SENATE BILL NO. 526
AS AMENDED BY SENATE AMENDMENT NOS. 1, 3, 4, 6 & 7
AND HOUSE AMENDMENT NO. 1
AN ACT AMENDING SUBCHAPTER VI, TITLE 31, DELAWARE CODE, RELATING TO THE STATE HOUSING AUTHORITY CONFERRING UPON IT ADDITIONAL POWERS RELATING TO FINANCING OF LOW AND MODERATE INCOME HOUSING FACILITIES AND COLLEGE DORMITORIES AND THE PURCHASE AND INSURING OF RESIDENTIAL MORTGAGES AND PROVIDING FOR A CAPITAL RESERVE FUND IN SUPPORT OF BONDS ISSUED BY THE STATE HOUSING AUTHORITY.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Amend §4053 of Subchapter VI, Chapter 40, Title 31, Delaware Code, by striking said section in its entirety and substitute in lieu thereof new section 4053 to read as follows:
"§4053. Powers of the Authority
In addition to its other powers, the Authority is hereby granted, has and may exercise all powers necessary or appropriate to carry out and effectuate its corporate purposes, including without limitation, the following:
(1) To sue and be sued in its own name;
(2) To have perpetual succession;
(3) To maintain an office at such place or places within this State as it may designate;
(4) To adopt and from time to time, amend and repeal by-laws, rules and regulations, not inconsistent with this subchapter, to carry into effect the powers and purposes of the Authority and the conduct of its business;
(5) To acquire real or personal property, or any interest therein, on either a temporary or long term basis in the name of the Authority by gift, purchase, transfer, in the manner prescribed by Chapter 61 of Title 10, foreclosure, lease or otherwise, including rights or easements; to hold, sell, assign, lease, encumber, mortgage or otherwise dispose of any real or personal property, or any interest therein, or mortgage lien interest owned by it or under its control, custody or in its possession and release or relinquish any right, title, claim, lien, interest easement or demand, however acquired, including any equity or right of redemption in property foreclosed by it and to do any of the foregoing by public or private sale, with or without public bidding notwithstanding the provisions of any other law;
(6) To make mortgage loans on such terms and conditions as may be determined by the Secretary of Community Affairs and Economic Development, and in accordance with this subchapter, for the construction, financing, refinancing or rehabilitation of housing for low and moderate income persons and families;
(7) To insure mortgage loans to finance the building or rehabilitation of housing designed and planned to be available by sale or lease to low or moderate income persons and families;
(8) To build or rehabilitate housing designed and planned to be sold or rented at prices which low and moderate income persons and families can afford and to rent or otherwise dispose of such housing to persons and families of low and moderate income or to housing sponsors for the purpose of renting or selling such property to such persons and families;
(9) To charge rents for the use of residential housing facilities in the amounts sufficient to comply with any agreements of the Authority, whether in connection with the issuance of bonds or otherwise, including but not limited to, reimbursement of all costs of financing by the Authority and such service charges as the Authority shall determine to be reasonable, and, in connection with its authorized programs, to make and collect such charges including, but not limited to, reimbursement of all costs of financing by the Authority and such service charges and insurance premiums as the Authority shall determine to be reasonable;
(10) To lease or rent any dwellings, houses, accommodations, lands, buildings, structures or facilities from private or public parties to effectuate the purposes of this subchapter;
(11) To enter into agreements with the State of Delaware or any agency thereof, municipalities of the State, the United States of America, public corporations or bodies and private corporations or individuals and to make and execute contracts and all other instruments necessary or convenient for the exercise of its powers and functions including contracts or agreements with qualified mortgage lenders for the servicing and processing of mortgage loans pursuant to this subchapter and to accept grants and the cooperation of the United States of America or any agency thereof or of the State of Delaware or any agency thereof, or any public corporation or municipality in furtherance of the purposes of this subchapter;
(12) To provide, contract or arrange for consolidated processing of any aspect of a housing development in order to avoid duplication thereof by either undertaking the processing in whole or in part for any department, agency, or instrumentality of the United States or of this State, or, in the alternative, to delegate the processing in whole or in part to any such department, agency or instrumentality;
(13) To provide advice, technical information, training and educational services, including assistance in obtaining federal and state aid, as will assist the planning, construction, rehabilitation, and operation of housing developments for persons and families of low and moderate income, including but not limited to, assistance in community development and organization, home management and advisory services for the residents of housing developments and to encourage community organizations to assist in developing same;
(14) To encourage research and demonstration projects in order to develop new and better techniques and methods for increasing the supply of housing for persons and families of low and moderate income and to engage in such research and demonstration projects and to receive and accept contributions, grants or aid, from any source, public or private, including but not limited to the United States and this State, for carrying out this purpose;
(15) To employ architects, engineers, attorneys, accountants, housing, construction and financial experts and such other advisors, consultants and agents as may be necessary in its judgment and to fix their compensation;
(16) To procure insurance against any loss in connection with its property and other assets, including mortgages and mortgage loans, in such amounts and from such insurers as it deems desirable;
(17) To invest any funds not needed for immediate use or disbursement including any funds held in reserve in the following:
(i) any bonds or other obligations which as to principal and interest constitute direct obligations of the United States of America or the State,
(ii) obligations of the Federal National Mortgage Association,
(iii) obligations of the Federal Intermediate Credit Corporation,
(iv) obligations of Federal Land Banks,
(v) obligations of Federal Home Loan Banks,
(vi) certificates of deposit of banks or trust companies, including the Trustee, organized under the laws of the United States or any state thereof which have a combined capital and surplus of at least $15,000,000,
() Bankers Acceptances, and
(i) commercial paper, which has been classified for rating purposes by Dun & Bradstreet Inc., as Prime-1 or by Standard & Poor's Corporation, as A-1.
(18) To borrow money and issue bonds and notes or other evidence or indebtedness as hereinafter shown; provided, however, that the authority shall not issue bonds and notes to exceed $20,000,000 without General Assembly approval;
(19) To the extent permitted under its contract with the holders of bonds, bond anticipation notes and other obligations of the Authority, to consent to any modification with respect to rate of interest, time and payment of any installment of principal or interest security or any other term of any contract, mortgage, mortgage loan, mortgage loan commitment, contract or agreement of any kind to which the Authority is a party;
(20) To the extent permitted under its contract with the holders of bonds, bond anticipation notes and other obligations, to enter into contracts with any mortgagor containing provisions enabling such mortgagor to reduce the rental or carrying charges to persons unable to pay the regular schedule of charges where, by reason of other income or payment from any department, agency or instrumentality of the United States or this State, such reductions can be made without jeopardizing the economic stability of housing being financed;
(21) To procure or agree to the procurement of insurance or guarantees from the Federal Government of the payment of any bonds or notes or any other evidences of indebtedness thereof issued by the Authority including the power to pay premiums on any such insurance;
(22) To acquire, lease, purchase, manage, operate, hold and dispose of real and personal property, in the State, take assignments of leases and rentals, sell and convey such property on any terms, proceed with foreclosure actions, and enter into contracts, leases and other arrangements necessary or incidental to the performance of its corporate duties;
(23) To exercise any or all of the powers conferred upon it, either generally or with respect to any specific housing project or projects, through or by an agent or agents which it may designate including any corporation or corporations which are or shall be formed under the laws of this State, and for such purposes, the Authority may cause one or more corporations to be incorporated under the laws of this State or may acquire the capital stock of any corporation or corporations. Any corporate agent, all of the stock of which shall be owned by the Authority or its nominee or nominees, may to the extent permitted by the law, exercise any of the powers conferred by this subchapter upon the Authority, or as shall be conferred upon it by the Authority, as agent;
(24) Fund the operation of any agents it may designate or any authority by advancing monies appropriated pursuant to §4067 of this subchapter;
(25) To do any act necessary or convenient to the exercise of the powers herein granted or reasonably implied including all powers presently or hereafter granted to local housing authorities under the provisions of Chapter 43 of Title 31."
Section 2. Amend §4055 (a) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by deleting the words "not exceeding the allowable maximum interest established by §2301 of Title 6, as amended" as the same appears in the first sentence thereof.
Section 3. Amend §4055(f) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by striking all the words immediately following the word "Authority" beginning with the word "but" and ending with the word "values" and insert a period (.) immediately after the word "Authority".
Section 4. Amend §4057 of Subchapter VI, Chapter 40, Title 31, Delaware Code, by creating a subparagraph A to read as follows:
"(A) Capital Reserve Fund
(1) The Authority shall create and establish a special fund to secure the bonds, herein referred to as Capitol Reserve Fund, and shall pay into the Capital Reserve Fund (a) any monies appropriated and made available by the State of Delaware for the purposes of such fund, (b) any proceeds of the sale of bonds, to the extent provided in the resolution of the Authority, authorizing the issuance thereof, and (c) any other monies which may be made available to the Authority for the purpose of such fund from any other source or sources. All monies held in the Capital Reserve Fund, except as hereinafter provided, shall be used solely for the payment of the principal of bonds of the Authority as the same mature, the redemption or purchase of bonds of the Authority, the payment of interest on such bonds of the Authority or the payment of any redemption premium required to be paid with such bonds are redeemed prior to the maturity. Monies in the Capital Reserve Fund shall not be withdrawn therefrom at any time in such amount as would reduce the amount of the fund to less than the maximum amount of principal and interest maturing and becoming due in any succeeding fiscal year on all bonds of the Authority then outstanding, except for the purpose of paying principal of and interest on bonds of the Authority maturing and becoming due and for the payment of which other monies of the Authority are not available. Any income or interest earned by, or increment to, the Capital Reserve Fund due to the investment thereof may be transferred by the Authority to any other fund of the Authority to the extent it does not reduce the amount of Capital Reserve Fund below the maximum amount of principal and interest maturing and becoming due in any succeeding fiscal year on all bonds of the Authority then outstanding.
(2) Except with respect to an issue, or portion of an issue of bonds the proceeds of which will be used to make loans to mortgage lenders secured as provided in §4072 hereof. The Authority shall not issue bonds at any time if the maximum amount of principal and interest maturing and becoming due in a succeeding fiscal year on the bonds then to be issued and on all other bonds of the Authority then outstanding will exceed the amount of the Capital Reserve Fund at the time of issuance unless the Authority, at the time of issuance of such bonds, shall deposit in the fund from the proceeds of the bonds so to be issued, or otherwise, an amount which, together with the amount then in the fund, will be not less than the maximum amount of principal and interest maturing and becoming due in any succeeding fiscal year on the bonds then to be issued and on all other bonds of the Authority then outstanding.
(3) To assure the continued operation and solvency of the Authority for the carrying out of the public purposes of this Act, provision is made for the accumulation in the Capital Reserve Fund of an amount equal to the maximum amount of principal and interest maturing and becoming due in any succeeding fiscal year on all bonds of the Authority then outstanding. In order further to assure such maintenance of the Capital Reserve Fund, there may be annually appropriated and paid to the Authority for deposit in the Capital Reserve Fund such sum, if any, as shall be certified by the Secretary to the Governor and Budget Director, as necessary to restore the Capital Reserve Fund to an amount equal to the maximum amount of principal and interest maturing and becoming due in any succeeding fiscal year on the bonds of the Authority then outstanding. The Secretary, if necessary, on or before December 15 shall make and deliver to the Governor and Budget Director, his certificate stating the amount required to restore the Capital Reserve Fund and the amount so stated may be appropriated and paid to the Authority during the next State of Delaware fiscal year.
(4) In computing the amount of the Capital Reserve Fund for the purposes of this Section, securities in which all or a portion of the fund is invested shall be valued in the manner provided in the resolution authorizing the issuance of the Trust Indenture securing such bonds.
(5) Calculations of the amount of principal and interest maturing and becoming due in any succeeding fiscal year shall be based upon the assumption that bonds of the Authority will, after said date of computation, cease to be outstanding by reason of the payment of such bonds at their respective maturities or the payment of all monies required to be paid into a sinking fund on account of such bonds as may be required by the terms of any resolution or indenture pursuant to which such bonds have been issued and the application of such sinking fund to the retirement of bonds in accordance with their terms.
(0) For the purposes of this Section, the term "bonds" shall mean obligations of the Authority bearing a maturity date more than one year after the date thereof."
Section 5. Amend §4057 (b) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by adding thereto immediately after the word "restriction" the following: "provided also that the provisions of §4057A, relative to the Capital Reserve Fund shall not be deemed to constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction."
Section 6. Amend §4066 (a) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by striking the words "non-profit organizations of housing" as the same appears in paragraph (a) of said section and substitute in lieu thereof the words 'housing sponsor'.
Section 7. Amend §4066 (b) (1) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by striking the words "non-profit organizations" as the same appears in the first sentence of said subsection (b) (1) of §4066 and substitute in lieu thereof the words 'housing sponsor'.
Section 8. Amend §4066(b) (2) of Subchapter VI, Chapter 40, Title 31, Delaware Code, by striking the words "non-profit organization" as the same appears in said subsection (b) (2) of §4066 and substitute in lieu the following words 'housing sponsor'.
Section 9. Amend Subchapter VI of Chapter 40, Title 31, Delaware Code, by adding thereto the following new sections:
"§4068. Declaration of findings and purpose
It is hereby declared: (a) that there exists, within this State, a serious shortage of sanitary, decent and safe residential housing, at prices or rentals which persons and families of low and moderate income can afford; that this shortage has contributed to and will contribute to the creation and persistence of slums and blight; that this shortage has been a major contributing factor to the deterioration of the quality of the environment and living conditions of large numbers of persons and families of this State, and that this shortage is inimical to the health, welfare and prosperity of the residents of this State; (b) that it is imperative that the supply of residential housing for persons and families displaced by public actions or natural disaster be increased; (c) that individual communities are often unable to meet local housing needs; (d) that private enterprise and investment have been unable, without assistance, to produce the needed construction or rehabilitation of sanitary, decent and safe residential housing at prices or rentals which persons and families of low and moderate income can afford and to provide sufficient long-term mortgage financing for residential housing for occupancy by such persons and families; (e) that private enterprise and investment be encouraged, both to sponsor land development, and build and rehabilitate, residential housing for such persons and families, and that private financing be supplemented by financing, as provided in this Chapter, in order to help prevent the creation and recurrence of slum conditions and blight and to assist in their permanent elimination throughout Delaware; (f) that it is to the economic benefit of the State to encourage the availability of adequate housing for all levels of society.
It is further declared that in order to provide a fully adequate supply of sanitary, decent and safe accommodations at rental or carrying charges which such persons or families can afford, the legislature finds that it is necessary to vest in the Authority, the powers granted by this subchapter for the purpose of encouraging the investment of private capital and stimulating the construction and rehabilitation of residential housing to meet the needs of such persons and families through the use of public financing, including, without limitation, public construction, public loans, public purchase and insuring of mortgages and otherwise.
It is hereby further declared to be necessary, and in the public interest, that the Authority provide for predevelopment costs, temporary financing, land development expenses and residential housing construction or rehabilitation, by public and private sponsors for sale or rental to persons and families of low and moderate income; further, to provide mortgage financing, including without limitation, long term federally insured mortgages and loans to mortgage lenders; further, to provide technical, consultative and project assistance services to communities and to public and private sponsors; further, to increase the construction and rehabilitation of low and moderate income housing through the purchase from financial institutions within the State of first mortgage loans for residential housing for persons and families of low and moderate income in this State; further, to assist in coordinating federal, state, regional and local, public and private efforts and resources, together with statewide housing planning to otherwise increase the supply of such residential housing; to guarantee to the extent provided herein, the repayment of certain loans secured by residential mortgages; and further, to promote wise usage of land and other resources in order to preserve the quality of life we value so highly in Delaware.
It is hereby further declared that all of the foregoing are public purposes and uses for which public monies may be borrowed, expended, advanced, loaned, or granted, and that such activities serve a public purpose in improving or otherwise benefiting the people of this State; that the necessity of enacting the provisions hereinbefore set forth is in the public interest and is hereby so declared as a matter of express legislative determination.
As used in this Subchapter, the following words and terms have the following meanings, unless a different meaning clearly appears from the context:
(1) "Authority" means the Delaware State Housing Authority created and established pursuant to §4050 of this subchapter.
(2) "Bonds, notes and other obligations" or "bonds, bond anticipation notes or other obligation" or "bonds" means any bonds, notes, debentures, interim certificates or other evidences of financial indebtedness issued by the Authority pursuant to this subchapter.
(3) "Federal government" means the United States of America, or any agency or instrumentality, corporate or otherwise, of the United States of America.
(0) "Federally insured mortgage" means a mortgage loan for land development or for residential housing insured or guaranteed by the United States or an instrumentality thereof, or a commitment by the United States or an instrumentality thereof to insure such a mortgage.
(1) "Federal mortgage" means a mortgage loan for land development for residential housing made by the United States or an instrumentality thereof or a resolution or commitment by the United States or an instrumentality thereof to make such a mortgage loan.
(2) "Fiscal year" means, in the case of the Authority, a period of 12 calendar months beginning and ending on such dates as the Authority shall determine prior to the issuance of its bonds, notes or other obligations pursuant to this subchapter, and in the case of the State of Delaware, shall mean the fiscal year of the state as may at any time be provided by law.
(7) "Governing body" means the Town Council, City Council, County Council or Levy Court which governs the municipality in question.
(8) "Housing development costs" means the sum total of all costs incurred in the development of a housing development, which are approved by the Authority as reasonable and necessary, which costs shall include, but are not necessarily limited to, (1) cost of land acquisition and any buildings thereon, including payments for options, deposits, or contracts to purchase properties on the proposed housing site or payments for the purchase of such properties, (2) cost of site preparation, demolition and development, (3) architectural, engineering, legal, accounting, the Authority, and other fees paid or payable in connection with the planning, execution and financing of the housing development, (4) cost of necessary studies, surveys, plans and permits, (5) insurance, interest, financing, tax and assessment costs and other operating and carrying costs during construction, (6) cost of construction, rehabilitation, reconstruction, fixtures, furnishings, equipment, machinery and apparatus related to the real property, (7) cost of land improvements, including without limitation, landscaping and offsite improvements, whether or not such costs have been paid in case or in a form other than cash, (8) necessary expenses in connection with initial occupancy of the housing development, (9) a reasonable profit and risk fee, in addition to job overhead to the general contractor and, if applicable, a limited profit housing sponsor,
(10) an allowance established by the Authority for working capital and contingency reserves, and reserves for any anticipated operating deficits during the first two years of occupancy, (11) the cost of such other items, including tenant relocation, as the Authority shall determine to be reasonable and necessary for the development of the housing development, less any and all net rents and other net revenues received from the operation of the real and personal property on the development site during construction.
(9) "Housing sponsor" means individuals, public bodies, joint ventures, partnerships, limited partnerships, trust, firms, associations, or other legal entities or any combination thereof, corporations, cooperatives and condominiums, approved by the Authority, as qualified, either to own, construct, acquire, rehabilitate, operate, manage or maintain a housing development whether non-profit or organized for limited profit subject to the regulatory powers of the Authority and other terms and conditions set forth in this subchapter.
(10) "Land development" means the process of acquiring land for residential housing construction, and of making, installing or constructing nonresidential housing improvements, including without limitation, waterlines and water supply installations, sewer lines and sewage disposal installation, steam, gas and electric lines and installations, roads, streets, curbs, gutters, sidewalks, whether on or off the site, which the Authority deems necessary or desirable to prepare such land for residential housing within this State.
(11) "Local authority or local housing authority" means a housing authority constituted under the provisions of Chapter 43, Title 31, Delaware Code.
(12) "Mortgage" means any instrument which secures an obligation and constitutes a lien on real property or on a leasehold under a lease having a remaining term, at the time such mortgage is acquired, which does not expire for at least that number of years beyond the maturity date of the obligation secured by such mortgage as is equal to the number of years remaining until the maturity date of such obligation.
(13) "Mortgage lender" means any bank or trust company, savings bank, national banking association, savings and loan association, or building and loan association, maintaining an office in the State, or any insurance company authorized to transact business in the State.
(0) "Mortgage loan" means an interest bearing obligation secured by mortgages, and notes or bonds which is a first lien on land and improvements in the State constituting one family or multi-family units.
(1) "Municipality" means any city, town or county in the State.
(2) "Low and moderate income" as applied to persons and families means persons and families, including those defined as "elderly" in the United States Housing Act of 1937, as amended, irrespective of race, creed, national origin or sex, determined by the Authority to require such assistance as is made available by this subchapter on account of insufficient personal or family income taking into consideration, without limitation, such factors as follows: (a) the amount of the total income of such persons and families available for housing needs, (b) the size of the family, (c) the cost and condition of housing facilities available, (d) the ability of such persons and families to compete successfully in the normal private housing market and to pay the amounts at which private enterprise is providing an adequate supply of sanitary, decent and safe housing, and (e) standards established for various federal programs determining eligibility based on income of such persons and families.
§4070. Powers relative to making mortgage loans and temporary construction loans to housing sponsors and persons and families of low and moderate income
The Authority shall have all the powers necessary or convenient to carry out and effectuate the purpose and provisions of this subchapter, including the following powers in addition to others herein granted:
(1) Make and undertake commitments to make mortgage loans, including without limitation federally insured mortgage loans and to make temporary loans and advances in anticipation of permanent loans to housing sponsors to finance the construction or rehabilitation of housing designed and planned for persons and families of low and moderate income upon the terms and conditions set forth in §4073;
(2) Make and undertake commitments to make first mortgage loans to persons of low or moderate income who may purchase residential housing, 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. Such loans shall be made only after a determination by the Authority that long term first mortgage loans are not otherwise available, wholly or in part, from private lenders upon reasonably equivalent terms and conditions;
(3) Make and publish rules and regulations respecting the grant of mortgage loans pursuant to this Section, the regulations of borrowers, the admission of housing developments pursuant to this Section, and the construction of ancillary commercial facilities;
(4) Enter into agreements and contracts with housing sponsors under the provisions of this Section;
(5) The Authority may institute any action or proceeding against any housing sponsor 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 act, or to foreclose its mortgage, or to protect the public interest, persons and families of low and moderate income, stockholders or creditors of such sponsor. In connection with any such action or proceeding it may apply for the appointment of a receiver to take over, manage, operate and maintain the affairs of such housing sponsor and the Authority through such agent as it shall designate is hereby authorized to accept appointment as receiver of any such sponsor when so appointed by a court of competent jurisdiction;
The reorganization of any housing sponsor shall be subject to the supervision and control of the Authority, and no such reorganization shall be had without the consent of the Authority. Upon any such reorganization the amount of capitalization, including therein all stocks, income debentures and bonds and other evidence of indebtedness shall be such as is authorized by the Authority, but not in excess of the fair value of the property received;
(0) In any foreclosure action involving a housing sponsor other than a foreclosure action instituted by the Authority, the municipality in which any tax exemption or abatement is provided such housing sponsor and the Authority, shall, in addition to other necessary parties, be made parties defendant. The Authority and the municipality shall take all steps in such action necessary to protect the interest of the public therein, and no costs shall be awarded against the Authority or the municipality.
Subject to the terms of any applicable agreement, contract or other instrument entered into or obtained pursuant to this subchapter, judgment of foreclosure shall not be entered unless the court to which application therefore is made shall be satisfied that the interest of the lien-holders or holders cannot be adequately secured or safeguarded except by the sale of the property; and in such proceeding the court shall be authorized to make an order increasing the rental or carrying charges to be charged for the housing accommodations in the housing development involved in such foreclosure, or appoint a member of the Authority or any officer of the municipality in which any tax exemption or abatement with respect to the development is provided, as a receiver of the property, or grant such other and further relief as may be reasonable and proper; and in the event of a foreclosure or other judicial sale, the property shall be sold only to a housing sponsor which will manage, operate and maintain the housing development subject to the provisions of this subchapter, unless the court shall find that the interest and principal on the obligations secured by the lien, which is the subject of foreclosure, cannot be earned under the limitations imposed by the provisions of this subchapter, and that the proceeding was brought in good faith, in which event the property may be sold free of limitations imposed by this subchapter or subject to such limitations as the court may deem advisable to protect the public interest;
(7) In the event of a judgment against any housing 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 hereunder of such housing sponsor except upon 60 days' written notice to the Authority. Upon receipt of such notice the Authority shall take such steps as in its judgment may be necessary to protect the rights of all parties.
§4071. Powers relative to purchase of and sale to financial institutions of mortgage loans; loans to mortgage lenders
The Authority shall have all the powers necessary or convenient to carry out and effectuate the purposes and provisions of this subchapter, including the following powers in addition to others herein granted:
(1) To invest in, purchase or to make commitments to purchase, and take assignments from mortgage lenders of, notes and mortgages evidencing loans for the construction, rehabilitation, purchase, leasing or refinancing of housing for persons and families of low and moderate income in this State, upon the terms set forth in §4077;
(2) To make loans to mortgage lenders upon terms and conditions requiring the proceeds thereof to be used by such mortgage lenders for the making of new residential mortgages, upon the terms set forth in §4074;
(3) In order to provide additional permanent financing for housing for persons and families of low and moderate income in this State, the Authority is authorized to make commitments to purchase, and to purchase, service and sell mortgages insured by any department, agency or instrumentality of the United States, and to make loans directly upon the security of any such mortgage, provided the underlying mortgage loans shall have been made and shall be continued to be used solely to finance or refinance the construction, rehabilitation, purchase or leasing of residential housing for persons and families of low and moderate income in this State;
(4) To sell, at public or private sale, with or without public bidding, any mortgage or other obligation held by the Authority;
(5) To enter into mortgage insurance agreements with mortgage lenders in connection with the lending of money by such institutions to persons and families of low or moderate income for the purchase of housing;
(6) Subject to any agreement with bondholders or note-holders, to collect, enforce the collection of, and foreclose on any collateral securing its loans to mortgage lenders and acquire or take possession of such collateral and sell the same at public or private sale, with or without public bidding, and otherwise deal with such collateral as may be necessary to protect the interest of the Authority therein.
§4072. Power to supervise housing sponsors
The Authority shall have the power to supervise housing sponsors including limited profit housing sponsors and their real and personal property in the following respects:
(1) The Authority may prescribe uniform systems of accounts and records for housing sponsors and may require them to make reports and give answers to specific questions on such forms and at such times as may be necessary for the purposes of this subchapter;
(2) Through its agents or employees, the Authority may enter upon and inspect the lands, buildings and equipment of a housing sponsor, including all parts thereof, and may examine all books and records with reference to capital structure, income, expenditures and other payments of a housing sponsor;
(3) The Authority may supervise the operation and maintenance of any housing development and may order such repairs as may be necessary to protect the public interest or the health, welfare or safety of the housing development occupants;
(0) The Authority may fix, and alter from time to time, a schedule of rents and charges for any housing development;
(1) The Authority may determine standards for tenant selection by a housing sponsor;
(2) The Authority may require any housing sponsor to pay to the Authority such fees as it may prescribe in connection with the examination, inspection, supervision, auditing, or other regulations of the housing sponsor;
(3) The Authority may order any housing sponsor to do, or to refrain from doing, such things as may be necessary to comply with the provisions of the law, the rules and regulations of the Authority, and the terms of any contract or agreement to which the housing sponsor may be a party;
(4) The Authority may regulate the retirement of any capital investment or the redemption of stock where any such retirement or redemption, when added to any dividend or other distribution, shall exceed in any one fiscal year 10% of the original face amount of any investment by any housing sponsor;
(5) The Authority may prescribe regulations specifying the categories of cost which shall be allowable in the construction or rehabilitation of a housing development. The Authority shall require any housing sponsor to certify the actual housing development costs upon completion of the housing development, subject to audit and determination by the Authority. Notwithstanding the provisions of this subsection, the Authority may accept, in lieu of any certification of housing development costs as provided herein, such other assurances of the said housing development costs, in any form or manner whatsoever, as will enable the Authority to determine with reasonable accuracy the amount of said housing development costs.
§4073. Loan terms and conditions
Loans made by the Authority shall be subject to the following terms and conditions :
(1) No application for a loan for a housing development shall be processed unless the applicant is a housing sponsor as defined in Section 4069 hereof.
(2) The ratio of loan to total housing development cost and the amortization period of loans made under this chapter, which are insured by FHA shall be governed by the FHA mortgage insurance commitment for each housing development; but in no event, shall such amortization period exceed fifty years.
In the case of a mortgage loan not insured by FHA the amount of the loan to (1) limited profit housing sponsors shall not exceed 95% of the total housing development costs, as determined by the Authority, and (2) other housing sponsors, shall not exceed 100% of the total development cost, as determined by the Authority, and the amortization period of such loans shall be determined in accordance with regulations formulated and published by the Authority, but in no event shall such amortization period exceed fifty years; provided, however, that any such loan shall be subject to an agreement between the Authority and any such housing sponsor prohibiting the transfer of ownership or management responsibilities by such housing sponsor at any time prior to repayment of at least 5% of the original loan, unless the transfer of ownership or management responsibilities has been ordered by a court of competent jurisdiction to a different housing sponsor.
(0) A loan made hereunder may be prepaid to maturity after a period of fifteen (15) years with the consent of the Authority, provided the Authority finds that the prepayment of the loan will not result in a material escalation of rents charged to persons and families of low and moderate income in the housing development.
(4) The Authority shall have authority to set from time to time the interest rates at which it shall make loans and commitments therefor. Such interest rates shall be established by the Authority at the lowest level consistent with the Authority's cost of operation, and its responsibilities to the holders of its bonds, bond anticipation notes and other obligations. In addition to such interest charges, the Authority may make and collect such fees and charges, including but not limited to, reimbursement of the Authority's financing costs, service charges, insurance premiums and mortgage insurance premiums, as the Authority determines to be reasonable.
(5) In considering any application for a loan, the Authority shall give first priority to applications for housing developments which will be well planned, well designed and which will be a part of or constructed in connection with a major redevelopment program; and shall also give consideration to:
(a) The comparative need for housing for persons of low and moderate income in the area to be served by the proposed development;
(b) The ability of the applicant to construct, operate, manage and maintain the proposed housing development;
(c) The existence of zoning or other regulations to protect adequately the proposed housing development against detrimental future uses which could cause undue depreciation in the value of the development; and
(d) The availability where reasonably possible of adequate parks, recreational areas, utilities, schools, transportation, parking, shopping facilities, churches and other community facilities.
(6) Each mortgage loan shall be evidenced by a mortgage note or bond arid by a mortgage which shall be a first lien on the housing development and which shall contain such terms and provisions and be in a form approved by the Authority. The Authority shall require the housing sponsor receiving a loan or its contractor to post performance and surety bonds in amounts related to the housing development cost as established by regulation and/or to execute such other assurances and guarantees as the Authority may deem necessary. It may also require the housing sponsors or the contractors to also execute such other assurances and guarantees as the Authority may deem necessary.
(7) Each loan shall be subject to an agreement between the Authority and the housing sponsor which will subject said sponsor and its principals or stockholders to limitations established by the Authority as to rentals and other charges, builders' and developers' profits and fees, and the disposition of its property and franchises to the extent more restrictive limitations are not provided by the law under which the borrower is incorporated or organized.
(8) As a condition of the loan, the Authority shall have the power at all times during the construction and rehabilitation of a housing development by a housing sponsor and the operation thereof:
(a) To enter upon and inspect any housing development, including all parts thereof, for the purpose of investigating the physical and financial condition thereof, and its construction, rehabilitation, operation, management and maintenance, and to examine all books and records with respect to capitalization, income and other matters relating thereto and to make such charges as may be required to cover the cost of such inspections and examinations;
(b) To order such alterations, changes or repairs as may be necessary to protect the security of its investment in a housing development or the health, safety, and welfare of the occupants thereof;
(c) To order any managing agent, housing development manager or owner of a housing development to do such acts as may be necessary to comply with the provisions of all applicable laws or ordinances of any agreement concerning the said development or to refrain from doing any acts in violation thereof and in this regard the Authority shall be a proper party to file a complaint and to prosecute thereon for any violations of laws or ordinances as set forth herein.
(9) A limited profit housing sponsor may not make distributions in any one year with respect to a housing development financed by the Authority in excess of ten (10) per cent of a limited profit housing sponsor's equity in such development. Such sponsor's equity in a housing development shall consist of the difference between the mortgage and the total housing development cost. With respect to every housing development, the Authority shall, pursuant to regulations adopted by it, establish such sponsor's equity at the time of the making of the final mortgage advance and for purposes of this paragraph, that figure shall remain constant during the life of the Authority's mortgage on such development.
(10) Whenever any housing sponsor accumulates earned surplus, in addition to reserves for maintenance, operation and replacement, as the Authority may require in excess of ten per cent of the initial annual rent roll for the housing development, rents in the housing development shall be reduced to the extent necessary to lower the earned surplus accumulation to such ten per cent figure in the following fiscal year. Every ten years the housing sponsor may seek the approval of the Authority for increases in said reserves. To the extent warranted the Authority may grant such approval, if in its judgment, there have been increased price levels or unusual maintenance and repayment requirements.
§4074. Terms and conditions of the purchase and sale to financial institutions of mortgage loans; loans to mortgage lenders
(a) The agency shall from time to time adopt, modify, amend or repeal rules and regulations governing the making of such loans to mortgage lenders and the application of the proceeds thereof, including rules and regulations as to any or all of the following:
(1) Procedures for the submission of requests or the invitations of proposals for loans;
(2) Standards and requirements as to allocations of loans among all or certain of the mortgage lenders or awards of loans and determining the amounts and interest rates thereof;
(0) Limitations or restrictions as to the number of family unite, location or other qualifications or characteristics of residences to be financed by new residential mortgages;
(4) Restrictions as to the interest rates on new residential mortgages or the return realized therefrom by mortgage lenders;
(5) Requirements as to commitments by mortgage lenders with respect to new residential mortgages;
(6) Schedules of any fees and charges necessary to provide for expenses and reserves of the agency; and
(7) Any other matters related to the duties and the exercise of the powers of the agency under this section.
Such rules and regulations shall be designed to effectuate the general purposes of this act and the following specific objectives: (i) the expansion of the supply of funds in the State available for new residential mortgages; (ii) the provision of the additional housing needed to remedy the shortage of adequate housing in the State and eliminate the existence of a large number of substandard dwellings; and (iii) the effective participation by mortgage lenders in the program authorized by the act and the restriction of the financial return and benefit thereto from such program to that necessary and reasonable to induce such participation.
(b) Loans to mortgage lenders shall be general obligations of the respective mortgage lenders owing the same and shall bear such date or dates, shall mature at such time or times, shall be evidenced by such note, bond or other certificate of indebtedness, shall be subject to prepayment, and shall contain such other provisions consistent with this section, all as the agency shall by resolution determine.
(c) Any other provision of this section to the contrary notwithstanding, the interest rate or rates and other terms of the loans to mortgage lenders made from the proceeds of any issue of bonds of the agency shall be at least sufficient so as to assure the payment of said bonds and the interest thereon as the same become due from the amounts received by the agency in repayment of such loans and interest thereon.
(d) The agency shall require as a condition of each loan to a mortgage lender that such mortgage lender shall on or prior to the One-Hundred-Eightieth day (or such earlier day as shall be prescribed by rules and regulations of the agency) following the receipt of the loan proceeds have entered into written commitments to make, and shall thereafter proceed as promptly as practicable to make and disburse from such loan proceeds, new residential mortgages having a stated maturity of not less than 15 years from the date thereof in any aggregate principal amount equal to the amount of such loan.
(e) The agency shall require that such loans to mortgage lenders shall be additionally secured as to payment of both principal and interest by a pledge of and lien upon collateral security in such amounts as the agency shall by resolution determine to be necessary to assure the payment of such loans the interest thereon as the same become due. Such collateral security shall consist of (i) direct obligations of, or obligations guaranteed by, the State or the United States of America; (ii) bonds, debentures, notes or other evidences of indebtedness, satisfactory to the agency, issued by any of the following Federal agencies; Bank for Cooperatives, Federal Intermediate Credit Bank, Federal Home Loan Bank System, Export-Import Bank of Washington, Federal Land Banks, the Federal National Mortgage Association or the Government National Mortgage Association; (iii) direct obligations of or obligations guaranteed by the State; (iv) mortgages insured or guaranteed by the United States of America or an instrumentality thereof as to payment of principal and interest; or (v) obligations of Federal Home Loan Banks; (vi) certificates of deposit of banks or trust companies, including the Trustee, organized under the laws of the United States or any state thereof, which have a combined capital and surplus of at least $15,000,000; (vii) Bankers Acceptances; and (viii) commercial paper, which has been classified for rating purposes by Dun & Bradstreet Inc., as Prime-1 or by Standard & Poor's Corp., as A-1. The Agency may require in the case of any or all mortgage lenders that such collateral be lodged with a bank or trust company located in the State designated by the agency as custodian therefor. In the absence of such requirement a mortgage lender shall upon, receipt of the loan proceeds from the agency enter into an agreement with the agency containing such provisions as the agency shall deem necessary to adequately identify and maintain such collateral and service the same and shall provide that such mortgage lender shall hold such collateral as an agent for the agency and shall be held accountable as the trustee of an express trust for the application and disposition thereof and the income therefrom solely to the uses and purposes in accordance with the provisions of such agreement. A copy of each such agreement and any revisions or supplements thereto shall be filed with the Secretary of State and no further filing or other action under any law of the State shall be required to perfect the security interest of the agency in such collateral or any additions thereto or substitutions therefor, and the lien and trust for the benefit of the agency so created shall be binding from and after the time made against all parties having claims of an kind in tort, contract or otherwise against such mortgage lender. The agency may also establish such additional requirements as it shall deem necessary with respect to the pledging, assigning, setting aside, or holding of such collateral and the making of substitutions therefor or additions thereto and the disposition of income and receipts therefrom.
(f) The agency shall require the submission to it by each mortgage lender to which the agency has made a loan of evidence satisfactory to the agency of the making of new residential mortgages as required by this section and prescribed by rules and regulations of the agency and in connection therewith may inspect the books and records of such mortgage lender.
(g) The agency may require as a condition of any loans to mortgage lenders such representations and warranties as it shall determine to be necessary to secure such loans and carry out the purpose of the act.
(h) All new residential mortgages made as required by this section shall comply with the applicable provisions of the laws of the State, and, where Federal law or the law of another jurisdiction govern the affairs of the mortgage lender, shall comply with applicable provisions of such law.
§4075. Terms and conditions of mortgage insurance
(1) For mortgage payments to be eligible for issuance under the provisions of this subchapter, the underlying mortgage loans shall: (a) Be one which is made to and held by a mortgagee approved by the Authority as responsible and able to service the mortgage properly; (b) have a maturity satisfactory to the Authority; (c) contain amortization provisions satisfactory to the Authority requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Authority; (d) be in such form and contain such terms and provisions with respect to maturity, property insurance, repairs, alterations, payment of taxes and assessments, default reserves, delinquency charges, default remedies, anticipation of maturity, additional and secondary liens, equitable and legal redemption rights, prepayment privileges and other matters as the Authority may prescribe.
(2) All applications for mortgage insurance shall be forwarded, together with application fee prescribed by the Authority, to the Secretary. The Authority shall cause an investigation of the proposed housing to be made, review the application and the report of the investigation, and approve or deny the application. No application shall be approved unless the Authority finds that it is consistent with the purposes of this subchapter and further finds that the financing plan for the proposed housing is sound. The Authority shall notify the applicant and the proposed lender of its decisions. Any such approval shall be conditioned upon payment to the Authority, within such reasonable time and after notification of approval as may be specified by the Authority, of the commitment fee prescribed by the Authority.
(3) The Authority shall fix mortgage insurance premiums for the insurance of mortgage payments under the provisions of this subchapter. The amount of premium need not be uniform for all insured loans. Such premiums shall be payable by mortgagors or mortgagees in such manner as prescribed by the Authority.
(4) In the event of default by the mortgagor, the mortgagee shall notify the Authority both of the default and the mortgagee's proposed course of action. When it appears feasible, the Authority may, for a temporary period, upon default or threatened default by the mortgagor, authorize mortgage payments to be made by the Authority to the mortgagee which payments shall be repaid under such conditions as the Authority may prescribe. The Authority may also agree to revised terms of financing when such appear prudent. The mortgagee shall be entitled to receive the benefits of the insurance, provided herein in accordance with rules and regulations established by the Authority in order to further the purposes of this subchapter, provided all claims of the mortgagee against the mortgagor or others arising from the mortgage foreclosure, or any deficiency judgment shall be assigned to the Authority without recourse except such claims as may have been released with the consent of the Authority; or, after the mortgagee has taken title to the mortgaged property, the mortgagee thereafter conveys the property to the Authority with an assignment, without recourse, to the Authority of all claims of the mortgagee against the mortgagor or others arising out of any mortgage foreclosure deficiency judgment or the Authority accepts title to the property or an assignment of the mortgage, without recourse to the Authority, all as the Authority may, in its own discretion, determine. Upon the occurrence of any of the above, the obligation of the mortgagee to pay premium charges for insurance shall cease, and the Authority shall, within thirty days thereafter pay the mortgagee ninety-eight per cent of the sum of (i) the then unpaid principal balance of the insured indebtedness, (ii) the unpaid interest to the date of conveyance or assignment to the Authority, as the case may be, (iii) the amount of all payments made by the mortgagee for which it has not been reimbursed for taxes, insurance, assessments and mortgage insurance premiums, and (iv) such other necessary fees, costs or expenses of the mortgagee as may be approved by the Authority.
(5) Upon request of the mortgagee, the Authority may, at any time, under such terms and conditions as it may prescribe, consent to the release of the mortgagor from his liability or consent to the release of parts of the property from the lien of the mortgage, or approve a substitute mortgagor or sales of the property or part thereof.
§4076. Cooperation with local authorities and municipalities
(1) The Authority may initiate and undertake housing developments in the State. The Authority may obtain the aid and cooperation of local authorities and the municipalities in which such local authorities are located and shall have the power to enter into (1) such agreements and arrangements as it deems necessary or advisable to obtain such aid and cooperation and (2) agreements with municipalities for the furnishing, installing, opening, or dosing of streets, roads, alleys, sidewalks or other places, or for the furnishing of property, services, parks, sewage, water and other facilities in connection with housing developments, or for the changing of the map of a political subdivision of the planning, replanning, zoning, or rezoning of any part of a political subdivision.
(2) The Authority and any local authority or authorities may join or cooperate with each other, either jointly or otherwise, in the exercise of any of their powers for the purpose of financing, including the issuance of bonds, notes or other obligations and the giving of security therefor, planning, undertaking, owning, constructing or contracting with respect to a housing development or a housing project as defined in Section 4301, Title 31, Delaware Code. For such purpose, any cooperating local authority may, by resolution, prescribe and authorize the Authority to act in its behalf in the exercise of any such powers.
§4077. Admission and income limitations relative to housing developments
(1) Admission to housing developments financed pursuant to the provisions of this subchapter shall be limited to persons or families of low or moderate income.
(2) The Authority shall approve a tenant selection plan, submitted by a housing sponsor for a housing development to be financed pursuant to the provisions of this subchapter. The Authority shall make and publish regulations, from time to time, governing the terms of such tenant selector plans. Such plans shall include criteria for tenant selection which establish income limits for eligible tenants which may vary with the size and circumstances of the person or family. Subject to the approval of the Authority, tenant selection plans shall provide with respect to dwelling accommodations designated for rent that the local authority in the municipality in which the housing development is located, shall have the right to designate tenants, who are otherwise eligible for such accommodations as they become available, either in the initial renting of the housing development or as vacancies thereafter occur.
(3) In the event the income of any person or family who is a tenant of any housing development exceeds the income levels established for such development by the Authority, the Authority may permit such person or family to continue to occupy the unit, provided that a surcharge is paid as additional rent in accordance with a schedule of surcharges established by the Authority.
§4078. Procedure prior to financing of housing developments undertaken by housing sponsors
Notwithstanding any other provision of this subchapter, the Authority is not empowered to finance any housing development undertaken by a housing sponsor pursuant to Sections 4070, 4072 and 4073 of this subchapter, unless prior to the financing of any housing development hereunder, the Authority, finds:
(1) That there exists a shortage of decent, safe and sanitary housing at rentals or prices which persons and families of low income or moderate income can afford within the general housing market area to be served by the proposed housing development.
(2) That private enterprise and investment have been unable, without assistance, to provide the needed decent, safe and sanitary housing at rentals or prices which persons or families of low and moderate income can afford or to provide sufficient mortgage financing for residential housing for occupancy by such persons or families.
(3) That the housing sponsor or limited-profit housing sponsor or sponsors undertaking the proposed housing development in this State will supply well-planned, well-designed housing for persons or families of low and moderate income and that such sponsors are financially responsible.
(4) That the housing development to be assisted pursuant to the provisions of this Chapter, will be of public use and will provide a public benefit.
(5) That the housing development will be undertaken within the authority conferred by this subchapter upon the Authority and the housing sponsor or sponsors.
§4079. Liberal construction
Neither this subchapter nor anything herein contained is or shall be construed as a restriction or limitation upon any powers which the Authority might otherwise have under any laws of this State, and this Chapter is cumulative to any such powers. This subchapter does, and shall be regarded as supplemental and additional to powers conferred by other laws. However, the issuance of bonds, notes and other obligations and refunding bonds under the provisions of this subchapter need not comply with the requirements of any other state law applicable to the issuance of bonds, notes and other obligations and contracts for the construction and acquisition of any housing developments undertaken pursuant to this subchapter need not comply with the provisions of any other state law applicable to contracts for the construction and acquisition of state-owned property. No proceedings, notice or approval shall be required for the issuance of any bonds, notes and other obligations or any instrument as security therefor, except as provided in this subchapter.
§4080. Chapter not affected if in part unconstitutional
If any section, subdivision, paragraph, sentence, clause or provision of this subchapter shall be unconstitutional or ineffective, in whole or in part, to the extent that it is not unconstitutional or ineffective, it shall be valid and effective and no other section, subdivision, paragraph, sentence, clause or provision shall, on account thereof, be deemed invalid or ineffective.
§4081. Inconsistent provisions in other laws superseded
Insofar as the provisions of this subchapter are inconsistent with the provisions of any other law, general, special or local, the provisions of this subchapter shall be controlling."
Section 10. This Act shall take effect immediately.
Approved July 19, 1974.