Maximum Loan Amount. The maximum loan amount, when added to any indebtedness secured by the property, may not exceed 95 percent of the after-rehabilitation value of the property. If 100 percent of the units are subject to a federal rent subsidy which is allocated to the project for the entire term of the loan, then the 95 percent loan-to-value ratio required by §A(1) of this regulation may be raised to 100 percent. Deferred loans in amounts greater than or equal to $25,000 may not exceed an amount which, when added to any prior debts secured by the property would equal 85 percent of the market value of the property after rehabilitation as determined by the Department or the local administrator unless, in the written determination of the Program Director, extraordinary or emergency circumstances justify an amount up to 95 percent of the after-rehabilitation value. If, in the determination of the Program Director, a loan increase is necessary to assure completion of the building and protect the Department's interest, an increase in the mortgage not to exceed 10 percent may be made to cover extraordinary and unforeseen construction problems provided the increase can be made within the limits on maximum loan amounts set forth in §§A(1)—(3) of this regulation. Closing costs as defined in Regulation .03B(4) of this chapter may be included in loans on owner-occupied dwellings, provided the loan does not exceed the limits on the maximum loan amount set forth in §§A(1)—(3) of this regulation. Interest Rate. Loans to the following borrowers shall have interest rates of not less than 4.5 percent: Owner-occupants who themselves are families of limited income or whose accessory housing tenants are families of limited income; and Sheltered housing sponsors whose tenants are families of limited income. Loans to the following borrowers may have interest rates of 4.5 percent or less: Owner-occupants who themselves are families of lower income or whose accessory housing tenants are families of lower income; and Sheltered housing sponsors whose tenants are families of lower income. Within the limits established in §B(1) and (2) of this regulation, the interest rate shall be the maximum rate based on the applicant's ability to pay. Insurance. Hazard Insurance. The owner of the building shall maintain fire and extended coverage insurance on the building at the owner's expense in an amount not less than the sum of the loan and any other indebtedness secured by the building. The hazard insurance policy shall: Be written by companies authorized to transact business in the State; Be written by companies which are reputable and financially sound, as determined by the Department; Be in force at the time of loan closing; Name the Department as named insured and loss payee as its interest may appear in a standard mortgage endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If the property is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development: The property shall be covered by a flood plain insurance policy in an amount equal to the sum of the loan and any other indebtedness secured by the building, naming the Department as beneficiary; and The flood plain policy may not be terminated without prior notification to the Department; Term. The term of each loan may not exceed 30 years from the date of completion of the improvements and shall be based upon the amount of the loan, the borrower's ability to repay, and the expected economic life of the building. Periodic Payment. Except for deferred payment loans, periodic payments shall be charged which shall be applied to expenses, when applicable, interest, and principal in that order. Late Charge. Late charges, as permitted by law, may be imposed. Security for Loans. Loans of $5,000 or less shall be evidenced by a promissory note and such other documents as may be required by the Department. All loans in excess of $5,000, and all loans providing for deferred payments, shall be secured by a mortgage or deed of trust, in the form required by the Department, which shall be recorded in the land records of the county in which the property is located. The mortgage or deed of trust may be subordinate to other recorded mortgage liens provided that the mortgagee of the mortgage gives any consents required by the prior mortgagee's loan documents or by the Department. Loans to political subdivisions may be secured by a recorded mortgage or deed of trust on real property, or by another security device acceptable to the Department. Appraisals. At the discretion of the Program Director or the local administrator, borrowers may be required to obtain an appraisal in a form and manner acceptable to the Department from an acceptable independent fee appraiser showing the building's value before and after the proposed rehabilitation. In the alternative, the staff of the Program or the local administrator may prepare a comparable appraisal but may not charge a fee. Applicants shall bear the costs of appraisals, which may be financed in the case of a loan made to an owner-occupant. Change of Borrower Eligibility. If the borrower's income changes or the borrower no longer satisfies other requirements of Regulation .04, the Department may, in accordance with the terms of the loan agreements between the borrower and the Department: Increase the interest rate up to a rate set by the Program from time to time; Accelerate the payment of the entire principal and interest due; or If the income of the individuals served by the loan changes, increase or decrease the interest rate to a rate permitted by §B of this regulation. Change of Ownership. If the loan finances improvements for a residential building with 4 or fewer units, one of which is occupied by the borrower, then the loan shall be due and payable in full upon the sale, encumbrance, or other transfer of the building or any interest in the building, including a lease of the owner's unit for more than 3 years, unless the transfer is made to a person who will occupy the owner's unit and the transfer is: Made by operation of law upon the death of a joint tenant; To a spouse upon separation or divorce; To a spouse or child; To a relative upon the death of the owner; To an inter vivos trust whereby the borrower is the beneficiary and owner of the property and provides assurances acceptable to the Department of any subsequent transfer; or A transfer for which the parties have received the prior written consent of the Department, in the Department's sole discretion. Default. Remedies upon loan default shall be exercised in the discretion of the Department and may be one or more of the remedies provided for in the loan documents or by law, such as: Adjustments to the interest rate of the loan upward or downward; Suspension or debarment from the Department's programs; Foreclosure; Accepting a deed instead of foreclosure; Appointment of a receiver; and Other legal action which protects the Department's interests. Refinancing. The Department may not refinance existing debt related to an eligible property.