No advance under the mortgage shall be eligible for insurance unless there is filed with the application for such advance a wage certificate as required by the Commissioner. The certificate shall state that the laborers and mechanics employed in the construction of the project have been paid not less than the prevailing wages determined by the Secretary of Labor and any overtime wages at a rate not less than one and one-half times the basic rate of pay for all work time, in excess of 8 hours during any workday, or in excess of 40 hours during any workweek.

FUNDS AND FINANCES

§ 1100.85 Funds and finances-deposits and letters of credit.

the

Commis

(a) Deposits. Where ́sioner requires the mortgagor to make a deposit of cash or securities, such deposit shall be with the mortgagee or a depository acceptable to the mortgagee. The deposit shall be held by the mortgagee in a special account or by the depository under an appropriate agreement approved by the Commissioner.

(b) Letter of credit. Where a letter of credit is acceptable to the Commissioner in lieu of deposit of cash or securities, the letter of credit shall be unconditional and irrevocable. The letter of credit shall be issued to the mortgagee by a banking institution. The mortgagee shall be responsible to the Commissioner for collection under the letter of credit. In the event a demand for payment under the letter of credit is not immediately met, the mortgagee shall forthwith provide a cash deposit equivalent to the undrawn balance of the letter of credit.

§ 1100.87

Funds and finances-off site utilities and streets.

The Commissioner may require a cash deposit with the mortgagee (or with an acceptable trustee or escrow agent designated by the mortgagee) in such amounts as may be necessary to complete offsite public utilities and streets. The mortgagee may accept, in lieu of a re'quired cash deposit, a letter of credit meeting the requirements of § 1100.85 (b). § 1100.90 Funds and finances insured

advances general requirements. (a) Establishment of funds. If the commitment provides for insurance of advances during construction, the mort

gagor shall, prior to initial endorsement, make each of the following deposits:

(1) An amount determined by the Commissioner as sufficient (when added to the proceeds of the insured mortgage) to assure completion of the project and to pay the initial service charge, the carrying charges, and the legal and organization expenses incident to the project. The deposit shall be in cash and shall be held by the mortgagee under an appropriate agreement, approved by the Commissioner, requiring that prior to the advance of any mortgage money, all the cash be disbursed for work and material on the physical improvements, and for any other charges and expenses which are payable.

(2) An amount representing all fees and charges to be paid by the mortgagor in connection with financing which are in excess of the initial service charge and which have been approved by the Commissioner.

(b) Deposit and use of funds. Unless other arrangements acceptable to the Commissioner are made, the funds referred to in paragraph (a) of this section shall be subject to the provisions of § 1100.85 (a).

(c) Letter of credit. The mortgagee may accept, in lieu of a cash deposit required by paragraph (a) (2) of this section, a letter of credit as provided in § 1100.85 (b).

§ 1100.92 Funds and finances-insured advances-working capital.

(a) The amount of working capital, if any, required by the Commissioner to be deposited by the mortgagor with the mortgagee or in a depository satisfactory to the mortgagee and under its control, shall not exceed 2 percent of the original amount of the mortgage. Disbursement from such deposit shall be made only in a manner prescribed by the Commissioner.

(b) The mortgagee may accept, in lieu of a cash deposit required by paragraph (a) of this section, an unconditional irrevocable letter of credit issued to the mortgagee by a banking institution. In the event a demand under the letter of credit is not immediately met, the mortgagee shall forthwith provide cash equivalent to the undrawn balance thereunder.

§ 1100.95 Funds and finances—insured advances-assurance of completion. (a) In general. The mortgagor shall furnish assurance of completion of the

project, in the form of a personal indemnity agreement, a surety company bond or bonds, a cash escrow deposit, or a letter of credit, as required by the Commissioner. The types of assurance to be furnished are as follows:

(1) Where the estimated cost of construction or rehabilitation is $200,000 or less, assurance will be accepted in the form of a personal indemnity agreement executed by the principal officers, directors, stockholders, or partners or individuals operating as the general contractor.

(2) Where the estimated cost of construction or rehabilitation is more than $200,000 or where such cost is less than $200,000 and a personal indemnity agreement is not executed, assurance shall be by a surety company bond or bonds, a cash escrow deposit, or a letter of credit, the amount of which shall be prescribed by the Commissioner.

(b) Indemnity agreement and bond requirements. The personal indemnity agreement and the bonds shall be on forms approved by the Commissioner. The surety company executing a bond must be satisfactory to the Commissioner.

(c) Escrow deposit requirements. The escrow deposit shall consist of cash, securities of the United States, or securities which are fully guaranteed by the United States as to principal. The deposit shall meet the requirements of § 1100.85 (a).

(d) Letter of credit requirements. The letter of credit shall meet the requirements of § 1100.85 (b).

[32 F.R. 6571, Apr. 28, 1967, as amended at 33 F.R. 15591, Oct. 22, 1968]

SUPERVISION OF MORTGAGOR

ceeds in good repair. It shall promptly complete such repairs and maintenance as the Commissioner considers necessary and required.

§ 1100.105

Supervision of mortgagor— books and accounts.

The books and accounts of the mortgagor relating to the operation of the physical facilities of the project (exclusive of the books and records relating to the group practice of medicine, dentistry, or optometry) shall be established and maintained in a manner satisfactory to the Commissioner. They shall be kept in accordance with the requirements of the Commissioner so long as the mortgage is insured by the Commissioner or the mortgage is held by the Secretary. The mortgagor shall file with the Commissioner such financial reports as the Commissioner may require.

§ 1100.107 Supervision of mortgagor inspection of facilities by Commis

sioner.

The mortgagor's property, equipment, buildings, plans, offices, apparatus, devices, books, contracts, records, documents, and papers relating to the operation of the physical facilities of the project (exclusive of the books and records relating to the group practice of medicine, dentistry or optometry) shall be subject to inspection and examination by the Commissioner or his duly authorized representative at all reasonable times. § 1100.110 Supervision of mortgagor— control over surplus cash.

Surplus cash acquired by the mortgagor from the operation of the project may be used only for such specific purposes as may be approved by the Commissioner. The term "surplus cash" as used in this section shall mean the cash legally available and remaining after the payment and allocation of funds as follows:

(a) The payment of each of the following:

(1) Sums currently due under the terms of the mortgage or note insured by the Commissioner or held by the Secretary.

(2) Amounts required to be deposited in the Reserve Fund for Replacements. (3) Outstanding obligations of the mortgagor arising out of the operation of the project other than those arising out of the mortgage indebtedness, unless funds for payment have been set aside

or deferment of payment has been approved by the Commissioner.

(b) The allocation and placement in a separate account of an amount equal to the aggregate of all special funds required to be maintained by the project. § 1100.112 Supervision of mortgagor— fund for replacements.

The mortgagor shall deposit and maintain with the mortgagee a reserve fund for replacements. The amount and type of such fund and the conditions under which it shall be accumulated, replenished, and used, shall be specified in the regulatory agreement, corporate charter, or in such other document as the Commissioner may require. § 1100.115 Rental of facilities.

Where the mortgagor rents the group practice facilities to a medical or dental group, the terms of the lease and the amount of rental charge shall be subject to the approval of the Commissioner. Provision shall be included in the lease for an annual review of the rental charge and for adjustments to increase or decrease such rental charge with the approval of the Commissioner. The mortgagor shall make an annual report to the Commissioner as to its financial status and adjustments in the annual rental shall be made only with the approval of the Commissioner.

PROPERTY REQUIREMENTS

§ 1100.120 Eligibility of property.

A mortgage to be eligible for insurance shall cover real estate in which the mortgagor has one of the following interests: (a) A fee simple title.

(b) A lease for not less than 99 years which is renewable.

(c) A lease having a term of not less than 75 years to run from the date the mortgage is executed.

(d) A lease executed by a governmental agency or an Indian or an Indian tribe for the maximum term consistent with the legal authority for the execution of such lease, provided that the term of any such lease shall run for a period of not less than 50 years from the date the mortgage is executed.

(a) Will be constructed in an economical manner.

(b) Will not be of elaborate or extravagant design or materials.

(c) Will provide adequate and suitable facilities for the group practice of medicine, optometry, or dentistry.

§ 1100.125 Zoning, deed or building restrictions.

The project when completed shall not violate any material zoning or deed restrictions applicable to the project site, and shall comply with all applicable building and other governmental regulations and requirements.

§ 1100.127 Discrimination prohibited.

Any contract or subcontract executed for the construction or rehabilitation of the project shall contain a provision that there shall be no discrimination against any employee, or applicant for employment because of race, color, creed, or national origin. Where the mortgagor is the general contractor, the building loan agreement shall contain the same provision against discrimination. COST CERTIFICATION

(a) Prior to initial endorsement of the mortgage for insurance, the mortgagor, the mortgagee and the Commissioner shall enter into an agreement approved by the Commissioner for the purpose of limiting the outstanding principal balance of the mortgage, at the time of final endorsement, to the statutory limitations based on the actual cost of the project. The agreement shall require the mortgagor to do each of the following:

(1) Disclose its relationship including any collateral agreements with the general contractor, the subcontractor, and the suppliers.

(2) Enter into a construction contract with the general contractor in a form meeting the requirements of § 1100.145.

(3) Execute a certificate of actual costs upon completion of the construction.

(4) Reduce the outstanding principal balance of the mortgage by applying thereto any excess of mortgage proceeds over statutory limitations based on actual costs.

§ 1100.142 Certificate as to subcontracts. If the Commissioner determines that the mortgagor or any of its officers, directors, stockholders, partners, or beneficiaries have an interest (financial or otherwise) in a subcontractor or material supplier, the mortgagor shall certify (at such times and in such form as may be prescribed by the Commissioner prior to final endorsement of the mortgage for insurance) that the amounts paid to such subcontractor or material supplier were not more than the rate being paid in the locality for similar type labor and materials.

§ 1100.145 Form of contract.

A cost-plus form of contract between the mortgagor and the general contractor shall be used unless it is established to the Commissioner's satisfaction that such form is not required to protect his interests and the interests of the mortgagor, in which case a lump sum contract may be used. § 1100.147

Certificate of actual costs.

Upon completion of the project to the satisfaction of the Commissioner and prior to final endorsement, the mortgagor shall submit a certificate showing the actual costs of the project to the mortgagor. The certificate shall be in a form prescribed by the Commissioner. § 1100.150 Certificate of actual costsgeneral contractor's costs.

Upon completion of the project to the satisfaction of the Commissioner and prior to final endorsement, the general contractor shall submit a certificate of actual costs in a form prescribed by the Commissioner.

§ 1100.152 Certificate of actual costs— subcontractor's costs.

Where the subcontractor, material supplier, or equivalent lessor have an identity of interest either with the mortgagor or the general contractor, the Commissioner may require the mortgagor to submit a certificate showing the actual cost of the labor, supplies, or equipment furnished to the project by any one or all of such entities. The certificate shall be in a form prescribed by the Commissioner.

§ 1100.155 Records.

The mortgagor shall keep and maintain adequate records of all construction costs, or other cost items not repre

In the case of new construction, in order to give effect to land value, the aggregate amount shown in the certificate of actual costs shall be adjusted, prior to final endorsement, as follows:

(a) Land held in fee. Where the land included in the mortgage security is owned in fee by the mortgagor, the Commissioner's estimate of the fair market value of such land prior to the beginning of construction shall be added to the total cost shown in the certificate.

(b) Land held under leasehold. Where the land included in the mortgage security is held by the mortgagor under a leasehold, the expense of acquiring the leasehold may be added to the aggregate amount shown in the certificate of actual costs. The amount added shall be limited to the Commissioner's estimate, prior to the beginning of construction, of the fair market value of the leasehold or other interest.

In the case of repair or rehabilitation, in order to give effect to land value, the aggregate amount shown in the certificate of actual costs shall be adjusted, prior to final endorsement, as follows:

(a) Property already owned. Where no part of the proceeds of the mortgage is to be used to finance the purchase of the land or the existing improvements, the mortgage shall be reduced to an amount which does not exceed 100 percent of the actual costs (as approved by the Commissioner) of the repair or

rehabilitation.

(b) Property subject to existing mortgage. Where the proceeds of the mortgage are to be used to refinance an existing mortgage, there shall be added to the actual costs of the repair or rehabilitation the lesser of the following: (1) The amount of the existing mortgage.

(2) 90 percent of the Commissioner's estimate (prior to repair or rehabilitation) of the fair market value of the land and existing improvements.

If the principal amount of the mortgage exceeds the total shown by the certificate of actual costs, after adjustment as provided in §§ 1100.157 and 1100.160, the mortgage shall be reduced by the amount of such excess prior to final insurance endorsement.

§ 1100.165 Effect of agreement.

Any agreement, undertaking, statement, or certification required by the Commissioner in connection with the certificate of actual costs shall specifically state that it has been made, presented, and delivered for the purpose of influencing an official action of the Commissioner and that it may be relied upon as a true statement of the facts contained therein.

erty, satisfactory to him, and a policy of title insurance covering such property, as provided in paragraph (a) of this section. If, for reasons the Commissioner deems satisfactory, title insurance cannot be furnished, the mortgagee shall furnish such evidence of title in accordance with paragraph (b) or (c) of this section, as the Commissioner may require. Any survey, policy of title insurance, or evidence of title required under this section shall be furnished without expense to the Commissioner. The types of title evidence are:

(a) A policy of title insurance issued by a company and in a form satisfactory to the Commisioner. The policy shall name as the insureds the mortgagee and the Secretary of Housing and Urban Development, as their respective interests may appear. The policy shall provide that upon acquisition of title by the mortgagee or the Secretary, it will become an owner's policy running to the mortgagee or the Secretary, as the case may be.

(b) An abstract of title satisfactory to the Commissioner, prepared by an abstract company or individual engaged in the business of preparing abstracts of title, accompanied by a legal opinion satisfactory to the Commission as to the quality of such title, signed by an attorney at law experienced in the examination of titles.

(c) A Torrens or similar title certificate.

[32 F.R. 6571, Apr. 28, 1967, as amended at 33 F.R. 16086, Nov. 1, 1968]

§ 1100.249 Effect of amendments.

The regulations in this subpart may be amended by the Commissioner at any time and from time to time, in whole or in part, but such amendment shall not adversely affect the interests of a mortgagee or lender under the contract of insurance on any mortgage or loan already insured and shall not adversely affect the interests of a mortgagee or lender on any mortgage or loan to be insured on which the Commissioner has made a commitment to insure. [33 F.R. 11170, Aug. 7, 1968]

Subpart B-Contract Rights and
Obligations

§ 1100.251 Incorporation by reference. (a) All of the provisions of §§ 207.251 et seq. (Part 207, Subpart B) of this chapter, relating to mortgages insured under section 207 of the National Housing Act,