825 R.I. Code R. 825-RICR-30-00-1.8

Current through December 3, 2024

Section 825-RICR-30-00-1.8 - REDEFINITION OF EQUITY

A. Purpose. Recalculation of Equity is intended to provide a financial incentive for Housing Developers to maintain Housing Developments affordable to persons and families of low and moderate income.

B. Redefinition of Equity Calculation. The Corporation shall recalculate Equity for Housing Developments every five (5) years, or more frequently at the Corporation's discretion. Not less than fifteen (15) years from the date of the closing of the Mortgage Loan and following the expiration of each five (5) year period thereafter, a Housing Sponsor may request that the Corporation redefine the Equity for a Housing Development. All such requests shall be in writing on forms provided by the Corporation and addressed to the Corporation at the Corporate Office, Attention: Director of Housing Development.

C. Fee. Each Application for Redefinition of Equity shall be accompanied by a non-refundable fee in cash or by certified or bank check made payable to the Corporation in an amount equal to one half percent (1/2%) of the outstanding balance of all amounts due under the Mortgage Loan, which fee may be waived by the Corporation in writing in whole or in part, and will be considered an annual operating expense for the year in which it is paid. The Housing Sponsor shall submit to the Corporation all supporting documentation and information together with the Application as the Corporation may require.

D. Financial and Structural Condition Equity shall only be redefined for those Housing Developments determined by the Corporation to be in good condition, and to have healthy finances and reserves. Equity for a Housing Development shall be denied if the Corporation determines that:

1. Deferred Maintenance exists;

2. Major Repairs or Replacements to the Housing Development are anticipated or required for the coming year, which would reduce the reserve accounts below levels required by the Corporation;

3. Operating Expenses of the Housing Development have not been paid within thirty (30) days of the date on which they were due;

4. The Housing Sponsor has failed to consistently maintain an Operating Account for the Housing Development with a balance equal to or greater than one (1) month's total Operating Expenses;

5. The Housing Development has failed to sustain ninety-five percent (95%) or greater Economic Occupancy for each of the prior twenty-four (24) consecutive months;

6. The Housing Sponsor has failed to maintain an Existing Waiting List satisfactory to the Corporation;

7. Amounts due under the Mortgage Loan have been delinquent during the preceding twenty-four (24) month period;

8. Reserve account balances for the Housing Development are determined by the Corporation to be inadequate;

9. The Housing Sponsor fails to limit future rent increases for the Housing Development to the amount needed to pay all annual Operating Expenses (which expenses shall include return on equity and maintaining reserves at the greater of Five Thousand Dollars ($5,000) per unit or twenty percent (20%) of the outstanding principal balance of the Mortgage Loan), and to execute any and all agreements relating thereto as the Corporation shall deem necessary; or

10. With respect to Developments other than Assisted Living Facilities (as to which this subsection 10 shall not apply), The Housing Sponsor fails to agree to maintain each unit of the Housing Development as affordable to persons of low and moderate income for a minimum of twenty (20) years from the:

a. date of maturity of the Mortgage Loan, as the same may be amended from time to time, or

b. date on which the Housing Sponsor could prepay any mortgage securing the Housing Development or could elect not to renew a Section 8 assistance contract for any development as defined under R.I. Gen. Laws § 34-45-4, as amended, which prepayments or options not to renew may not occur without the prior consent of the Corporation.

E. Calculation of Redefined Equity. Redefined Equity shall be equal to the greater of:

1. the difference between the amount derived from a capitalization of the annual cash flow of a Housing Development determined in accordance with standard appraisal practices approved by the Corporation and the unpaid principal balance of any mortgage loans secured by a lien on the Housing Development; and

2. the difference between the fair market value of the Housing Development determined by the Corporation and the unpaid principal balance of any mortgage loans secured by a lien on the Housing Development.

825 R.I. Code R. 825-RICR-30-00-1.8