"CHAMP" Loan - What is it and how does it work

ref: http://www.dime-bank.com/champ.shtml

COMPLETE INFO PACKAGE http://www.dime-bank.com/CHAMP.pdf
"CHAMP"
Creating Housing – Affordable Mortgage Program
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Dime Bank is dedicated to meeting the housing needs of the low and moderate-income population in its community. As a result, Dime Bank has extended its community efforts for affordable housing by establishing a new flexible loan program, “CHAMP”, for landlords, with a below market interest rate. By taking advantage of the program, the landlords will be able to offer more affordable rental units to the low and moderate-income population. The program is designed to provide rehabilitation and purchase monies for vacant properties.

The Program
Dime Bank will provide financing at a below market rate for a fixed term of 10 years. After 10 years, the rate will convert to current market rates. The maximum term is 26 years, (one year construction, 25 years permanent).
Maximum loan to value is 90%. For the LTV calculation, the property value will be determined by the lesser of the purchase price plus the cost of rehab, or the appraised “as completed” value of the property.
Dime Bank will consider equity in other pledged properties to meet the down payment requirement. The combined loan to value (CLTV) for blanket mortgages must not exceed 75%.
Loans originated under this program will have one year to complete the project. During that time, the borrower will pay interest only monthly on the unpaid balance. The loan will convert to a permanent mortgage upon receipt of the following:
Certificate of Occupancy
Rental Certificate (if applicable)
Equity contribution will be required at closing.
Maximum loan(s) available to one Borrower may not exceed $500,000.00.
No application fee
Limited construction inspection fees (6 free, then $75.00 thereafter).
Borrower will pay for appraisal(s).
A 5% prepayment premium based on the original loan amount will be imposed if the loan is paid off within the first five years. A 3% prepayment premium based on the original loan amount will be imposed if the loan is paid off in years 6 through 10.
Refinancing of existing loans is not allowed under this program.
No private mortgage insurance will be required.
All attorney fees to be paid by the Borrower.
Eligibility Requirements
Borrower (landlord) must demonstrate a minimum of five years satisfactory experience in owning and managing multifamily properties.
To determine adequate property management and experience, Dime Bank may at its option inspect currently owned properties.
Borrower (landlord) agrees to maintain the unit rents at/or below fair market rents for a minimum of 10 years, based on the following:
U.S. Department of HUD: Fair Market Rents (monthly)

Connecticut
Eff.
1BR
2 BR
3 BR
4BR

$700
$830
$961
$1,176
$1,299

Rhode Island
Eff.
1BR
2 BR
3 BR
4BR

$683
$859
$1,005
$1,201
$1,568

To be reviewed and updated annually.
Rev 03/09

Borrower (landlord) agrees to provide Dime Bank a rent roll and copies of rental agreements on an annual basis for the first 10 years of the loan.
Borrower (landlord) must reside in Southeastern Connecticut.
During the loan, the Borrower (landlord) agrees to allow interior inspections of the property by Dime Bank if it has reasonable cause.
Property Requirements
The property must be vacant at the time of purchase. Upon completion of the rehab, the property may be owner-occupied or non-owner occupied.

Eligible properties include:

2 to 4 family homes
The Bank may consider 5 or more units on a case-by-case basis. Any loan securing five or more units will be considered a commercial loan.
Environmental Issues
Environmental issues, including but not limited to asbestos and lead paint, will be addressed on a case-by-case basis. The decision to require or waive the environmental testing will be determined upon a satisfactory review of the scope of the rehab work by Dime Bank.

Rehab Documentation
All requests made under this program must be accompanied by a licensed third party contract; or if the borrower will be acting as its own general contractor, the borrower must demonstrate adequate experience in this type and scope of rehab projects. A letter from the borrower regarding his/her contracting experience must be provided.

Borrower shall provide Dime Bank with the following:

Cost estimates
Specifications
Plans (if applicable)
Disbursement schedule
Default
In addition to the standard loan documents, a separate addendum signed by the Borrower (landlord) will be required. This addendum will address additional events of default which will include, but not be limited to the following:

Borrower (landlord) does not provide copies of rental agreements and a rent roll on an annual basis for the first 10 years of the loan.
Borrower (landlord) agrees to maintain the unit rents at/or below fair market rents for a minimum of 10 years, based on the following:
U.S. Department of HUD: Fair Market Rents (monthly)

Connecticut
Eff.$700
1BR$830
2 BR$961
3 BR $1,176
4BR$1,299

Rhode Island
Eff.$683
1BR$859
2 BR $1,005
3 BR $1,201
4BR$1,568

To be reviewed and updated annually.
Rev 03/09

In the event of default:

The interest rate will convert to the current 10 year T-bill plus margin of 3.75%.
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