New Jersey Administrative Code › Title 5 - COMMUNITY AFFAIRS › Chapter 80 - NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY › Subchapter 5 - TRANSFER OF OWNERSHIP INTERESTS › Section 5:80-5.10 - Prepayment

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Prepayment of the mortgage loan made by the
				Agency is prohibited, except as permitted in (b) below.
(b) Prepayment of the Agency mortgage loan will be
				permitted, with the prior written approval of the Agency's Executive Director,
				Deputy Executive Director, Chief Financial Officer, or Chief of Legal and Regulatory
				Affairs, provided all of the following conditions are met:
1. Sponsors of projects may prepay the mortgage at
				any time following the 15-year period following the date of the mortgage closing.
				However, any such prepayment shall be conditioned upon the housing sponsor's
				agreement that: the Agency policies on tax, insurance, and repair and replacement
				reserves; the provisions of N.J.S.A. 55:14K-7b; and the statutory provisions at
				N.J.S.A. 55:14K-1et seq.,
				and the corresponding rules under this chapter regarding tenant income eligibility,
				tenant selection, rent increases, certification/recertification of income,
				affirmative fair housing marketing, transfer of ownership interests, and return on
				equity (except as modified by (b)7 below) shall continue to be applicable in their
				entirety to the sponsor, project and tenants residing therein until the original
				expiration date of the original mortgage loan. Such prepayment shall also be
				conditioned upon the agreement of the sponsor to pay the servicing fees and charges
				currently being paid by the sponsor under the mortgage documents, through the
				remainder of the original mortgage term, in order to cover the administrative costs
				of the Agency in monitoring the statutory and regulatory controls that will continue
				to apply to the project. The Agency may require housing sponsors to execute a deed
				restriction or other appropriate agreement upon prepayment whereby the sponsor
				acknowledges the continuing statutory and regulatory control of the Agency and its
				obligation to pay fees and charges determined by the Agency.
2. Any repairs or improvements pursuant to
				N.J.A.C.
				5:80-5.4(d) must be made prior to
				prepayment or an amount sufficient to fund such repairs or improvements must be paid
				into an Agency-controlled escrow account or Agency-approved construction funding
				account upon prepayment.
3. All fees and
				charges due the Agency must be paid prior to prepayment.
4. All supplemental financing on the project
				provided by the Agency or other State agency must be prepaid, unless prohibited by
				the terms of that supplemental financing or by (c) below or any other applicable law
				or regulation.
5. After prepayment, in
				implementing the provisions of
				N.J.S.A.
				55:14K-7.b, the Agency will require the following:
i. Submission of an annual budget;
ii. Submission of annual audited financial
				statements;
iii. Annual physical
				inspections conducted by the Agency.
6. The Agency reserves the right to implement any
				of the additional provisions of N.J.S.A. 55:14K-7b, if determined by the Agency to
				be needed to preserve the financial viability of the project or its status as a
				low-and moderate-income project, to maintain the physical condition of the project
				or to help ensure the safety and well-being of the tenants residing at the
				project.
7. After prepayment, return on
				equity rules at N.J.A.C. 5:80-3 shall continue until the expiration of the original
				mortgage term or until the owner funds an operating reserve account, whichever is
				sooner. Upon funding of an operating reserve account, return on equity rules shall
				terminate. The operating reserve shall be equal to three months of operating
				expenses (for senior citizen projects) or six months of operating expenses (for
				family projects), which includes debt service and reserve payments. The three/six
				months of operating expenses shall be calculated based on the Agency-approved annual
				budget. Once established, interest earned on a fully-funded operating reserve
				account may be withdrawn by the owner upon written request to and verification by
				the Agency that the account is fully-funded. If the operating reserve is thereafter
				used, return on equity rules shall be reinstituted until the operating reserve is
				again fully-funded. The determination of a fully-funded operating account after its
				initial establishment shall be based on the Agency-approved budget in effect at the
				time the project first established the operating reserve account.
8. Additional mortgage financing placed on the
				project upon prepayment, or otherwise during the Agency's continued statutory and
				regulatory oversight period pursuant to (b)1 above, shall be subject to Agency
				staff's prior determination of continued project financial feasibility throughout
				the remainder of such period.