to by the general contractor and borrower, a lump sum form of contract between the borrower and the general contractor may be used unless the Commissioner determines that a cost plus contract with a maximum upset price is necessary to protect the interests of the borrower or the Commissioner. (a) Certificate and adjustment. No loan shall be insured unless: (1) A certification of actual cost is made by the contractor in cases in which a cost plus form of contract is used; and (2) The amount of the loan is adjusted to reflect the actual cost to the borrower of the improvements when either a cost plus or lump sum form of contract is used. (b) Cost computation. The term actual cost of the improvements shall mean the cost to the borrower of the improvements, after deducting the amount of any kickbacks, rebates, or trade discount received in connection with the improvements, and including the amounts paid under any contract for the improvements, labor, materials, and for any other items of expense approved by the Commissioner. (c) Statement of facts. Any agreement, undertaking, statement or certification required in connection with cost certification shall specifically state that it has been made, presented and delivered for the purpose of influencing an official action of the Commissioner and may be relied upon as a true statement of the facts contained therein. (d) Incontestability. Upon the Commissioner's approval of the cost certification, such certification shall be final and incontestable except for fraud or material misrepresentation on the part of the borrower. (e) Records. The borrower shall keep and maintain adequate records of all costs of any construction improvements or other cost items not representing work under the general contract and shall require the builder to keep similar records and, upon request by the Commissioner, shall make available for examination such records, including any collateral agreements. (a) In order to be eligible as a borrower under this subpart the applicant shall be a profit or non-profit entity, which owns a nursing home or intermediate care facility for which the Secretary of Health and Human Services has determined that the installation of fire safety equipment in such facility is necessary to meet the applicable requirements of the Secretary of Health and Human Services for providers of services under Title XVIII and Title XIX of the Social Security Act and that upon completion of the installation of such equipment the nursing home or intermediate care facility will meet not only the applicable fire safety requirements of HHS but will meet other pertinent health and safety requirements of HHS for providers of such services. At the time of application, a nursing home or intermediate care facility need not be providing such services if upon completion of installation such home or facility will meet other pertinent health and safety requirements of HHS for providers of such services. In lieu of a facility being able to meet HHS's requirements for other pertinent health and safety requirements at the time of application, HHS may accept a list of deficiencies from the State Agency responsible for determining compliance with HHS's requirements for other pertinent health and safety requirements for providers of such services along with a plan prepared by the applicant for correcting those deficiencies. In such event, HHS will inform HUD that, if the facility complies with such plan, the facility will meet the applicable health and safety requirements of HHS for providers of services under Titles XVIII and XIX of the Social Security Act upon the installation of the fire safety equipment. Until the termination of all obligations of the Commissioner under an insurance contract under this subpart and during such further period of time as the Commissioner shall be the owner, holder, or reinsurer of the loan, the borrower shall be regulated or restricted by the Commissioner as to methods of operation including requirements for maintenance of fire safety equipment. (b) Also eligible as a borrower shall be a profit or nonprofit entity which owns an assisted living facility or board and care home for which HUD has determined that the installation of fire safety equipment is approvable under the definition contained in §232.500(c). [39 FR 28966, Aug. 12, 1974; 39 FR 30349, Aug. 22, 1974, as amended at 50 FR 37523, Sept. 16, 1985; 59 FR 61228, Nov. 29, 1994] To be eligible for mortgage insurance under this subpart, the mortgagor must meet the requirements for the disclosure and verification of Social Security and Employer Identification Numbers, as provided by part 200, subpart U, of this chapter. [54 FR 39695, Sept. 27, 1989] An application under this subpart must be accompanied by a statement from the Secretary of Health and Human Services, or his designee, that the Secretary has determined that the physical plant of the facility, when the fire safety equipment has been installed, will be in compliance with the HHS requirements for fire safety and will meet other pertinent health and safety requirements of HHS for providers of services under title XVIII and XIX of the Social Security Act (Medicare and Medicaid). In lieu of a facility being able to meet HHS's requirements for other pertinent health and safety requirements at the time of application, HHS may accept a list of deficiencies from the State Agency responsible for determining compliance with HHS's requirements for other pertinent health and safety requirements for providers of such services along with a plan prepared by the applicant for correcting those deficiencies. In such event, HHS will inform HUD that, if the facility complies with such plan, the facility will meet the applicable health and safety requirements of HHS for providers of services under titles XVIII and XIX of the Social Security Act upon the installation of the fire safety equipment. The architectural exhibits, as approved, by HHS, together with any commitment requirements HHS deems appropriate, must accompany the statement. In the case of Intermediate Care Facilities, the statement by HHS to HUD will be based upon a determination that the facility has been approved in accordance with applicable HHS statutes and regulations, subject to the proper installation of the proposed equipment. Any contract or subcontract executed for the installation of equipment, or construction of improvements to the project shall provide that there shall be no discrimination against any employee or applicant for employment because of sex, religion, race, color, creed or national origin. If the property upon which the fire safety equipment is to be installed is subject to a mortgage insured or held by the Commissioner pursuant to subpart B of this part, the Commissioner may require such assurance of completion of the contract for installation as he may from time to time prescribe. Source: 39 FR 28970, Aug. 12, 1974, unless otherwise noted.
All of the definitions contained in §232.500 shall apply to this subpart. In addition, as used in this subpart, the following term shall have the meaning indicated: (a) Contract of insurance means the agreement evidenced by the endorsement of the Commissioner upon the note given in connection with an insured loan and includes the provisions of this subpart and the applicable provisions of the Act. (b) Maturity means the date on which the loan indebtedness would be extinguished if paid in accordance with periodic payments provided for in the loan. (a) First premium. The lender, upon the endorsement of the loan for insurance, shall pay to the Commissioner a first loan insurance premium equal to one percent of the original face amount of the note. (b) Second premium. The lender, on the date of the first principal payment, shall pay a second premium equal to one percent of the average outstanding principal obligation of the loan for the year following such first principal payment date which shall be adjusted as of that date so that the aggregate of the first and second premiums shall equal the sum of one percent per annum of the average outstanding principal obligation of the loan for the period from the date of the insurance endorsement to one year following the date of the first principal payment. (c) Annual insurance premium. Until the note is paid in full, or until the loan is assigned to the Commissioner, or until the contract of insurance is otherwise terminated with the consent of the Commissioner, the lender, on each anniversary of the date of the first principal payment shall pay an annual loan insurance premium equal to one percent of the average outstanding principal obligation of the loan for the year following the date on which such premium becomes payable. (d) Method of premium payment. Premiums shall be payable in cash or in debentures of the General Insurance Fund at par plus accrued interest. All premiums are payable in advance and no refund can be made of any portion thereof except as provided in §232.800 et seq. (e) Calculation of premiums. The premiums payable on and after the date of the first principal payment shall be calculated in accordance with the amortization provisions without taking into account delinquent payments or prepayments. Mortgage insurance premiums which are paid to the Commissioner more than 15 days after the billing date or due date, whichever is later, shall include a late charge of 4 percent of the amount of the payment due, except that no late charge shall be required with respect to any case for which HUD fails to render a proper billing to the mortgagee. [43 FR 60154, Dec. 26, 1978] (a) Prepayment in full. The contract of insurance shall be terminated if the loan is paid in full prior to its maturity. Notice of the prepayment shall be given to the Commissioner, on a form prescribed by the Commissioner, within 30 days from the date of the prepayment. The insurance termination shall become effective as of the date of the prepayment, or 30 days prior to the Commissioner's receipt of the prepayment notice, whichever is later. (b) Voluntary termination. The contract of insurance shall be voluntarily terminated upon receipt by the Commissioner of a written request, on a form prescribed by the Commissioner, by the borrower and the lender for such termination, accompanied by a submission of the original credit instrument for cancellation of the insurance endorsement and the remittance of all sums to which the Commissioner is entitled. The termination shall become effective as of the date these requirements are met. Upon termination of a loan insurance contract by a payment in full or by a voluntary termination, the Commissioner shall refund to the lender for the account of the borrower an amount equal to the pro rata portion of the current annual loan insurance premium theretofore paid which is applicable to the portion of the year subsequent to the effective date of the termination. (a) If the borrower fails to make any payments due under or provided to be paid by the terms of the note or security instrument, the note shall be considered in default for the purposes of this subpart. (b) The failure to perform any other covenant under the note or security instrument shall be considered a default, provided the lender, because of such default, has exercised its rights under the note or security instrument and accelerated the debt. (c) If such defaults as defined in paragraphs (a) and (b) of this section continue for a period of 30 days, the lender shall be entitled to receive the benefits of insurance hereinafter provided. In computing loan insurance benefits, the date of default shall be considered as: (a) The date of the lender's acceleration of the debt because of the borrower's uncorrected failure to perform a covenant or obligation under the note or security instrument; or (b) The date of the first failure to make a monthly payment which subsequent payments by the borrower are insufficient to cover when applied to the overdue monthly payments in the order in which they become due. (a) If the default is not cured within the 30 day grace period, as defined in §232.830(c), the lender shall, within 30 days thereafter, notify the Commissioner in writing of such default. (b) The lender shall give notice in writing to the Commissioner of the failure of the borrower to comply with any covenant or obligation under the security instrument or note regardless of the fact that the lender may not have elected to accelerate the debt. Upon receipt of notice of the failure of the borrower to comply with any covenant or obligation under the security instrument or note, or otherwise being apprised thereof, the Commissioner may require the lender to accelerate payment of the outstanding principal balance due. Where a real estate mortgage, or other security instrument has been used to secure the payment of a loan made under the provisions of this subpart and subpart C of this part, the lender may either elect to assign the loan to the Commissioner in exchange for the payment of insurance benefits or may exercise its rights under the note and security instrument in lieu of making a claim for insurance benefits. If the lender elects the latter course, the Commissioner shall be so notified and the contract of insurance shall be deemed terminated upon the date of receipt of such notification. Notice of intention to file claim on a form prescribed by the Commissioner shall be filed within 45 days after the lender becomes eligible for the benefits of the loan insurance, or within such later time as may be agreed upon by the Commissioner in writing. Within 30 days after the filing of the notice of intention to file claim, or within such further period as may be agreed upon by the Commission in writing, the lender shall deliver to the Commissioner: (a) The fiscal data pertaining to the loan transactions; (b) Receipts covering all disbursements as required by the fiscal data form; (c) The original note and any security instrument or instruments which shall be assigned to the Commissioner without recourse or warranty, except that the lender must warrant that no act or omission of the lender has impaired the validity and priority of such security instrument or instruments, that the security instrument or instruments are prior to all mechanics' and material-men's liens filed of record subsequent to the recording of such security instrument or instruments regardless of whether such liens attached prior to such recording date, and prior to all liens and encumbrances which may have attached or defects which which may have arisen subsequent to the recording of such security instrument or instruments, except such liens or other matters as may be approved by the Commissioner, that the amount stated in the instrument of assignment is actually due and owing under the security instrument or instruments, that there are no offsets or counterclaims thereto, and that the lender has a good right to assign such note and security instrument or instruments; (d) The assignment to the Commissioner of all rights and interests arising under the note and security instrument or instruments so in default and all claims of the lender against the borrower or others arising out of the loan transaction; (e) All policies of title or other insurance or surety bonds, or other guarantees and any and all claims thereunder; including evidence satisfactory to the Commissioner that the original title coverage has been extended to include the assignment of the note and security instrument or instruments to the Commissioner; (f) All records, ledger cards, documents, books, papers and accounts relating to the loan transaction; (g) Any additional information or data which the Commissioner may require; (h) The following cash items, held in connection with the loan insured under this subpart, shall either be retained by the lender or delivered to the Commissioner in accordance with instructions to be issued by the Commissioner at the time the insurance claim is filed. (1) Any cash held by the lender or its agents or to which it is entitled including deposits made for the account of the borrower and which have not been applied in reduction of the principal of the loan indebtedness. (2) All funds held by the lender for the account of the borrower received pursuant to any other agreement. (a) Method of payment. Payment of claim shall be made in the following manner: (1) Payment in cash. Unless a written request for payment in debentures is filed with the application, payment shall be made in cash. (2) Optional payment in debentures. Payment shall be made in debentures upon filing a written request with the application. (b) Amount of payment. Upon an acceptable assignment of the note and security instrument, the Commissioner shall pay the claim of the lender in an amount equal to the unpaid principal balance of the loan as of the date of default determined as follows: (1) By adding the following items: (i) Any accrued interest due as of the date of execution of the assignment of the loan to the Commissioner. (ii) Any advances approved by the Commissioner made previously by the lender under the provisions of the note or security instrument or instruments. (iii) Reimbursement for such reasonable collection costs, court costs, and attorney's fees as may be approved by the Commissioner. (iv) Any loan insurance premiums paid after default. (v) If payment is made in cash, an amount equivalent to the debenture interest which would have been earned thereon, as of the date such cash payment is made, except when the lender fails to meet any one of the applicable requirements of §§232.850, 232.875, and 232.880, within the specified time and in a manner satisfactory to the Commissioner (or within such further time as the Commissioner may approve in writing), the interest allowance in such cash payment shall be computed only to the date on which the particular required action should have been taken or to which it was extended. (2) By deducting from the total of the items computed under paragraph (b)(1) of this section the following items: (i) Any amount received by the lender on account of the loan after the date of default. (ii) Any net income received by the lender from the property covered by the note or security instrument and not applied to prior debts held by that lender. (iii) The sum of the cash items retained by the lender pursuant to §232.880(h)(i)(ii). Debentures issued in settlement of insurance claims under this subpart shall have the same characteristics and the same requirements for registration and redemption as those issued pursuant to subpart B of this part except that debentures shall bear interest at the rate in effect as of the date the commitment was issued, or as of the date the loan was first endorsed for insurance, whichever rate is higher and shall mature 10 years from the date of issue which date shall be the date of execution of the assignment of the loan to the Commissioner. Any difference of less than $50 between the amount of debentures to be issued to the lender and the total amount of the lender's claim, as approved by the Commissioner, may be adjusted by the issuance of a check in payment thereof. [59 FR 49816, Sept. 30, 1994] (a) An insured loan may be transferred only to a transferee who is a lender approved by the Commissioner. Upon such transfer and the assumption by the transferee of all obligations under the contract of insurance the transferor shall be released from its obligations under the contract of insurance. (b) The contract of insurance shall terminate with respect to loans described in paragraph (a) of this section upon the happening of either of the following events: (1) The transfer or pledge of the insured loan to any person, firm, or corporation, public or private, other than an approved lender. (2) The disposal by a lender of any partial interest in the insured loan to other than an approved lender. With respect to any action required of the lender within a period of time prescribed by this subpart, the Commissioner may extend such period. Source: 53 FR 33735, Aug. 31, 1988, unless otherwise noted.
A mortgage executed in connection with the purchase or refinancing of an existing project without substantial rehabilitation may be insured under this subpart pursuant to section 223(f) of the Act. A mortgage insured pursuant to this subpart shall meet all other requirements of this part except as expressly modified by this subpart. [59 FR 61228, Nov. 29, 1994] Existing projects (with such repairs and improvements as are determined by the Commissioner to be necessary) are eligible for insurance under this subpart. The project must not require substantial rehabilitation and three years must have elapsed from the date of completion of construction or substantial rehabilitation of the project, or from the beginning of occupancy, whichever is later, to the date of application for insurance. In addition, the project must have attained sustaining occupancy (occupancy that produces income sufficient to pay operating expenses, annual debt service and reserve fund for replacement requirements) as determined by the Commissioner, before endorsement of the project for insurance; alternatively, the mortgagor must provide an operating deficit fund at the time of endorsement for insurance, in an amount, and under an agreement, approved by the Commissioner. [59 FR 61228, Nov. 29, 1994] Notwithstanding the maximum mortgage limitations set forth in §232.30, a mortgage within the limits set forth in this section shall be eligible for insurance under this subpart. (a) Value limit. The mortgage shall involve a principal obligation of not in excess of eighty-five percent (85%) for a profit motivated mortgagor (ninety percent (90%) for a private nonprofit mortgagor) of the Commissioner's estimate of the value of the project, including major movable equipment to be used in its operation and any repairs and improvements. The Commissioner's estimate of value shall result from consideration of: (1) Estimated market value of the Project by capitalization, (2) Estimated market value of the Project by direct sales comparison, and (3) Total estimated replacement cost of the Project. In the event the mortgage is secured by a leasehold estate rather than a fee simple estate, the value of the property described in the mortgage shall be the value of the leasehold estate (as determined by the Commissioner) which shall in all cases be less than the value of the property in fee simple. (b) Debt service limit. The insured mortgage shall involve a principal obligation not in excess of the amount that could be amortized by eighty-five percent (85%) for a profit motivated mortgagor (ninety percent (90%) for a private nonprofit mortgagor) of the net projected project income available for payment of debt service. Net projected Project income available for debt service shall be determined by reducing the Commissioner's estimated gross income for the Project by a vacancy and collection loss factor and by the cost of all estimated operating expenses, including deposits to the reserve for replacements and taxes. (c) Project to be refinanced—additional limit. In addition to meeting the requirements of paragraphs (a) and (b) of this section, if the Project is to be refinanced by the insured mortgage (i.e., without a change of ownership or with the Project sold to a purchaser who has an identity of interest as defined by the Commissioner with the seller with the purchase to be financed with the insured mortgage), the maximum mortgage amount must not exceed the cost to refinance the existing indebtedness, which will consist of the following items, the eligibility and amounts of which must be determined by the Commissioner: (1) The amount required to pay off the existing indebtedness; (2) The amount of the initial deposit for the reserve fund for replacements; (3) Reasonable and customary legal, organization, title, and recording expenses, including mortgagee fees under §232.15; (4) The estimated repair costs, if any; (5) Architect's and engineer's fees, municipal inspection fees, and any other required professional or inspection fees. (d) Project to be acquired—additional limit. In addition to meeting the requirements of paragraphs (a) and (b) of this section, if the project is to be acquired by the mortgagor and the purchase price is to be financed with the insured mortgage, the maximum amount must not exceed eighty-five percent (85%) for a profit motivated mortgagor (ninety percent (90%) for a private nonprofit mortgagor) of the cost of acquisition as determined by the Commissioner. The cost of acquisition shall consist of the following items, to the extent that each item (except for item numbered (1)) is paid by the purchaser separately from the purchase price. The eligibility and amounts of these items must be determined in accordance with standards established by the Commissioner. (1) Purchase price is indicated in the purchase agreement; (2) An amount for the initial deposit to the reserve fund for replacements; (3) Reasonable and customary legal, organizational, title, and recording expenses, including mortgagee fees under §232.15; (4) The estimated repair cost, if any; (5) Architect's and engineer's fees, municipal inspection fees, and any other required professional or inspection fees. [53 FR 33735, Aug. 31, 1988, as amended at 59 FR 61228, Nov. 29, 1994] Notwithstanding the provisions of §232.27, a mortgage insured under this subpart must have a maturity satisfactory to the Commissioner which is not less than 10 years, nor more than the lesser of 35 years or 75 percent of the estimated remaining economic life of the physical improvements. The term of the mortgage will begin on the first day of the second month following the date of endorsement of the mortgage for insurance. The provisions of §§232.70–232.74 of this part shall not apply to mortgages insured under commitments issued in accordance with this subpart. (a) Processing of applications. The local HUD Office will determine whether participation in a preapplication conference is required as a condition to submission of an initial application for either a conditional or firm commitment. After the preapplication conference an application for a conditional or firm commitment for insurance of a mortgage on a project shall be submitted by the sponsor and an approved mortgagee. Such application shall be submitted to the local HUD Office on a HUD approved form. An application may, at the option of the applicant, be submitted for a firm commitment omitting the conditional commitment stage. No application shall be considered unless accompanied by all exhibits required by the form and program handbooks. An application may be made for a commitment which provides for the insurance of the mortgage upon completion of any improvements or for a commitment which provides, in accordance with standards established by the Commissioner, for the completing of specified repairs and improvements after endorsement. (b) Application fee—conditional commitment. An application-commitment fee of $3 per thousand dollars of the requested mortgage amount shall accompany an application for conditional commitment. (c) Application fee—firm commitment. An application for firm commitment shall be accompanied by an application-commitment fee of $5 per thousand dollars of the requested mortgage amount to be insured less any amount previously received for a conditional commitment. (d) Inspection fee. Where an application provides for the completion of repairs, replacements and/or improvements (repairs), the Commissioner will charge an inspection fee equal to one percent (1%) of the cost of the repairs. However, where the Commissioner determines the cost of repairs is minimal, the Commissioner may establish a minimum inspection fee that exceeds one percent of the cost of repairs and can periodically increase or decrease this minimum fee. (e) Cross-reference. The provisions of paragraphs (f)(1) (Fee on increases), (g) (Reopening of expired commitments), (h) (Transfer fee), (i) (Refund of fees), and (j) (Fees not required) of §200.40 of this chapter apply to applications submitted under subpart E of this part. [61 FR 14416, Apr. 1, 1996]
Title 24: Housing and Urban Development
PART 232—MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES
Section Contents
§ 232.1 Eligibility requirements.
§ 232.2 License.
§ 232.3 Bathroom.
§ 232.251 Cross-reference.
§ 232.252 Definitions.
§ 232.500 Definitions.
Fees and Charges
§ 232.505 Application and application fee.
§ 232.510 Commitment and commitment fee.
§ 232.515 Refund of fees.
§ 232.520 Maximum fees and charges by lender.
§ 232.522 Inspection fee.
Eligible Security Instruments
§ 232.525 Note and security form.
§ 232.530 Disbursement of proceeds.
§ 232.535 Loan multiples—minimum principal.
§ 232.540 Method of loan payment and amortization period.
§ 232.545 Covenant against liens.
§ 232.550 Accumulation of next premium.
§ 232.555 Security instrument and lien.
§ 232.560 Interest rate.
§ 232.565 Maximum loan amount.
§ 232.570 Endorsement of credit instrument.
§ 232.580 Application of payments.
§ 232.585 Prepayment privilege and prepayment charge.
§ 232.586 Minimum principal loan amount.
Property Requirements
§ 232.590 Eligibility of property.
§ 232.591 Smoke detectors.
Title
§ 232.595 Eligibility of title.
§ 232.600 Title evidence.
Form of Contract
§ 232.605 Contract requirements.
Cost Certification Requirements
§ 232.610 Certification of cost requirements.
Eligible Borrowers
§ 232.615 Eligible borrowers.
§ 232.616 Disclosure and verification of Social Security and Employer Identification Numbers.
Special Requirements
§ 232.620 Determination of compliance by HHS.
§ 232.625 Discrimination prohibited.
§ 232.630 Assurance of completion.
§ 232.800 Definitions.
Premiums
§ 232.805 Insurance premiums.
§ 232.805a Mortgagee's late charge.
§ 232.815 Termination of insurance.
§ 232.825 Pro rata refund of insurance premium.
Rights and Duties of Lender Under the Contract of Insurance
§ 232.830 Definition of default.
§ 232.840 Date of default.
§ 232.850 Notice of default.
§ 232.860 Commissioner's right to require acceleration.
§ 232.865 Election by lender.
§ 232.875 Maximum claim period.
§ 232.880 Items to be delivered on submitting claim.
§ 232.885 Insurance benefits.
§ 232.890 Characteristics of debentures.
§ 232.893 Cash adjustment.
Assignments
§ 232.895 Assignment of insured loans.
Extension of Time
§ 232.897 Actions to be taken by lender.
§ 232.901 Mortgages covering existing projects are eligible for insurance.
§ 232.902 Eligible project.
§ 232.903 Maximum mortgage limitations.
§ 232.904 Term of the mortgage.
§ 232.905 Labor standards and prevailing wage requirements.
§ 232.906 Processing of applications and required fees.
Subpart A—Eligibility Requirements
top
§ 232.1 Eligibility requirements.
top
§ 232.2 License.
top
§ 232.3 Bathroom.
top
Subpart B—Contract Rights and Obligations
top
§ 232.251 Cross-reference.
top
§ 232.252 Definitions.
top
Subpart C—Eligibility Requirements—Supplemental Loans To Finance Purchase and Installation of Fire Safety Equipment
top
§ 232.500 Definitions.
top
Fees and Charges
top
§ 232.505 Application and application fee.
top
§ 232.510 Commitment and commitment fee.
top
§ 232.515 Refund of fees.
top
§ 232.520 Maximum fees and charges by lender.
top
§ 232.522 Inspection fee.
top
Eligible Security Instruments
top
§ 232.525 Note and security form.
top
§ 232.530 Disbursement of proceeds.
top
§ 232.535 Loan multiples—minimum principal.
top
§ 232.540 Method of loan payment and amortization period.
top
§ 232.545 Covenant against liens.
top
§ 232.550 Accumulation of next premium.
top
§ 232.555 Security instrument and lien.
top
§ 232.560 Interest rate.
top
§ 232.565 Maximum loan amount.
top
§ 232.570 Endorsement of credit instrument.
top
§ 232.580 Application of payments.
top
§ 232.585 Prepayment privilege and prepayment charge.
top
§ 232.586 Minimum principal loan amount.
top
Property Requirements
top
§ 232.590 Eligibility of property.
top
§ 232.591 Smoke detectors.
top
Title
top
§ 232.595 Eligibility of title.
top
§ 232.600 Title evidence.
top
Form of Contract
top
§ 232.605 Contract requirements.
top
Cost Certification Requirements
top
§ 232.610 Certification of cost requirements.
top
Eligible Borrowers
top
§ 232.615 Eligible borrowers.
top
§ 232.616 Disclosure and verification of Social Security and Employer Identification Numbers.
top
Special Requirements
top
§ 232.620 Determination of compliance by HHS.
top
§ 232.625 Discrimination prohibited.
top
§ 232.630 Assurance of completion.
top
Subpart D—Contract Rights and Obligations
top
§ 232.800 Definitions.
top
Premiums
top
§ 232.805 Insurance premiums.
top
§ 232.805a Mortgagee's late charge.
top
§ 232.815 Termination of insurance.
top
§ 232.825 Pro rata refund of insurance premium.
top
Rights and Duties of Lender Under the Contract of Insurance
top
§ 232.830 Definition of default.
top
§ 232.840 Date of default.
top
§ 232.850 Notice of default.
top
§ 232.860 Commissioner's right to require acceleration.
top
§ 232.865 Election by lender.
top
§ 232.875 Maximum claim period.
top
§ 232.880 Items to be delivered on submitting claim.
top
§ 232.885 Insurance benefits.
top
§ 232.890 Characteristics of debentures.
top
§ 232.893 Cash adjustment.
top
Assignments
top
§ 232.895 Assignment of insured loans.
top
Extension of Time
top
§ 232.897 Actions to be taken by lender.
top
Subpart E—Insurance of Mortgages Covering Existing Projects
top
§ 232.901 Mortgages covering existing projects are eligible for insurance.
top
§ 232.902 Eligible project.
top
§ 232.903 Maximum mortgage limitations.
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§ 232.904 Term of the mortgage.
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§ 232.905 Labor standards and prevailing wage requirements.
top
§ 232.906 Processing of applications and required fees.
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