7. a. Loans made by the agency to finance housing projects shall be subject to the following terms and conditions:

(1) The loan shall be for a period of time not in excess of 50 years as determined by the agency;

(2) The amount of the loan shall not exceed 90% of the total project cost as determined by the agency, except that as to projects to be owned, constructed, improved, rehabilitated, operated, managed and maintained as mutual housing or by any corporation or association organized not for profit which has as one of its purposes the construction, improvement or rehabilitation of housing projects, the amount of the loan shall not exceed 100% of the total project cost as determined by the agency; but the agency may make additional loans to a housing sponsor to which a loan by the agency for the cost of a project is outstanding if and to the extent that the agency finds that such additional loan is required to more adequately secure and protect the project or to avoid a default by the sponsor on the original loan for the cost of the project and is in the best interest of the agency and the holders of its bonds issued to finance the original loan for the cost of the project;

(3) The interest rate on the loan shall be established by the agency at the lowest level consistent with the agency’s cost of operation and its responsibilities to the holders of its bonds;

(4) The loan shall be evidenced by a mortgage note or bond and by a mortgage which shall be a first lien on the project and which shall contain such terms and provisions and be in a form approved by the agency. The agency shall require the qualified housing sponsor receiving a loan or its contractor to post security in amounts related to the project cost as established by regulation and to execute such other assurances and guarantees as the agency may deem necessary and may require its principals or stockholders to also execute such other assurances and guarantees as the agency may deem necessary;

(5) The loan shall be subject to an agreement between the agency and the housing sponsor which will subject the housing sponsor and its principals or stockholders to limitations established by the agency 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;

(6) The loan shall be subject to an agreement between the agency and the housing sponsor limiting the housing sponsor and its principals or stockholders to such rate of return on its investment in the housing project to be assisted with a loan from the agency as shall be fixed from time to time by the agency in its regulations which shall take into account the prevailing rates of return available for similar investments and the risks associated with the development of the project, together with factors designed to promote the objectives of providing affordable housing, encouraging investment in urban development areas, maintaining and improving the existing housing stock, and other objectives of this act; but agreements entered into by the predecessors of the agency prior to the effective date of this act shall continue to be subject to any restrictions on rate of return imposed by prior law unless those restrictions are expressly modified pursuant to regulations of the agency. No housing sponsor which is permitted by the provisions of the law under which it is organized or incorporated to earn a return on its investment, nor any of the principals or stockholders of that housing sponsor, shall earn, accept or receive a return on investment greater than the rate of return fixed by the agency in any housing project assisted with a loan from the agency, whether upon the completion of the construction, improvement or rehabilitation of the project, or upon the operation thereof, or upon the sale, assignment or lease of the project to any other person, association or corporation. Any person, association or corporation who violates the provisions of this subsection is guilty of a crime of the fourth degree;

(7) No loan shall be executed except a loan made to a corporation or association organized not for profit which has as one of its purposes the development, construction, improvement or rehabilitation of housing projects or for mutual housing unless the housing sponsor agrees (a) to certify upon completion of project construction, improvement or rehabilitation, subject to audit by the agency, either that the actual project cost as defined herein exceeded the amount of the loan proceeds by 10% or more, or the amount by which the loan proceeds exceed 90% of the total project cost, and (b) to pay forthwith to the agency, for application to reduction of the principal of the loan, the amount, if any, of such excess loan proceeds, subject to audit and determination by the agency. No loan shall be made to a corporation or association organized not for profit or for mutual housing unless the corporation or association organized not for profit or for mutual housing agrees to certify the actual project cost upon completion of the project, subject to audit and determination by the agency, and further agrees to pay forthwith to the agency, for application to reduction of the principal of the loan, the amount, if any, by which the proceeds of the loan exceed the certified project cost subject to audit and determination by the agency. Notwithstanding the provisions of this paragraph, the agency may accept, in lieu of any certification of project cost as provided herein, such other assurances of the project cost in any form or manner whatsoever, as will enable the agency to determine with reasonable accuracy the amount of the project cost;

(8) No loan shall be made for the construction, improvement or rehabilitation of a housing project for which tax exemption is granted by a municipality unless the tax exemption remains in effect during the entire term of the loan, unless a lesser period of tax exemption is approved by the agency; and

(9) The loan shall be subject to an agreement between the agency and the qualified housing sponsor which contains a provision stating the prevailing wage rate, as determined by either the Commissioner of Labor and Industry or the Secretary of the United States Department of Labor in accordance with the provisions of section 42 of this act, which can be paid to the workmen employed in the performance of any contract for the construction or rehabilitation of any housing project, and which stipulates that the qualified housing sponsor, or any builder, contractor or subcontractor thereof, shall pay to such workmen not less than the applicable prevailing wage rate pursuant to that section.

b. As a condition of any loan to finance a housing project, the agency shall have the power at all times during the construction, improvement or rehabilitation of a housing project and the operation thereof:

(1) To enter upon and inspect without prior notice any project, including all parts thereof, for the purpose of investigating the physical and financial condition thereof, and its construction, improvement, 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;

(2) To order such alterations, changes or repairs as may be necessary to protect the security of its investment in a housing project or the health, safety, and welfare of the occupants thereof;

(3) To order any managing agent, project manager or owner of a housing project to do such acts as may be necessary to comply with the provisions of all applicable laws or ordinances or any rule or regulation of the agency or the terms of any agreement concerning the project or to refrain from doing any acts in violation thereof and in this regard the agency shall be a proper party to file a complaint and to prosecute thereon for any violations of law or ordinances as set forth herein;

(4) To require the adoption and continuous use of uniform systems of accounts and records for a project and to require all owners or managers of a project to file annual reports containing that information and verified in such manner as the agency shall require, and to file at the times and on the forms as it may prescribe, reports and answers to specific inquiries required by the agency to determine the extent of compliance with any agreement, the terms of the loan, the provisions of this act and any other applicable law;

(5) To enforce, by court action if necessary, the terms and provisions of any agreement between the agency and the housing sponsor and the terms of any agreement between the housing sponsor and any municipality granting tax exemption, as to schedules of rental or carrying charges, income limits as applied to tenants or occupants, or any other limitation imposed upon the housing sponsor as to financial structure, construction or operation of the project;

(6) (a) Subject to the provisions of paragraph (7) of subsection b. of this section, in the event of a violation by the housing sponsor of the terms of any agreement between the agency and the housing sponsor, or between the municipality granting tax exemption and the housing sponsor, or in the event of a violation by the housing sponsor of this act or of the terms of the loan agreement or of any rules and regulations of the agency duly promulgated pursuant to this act, or in the event that the agency shall determine that any loan or advance from the Housing Development Fund pursuant to section 30 of this act is in jeopardy of not being repaid, the agency may, without resort to any judicial process, assume all of the powers and duties of the housing sponsor in the management and operation of the project, including but not limited to the power to receive all revenues and pay all expenses of the project and the power to control all property, including bank accounts and cash, owned by the housing sponsor. The agency may appoint such person or persons whom the agency in its sole discretion deems advisable, including officers or employees of the agency, to perform the functions of the officers or other controlling persons of the housing sponsor. Persons so appointed need not be stockholders or meet other qualifications which may be prescribed by the certificate of incorporation, bylaws or partnership agreement of the housing sponsor. In the absence of fraud or bad faith, persons so appointed shall not be personally liable for debts, obligations or liabilities of the housing sponsor. Persons so appointed shall serve only for a period coexistent with the duration of the violation or until the agency is assured in a manner satisfactory to it that the violation, or violations of a similar nature, will not recur. Persons so appointed shall serve in such capacity without compensation, but shall be entitled to be reimbursed, if and as the certificate of incorporation, bylaws or partnership agreement of the housing sponsor may provide, for all necessary expenses incurred in the discharge of their duties as determined by the agency; and

(b) the provisions of section 18 of P.L. 1991, c. 431 (C. 40A:20-18) concerning housing projects in financial difficulty shall not apply to housing projects financed by the agency; and

(7) The provisions of this subsection and this act pertaining to the regulation of housing sponsors shall be for purposes of protecting the collateral for any loan or loans; implementing or enforcing any condition, requirement or criterion for loans as provided in this act or other applicable law; and securing the rights and remedies of lenders and bond holders to the extent of the undertakings of the agency. Subject to the foregoing, the agency shall permit, provide for and encourage the right of local housing sponsors to exercise their own initiative and competence in the administration of their assets and the conduct and operation of housing projects and exercise their rights and responsibilities to the fullest extent permitted by law. Therefore, the agency shall exercise its remedies and powers under paragraph (6) of this subsection only with regard to material violations and only after reasonable notice and reasonable opportunity to correct the violation is provided to the housing sponsor in accordance with regulations adopted by the agency.

c. Notwithstanding any law, rule or regulation to the contrary, the provisions of paragraphs (5) and (6) of subsection a. of this section shall not be applicable to market rate units.

d. As used in this section, “market rate unit” means a housing unit for which occupancy is not subject to limitations based on tenant income.

L.1983, c.530, s.7; amended 2021, c.34, s.10.