§ 1944.222 - Technical, legal, and other services.

(a) Appraisals. When real estate is taken as security, the property will be appraised without regard to such factors as race, color, religion, sex, handicap, marital or familial status, or National origin, and it is unlawful to use an appraisal where the person knows, or reasonably should know, that the appraiser improperly took into consideration the factors indicated above. Appraisals for FmHA or its successor agency under Public Law 103-354 will be done by the multiple housing appraiser or a designated contract appraiser authorized to make real estate appraisals. If security involves less than five rental units, the property will be appraised under subpart C of part 1922 of this chapter. For security involving five or more rental units, the appraisal will be made under FmHA Instruction 1922-B (available in any State or servicing office). Form FmHA or its successor agency under Public Law 103-354 1922-7, “Appraisal Report for Multi-Unit Housing,” will be completed to show the depreciated replacement value of all the buildings existing or to be constructed on the property to be taken as security.

(b) Architectural and engineering services. (1) Housing and related facilities will be planned and developed in accordance with subparts A and C of part 1924 of this chapter. The housing will be designed to meet the needs of the types of persons who will likely occupy it.

(2) A written contract for architectural services will be required as outlined in subpart A of part 1924 of this chapter.

(c) Construction and development policies. Construction and development will be performed in accordance with subpart A of part 1924 of this chapter (FmHA Instruction 1924-A), available in any FmHA or its successor agency under Public Law 103-354 office.

(d) Compliance with Federal, State and local codes, regulations and ordinances. Planning, construction and operation of housing financed with an RRH or RCH loan will conform with applicable laws, ordinances, codes and regulations (including any licensing required governing such matters as construction, heating, plumbing, electrical installation, fire prevention, health, sanitation, use and occupancy).

(e) Contracts for legal services. On projects requiring extensive legal services, the applicant must have a written contract if loan funds will be use for these services. All contracts will be subject to review and concurrence by FmHA or its successor agency under Public Law 103-354 and should be submitted to FmHA or its successor agency under Public Law 103-354 before execution by the applicant. Contracts will provide for the types of services to be performed and the amount of the fees to be paid, either in lump-sum on the completion of all services or in installments as services are performed.

(f) How to apply for a rural rental or rural cooperative housing loan. Exhibit A may be used as a guide for applicants applying for loans. Extra copies may be obtained from FmHA or its successor agency under Public Law 103-354.

(g) Optioning of land. If a loan includes funds to purchase real estate, the applicant must obtain an option on the parcel to be purchased from the current owner of public record. Form FmHA or its successor agency under Public Law 103-354 440-34, “Option to Purchase Real Property,” or other option form with provisions acceptable to FmHA or its successor agency under Public Law 103-354 and the applicant may be used. When an option form other than Form FmHA or its successor agency under Public Law 103-354 440-34 is used, a provision should be included indicating that it is contingent upon FmHA or its successor agency under Public Law 103-354 making a loan to the buyer.

(h) Title clearance and legal services. When the applicant is an organization or an individual with special title or loan closing problems, title clearance and legal services will be obtained in accordance with instructions from OGC. In other cases, the provisions of subpart A of part 1944 and 7 CFR part 3550 of this chapter regarding title clearance and legal services will apply.

(i) Use of and accountability for loan funds. Loan funds and any funds furnished by the borrower for eligible loan purposes may be deposited in accordance with the loan agreement or loan resolution and the provisions of subpart A to part 1902 and subpart C to part 1930. Collateral for deposit of funds will be pledged in accordance with § 1902.7 of subpart A of part 1902 of this chapter. Funds furnished by the borrower for the purchase of special equipment and furnishings to be used in connection with the project, for which loan funds cannot be used, should not be deposited in the supervised bank account with loan funds. Withdrawals of funds from the supervised bank account may be made only for eligible loan purposes.

(j) Insurance. The loan approval official will determine the minimum amounts and types of insurance the applicant will carry.

(1) Fire and extended coverage will be required on all buildings included in the security for the loan in accordance with subpart A of part 1806 of this chapter (FmHA Instruction 426.1) and subpart C of part 1930 of this chapter.

(2) Suitable worker's compensation insurance will be carried by the applicant for all its employees.

(3) The applicant will be advised of the possibility of incurring liability and encouraged or required, when appropriate, to obtain liability insurance.

(4) Flood insurance will be required on all buildings located in or to be located in special flood or mudslide prone areas in accordance with subpart B of part 1806 (FmHA Instruction 426.2).

(k) Surety bonding and fidelity coverage. (1) The provisions of subpart A of part 1924 of this chapter pertaining to surety bonds are applicable to RRH and RCH loans. When interim financing is used during the construction period, the decision concerning whether or not to require surety bonds is the interim lender's. If the interim lender decides not to require surety bonds, a bond waiver is not required from the National Office.

(2) If the applicant is an organization, it will see that fidelity coverage is in place on any personnel entrusted with the receipt, custody and disbursement of any project monies, securities, or readily salable property other than money or securities. Fidelity coverage will be in force as soon as there are assets in the organization in accordance with the provisions described at paragraph XV A of exhibit B of subpart C of part 1930 of this chapter.

(l) Previous participation certification. All principals and affiliates are required to submit a properly completed Form HUD-2530/FmHA 1944-37, “Previous Participation Certification.” Architects and attorneys who have any interest in the project other than an arms length fee arrangement for professional services are also considered principals. The forms will be completed and processed in accordance with instructions attached to the form.