3.7.23.1 Discounts and/or Costs of Issuance

A. Discounts and/or Costs of Issuance associated with bond financing may be eligible for inclusion in the computation of Criteria 7 and 10.

1. Review documentation regarding permanent financing. Documentation must state the amount of the discounts, financing fees, and/or costs of issuance to be charged and to whom they will be paid.

2. Permanent Placement Fee. This fee must include all permanent placement expenses, including Lender’s legal fees, except discounts. Where Ginnie Mae Mortgage-Backed Securities (MBS) are involved and the mortgagee charges:

   • The maximum permanent placement fee, it may not assess an additional charge for either the MBS application fee and/or the securities custodial fee.

   • Less than the maximum permanent placement fee, it may assess an additional charge for either the MBS application fee and/or the securities custodial fee provided the total fees and charges do not exceed the dollar value of the maximum permitted permanent placement fee.

3. Determine if the discounts, financing fees and costs of issuance are reasonable and generally in line with prevailing market conditions and mortgage credit data. Recognize financing fees and discounts charged by the permanent Lender, for inclusion in the mortgage:

   • Where a project is to be financed through the sale of either taxable or tax-exempt bonds, the maximum financing fees allowable in the mortgage computation and recognizable for cost certification purposes is 5.5% of the mortgage amount. Any cost beyond the 5.5% must be paid from sources outside the mortgage.

• The maximum financing fee the mortgagee may retain for its own account is 3.5% to cover the costs of origination, permanent placement, processing, underwriting, closing and delivery (including the mortgagee's legal fees), escrow monitoring, etc. The remaining 2% (or such greater percentage as may result from the Lender reducing its maximum retained 3.5% fee) may be used to offset the bond fees.

• Discounts. In a refinancing or purchase transaction, discount fees will be recognized only for those actual costs charged by the placement Lender, which are determined to be eligible. Discounts included in the computation of Criteria 7 and 10 must be reasonable based on current market conditions.

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Chapter 3 Programs 3.8 Section 223(a)(7) Refinancing

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