Chapter 554

2006 -- H 8259 SUBSTITUTE A

Enacted 07/10/06

A N A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT - RHODE ISLAND HOUSING AND MORTGAGE FINANCE CORPORATION

Introduced By: Representative Joseph N. Amaral

Date Introduced: June 19, 2006

It is enacted by the General Assembly as follows:

SECTION 1. Section 42-55-6 of the General Laws in Chapter 42-55 entitled "Rhode

Island Housing and Mortgage Finance Corporation" is hereby amended to read as follows:

42-55-6. Powers relative to making loans. -- The corporation shall have all of the

powers necessary or convenient to carry out and effectuate the purpose and provisions of this

chapter, including the following powers in addition to others granted in this chapter:

(1) Make, undertake commitments to make, and participate in the making of mortgage

loans, including without limitation federally insured mortgage loans, and to make temporary

loans and advances in anticipation of permanent mortgage loans to housing sponsors or health

care sponsors to finance the construction or rehabilitation of, or installation of energy saving

improvements to, residential housing designed and planned for occupancy primarily by persons

and families of low and moderate income or health care facilities upon the terms and conditions

set forth in section 42-55-9;

(2) Make, undertake commitments to make, and participate in the making of mortgage

loans to persons of low or moderate income who may purchase residential housing or who own

and occupy residential housing used as security for loans where the proceeds may be dispersed at

such time or times that the corporation may determine, including without limitation persons and

families of low and moderate income who are eligible or potentially eligible for federally insured

mortgage loans or federal mortgage loans. These loans shall be made only after a determination

by the corporation that mortgage loans are not otherwise available, wholly or in part, from private

lenders upon reasonably equivalent terms and conditions;

(3) Make, undertake commitments to make, and participate in the making of loans to

persons of low or moderate income for the purpose of making energy saving improvements to

residential housing. Any loan made pursuant to this paragraph may be secured by a mortgage or

otherwise, shall be repaid, shall bear interest and shall be upon any terms and conditions that may

be determined by the corporation;

(4) Make and publish rules and regulations respecting the grant of mortgage loans

pursuant to this chapter, the regulation of borrowers, the admission of tenants and other occupants

to housing developments pursuant to this chapter, and the construction of ancillary commercial

facilities;

(5) Enter into agreements and contracts with housing sponsors or health care sponsors

under the provisions of this chapter;

(6) Institute any action or proceeding against any housing sponsor or health care sponsor

or persons and families of low and moderate income receiving a loan under the provisions hereof,

or owning any housing development hereunder in any court of competent jurisdiction in order to

enforce the provisions of this chapter or the terms and provisions of any agreement or contract

between the corporation and the recipients of loans under the provisions hereof, or to foreclose its

mortgage, or to protect the public interest, the occupants of the housing development, or the

stockholders or creditors, if any, of the sponsor. In connection with an action or proceeding it

may apply for the appointment of a receiver to take over, manage, operate, and maintain the

affairs of the housing sponsor or health care sponsor and the corporation, through the agent it

shall designate, is hereby authorized to accept the appointment of the receiver of a sponsor when

so appointed by a court of competent jurisdiction. In the event of the reorganization of any

housing sponsor or health care sponsor to the extent possible under the provisions of law, the

reorganization shall be subject to the supervision and control of the corporation, and no

reorganization shall be had without the prior written consent of the corporation. In the event of a

judgment against any housing sponsor or health care sponsor in any action not pertaining to the

foreclosure of a mortgage, there shall be no sale of any of the real property included in any

housing development, housing project, or health care facilities hereunder of a sponsor except

upon sixty (60) days' written notice to the corporation. Upon receipt of that notice, the

corporation shall take those steps that in its judgment may be necessary to protect the rights of all

parties;

(7) Make, undertake commitments to make, and participate in the making of mortgage

loans to persons of low or moderate income for the purpose of improving septic systems and

wells on their residential property to substantially comply with standards as set by the department

of environmental management and/or the department of health. Any loan made pursuant to this

subdivision may be secured by a mortgage or otherwise shall be repaid, shall bear interest, and

shall be upon those terms and conditions that may be determined by the corporation;

(8) Make and participate in the making of grants to assist in the construction,

rehabilitation, or operation of residential housing;

(9) Make and publish rules and regulations respecting the making of grants to assist in

the construction, rehabilitation, or operation of residential housing;

(10) Provide grants to any existing private nonprofit housing program sponsor for the

following use and purpose:

(i) Establish or expand an existing revolving loan fund, if the housing program sponsor

matches the funds, those grants not to exceed one hundred thousand dollars ($100,000).

(ii) Provided, however, that grants shall not be made more frequently than once per year

and that the grants be made from funds held in the corporation's reserve fund.

(iii) In the event that the private non-profit housing program sponsor should cease its

operations, all unexpended funds shall revert back to the corporation;

(11) Guaranty "homeowners notes".

(i) A "homeowners note" is the promissory note secured by a second mortgage of any

eligible home buyer made payable to any person, firm, corporation or other entity loaning money

to the eligible home buyer to purchase his or her principal residence. The homeowners note shall

be in a form, at an interest rate, in denominations and upon other terms and conditions established

in rules and regulations promulgated by the corporation. "Homeowners notes" may be used solely

to assist in the financing of the purchase of a principal residence by eligible home buyers.

(ii) An eligible home buyer is a first-time buyer (defined as one who has not had an

ownership interest in his or her principal residence for at least three (3) years) whose current

income, as defined by federal regulation, does not exceed the median family income of Rhode

Island residents, as determined annually by the U.S. department of housing and urban

development.

(iii) The corporation shall qualify eligible borrowers and issue a commitment to guaranty

the homeowners note upon the terms and conditions set forth in the commitment. The

commitment of guaranty will be valid for four (4) months after the date of issuance by the

corporation.

(iv) The principal face amount of the homeowners note to be guaranteed shall be

determined by a formula to be developed and recalculated by the corporation, within thirty (30)

days after new figures are determined by the U.S. department of housing and urban development,

as follows:

(A) The maximum principal amount for which eligible home buyers may qualify for a

guarantee is twenty percent (20%) of the median home price in the state of Rhode Island, as

determined by the U.S. treasury department.

(B) The formula shall provide for eligibility by increments of five hundred dollars ($500)

with eligibility being rounded up to the next increment.

principal amount determined by multiplying: twenty percent (20%) of the median home price in

the state of Rhode Island times (X) thrice the percentage by which the home buyer falls below the

Rhode Island median family income, up to the maximum amount for which homeowners are

eligible.

(v) The guaranty shall become effective at the time of acquisition of the real estate;

provided, that the eligible home buyer has complied with the terms and conditions of the

commitment; the eligible home buyer has granted to the payee of the note a mortgage on the

residence subject only to a purchase money mortgage and real estate taxes not yet due and

payable; and a confirmed copy of the homeowners note and a certified copy of the recorded

mortgage securing the note has been delivered to the corporation.

(vi) A homeowners note shall mature at the end of seven (7) years from the date of

endorsement or upon the sale or transfer of the title to the real estate securing the note, whichever

shall first occur. Interest shall accrue, in arrears, from the date of endorsement and become due

and payable at maturity of the homeowners note.

(vii) The corporation may promulgate any rules and regulations as may be necessary to

implement the homeowners notes program.

(12) Establish the Environmentally Compromised Home Opportunity (ECHO) loan

program.

(i) The corporation may make, undertake commitments to make, and participate in the

making of loans to persons owning residential property, the value of which has been significantly

reduced by contamination.

(ii) Any loan made pursuant to this paragraph may be made on properties which have

been certified by the department of environmental management as (a) within the boundaries, or

directly abutting a site, known to be impacted by the release of hazardous materials or petroleum,

or (b) within the boundaries, or directly abutting a site, listed on the National Priorities List as

determined by the federal Comprehensive Environmental Response Compensation and Liability

Act (CERCLA, as may from time to time be amended).

(iii) Any loan made pursuant to this paragraph may be secured by a mortgage or

otherwise, shall be repaid, shall bear interest and shall be upon any terms and conditions that may

be determined by the corporation; the principal amount of such loan shall not exceed twenty-five

thousand dollars ($25,000), but such loan shall not in any way limit any other loan or grant

assistance which may otherwise be available.

(iv) The corporation shall have no liability under any environmental statute or regulation

due to any loan made pursuant to this paragraph.

SECTION 2. This act shall take effect upon passage.

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LC03516/SUB A

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