§ 1944.176 - Loan and/or grant closing.

(a) Applicable instructions. LH loans and/or grants will be closed in accordance with applicable provisions of subpart B of part 1927 of this chapter and State supplements. Loan dockets for an organization and loan dockets for an individual in special cases will be sent to OGC for additional closing instructions. A family farm corporation or partnership or an association of farmers applicant may use its attorney to close the loan in accordance with applicable loan closing instructions provided the attorney is not a member, officer, director, trustee, stockholder, or partner of the applicant entity. Nonprofit organizations may use an attorney who is a member of their organization. The cost incurred by the organization for legal services must be reasonable and competitive for the area.

(b) LH grant agreement. An LH grant agreement, prepared and authorized as provided in § 1944.164(e), will be dated and executed by the applicant on the date of grant closing. The executed agreement will be filed with the mortgage or other security instrument in the County Office case file.

(c) LH loan agreement. A LH loan agreement, prepared and authorized as provided in § 1944.164 (g) of this subpart will be dated and executed by the applicant on the date of loan approval. The executed agreement will be filed with the mortgage or other security instrument in the District Office case file.

(d) Mortgage. Unless the OGC determines the Form to be inappropriate, real estate mortgage Form FmHA or its successor agency under Public Law 103-354 1927-1 (state), “Real Estate Mortgage for ___,” will be used. For loans and/or grants to organizations, Form FmHA or its successor agency under Public Law 103-354 1927-1 will be modified as prescribed by or with the advice of the OGC with respect to the name, address, and other identification of the borrower, style of execution, acknowledgement, and any other provisions.

(1) The mortgage or other instrument will contain the following covenant:

(2) For all LH loans, the restrictive-use provisions contained in exhibit A-1 of subpart E of part 1965 of this chapter will be included in the mortgage.

(3) When a loan resolution or loan agreement is used, an additional paragraph will be included in the mortgage to read as follows:

(4) When the borrower is an organization the mortgage will include the following provision:

(5) For a grant made at the same time as an LH loan, the mortgage securing the loan will contain a provision making it also secure the applicant's obligations under the LH grant agreement. For a grant not made at the same time as an LH loan, the type of security instrument will be determined by the National Office based upon the State Director's recommendation and the advice of OGC.

(e) Promissory note. (1) Form FmHA or its successor agency under Public Law 103-354 1944-52, “Multiple Family Housing Promissory Note,” will be used for all LH loans except those secured by bonds. Payments on LH loans will be scheduled on a monthly or annual basis in accordance with the expected schedule of income from the project. If periodic payments are desired on an annual note they may be scheduled on Form FmHA or its successor agency under Public Law 103-354 440-9.

(2) The note will be dated the date of loan closing as authorized in subpart B of part 1927 of this chapter.

(3) In the case of multiple advances on PASS or DIAS monthly installments, payments will be deferred for the period of construction and any remaining period until the project is operational. When construction is substantially complete and/or the project is ready for full operation or interest plus principal reaches the “Maximum Debt Limit (MDL) at Amortization Effective Date (AED),” the accrued interest on advances will be capitalized establishing a new loan amount. The MDL at AED will be established according to § 1944.157(a)(7)(iii) of this subpart. The borrower's payment of principal and interest will be established according to the FMI, for Form FmHA or its successor agency under Public Law 103-354 1944-52, “Multiple Family Housing Promissory Note.” At loan closing the Finance Office will be notified of the projected AED and the MDL at AED on Form FmHA or its successor agency under Public Law 103-354 1944-57. When the MDL at AED is reached or the loan is fully advanced, Finance Office will:

(i) Capitalize the construction interest. When there is a remaining obligation balance, the remaining obligation will be cancelled by the Finance Office.

(ii) Notify the District Office of the new loan amount and the borrower's scheduled loan payment.

(iii) Prepare and forward to the District Office Form FmHA or its successor agency under Public Law 103-354 1944-7, “Multiple Family Housing Interest Credit and Rental Assistance Agreement” if RA has been obligated for the project.

(iv) The District Office will complete Forms FmHA 1944-52 and FmHA 1944-7 according to the FMI's.

(4) Deferred principal payments may be permitted up to 2 years when determined to be necessary and advisable. Accrued interest must be paid annually when the loan is closed on DIAS; however, smaller than regular payments of principal or no payments of principal may be provided for the first and second installments after loan closing.

(5) The promissory note(s) will be signed in accordance with subpart B of part 1927 of this chapter and any supplemental instructions from OGC.

(6) After loan closing the original note and copies will be distributed according to the FMI. The loan closing information will be transmitted via the field office terminals when the loan is closed with a promissory note.

(7) For a loan to a public body, the forms of obligation will be determined in accordance with exhibit H to this of subpart.

(f) Recorded mortgage. When the real estate mortgage is returned by the recording official, the District Director will retain the original in the borrower's case folder. If the original is retained by the recording official for the county records, a conformed copy including the recording data showing the date and place of recordation and book and page number will be prepared and filed in the borrower's case folder. A copy of the mortgage, conformed as to all matters except the recording date, will be delivered to the borrower.

(g) Date of closing—establishment of account. (1) An LH loan and/or grant is considered closed when the security instrument is filed of record or, if no security instrument is filed of record, when the loan or grant funds are deposited in the supervised bank account or otherwise made available to the borrower after the borrower executes and delivers the note and any other required instruments.

(2) After the loan and/or grant is closed, the account and case folder will be established in accordance with applicable FmHA or its successor agency under Public Law 103-354 regulations (FmHA Instruction 1905-A which is available in any FmHA or its successor agency under Public Law 103-354 office and FmHA Instruction 2033-A which is available in the FmHA or its successor agency under Public Law 103-354 State and National Offices.)