This loan is available to help provide undergraduates with the safest living environment possible. This loan is for qualifying House Corporations to complete specific life safety house improvements at an interest rate much lower than the Fraternity’s normal lending rate.
What can the loan proceeds be used for and how are they disbursed?
The loan proceeds are disbursed on a “draw basis”, for work and materials properly completed.The proposed work and materials shall be subject to the review and approval of the International Fraternity, of which shall generally include, but not be limited to: “Fire Sprinkler” or fire suppression system that is properly permitted and approved by the relevant local authorities on such matters.” Hardwire” (electrical driven) fire, smoke, and/or carbon monoxide alert systems that are properly permitted and approved by the relevant local authorities on such matters.
Battery driven systems will be considered if a hardwire system is not practical and/or affordable. Stand-alone fire suppression equipment, such as code required fire extinguishers and suppression systems for kitchen equipment. Installation of new exit and emergency backup lighting in accordance with and as required by code. Permanently affixed signage that describes and identifies fire evacuation routes, and/or gives other life-safety related instruction such as emergency contacts, emergency plan of action, post evacuation rendezvous point, no storage of certain items, etc., as well as signage to warn about premises hazards and non access areas. Equipment related to security, such as, but not limited to surveillance equipment, strategic lighting, personal identification access systems, land perimeter control like security gates and fencing. Funding to replace or repair of any of the above due to neglect or mistreatment would not be eligible with loan proceeds from this program.
Who can borrow the money and how do they qualify for a loan?
The Borrower must be an incorporated “house corporation”, in good standing with the state in which it was incorporated, that exists for the benefit of an active Pi Kappa Alpha Chapter or provisional chapter. Borrower must own the real estate that will be improved with the loan proceeds, or have an adequate leasehold interest with a term at least equivalent to the term of the proposed loan.
Borrower must have an organized governing Board committed to the perpetual and effective management of the corporation, that agrees to follow Pi Kappa Alpha Fraternity’s suggested property management practices and strive to achieve and maintain Pi Kappa Alpha’s recommended Operation & Condition Standards.
Borrower must properly complete and submit the standard application for the loan; clearly describing the need and cost of the desired solution, and it shall require financial information about the Borrower and the chapter which shall display an ability to afford the loan with reasonable projections of income and expenses, including adequate allowances for contingencies and reserves.
What are the parameters and conditions of the loan?
Depending on the loan to value ratio and the size of the loan, there shall be no less than three but not more than ten alumni guarantors, each sharing an equal portion of the guarantee, of all or part of the loan amount.The loan shall be conditioned upon the Fraternity’s general conditions required of all its loans. Fraternity may require that a mortgage or an assignment of leasehold rights in any of the corporation’s real estate be pledged as collateral for this loan.
The maximum amortization term shall be 20 years. Principal and interest payments shall be due on the first day of each month, twelve months per year, and shall be done electronically in accordance with the Automated Clearing House (ACH) program.
What fees and expenses are the responsibility of the borrower?
There is no prepayment penalty. There shall be a $35 fee for an insufficient funds transaction. The interest rate shall be variable, subject to change on an annual basis. At no time shall the initial or adjusted rate of interest exceed the maximum legal rate chargeable in the state where the loan is closed or 9.0%, whichever is less. The adjusted rate of interest may either lead to an upward or downward adjustment above or below the initial rate of interest.
However, under no circumstance shall the adjusted rate of interest increase more than 2.0% (200 basis points) at any one time. The initial rate of interest, and any subsequent adjustments, shall be based on changes in the measure of the cost of home mortgage loans called the “Index”. The Index is the “National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders” as reported by the Federal Housing Finance Board. The interest rate shall be the Index rate and rounded down to the nearest .25%. For example, if the Index is 7.21%, the interest rate would be 7.00%. The initial rate of interest shall be subject to change annually, based upon the Index published on the date closest to April 15th of each year, with the new rate taking effect on the following July 1st of that same year. If the loan commitment is made between January 1st and June 30th, the rate shall not be subject to change until July 1st of the following year. The monthly principal and interest installment shall increase or decrease as calculated on the resulting new rate over the remaining term of the original amortization schedule.
Until a written loan commitment is made by White Horse Capital, the initial interest rate shall be subject to change on the 15th day of each month, in accordance with the formula described above. Loans committed shall state the initial interest rate as of the date of the commitment, which shall not change through and including a date six months from the date of the issuance of the commitment, provided the loan is closed and all funds are disbursed during that time. Any approved extension of the commitment could result in a change of the initial interest rate. If the Index ceases to be made available, White Horse Capital shall set the interest rate by using an alternative Index it deems comparable.
There shall be a 1.5% of the loan amount commitment and service fee, however at no time shall it be less than $500.00. All closing costs and legal fees shall be the responsibility of the Borrower.