80-005 Code Vt. R. 80-140-005-X - VHFA LIMITED OBLIGATION PROGRAM

Section 1 AUTHORITY

These rules are adopted under and pursuant to the authority granted to Vermont Housing Finance Agency by 10 V.S.A. § 627.

Section 2 PURPOSE

These Rules shall govern the purchase of Mortgage Loans, Rehabilitation Loans, and Eligible Securities, and the application of the proceeds thereof under the general program authorized by 10 V.S.A. § 627. Such general program is in addition to other programs of the Agency, and Mortgage Loans and Rehabilitation Loans financed under this program are not required to bear interest at rates less than the prevailing rate of interest in the State.

Section 2.2 The specific objectives of these Rules are to encourage the expansion of the supply of funds in the state available for mortgage loans for residential housing generally and particularly for occupancy by persons and families of low and moderate income, to provide for additional housing or rehabilitated housing needed to remedy the shortage of adequate housing in the state and to eliminate the existence of a large number of substandard dwellings, and to restrict the financial return and benefit on mortgage loans for residential housing for persons and families of low and moderate income to that level necessary to protect against the realization by mortgage lenders of a financial return or benefit in excess of prevailing market conditions.

Section 3 APPLICATION

These rules apply to the purchase of Mortgage Loans, Rehabilitation Loans, and Eligible Securities by the Agency or others pursuant to a Limited Obligation Program where the sources of funds for such purchase are other than bonds, notes, or other obligations, or Eligible Securities which are general obligations of the Agency.

Section 4 DEFINITIONS

Section 4.1 "Eligible Security" means any security or obligation payable from or evidencing an interest in mortgages or other obligations securing loans to finance residential housing in the state.

Section 4.2 "Mortgage Loan" means an interest-bearing obligation secured by either a mortgage or note or bond constituting a first lien on land and improvements in the state.

Section 4.3 "Rehabilitation Loan" means a loan made for the rehabilitation, improvement and repair of residential housing and facilities incidental thereto undertaken primarily to provide principal dwelling accomodations for persons and families, including the land and improvements thereon and such non-housing facilities considered necessary or convenient by the Agency in connection with the residential housing.

Section 4.4 "Mortgage Lender" shall mean "mortgage lender" as defined in 10 V.S.A. § 601(9), as the same may be amended from time to time.

Section 4.5 "Limited Obligation Program" means any program of the Agency authorized by 10 V.S.A. § 627.

Section 5 LIMITED OBLIGATION PROGRAM

Section 5.1 The Agency may participate with Mortgage Lenders in a Limited Obligation Program whereby Mortgage Loans, Rehabilitation Loans and Eligible Securities are purchased from Mortgage Lenders by the Agency or by others pursuant to the provisions of 10 V.S.A. § 627 and of these Rules.

Section 5.2 The Agency may determine for all or any part of a Limited Obligation Program to purchase the entire principal balance of a loan or only a portion thereof. Furthermore, a Limited Obligation Program may be established in conjunction with other programs of the Agency and involve the purchase of loans which are also financed in part by, and secure obligations of the Agency other than those issued pursuant to 10 V.S.A. § 627.

Section 5.3 In order to promote the efficiency of the Limited Obligation Program and to minimize the cost thereof to participating Mortgage Lenders, the Agency may determine to incorporate Rules and Regulations for other programs and the provisions of contracts or documents already in existence between the Agency, Mortgage Lenders and others.

Section 5.4 The Agency may enter into contracts or other instruments for the administration and implementation of the Limited Obligation Program including, without limitation contracts for the purchase or sale of Mortgage Loans, Rehabilitation Loans, or Eligible Securities, master servicing contracts for such loans or securities, and contracts of brokerage.

Section 5.5 For purposes of illustration only, and not by way of limitation, the Agency may contract with builders, housing sponsors, prospective homeowners, governmental agencies, underwriters, investors, any financial institution with trust powers under the law of the jurisdiction in which it is chartered, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, their successors, or other financial institutions or intermediaries in the residential mortgage market, such special agents as it deems necessary or useful to the accomplishment of the purposes of 10 V.S.A. Section 627, as well as Mortgage Lenders.

Section 5.6 At or before the time of purchase of Mortgage Loans, Rehabilitation Loans, or Eligible Securities from Mortgage Lenders by the Agency or by others, the Agency by resolution shall determine that such purchase, and any contract with a Mortgage Lender for such purchase, when performed, will tend to accomplish the specific objectives of these Rules as set forth in Section 2, above, and shall determine that the specific provisions of the contract are consistent with the intent of 10 V.S.A. § 627. Any such contract may contain specific provisions with respect to any or all of the following:

(1) eligibility of borrowers obligated under a Mortgage Loan or Rehabilitation Loan, or in connection with an Eligible Security as applicable;

(2) mortgage or property insurance (if any);

(3) forms of notes, mortgages or Eligible Securities;

(4) interest rate or rates on Mortgage Loans, Rehabilitation Loans, or Eligible Securities or the return realized therefrom by Mortgage Lenders;

(5) Limitations, if any, on the purchase price of Residential Housing, and Mortgage Loans, Rehabilitation loans and Eligible Securities.

(6) limitations or restrictions, (if any) as to location or other qualifications or characteristics of residences to be financed, in addition to restrictions imposed by these Rules;

(7) forms of relevant documents including without limitation, application and commitment agreements, purchase agreements and servicing agreements.

(8) requirements as to commitments by Mortgage Lenders with respect to the application of the proceeds of loans or Eligible Securities purchased by the Agency or others.

Section 5.7 Any contract between the Agency and a Mortgage Lender for the purchase of Mortgage Loans, Rehabilitation Loans, or Eligible Securities shall make such provision for security as the Agency shall deem necessary and prudent, taking into consideration the requirements of any third-parties or purchasers contemplated by the transaction. Contracts may contain specific provisions establishing (i) fees and charges necessary to provide for expenses and reserves of the Agency, (ii) requirements and specifications as to recourse, and (iii) conditions of purchase which shall preclude the realization by the Mortgage Lender of a financial return or benefit in excess of prevailing market conditions, as determined by the Agency, and such other provisions as the Agency may deem necessary or prudent.

Section 6 USE OF PROCEEDS

Section 6.1 To the extent deemed necessary by the Agency in order to accomplish the specific objectives of these rules, any contract with a Mortgage Lender for the purchase of Mortgage Loans, Rehabilitation Loans, or Eligible Securities may provide that the proceeds of purchase of Mortgage Loans, Rehabilitation Loans, or Eligible Securities from Mortgage Lenders shall be reinvested by such Mortgage Lenders in new Mortgage Loans and Rehabilitation Loans for Residential Housing; except when such proceeds arise from the sale of new loans initiated for the purpose of sale to the Agency or others.

Section 6.2 Where the reinvestment restriction of § 6.1 is applicable, the interest rate on loans made with the proceeds of such purchase shall be as determined by the Agency from time to time, with the purpose of assuring that the financial return and benefit to the Mortgage Lender shall not exceed the prevailing market conditions.

Section 7 PROCEDURE

The Agency shall determine for each such Program the procedures for submission of requests or proposals by Mortgage Lenders for the sale of Mortgage Loans, Rehabilitation Loans, and Eligible Securities, provided that applications by or invitations to a Mortgage Lender to participate in the Limited Obligation Program may be oral or written and any contract by a Mortgage Lender or the Agency shall be in writing.

Notes

80-005 Code Vt. R. 80-140-005-X

Effective Date: July 1983 (Secretary of State Rule Log #83-42)

Statutory Authority: 10 V.S.A. § 627