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HOUSING AND COMMUNITY SERVICES DEPARTMENT

 

DIVISION 38

PREDEVELOPMENT LOAN PROGRAM

813-038-0005

Purpose and Objectives

OAR chapter 813, division 038 is promulgated to accomplish the general purposes of the department's Predevelopment Loan Program (the "Program") as authorized in ORS 456.515 to 456.725. The Program is designed to assist in the financing of start-up costs incurred prior to the actual development of low-income housing projects. It is intended to facilitate the development of high quality, affordable housing by providing below market financing and flexible terms for site acquisition and typical predevelopment expenses. The Department has no obligation to approve any Loan or to issue a Commitment Letter in response to any Program application or otherwise.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0010

Definitions

All words and terms used in OAR chapter 813, division 038, except as the context specifically requires, are defined in ORS 456.515 to 456.725, as provided in 813-005-0005, or herein. As used in these rules, unless the context indicates otherwise:

(1) "Application" means a Loan request provided by the Eligible Borrower to the Department in a form and format as prescribed by the Department and modified from time to time reflecting current Program criteria.

(2) "Collateral" means real or personal property pledged to secure the repayment of a Predevelopment Loan as set forth in these rules, including but not limited to real property, guarantees, savings accounts, certificates of deposit and receivables.

(3) "Commitment Letter" or "Commitment" means the written conditional obligation of the Department to provide a Loan issued to the Borrower after the Department has received, reviewed and determined to approve a Loan request. The Commitment Letter may be for an amount different than that requested and may include, but is not necessarily limited to stating the approved loan amount, interest rate, costs of borrowing, repayment terms, performance criteria, monthly reporting requirements and other conditions of the Loan.

(4) "Eligible Borrower" or "Borrower" means a for-profit, non-profit or governmental entity who satisfies the legal, financial, and other criteria of the Department for receipt of a Loan and who has or will make a Loan request that will qualify for approval by the Department.

(5) "Eligible Predevelopment Costs" means costs associated with predevelopment activities including but not limited to architectural design, legal fees, land surveys, soils reports, environmental reports, appraisals, market studies, land option carrying charges, land acquisition costs, federal/state application fees, and other recoverable development costs approved by the Department at its sole discretion.

(6) "Eligible Project" means the new construction or acquisition and rehabilitation of affordable multi-family rental housing with a minimum of five (5) units that comply with Program requirements as determined by the Department. A single-family housing subdivision may qualify as an Eligible Project if there are five (5) or more lots that will be for sale to home owners who meet the Department's Single-Family Loan Program requirements. Income limits and home prices in the Single-Family Loan Program typically are established in consideration of the County in which the subdivision is located.

(7) "Funds" means the funds the Department makes available for predevelopment activities through this Predevelopment Loan Program.

(8) "Predevelopment Loan" or "Loan" means a loan made by the Department to a Eligible Borrower in order to finance Eligible Predevelopment Costs for an Eligible Project.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0015

Availability and Source of Predevelopment Loan Funds

The Predevelopment Loan Program Funds generally are maintained in a Department revolving account. Funding availability, among other considerations, is dependent upon the number of outstanding loans at the time of the Program Application. The Department may provide funding on its own initiative or through a process which may include, but is not limited to, a first-come first-reviewed and approved approach or a competitive review and approval approach. The Department may provide a Predevelopment Loan under this Division from:

(1) Unrestricted cash and investments of the Department made available for use as Predevelopment Loans not needed for operations of the Department and not otherwise determined by the Director to be a necessary and prudent reserve;

(2) Resources made available to the Department for Predevelopment Loans from other institutions, including, but not limited to, Federal Home Loan Bank, Fannie Mae, or other lending institutions;

(3) Appropriations for this purpose; and

(4) Other appropriate sources.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625; 456.692
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0020

Program Criteria

Program criteria includes but is not limited to:

(1) The Eligible Borrower shall provide a complete Program Application satisfactory to the Department that appropriately demonstrates, inter alia, the need for and projected use of the requested Loan.

(2) The Eligible Borrower shall provide such other information, warranties and assurances as the Department may require, including, inter alia, that it will comply with all Program requirements as set forth in statute, these rules, the Application and the Loan Documents.

(3) The Loan will not exceed 100% of the value of the Collateral unless otherwise approved in writing by the Department and may have such other conditions and requirements as the Department, in its sole discretion, determines to be reasonable or appropriate.

(4) The Loan must be secured by a first-lien interest in appropriate Collateral as determined by the Department, unless otherwise approved in writing by the Department.

(5) A proposed multi-family rental housing Eligible Project must have five (5) or more rental housing units and meet the maximum income requirements of either 20% of the units rented to residents at 50% of area median income or 40% of the units rented to residents at 60% of area median income, as determined by the Department. One-third of the total units may be occupied by households whose incomes are more than 120% of the area median income. Rents for income restricted units must also be restricted as required by the Department.

(6) A proposed single-family subdivision with five (5) or more lots must offer the for-sale homes to owners that meet the Department's Oregon Bond Loan requirements for Eligible Borrowers. Income limits and home prices are restricted, based on the County in which the subdivision is located.

(7) Loan funds may be disbursed in a lump sum, in installments, or on a cost reimbursement basis as determined by the Department.

(8) The Program Application shall include, at a minimum, two independent and comprehensive repayment plans to fully repay the Loan within the terms and conditions of the Loan Commitment Letter and are satisfactory to the Department. At least one repayment plan shall include repayment of the Loan without using other Department funding sources.

(9) The Department may require such further information as it deems appropriate prior to disbursement of any Loan Funds.

(10) The Commitment Letter must be executed by an authorized signor of the Eligible Borrower and returned to the Department prior to any disbursement of Loan Funds.

(11) Notwithstanding any Commitment, disbursement of Loan Funds to the Eligible Borrower by the Department is specifically conditioned upon the Borrower's execution, delivery and recording of Loan and other Program documents satisfactory to the Department.

(12) The Department may give a preference for a Loan based upon factors including, but not limited to those described in subparagraph 038-0030(2) and the following:

(a) Projects providing the greatest number of suitable housing units constructed, acquired, developed or rehabilitated for the least amount of loan; and

(b) Those Program applications which, in the sole judgment of the Department, best achieve the purposes of the Predevelopment Loan Program.

(13) The Department will make Loans to Eligible Borrowers under the terms of a written Commitment Letter.

(14) The Borrower shall comply with the provisions of these rules, appropriate directives of the Department and the Loan Documents. If the Borrower does not comply or fails to comply, the Department may revoke its Commitment Letter and demand immediate repayment of all or a portion of the Loan Funds advanced.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0025

Program Loan Terms

(1) The minimum Loan is $40,000 and the maximum Loan is $1,500,000, unless otherwise specified in writing by the Department.

(2) Loans between $40,000 and $500,000 may have a term of up to two (2) years and Loans above $500,000 may have a term of up to six (6) months; unless otherwise specified in writing by the Department.

(3) The interest rate applicable to Program Loans will be established from time to time by the Department as it determines appropriate in consideration of factors it may determine to be relevant, potentially including, but not necessarily limited to current market rates, the availability of Funds, the credit-worthiness of the Borrower, the size and term of the Loan, any determination by the Department with respect to the need for the Project, the quality of Collateral, or market conditions in general. Unless otherwise established by the Department, interest will accrue as simple interest due and payable under the terms of the Commitment Letter and Loan Documents.

(4) Loans shall be repaid with the sooner of the first available funding sources and otherwise in accordance with the Application, the proposed repayment plans, and within the specified term of the loan.

(5) Due to the limited amount of Funds available, the Department discourages any Loan term extensions. The Department may extend the term of a Loan at its sole discretion and subject to such additional conditions and charges as it determines to be appropriate.

(6) The Loan shall be secured by a fully executed trust deed note and other appropriate Loan Documents satisfactory to the Department. Loan Program commitments by the Borrower with respect to the Project shall be memorialized in an agreement or instrument satisfactory to the Department and executed and recorded by the Borrower at their own expense as required by the Department.

(7) If the Loan is secured by real property, the trust deed shall be recorded in an acceptable lien position, as determined by the Department.

(8) The Borrower shall demonstrate control over the Collateral satisfactory to the Department.

(9) All conditions contained in the Commitment and Loan Documents shall be timely fulfilled by the Borrower to the satisfaction of the Department.

(10) The Borrower shall repay the Loan within the terms of the Commitment Letter and applicable Loan Documents.

(11) The Loan shall not be transferred to another party or assumed by another party unless approved in writing by the Department prior to the change.

(12) During the term of the Loan, the Eligible Borrower shall not take any action that directly or indirectly affects the value of the Collateral used as security without prior written approval of the Department.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0030

Application Criteria

(1) An Eligible Borrower shall provide a complete Program application in the form and content satisfactory to the Department.

(2) The Program application shall include, but is not limited to, the following documents:

(a) A written description of the proposed Eligible Project including, but not limited to, the development timelines, number of units, unit mix, proposed rents, site location and amenities;

(b) A written description indicating the market need of the proposed type of housing, prospective income levels of the residents and prospective resident services;

(c) A proforma of the proposed Eligible Project operating income and expenses, funding sources, and development costs;

(d) The Predevelopment Loan amount requested;

(e) A written explanation itemizing the proposed uses and associated Eligible Predevelopment Costs for the Loan proceeds;

(f) At a minimum, two (2) comprehensive repayment plans for the Loan;

(g) A description of the Eligible Borrower and their development team's experience in and capacity for developing and operating similar housing projects;

(h) Adequate documentation demonstrating at least 100% Collateral to secure the Loan and any subordinate loans using the same Collateral; and

(i) Such other documents and information as the Department may require.

(3) In evaluating whether or not to provide a Loan, the Department may consider factors including, but not limited to:

(a) The value of the security for the Loan;

(b) The economic and financial feasibility of the Eligible Project;

(c) The readiness of the Eligible Project to proceed with development;

(d) The location and need for the Eligible Project;

(e) The availability of Department Funds;

(f) The Department's experience with and/or the reputation, experience and capacity of the Borrower, including any of its agents, representatives, employees or contractors;

(g) The amount, quality, and duration of suitable affordable housing to be provided or enabled by the proposed Eligible Project;

(h) The mix of affordable housing units to be provided or enabled; and

(i) Any other information obtained by or made available to the Department.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0035

Fees

(1) A non-refundable Application charge, as specified from time to time by the Department, is due and payable by the Eligible Borrower upon submission of the Application.

(2) A non-refundable loan processing charge, as specified from time to time by the Department is due and payable by the Eligible Borrower upon the sooner of the closing of the Loan or 90 days after the Borrower's acceptance of the Commitment.

(3) If the Borrower determines the need for an extension of the Loan, it must request and justify the extension to the Department in writing in advance of the loan maturity date.

(4) Should the Department determine, in its sole discretion, that an extension of the loan term is warranted, the Department may grant the extension subject to such additional conditions and an extension charges as it deems appropriate.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

813-038-0040

Waiver

Subject to applicable law, the Department may waive or modify any requirements of OAR 813, division 038, as it deems appropriate for the public interest.

Stat. Auth.: ORS Ch. 183, 456.555(2), 456.625(12)
Stats. Implemented: ORS 456.561; 456.574; 456.620; 456.625
Hist.: OHCS 12-2007, f. & cert. ef. 5-10-07

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