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Affordable Housing Funds Policies and Procedures Page 20 <br />V.LOAN TERMS AND CLOSING PROCEDURES <br />Loan Terms <br />Permanent loans that are not grants shall be due and payable in no more than fifty-five (55) years <br />subject to the terms of the applicable Loan Agreement and recorded Affordability Restrictions. <br />If a developer requests a shorter term loan, the City would be willing to negotiate. However, <br />except for certain HOME funded projects, the Affordability Restrictions shall remain in effect <br />for at least 55 years. <br />Purchase Option <br />At the end of the permanent loan term, the City may have the option to take title to the property <br />in accordance with the terms of an option agreement if the owner of the property decides to sell <br />Interest Rates for Loans <br />The interest rate shall be set at either: <br />(1)The rate established by the Federal Home Loan Mortgage Corporation for the average <br />conventional commitment of a fixed rate, thirty-year (30) mortgage, and shall be <br />compounded annually; or <br />(2)When necessary to secure investor equity, interest rates of affordable housing projects <br />that include tax credits or conventional lenders, at 3% simple interest; or <br />(3)When the City loan is in a subordinate position to a first trust deed capital advance/loan <br />made under the U.S. Department of Housing and Urban Development (HUD) Section <br />202 or Section 811 Programs, the interest rate shall not exceed the highest permissible <br />rate on the applicable HUD Section 202 or Section 811 Program mortgages, under <br />authority of Chapter 24 of the Code of Federal Regulations (CFR), Subpart 885.410(g); <br />or <br />(4)When required to meet federal subsidy layering guidelines, at the Applicable Federal <br />Rate (that rate established by the Internal Revenue Service pursuant to Section 1274(d)(1) <br />of the Internal Revenue Code). <br />Loan Payments <br />Payments on permanent loans shall be made as follows: <br />(1)Payments of principal and interest shall be made annually to the City in an amount equal <br />to 50% of project Residual Receipts, if any. Payments shall be applied first to accrued <br />interest, and then to principal. <br />Exhibit 1