80-001 Code Vt. R. 80-140-001-X - HOME IMPROVEMENT LOANS

Section I SCOPE AND DEFINITIONS

A. Scope and Authority

These rules are made and published pursuant to Section 621(12), Section 623(a)(2), and Section 622(7) of title 10, Vermont Statutes Annotated, being the Vermont Housing Finance Agency Act of 1974, as amended ("the Act") and relate to providing home improvement loans to eligible borrowers for rehabilitation of existing residential housing.

B. Purpose

The basic purpose of home improvement loans is to encourage and preserve an adequate supply of safe and decent housing at reasonable cost for occupancy by persons and families of low- and moderate-income.

C. Definitions

The following words and terms, unless the context clearly indicates a different meaning, shall have the following meaning;

1. "Eligible Lender" means any bank or lending institution (including public agency or nonprofit organization) having an office in Vermont, and having a minimum of two years experience originating and servicing home improvement or home equity loans;

2. "Eligible Borrower" means persons and families of low- and moderate-income so defined from time to time by VHFA for purposes of its single-family programs, having due regard for changing economic conditions and the criteria set forth in 10 V.S.A. Section 601(11);

3. "Eligible Property" means residential housing located in Vermont which contains no more than four separate dwelling units, that has been completed and occupied for at least 90 days prior to the date of application for the home improvement loan, and is the principal residence of the borrower;

4. "Eligible Improvement" means permanent improvements, alterations, and repairs that protect, preserve, and improve the livability, accessibility, or energy efficiency of the property. In addition, costs and fees associated with completing improvements, alterations and repairs and obtaining a home improvement loan that are eligible for financing under HUD/FHA Title I requirements, the Vermont Home Mortgage Guarantee Board, or other insurance programs, may be included in the home improvement loan;

5. "Mortgage" means a mortgage deed, deed of trust, or other instrument which shall constitute a lien on real property in fee simple or on a leasehold having a remaining term, at the time such mortgage is acquired, consistent with the Act;

6. "Real Property" means all lands, including improvements and fixtures thereon, and property of any nature appurtenant thereto, or used in connection therewith, and every estate, interest and right, legal or equitable, therein including terms of years and liens by way of judgment, mortgage or otherwise and the indebtedness secured by such liens;

7. "Rehabilitation" means the improvement and repair of residential housing and facilities incidental thereto undertaken primarily to provide dwelling accommodations for occupancy by persons and families in the State;

8. "Residential Housing" means single family or multifamily residential housing comprised of not more than four units designed and used primarily to provide principal dwelling accommodations,for persons and families, including the land and the improvements are situated on;

9. "VHFA" means the Vermont Housing Finance Agency created by the Act.

D. Waivers

The provisions of these rules may be waived by the Commissioners upon their determination that the application of such rules, in specific cases, may result in undue hardship and that such waiver is not inconsistent with the Act.

E. Separability

If any word, phrase, sentence, paragraph, section or part of these rules is finally adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of the rules.

Section II APPLICATION PROCEDURES

A. Lender Participation Procedures

1. An Application and Commitment Agreement and a Loan Purchase and Servicing Agreement may be submitted by an Eligible Lender to VHFA, Execution of such agreements by VHFA will authorize the lender to originate, sell, and service home improvement loans made for the purchase of making Eligible Improvements to Eligible Properties.

2. Lenders shall receive a fee for originating/processing a loan application and a fee for servicing a loan purchased by VHFA.

3. All loans must be "direct loans" as defined by HUD/FHA Title I regulations. Loans involving "dealers" are not eligible.

4. Lenders shall be required to certify (a) as to the eligibility of the borrower, the property and the proposed improvements in accordance with these regulations; and (b) that the borrower is a reasonable credit risk with reasonable ability to repay the loan obligation, according to the underwriting standards established by VHFA for home improvement loans.

B. Direct Lending Procedures

VHFA may receive applications from prospective borrowers and may make home improvement loans directly to eligible borrowers. In such cases, VHFA shall receive the origination/processing fee and shall determine that the conditions specified in paragraph A4. of this section are met. VHFA may also elect to service home improvement loans originated by VHFA or an Eligible Lender or contract with another Eligible Lender or an organization specializing in the servicing of home improvement loans.

C. Applicant Certifications

Before the Note (loan) is signed the applicant must complete and sign a certification including:

1. The type and extent of proposed improvements, including a detailed written description of the work to be performed and the materials to be furnished and their estimated costs, or a proposal or contract to complete the work that describes in detail the work to be completed and estimated or actual cost;

2. A statement that the improvements to be financed by the loan shall be completed within six months and a completion certificate will be returned to the lender or VHFA within thirty days of completion;

3. A statement that VHFA or an authorized representative shall have the right to inspect the property at any time upon giving reasonable notice to the borrower(s);

4. Other reasonable certifications that may be required by VHFA to comply with the Act or regulations of the HUD FHA Title I program, VHMGB, or another insurer of home improvement loans.

Section III FINANCING TERMS

A. Amount of Loan/Term

The maximum principal amount, loan fees, including loan fees that might be eligible for financing, and the term of a loan shall be determined from time to time by VHFA and will depend on the source of funds available to purchase home improvement loans, and requirements for HUD/FHA Title I Home Improvement Loans, the Vermont Home Mortgage Guarantee Board, or other insurance programs.

B. Repayment Provisions

The minimum monthly payment on a loan shall be $10.00. For example, for the principal amount desired, if a 20 year maturity (term) results in a monthly payment of less than $10.00, then the term shall be decreased to yield a monthly payment of not less than $10.00. There shall be no prepayment penalties and the loan shall be paid in fall upon sale of the property.

C. Security for Loans

At the option of VHFA, loans may be secured by the property being improved.

Section IV LOAN SERVICING

A. Inspections

If the borrower fails to return a completion certificate to VHFA, or at its option after giving reasonable notice, VHFA may inspect the property to determine that the improvements specified in the Applicant Certification have been completed and that no unauthorized use has been made of loan funds. Such inspection may be made by the originating lender, the servicing lender or organization, VHFA staff, or any other VHFA authorized inspector.

B. Servicing and Collection of Payments VHFA may service and collect payments itself or contract with one or more agents to service and collect payments.

Notes

80-001 Code Vt. R. 80-140-001-X

Effective Date: September 27, 1977 (Secretary of State Rule Log #77-147)
AMENDED: December 1, 1995 (Secretary of State Rule Log #95-81)

AUTHORITY: 10 V.S.A. 621(12), 622(7), 623(a)(2)