(a) Evidence of need. Loans will be made on the basis of the applicant providing firm information as to the number of sites to be developed and evidence of a need for the proposed building sites in the locality.
(b) Nondiscrimination. The borrower will be required to agree not to discriminate or permit discrimination, in accordance with section 3 of the loan resolution form “(‘Rural Housing Site’ Loan to Nonprofit Corporation),” available at all RD offices.
(c) Supervisory assistance. Supervision will be provided borrowers to the extent necessary to achieve the objectives of the loan and to protect the interests of the Government. County supervisors will counsel with applicants in selecting locations that will provide essential services and facilities and will result in the development of desirable residential communities.
(d) Loan resolution. A Loan Resolution will be adopted by the applicant's Board of Directors or similar governing body. If any provisions are not appropriate to a particular case, proposed substitute language should be submitted to the national office with the recommendations of the State director.
(e) Development policies. Development will be planned and performed in accordance with subparts A and C of part 1924 of this chapter.
(f) Water and waste disposal facilities. If public water and waste disposal facilities are not available and these facilities will be provided on a community basis with funds included in the RHS loan or with other financing, provision should be made to form an organization with members who will provide continuing maintenance and management of facilities. The cost of the facilities should be considered as a cost of developing the sites and included in the price charged for the lots when they are sold.
(g) Compliance with local codes and regulations. Planning and development of sites will comply with all State, county, and local planning and zoning requirements, and will be for housing that will conform with any applicable laws, ordinances, codes, and regulations governing such matters as construction, heating, plumbing, electrical installation, fire prevention, health, and sanitation.
(h) Optioning of land. If a loan includes funds to purchase real estate, the applicable provisions of subpart A of part 1943 regarding options will be followed. After the loan is approved, the county supervisor will have Form RD, “Form Letter - Acceptance of Option,” or other appropriate form of acceptance, completed, signed by the applicant, and mailed to the seller.
(i) Use of and accountability for loan funds. Supervised bank accounts will not be used except when their requirement is made or authorized by the State director for cases where adequate bonding is not available. If a supervised bank account is used, collateral for deposits of funds will be pledged when the supervised bank account exceeds $100,000. All loan funds and funds from other sources to be used to pay the development costs of the site, as well as proceeds from the sale of any sites, will be deposited in accordance with part 1902, subpart A of this chapter. The county supervisor will see that funds for land purchase are paid to the seller simultaneously with loan closing. After the loan is closed, monthly reports will be provided to Rural Development of all disbursements made and income received by the borrower. Reports for each month will be submitted to the Rural Development county office during the first 10 days of the next month. No expenditures will be made without prior Rural Development consent for items which are not included in the Rural Development approved development cost estimate or for amounts greater than those set forth in such estimate.
(j) Insurance. The State director will determine the minimum amounts and types of insurance the applicant will carry.
(1) Suitable workman's compensation insurance will be carried by the applicant for all its employees.
(2) The applicant will be advised of the possibility of incurring liability and encouraged, or required when appropriate, to obtain liability insurance.
(k) Bonding.
(1) Approved corporate surety bonds will be required in all cases involving a development contract in excess of $20,000, unless an exception is made by the national office. In other cases, the county supervisor will determine whether a surety bond is required.
(2) The applicant will provide fidelity bond coverage for its officers and employees entrusted with the receipt, custody, and disbursement of its funds and the custody of any other negotiable or readily saleable personal property. The amount of the bond will be at least equal to the maximum amount of such funds including funds in bank accounts, and property that the applicant will have in its possession or control at any one time. If permitted by State law, the United States will be named coobligee in the bond. Form RD, “Position Fidelity Schedule Bond,” may be used if permitted by State law.
(l) Conditional commitments for construction of homes on developed sites. Conditional commitments may be issued on sites developed with an RHS section 524 loan to permit homes to be constructed on sites prior to the sale of the site to an eligible purchaser in accordance with the following:
(1) The requirements of 7 CFR 3550.70 must be met and a conditional commitment issued prior to the start of construction of the home.
(2) The conditional commitment must be issued to an RHS borrower who can legally provide the proposed housing and has the experience and training in construction to the extent necessary to assure that the housing will be built or jointly to the RHS loan borrower and a builder who has the legal capacity, training and experience necessary to construct the housing. In all cases the following language will be added under “other conditions” on Form RD 1944-11, “Conditional Commitment”:
(i) “Not withstanding the other provisions of this commitment the sale of completed homes on sites developed with section 524 Rural Housing Site loans will be limited to families eligible for assistance under any section of title V of the Housing Act of 1949 or under any other law which provides financial assistance for housing low- and moderate-income families. The approval of Rural Development will be obtained prior to the sale of each home. The request for approval shall be submitted to the local Rural Development office along with an application for an RH 502 loan or a financial statement from the purchaser and verification of the other credit that is available.”
(ii) The benefits of the nonprofit development of the site(s) must be passed on to the purchaser. This will result in this site being sold for $___ (price to be determined as provided for in (§ 1822.275(b))).
(3) In arriving at the commitment price for the site and the completed home, the value will be based on the present market value of the house only, plus the nonprofit selling price of the lot.
(4) If in order to obtain interim financing for the construction of the homes, the RHS loan borrower requests a subordination by Rural Development on individual lots, the State Director may approve the subordination by completing and executing a subordination in the format of exhibit C of this subpart.
(5) The government's lien on any lot will be released only at the time of sale to an eligible purchaser.
(6) The County Supervisor should provide the necessary supervision to assure that the RHS loan borrower takes the necessary action to assure that all qualified builders in the area are aware of the availability of rural housing sites and are given an equal opportunity to participate in this conditional commitment program. As a minimum, the borrower will be required to submit a signed statement indicating the actions taken including names and dates of contacts with builders.
[35 FR 16087, July 1, 1970, as amended at 41 FR 47460, Oct. 29, 1976; 42 FR 44669, Sept. 6, 1977; 43 FR 24264, June 5, 1978; 44 FR 1702, Jan. 8, 1979; 45 FR 39793, June 12, 1980; 46 FR 36106, July 14, 1981; 46 FR 61989, Dec. 21, 1981; 52 FR 8002, Mar. 13, 1987; 52 FR 19283, May 22, 1987; 67 FR 78326, Dec. 24, 2002; 80 FR 9866, Feb. 24, 2015]