7 C.F.R. § 1944 app Exhibit F to Subpart I of Part 1944
I. Objectives
The objective of a Site Option (SO) loan under Section 523(b)(1)(B) of Title V of the Housing Act of 1949 is to enable technical assistance (TA) grantees to establish revolving fund accounts to obtain options on land needed to make sites available to families that will build their own homes by the self-help method. An SO loan will be considered only when sites cannot be made available by other means including a regular Rural Housing Site (RHS) loan.
II. Eligibility Requirements
To be eligible for an SO loan, the applicant must be a TA grantee that is currently operating in a satisfactory manner under a TA grant agreement. If the SO loan applicant has applied for TA funds but is not already a TA grantee and it appears that the TA grant will be made, the SO loan may be approved but not closed until the TA grant is closed.
III. Loan Purposes
Loans may be made only as necessary to enable eligible applicants to establish revolving accounts with which to obtain options on land that will be needed as building sites by self-help families participating in the TA self-help housing program. Loans will not be made to pay the full purchase price of land but only for the minimum amounts necessary to obtain an option from the seller. The option should be for as long as necessary but in no case should the option be for less than 90 days.
IV. Limitations
(A) If the amount of an SO loan will exceed $10,000, the prior consent of the National Office shall be obtained before approval.
(B) The amount of the SO loan should not exceed 15 percent of the purchase price of the land expected to be under option at any one time, unless a higher percent is authorized by the State Director when other land in not available or the particular area requires more down payment than elsewhere or similar circumstances exist.
(C) Form FmHA or its successor agency under Public Law 103-354 440-34, "Option to Purchase Real Property," will be used without modification in all cases for obtaining options under this subpart.
(D) The limitations of § 1822.266(b) (1) and (2) of subpart F of part 1822 of this chapter (FmHA Instruction 444.8, paragraphs VI B (1) and (2)) concerning land purchase will apply to options purchased under this subpart.
V. Rates and Terms
(A) Interest. Loans will be made at an interest rate of 3 percent.
(B) Repayment period. Each SO loan will be repaid in one installment which will include the entire principal balance and accrued interest. The maximum repayment period for each SO loan will be the applicant's remaining TA grant funding period.
(1) A shorter repayment period will be established if SO funds will not be needed for the entire TA grant funding period.
(2) If a regular RHS loan is to be processed, the SO loan should be scheduled for repayment when RHS loan funds will be available to purchase the land and repay the amount of SO funds advanced on the option, unless SO loan funds will still be needed to purchase other options. Under no circumstances, however, will the repayment period exceed the applicant's remaining TA grant funding period.
VI. Processing Application
(A) Form of application: The application for assistance will be in the form of a letter to the FmHA or its successor agency under Public Law 103-354 County Supervisor having jurisdiction over the area of the proposed site to be optioned. The letter will be signed by the applicant or its authorized representative and contain, as a minimum, the following information:
(1) A copy of the proposed option that shows a legal description of the land, option price, purchase price, and terms of the option. If more than one site is to be purchased, a schedule of the proposed options should be included.
(2) Information to verify that a regular RHS loan cannot be processed in time to secure the option.
(3) Proposed method repayment of the SO loan.
(4) Resolution from the applicant's governing body authorizing the application for an SO loan from FmHA or its successor agency under Public Law 103-354 .
(B) Responsibility of the County Supervisor. Upon receipt of an SO loan application, the County Supervisor will:
(1) Determine whether the applicant is eligible. If the applicant is not eligible, or the loan cannot be made for other reasons, the application may be rejected by the County Supervisor with the concurrence of the District Director. The reasons for the rejection should be clearly stated and provided, in writing to the applicant. The applicant will have the right to have the decision reviewed following the procedure established in subpart B of part 1900 of this chapter.
(2) Review and verify the accuracy of the information provided.
(3) Make an inspection and a memorandum appraisal of each proposed site "as is." The appraisal will include a narrative statement as to whether the site has been recently sold, verify that the seller is the owner of the property, and indicate whether the purchase price is acceptable based on the selling price of similar properties in the area.
(4) Indicate whether or not it appears that, considering the location and cost of development, adequate building sites can be provided at reasonable costs.
(5) If the option is for a tract of land on which 5 or more sites are proposed, the County Supervisor will forward to the District Director with recommendations as defined in § 1924.119 of subpart C of part 1924 of this chapter.
(6) If approval is recommended, prepare and have the applicant execute Form FmHA or its successor agency under Public Law 103-354 1940-1, "Request for Obligation of Funds," for the amount needed. Copies of the form will be distributed as provided in the Forms Manual Insert (FMI).
(7) Forward the SO loan application and the applicant's TA application or TA docket to the State Director. The submission will include the appraisal report and the County Supervisor's comments and recommendations.
VII. Loan Approval Authority and State Office Actions
The State Director is authorized to approve SO loans developed in accordance with this exhibit. The approval or disapproval of the loan will be handled in the same manner as provided in § 1822.272 of subpart F of part 1822 of this chapter (FmHA Instruction 444.8, paragraph XII). SO loans will be established in Automated Multiple Housing Accounting System (AMAS) using Form RD 3560-51, "Multiple Family Housing Obligation Fund Analysis". The Issue loan/Grant checks transaction will be used to request a check for SO loans.
VIII. Loan Closing
(A) General. Loan closing instructions will be provided by the Office of the General Counsel (OGC) to assure that the Promissory Note is properly completed and executed. The County Supervisor may then close the loan.
(B) Security for the loan. The loan will be secured by a Promissory Note properly executed by the grantee using Form FmHA or its successor agency under Public Law 103-354 1940-16, "Promissory Note." A lien on the optioned real estate will not be taken.
(1) The "kind of loan" block on the note will read "SO loan."
(2) The note will be modified to show that the only installment on the loan will be the final installment.
(C) Loan is closed. The loan will be considered closed when the note is executed and the loan check delivered to the grantee.
IX. Establishment of SO Loan Revolving Account
(A) Supervised bank accounts will not be used for SO loans.
(B) Grantee will deposit SO loan funds in a depository institution of its choice. The use of minority institutions is encouraged. Such funds will remain separate from any other account of the grantee and shall be established as an SO revolving account.
(C) Checks drawn on the revolving account will be for the sole purpose of purchasing land options and must be signed by at least two authorized officials of the grantee who have been properly bonded in accordance with § 1944.411(e) and (g) of this subpart.
(D) Grantees will not expend funds for any options until the site and the option form have been reviewed and approved by the County Supervisor.
(1) SO funds will not be left unused in the revolving account in excess of 60 days.
(2) If the funds are not used for the intended purpose within the 60 days specified above, the unused portion will be refunded on the account.
(E) When funds become available for repayment of the SO loan, such funds will be deposited in the revolving account for the purchase of additional site options if needed. If such funds are not needed to purchase more options, they will be applied on the SO loan.
X. Source of Funds
SO loans will be funded from the self-help housing land development fund.
7 C.F.R. 1944 app Exhibit F to Subpart I of Part 1944