18.3.12 Source of Funds for Prepayment Penalty Costs

A. Prepayment penalty costs are, as discussed in Section 18.3.3.A.3.a eligible mortgageable costs. The amount of the cost that is not supported by the refinancing must be paid from other sources.

B. The one exception to the general prohibition that lenders may not pay or otherwise provide funds for borrower costs is that in 223(a)(7) transactions lenders may pay that portion of prepayment penalty costs not covered by the controlling loan criterion.

C. The lender’s application must include an estimated Sources and Uses statement specifying the amount of any lender fees or profit used to pay prepayment penalty costs and if the total prepayment penalty costs associated with the mortgage note(s) to be repaid exceed such amount, the amount of prepayment penalty costs to be paid from other sources, specifying such source(s).

D. The amounts of lender fees or profit and borrower or other funds used to pay prepayment penalties should be shown as sources in the project’s Sources and Uses statement referenced in Section 18.3.12.C. above.

E. The lender may not pay, either directly or indirectly, for repairs or costs other than the Prepayment Penalty as noted above. The source of funds for repairs and transactions costs must be accounted for separately in the project’s Sources and Uses statement referenced in Section 18.3.12.C. above.