These regulations prescribe the policies, procedures, and authorizations for making loans for the rehabilitation of residential buildings with four or fewer units under Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland. The basic objectives of the Program are to: Make loans to families of limited income or sponsors to finance the rehabilitation of buildings with four or fewer units to eliminate health, safety, and property maintenance deficiencies and ensure compliance with applicable codes and standards; Make loans to elderly or disabled homeowners who qualify as families of limited income, in order to provide modifications or improvements to a building with four or fewer units that make the owner's dwelling unit more accessible to or functional for the elderly or disabled occupants, if, upon completion of the improvements, the building is structurally sound and free of health and safety hazards; and Develop the capacity of political subdivisions to administer the Program. The terms appearing in Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, have the meanings defined there and, in addition, the meanings used in these regulations. Terms Defined. “Accessory dwelling unit” means a dwelling unit which is: Within, attached to, or on the same parcel as, and subordinate to but under the same ownership as, a single family, owner-occupied dwelling; and Intended for use as a complete, independent living facility, including permanent provisions for living, sleeping, cooking, and sanitation by one household within limits established by local codes, if any, pertaining to health, building, or other relevant provisions of the law. “Act” means Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, as amended. “Allocation” means the share of the monies appropriated annually for the Program which is reserved for each county based on an allocation formula devised by the Department, in accordance with Regulation .17 of this chapter. Amortizing Loans. “Amortizing loans” means loans with equal payments of principal and interest over the term of the loan such that the payments retire the loan by the end of the term. “Amortizing loans” includes loans with zero interest when the principal is repaid in equal monthly installments over the term. “Annual income” means total household income from all sources, including wages, investment income, Social Security, retirement, disability, and unemployment benefits less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Applicable codes and rehabilitation standards” means the construction, health, safety, fire, occupancy, livability, and other codes and standards in force in the political subdivision in which an eligible building is located and applicable to that building. “Applicant” means any person or entity applying for a loan under the Program. “Borrower” means a single family owner-occupant, nonprofit sponsor, or sponsor who receives a loan to rehabilitate an eligible building. “Closing costs” means the total of all settlement costs and fees and, when applicable, initial payments for taxes, property insurance, title examination, percolation tests, or other expense items as determined by the Department. “Contract” means the agreements between a borrower and a licensed general contractor or licensed home improvement contractor accepted by the Department setting forth the terms of performance of work to be financed by a loan made under the Program. “County” means any of the 23 counties in the State and the City of Baltimore. “Deferred payment loans” means loans which have no current payment of principal and interest, and the principal and any interest are repaid in full upon loan maturity or sale or transfer of the property. “Department” means the Department of Housing and Community Development. “Director” means the Director of Single Family Housing Programs of the Department. “Elderly” means the age limit specified by the Secretary that is 55 years old or older. Family of Limited Income. “Family of limited income” means one or more individuals permanently residing as a household in a dwelling unit in an eligible building whose combined annual income does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-915, Annotated Code of Maryland. “Family of limited income” includes a trust described in 42 U.S.C. §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-915, Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. Family of Lower Income. “Family of lower income” means one or more individuals residing as a household in a dwelling unit in an eligible building, whose combined annual income does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland. “Family of lower income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. Family of Very Low Income. “Family of very low income” means one or more individuals residing as a household in a dwelling unit, whose combined total income does not exceed an amount determined by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland, which income limits shall be lower than those established for families of lower income. “Family of very low income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. “General property improvements” mean nonessential improvements that enhance the comfort, convenience, and appearance of a property, but are not necessary to remove unsanitary conditions or eliminate hazards to health and safety. “Household” means an individual or a group of individuals who occupy a dwelling unit as their permanent residence. “Level I local administrator” means a political subdivision certified by the Department under Regulation .16 of this chapter. “Level II local administrator” means a political subdivision certified by the Department under Regulation .16C of this chapter. “Local administrator” means a level I or level II local administrator. “Nonprofit organization” means a political subdivision, corporation, foundation, or other legal entity, no part of the net earnings of which inures to the benefit of any private shareholder or individual holding an interest in the entity. “Nonprofit sponsor” means either a: Nonprofit organization; or Limited partnership formed for the purpose of undertaking a rehabilitation project which is eligible in whole or part for federal programs or incentives, including low-income housing tax credits, if each of the general partners qualifies as a nonprofit organization, or the following two requirements are satisfied: A general partner of the limited partnership is a wholly owned subsidiary of a nonprofit organization, and A nonprofit organization either manages the rehabilitation project, or will be the recipient of net cash flow or the residual sale proceeds upon sale of the rehabilitation project. “Partially deferred loans” means loans for which there is periodic payment of a portion of the principal or interest, or both, due during the term of the loan with unpaid amounts accrued and repaid upon maturity of the loan or sale or transfer of the property. “Political subdivision” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, and any of the 23 counties in Maryland. “Program” means the Regular Rehabilitation Program of the Maryland Housing Rehabilitation Program. “Program Director” means the Assistant Director of Special Loan Programs in the Division of Development Finance of the Department. Repealed. “Secretary” means the Secretary of Housing and Community Development. “Shared living unit facility” means a dwelling which will accommodate two or more households when some or all of the living, dining, kitchen, or sanitary facilities are shared by the households. Single Family Owner-Occupant. “Single family owner-occupant” means an eligible borrower residing or intending to reside in an eligible building which contains one residential unit and which may contain one accessory dwelling unit financed under the Program, but which contains no other units, either commercial or residential. “Single family owner-occupant” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. “Special Loan Programs Fund” means the special fund created under Housing and Community Development Article, §4-501(a)(1), Annotated Code of Maryland. “Sponsor” means an owner who receives a loan to rehabilitate a building with four or fewer units used for residential rental purposes. “Structurally sound” means not having any physical conditions serious enough to endanger the life, property, or safety of the occupants or their invitees, whether or not the building is in compliance with applicable codes and rehabilitation standards. “Subcontractor” means an entity authorized by the Department to carry out the duties and responsibilities of a local administrator under Regulation .16D(1) of this chapter and to hold and disburse funds under Regulation .16D(2) of this chapter. “Work write-up” means a description of the structural, mechanical, electrical, and other work items needed for the rehabilitation of an eligible building. To qualify as an eligible borrower under the Program, the requirements set forth in §§B and C of this regulation shall be met jointly and separately if more than one individual is applying for a loan. Single family owner-occupants shall: Be a “family of limited income” as defined in Regulation .03B(15) of this chapter; Intend to reside in the property to be rehabilitated; Own the eligible property in fee simple or under a freely transferable ground rent lease; Have the legal capacity to incur the obligations of the loan; Demonstrate credit worthiness and repayment ability acceptable to the Department; and Have income at a level that the Secretary has determined will render the applicant unable to afford or secure private financing to rehabilitate the property. Sponsors and nonprofit sponsors shall: If a business, be in good standing and be qualified to do business in Maryland; Own the eligible property in fee simple or under a ground rent; Have the legal capacity and all necessary legal and corporate authorizations to incur the obligations of the loan; Demonstrate credit worthiness and repayment ability acceptable to the Department; In the estimation of the Department be unable to afford or secure a loan from a private lending institution for the full amount required for rehabilitation and agree to use, to the extent determined by the Department, the maximum amount of private financing which the project can support consistent with the Program's purposes, without impairing the feasibility of the project; Agree in writing that all of the dwelling units rehabilitated with the proceeds of a loan shall be occupied by families of limited income until the later of: The date on which all principal or interest due on the loan is paid; or 15 years after completion of the rehabilitation; Agree to abide by the requirements of Titles VI and VII of the Civil Rights Act of 1964, and Title VIII of the Civil Rights Act of 1968; Agree to abide by all provisions of the Governor's Code of Fair Practices, COMAR 01.01.1987.20 and COMAR 01.01.1988.05, as amended from time to time; Provide satisfactory assurances that the borrower did not, within 12 months before making application for a loan under these regulations, cause a residential tenant to leave the building to be rehabilitated, except upon good cause; Agree in writing to assist with relocation of tenants to the extent required by the Department; and Agree to abide by any regulations promulgated by the Department implementing the Governor's Executive Order 01.01.1989.18, as amended from time to time, requiring recipients of State funds to maintain a workplace free of drug and alcohol abuse. Borrowers shall be in good standing and may not be under suspension or debarment from any of the Department's programs pursuant to any action under COMAR 05.01.05. Buildings shall meet the following requirements: Be located within the State; Contain not more than four residential units or shared living unit facilities for more than four households; Be properly zoned for the proposed use; Be in need of repairs or modifications considered eligible under this chapter; Have the potential to be rehabilitated, reconstructed, renovated, redeveloped, improved, or modified as determined by the local administrator; Be owned by an eligible borrower who shall provide assurance of title or evidence of ownership acceptable to the Department; and If the building is in the 100-year flood plain, as designated by the U.S. Department of Housing and Urban Development, be covered by a flood plain insurance policy which: Is an amount equal to the loan, Names the Department as beneficiary, and Provides that the policy may not be terminated without prior notification to the Department. A manufactured housing unit is eligible if it is intended for residential use by a single household, and: Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is not independently capable of movement and is installed permanently on an engineered foundation in conformance with COMAR 05.02.04; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the: United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and Complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the occupant owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. Manufactured homes which are taxed as personal property may be eligible for loans in amounts of $5,000 or less. Applications for manufactured homes shall be reviewed and approved by the Department on a case-by-case basis. Condominiums and cooperative units may be eligible buildings and shall be reviewed by the Department on a case-by-case basis before loan approval. Other types of property are not eligible buildings. All of the dwelling units in sponsor-owned or nonprofit sponsor-owned residential properties shall be occupied upon completion by families of limited income until the later of the date: On which the payment of all principal and any interest on the loan is made; or 15 years after completion of rehabilitation. Loans shall be made on terms conforming to the requirements in §§B—K of this regulation. Interest Rate. The interest rate to be paid on loans may be at preferred rates set by the Department from time to time, as required by the Act. The collective interest rate charged on all loans shall be at least sufficient to cover administrative costs of the program and reasonably expected losses due to defaults. The Department may establish different interest rates available on loans serving occupants who are families of: Limited income; Lower income; and Very low income. The interest rates charged on loans may not be more than private lending rates for comparable loans. Within the limits established in §§B(3) and (4), above, the interest rate shall be the maximum interest rate based on an applicant's ability to repay. Term. The term of each loan may not exceed 30 years from completion of construction, and shall be based on the amount of the loan, the expected life of the rehabilitated building, and an applicant's ability to repay. Maximum Loan Amount. The maximum loan may not exceed an amount which, when added to any prior debts secured by or relating to the eligible building or property, or both, would equal 110 percent of the market value of the eligible building and property after rehabilitation as determined by the Department or the local administrator. For projects when 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, the 110 percent loan-to-value ratio requirement of §D(1), above, may be raised to 115 percent. 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 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 §D(1)—(2) of this regulation. Closing costs 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 §D(1)—(2) of this regulation. Payments. Payments shall be applied to escrow expenses, when applicable, interest, and principal, in that order. Late Charge. Late charges, as permitted by law, may be charged. 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. Except as provided in §G(3)—(4) of this regulation, loans in excess of $5,000 and 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. A loan to a trust described in 42 U.S.C §1396P(D)(4), may be secured by a mortgage or deed of trust on real property, or other security device acceptable to the Department. A loan in excess of $5,000 to a borrower in a housing cooperative unit may be secured by another security device acceptable to the Department. 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. Change of Ownership. A borrower may not sell, cease to own, assign, transfer, dispose of, or lease all or any part of the property except for residential leases of not more than 3 years duration, during the loan term, without the prior written consent of the Department, except as permitted by federal law. Refinancing. The Department may not refinance existing debts related to an eligible building. Land Installment Contracts. Purchases under a land installment contract are not eligible for a loan. In addition to the conditions and requirements of Regulation .06 of this chapter, deferred loans for residential buildings of four or fewer units shall meet the requirements in §§B—E of this regulation. Eligibility. The Department may make loans with deferred payments of principal or interest or both principal and interest to: Single family owner-occupants who are families of very low income and sponsors or nonprofit sponsors of buildings occupied entirely by tenants who are families of very low income; or As determined by the Secretary, any category of borrowers necessary to achieve the purposes of the Act. Amount of Deferred Payments. Loans may provide for deferred payments of principal or interest, or both principal and interest, to the minimum extent necessary based on a borrower's ability to repay. Repayment. The loan documents shall provide for repayment of deferred amounts at the maturity date or at any earlier date established by the Department, or the local administrator, or upon any sale or other transfer of the building or any interest in the building other than a residential lease of less than 3 years duration. The Department may, but need not, charge interest on the deferred interest. Limitations. The Department may, from time to time, establish limitations on the percentage of allocations and the percentage of the annual funding appropriated to the Program which may be used for no interest and deferred payment loans. The Department may make a Program loan in the form of a grant to a single family owner-occupant that meets the requirements of this regulation. To be eligible for a grant, an applicant shall: Own and occupy the dwelling; Be a family of very low income; and Be unable to undertake the rehabilitation project without a grant as determined by the Department. A grant may provide for: No required payments; The deferral of payments; or The reduction of the principal balance owed over a period of time. The Department shall follow Regulations .09 —.15 of this chapter for approving and processing grants. A grant may be unsecured or secured by a security instrument acceptable to the Department. The Department may establish limitations: On the percentage of allocations and the percentage of the annual funding appropriated to the Program which may be used for grants; and On the maximum grant amount that may be awarded for a dwelling. In addition to the conditions and requirements of Regulations .06 and .07 of this chapter, secured loans shall meet the requirements of §§B—F of this regulation. Deed of Trust. A mortgage or deed of trust shall secure repayment of the loan by the granting of a valid lien on the eligible building and the underlying land or leasehold interest in the land. Escrow Account. If there is no prior mortgage or deed of trust requiring the payment of expenses to the mortgagee, the rehabilitation mortgage may require expense payments to the Department in escrow, consisting of 1/12 of annual real estate taxes, ground rent, property insurance premiums, and, when appropriate, other items for which payments are required by the Department. Interest need not be paid to the borrowers on escrows. Insurance. A borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount not less than the sum of the rehabilitation loan and any prior mortgage or mortgages on the property. The insurance policy or policies shall: Be written by companies authorized to transact business in the State; Be in force at the time of loan closing; Name the Department as mortgagee in a standard mortgagee clause attached to or printed in the policy; and Contain other terms and coverage satisfactory to the Program. Title Insurance. The Department, in its discretion, may require the borrower to provide a standard American Land Title Association (ALTA) Loan policy, with the Environmental Endorsement 8.1, or other form of title policy approved by the Department and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Department, evidencing that title to the building on the date of closing is vested in the borrower, and containing only standard exceptions and encumbrances acceptable to the Department and the Office of the Attorney General. Appraisals. At the discretion of the Program Director or the local administrator, a borrower may be required to obtain an appraisal in a form and manner acceptable to the Department from an acceptable independent fee appraiser showing a building's value before and after the proposed rehabilitation. Applicants shall bear the costs of appraisals, which may be financed by the loan for single family owner-occupants. Application Procedure Generally. The Department shall establish application processes and procedures for local administrators that will facilitate the application process and best serve the needs of the political subdivisions and the State. These procedures may be amended from time to time and shall be binding upon all applicants. Alternative procedures may not be used by local administrators without the prior approval of the Department. Application Forms. Loan applications shall be made upon standard forms prescribed by the Department. Application Fee. Upon submission of a loan application, an applicant may be required to pay an application fee in an amount determined by the local administrator, subject to approval by the Department. Documentation. An applicant shall submit with the application any documentation that the Department requires, including, but not limited to, any documentation needed to establish the eligibility and creditworthiness of the applicant. An applicant shall submit supporting documentation specified in the checklist attached to the application, which may include any of the following: A copy of the deed to the property; Copies of any existing mortgages secured by the building to be rehabilitated, or mortgage verification requests, on the form approved by the Department, signed by the applicant for each mortgage secured by the building to be rehabilitated; A copy of the first page and declarations page of all policies for fire and extended coverage insurance and, if applicable, flood insurance; A copy of the most recent real estate tax bill with the current assessed value; Verification of the total assets and annual income of each person in the household of a single-family owner-occupant applicant, and for sponsor applicants or nonprofit sponsors, a list of tenants in a building showing household name, address, number of persons in household, combined annual household income, and current monthly rent; For each of the immediately preceding 2 years, copies of the applicant's: Federal income tax returns, or when applicable, the federal reporting forms for nonprofit organizations, State income tax returns, or A signed request, on the form designated by the Department, for copies of the applicant's state income tax returns; and Sufficient information and documentation to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property. In addition, all sponsor and nonprofit sponsor applicants shall submit the following documentation: Organizational documents of the sponsor or nonprofit sponsor and a certificate of good standing; A certified personal financial statement of the applicant or principals of the sponsor or nonprofit sponsor; Three years operating statements for a rental project; For sponsors or nonprofit sponsors which are corporations, a resolution of the board of directors authorizing the application; For rental projects receiving federal Section 8 Housing Assistance, copies of the Section 8 contracts or feasibility analysis prepared by the administering agency, as applicable; Photographs of the building and site; Evidence of zoning compliance; Preliminary plans and specifications or a detailed description of the proposed improvements and an estimate of the improvement costs. Initial Eligibility Determination. Each application shall be submitted to the local administrator for initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible, appropriate verification forms shall be distributed, credit reports shall be obtained, and the applicant may be provided with a letter from the local administrator in the form approved by the Program acknowledging receipt of the application and notifying the applicant of the ongoing review process. If an applicant is ineligible for a loan, the applicant shall be informed in writing of the determination and the reasons for it. Building Evaluation. Each building for which an eligible application is received shall be inspected for the purpose of preparing a work write-up by: The Department; The local administrator; A nonprofit corporation, acceptable to the Program; or A licensed contractor who is acceptable to the Program. The applicant shall be provided with a copy of the work write-up or an analysis of rehabilitation proposals and instructions for obtaining the contractor's proposals to complete the work. Loan Approval. Upon receipt and approval of mortgage verifications, employment verification, credit information, the contractor's proposals which comply with the Department's standards and cost estimations, and any other pertinent data the Program considers relevant or necessary, the local administrator originating the loan shall undertake an analysis of each loan as to loan amount, interest rate, repayment provisions, and other loan terms and conditions. After completing the steps described in §C(1) of this regulation, a level I local administrator, or a level II local administrator, evaluating a loan for more than $60,000, shall forward the application package and the analysis of the loan to the Department for approval, disapproval, or modification. Approval to make a loan is as follows: Loans in amounts of $60,000 or less may be approved by the: Level II local administrator, when a level II local administrator originates the loan; or Program Director, when a level I local administrator or the Department originates a loan; Loans in amounts over $60,000 and up to $250,000 may be approved by the Director; Loans in amounts over $250,000 shall be submitted to the Housing Finance Review Committee in accordance with COMAR 05.01.07. In an emergency, when urgent action is required, the Secretary may approve loans by written determination without the recommendation of the Housing Finance Review Committee. Before a level II local administrator gives final approval and issues a loan commitment for a loan in the amount of $60,000 or less, the level II local administrator shall contact the Program and receive confirmation that funds for the loan are available. Loan Commitments. Loan commitments shall be made on forms provided by the Program. Loan commitments shall specify a time limit for closing the loan. The time limit may be extended at the discretion of the local administrator with the approval of the Program. If the loan closing does not occur within the specified time, the local administrator shall notify the applicant that the commitment is officially canceled. Rejection. If a loan application is rejected, the Department or the local administrator, as the case may be, shall notify the applicant in writing. The rejection letter shall state the reason the loan is rejected. Reconsideration. Sponsors may request reconsideration of a rejection in accordance with the procedures contained in the program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Withdrawal of Application. An applicant may withdraw a loan application at any time before closing by delivering written notice to the Department or the local administrator originating the loan. The applicant shall bear any costs incurred for items other than internal processing including, but not limited to, title examinations, credit reports, and appraisals. Cancellation of Application. The Program or the local administrator may cancel an application at any time during processing if the applicant fails to provide information requested by the Program which is required to evaluate the request. Notification of the cancellation of an application shall be made in writing. A cancelled application may be reinstated upon the applicant's written request within 60 days following the date of the cancellation. Any time after 60 days following cancellation, a new application with supporting documents may be required. Time and Place. The loan closing shall be scheduled at a time acceptable to the applicant and the local administrator through a closing officer serving the applicant's area and otherwise acceptable to the local administrator. Loan Documents. Loan document forms shall be provided by the Program and may not be altered by the local administrator. Loan documents shall be executed on behalf of the Department by the officer or employee authorized to do so by the Department. Charges and Fees. The Department or the local administrator may charge and collect from the borrower reasonable and customary amounts acceptable to the Department for the following items: Credit reports; Appraisal fee, if applicable; Recording fees and recording taxes or other charges incident to recordation; Required survey charges, if applicable; Cost of title examination and title insurance, if required; Administrative fee; Property and judgment report fees; Inspection fees; and Other reasonable and customary charges or fees authorized by the Department. Points. Points may not be charged to the applicant on any loan under the program. Mortgageable Items. Closing costs, program charges, and fees may be allowed as mortgageable items for owner-occupants or for nonprofit sponsors. Sponsors that are not nonprofit organizations are required to pay for closing costs, program charges, and fees. Taxes and Assessments. Taxes and assessments against the property which are due and payable shall be paid at or before closing. Except as provided in §G of this regulation, loans shall comply with §§B—F of this regulation. Applicable Codes and Standards. The goal of the Program is to assure that all properties rehabilitated under the Program meet health, safety, fire, occupancy, and other codes and standards in force in the political subdivision in which an eligible building is located and applicable to that building. If these codes and standards do not exist or are considered by the Secretary to be insufficient to promote the purpose of the Act, then the codes and rehabilitation standards prescribed in COMAR 05.04.02 shall be in force for the purposes of the Program. Eligible Rehabilitation Work. Eligible rehabilitation work includes work done to address the following: Health and safety violations, including structural defects; Major system deficiencies; Exterior deficiencies; Interior deficiencies; Weatherization and energy conservation; Handicapped modifications; or Creation of accessory dwelling units, if the habitable floor area of the unit created does not exceed a percentage acceptable to the Department of the habitable floor area of the existing property to which the unit is added. Eligible Work—General Property Improvements. General property improvements may: Only be financed under the Program if the loan for the general property improvement is made in: Connection with a loan to bring a building into conformance with the applicable codes and standards as set forth in §B of this regulation; and Accordance with the restrictions in §D(2) and (3) of this regulation; Not exceed 40 percent of the total loan amount; Not be funded with the proceeds of deferred payment loans; Include, but are not limited to: Additions, provided the addition does not exceed 240 square feet, exclusive of passageways and bathrooms; Alterations and remodeling; Enlargement of rooms; The finishing of spaces within the building such as an attic, porch, or basement; Remodeling kitchens, including the purchase and permanent installation of appliances; and Fences and landscaping. A loan may not provide for materials, fixtures, equipment, or landscaping of a type or quality which exceeds that customarily used in the locality for buildings of the same general type as the one being rehabilitated. Unapproved or untested materials and systems are not eligible costs except when they are used as part of a demonstration or pilot program approved by the Department. Water Supply and Sewage. A loan may not be approved unless safe, sanitary, and adequate water supply and sewage disposal are available or will be provided through the rehabilitation financed by the loan. Code Enforcement. Any action taken by the Department or the local administrator to prepare or review work write-ups, evaluate the property, or review and approve plans and specifications is to ensure the Department and the local administrator of the adequacy of the proposed work. These actions are not intended to substitute for or ensure compliance with appropriate State and local building codes. Compliance with applicable codes and obtaining required permits and licenses are the responsibility of the borrower and contractor. If the owner is elderly or disabled and resides in the building, and the improvements make the building more accessible to or functional for the elderly or disabled owner, then the building shall be structurally sound and free of health and safety hazards, whether or not applicable codes and rehabilitation requirements are met. General Requirements. Contractors and subcontractors: Shall be licensed by the Maryland Home Improvement Commission or meet other State and local licensing requirements necessary to do the rehabilitation. Shall be qualified to do business in Maryland. Shall be able to demonstrate the capability to complete the rehabilitation as determined by the Department as evidenced by previous professional rehabilitation experience. May not be under a suspension or debarment order for any of the Department's programs pursuant to any action under COMAR 05.01.05. Shall agree in the contract to: Perform all work in conformance with the contract and all applicable laws, local codes, and Departmental rehabilitation standards in a competent, workman-like manner, equal to the standards of the industry. Failure of the work write-up to include any work required by local codes or standards does not relieve the contractor of the responsibility of complying with local codes and standards. Payment for any additional cost to complete work not included in the approved work write-up is the obligation of the borrower. A borrower may apply to the local administrator for a loan increase to cover some or all of the increased cost. Any loan increase shall be subject to approval or disapproval in accordance with the provisions of these regulations. The Department has no obligation under the contract to pay for increased costs. Comply with all applicable laws, ordinances, and regulations relating to the protection and safety of persons and property. Furnish all labor, materials, and equipment, and obtain all licenses, permits, insurance coverage, and workers' compensation as may be required to complete the rehabilitation. Not assign the contract without prior written consent of the owner and approval by the local administrator. In addition to all remedies and guarantees provided by law, make all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as become necessary by reason of faulty workmanship or material, which appear within a period of 1 year from the date the notice of completion is filed, at its sole cost and expense, provided, however, that if any longer guarantee period is specified for any particular materials or workmanship under the plans and specifications, or under any subcontract, or in connection with any manufactured unit which is installed in the structure, or under the laws of the State, the longer period governs. Agree to complete all specifications of the work write-up within the completion date as specified in the contract. Shall indemnify and hold the Department and any local administrator harmless from all liability and loss because of injury to or death of any individual or damage to any property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent or otherwise, by the contractor, subcontractors, or their agents, servants, and employees. The contractor shall defend all suits or claims involving those in this subsection at the contractor's sole cost and expense. Minority Contractors. The Department encourages the use of minority contractors in all jurisdictions for all projects, and requires compliance with the Department's Minority Business Participation Plan. Copies of the Department's plan shall be made available to sponsors and contractors. Identity of Interest. Sponsors or nonprofit sponsors may act as general contractors only with the prior written approval of the Department or the local administrator. Application forms shall be provided upon request and shall be submitted and approved before submission of the proposal. Approval is conditioned on an assurance of completion acceptable to the Department. An owner-occupant may not act as a general contractor. Assurance of Completion. The Department or the local administrator, at its discretion, may require: Performance and payment bonds; A letter of credit in the amount of 25 percent of the rehabilitation contract cost and an assurance of completion agreement; or Other assurances of completion acceptable to the Department. It shall be agreed by both the contractor and the owner that all communications which bear upon the content or performance of the contract shall be in writing. Contractors performing work covered by a rehabilitation loan may not be on the unacceptable risk determination list of the Department of Housing and Urban Development or the United States Department of Agriculture Rural Development, and any previous experience with the Program shall have been satisfactory. Contractors that do not perform up to program requirements may be suspended or debarred under COMAR 05.01.05. Permits. If required by local codes, building permits shall be obtained and posted at the project before the beginning of construction. All other permits, if any, required by State or local government also shall be secured before construction begins. Contract Documents. Work done, materials supplied, and construction procedures employed shall comply with all contract documents, applicable codes and standards, including those set forth in these regulations, and those general specifications established by the Department. The Department's general requirements and specifications guidelines shall be furnished on request. Contract documents include without limitation: Rehabilitation contract agreement; Change orders; Work write-ups; Instructions to bidders; Specifications; Drawings; and Contractor's proposal. There shall be no modification of any contract documents without the prior written consent of the Department or the local administrator, as evidenced by an approved change order, executed by: The contractor; and The property owner. Inspections. The local administrator or an agent authorized by the local administrator and acceptable to the Program may conduct inspections to determine the required scope of work, to verify payments, and to facilitate construction problems and disputes and arbitration procedures. Construction Disputes. If disputes between the contractor and borrower occur, the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General. Termination of Contracts. Contracts may be terminated for cause in accordance with the loan documents and contract documents. Monitoring. The local administrator shall monitor loans and disbursement of loan funds during rehabilitation to assist borrowers and to assure that loan funds are properly used. Based on Program guidelines, the local administrator shall determine the frequency and level of inspections during rehabilitation taking into consideration: The capability of the borrower; The demonstrated experience and reliability of the contractor; The amount of the loan; The availability of local technical assistance; and Other factors considered relevant by the Department. The local administrator may charge borrowers a fee for inspections during rehabilitation, as approved by the Department. Payments Generally. Loan funds shall be disbursed in full at the closing of the loan to an account held on behalf of the borrower by either the political subdivision that is the local administrator for the loan or the subcontractor. The loan funds shall be held in an account established under §C of this regulation. The local administrator or the subcontractor shall disburse the loan proceeds in accordance with the requirements of §B(3)—(5) of this regulation. Loan funds may not be disbursed if payments of interest or escrows required by the loan documents are in arrears. Payments of draws shall be by joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director. Except as provided in §D of this regulation, payments shall be made only for work completed. Payments may not be made for material delivered to the site but not installed in the project. Loan Accounts. Loan funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney's trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with any statements required under §C(2) of this regulation; and Any other requirements established by the Department; or Another type of account approved by the Department. The Department may require the local administrator or the subcontractor to provide periodic statements to the Department of all loan funds in an account. If the statements do not correspond with the Department's records of loan funds in the account, the local administrator or the subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any loan account established under this regulation. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 20 percent of the contract costs. Progress Payments. Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the Department or the local administrator, when the entire cost of the project is $60,000 or less. At a minimum, however, the local administrator shall verify completion of the work before disbursing the final payment, as described in §F of this regulation. If a borrower's request for payment is refused, the local administrator shall notify the borrower. The determination of the local administrator as to percentage of work completed is final. Final Payment. Final payment shall be made as follows: A borrower shall submit to the local administrator a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents. Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed. If, in the opinion of the local administrator, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, then the local administrator may follow the following procedure: The local administrator may require the borrower to explain in writing within 10 days why the local administrator should not make direct payment to the contractor; If the borrower responds within the 10-day period and requests a meeting, the local administrator shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment; The local administrator, in its discretion, may then either approve or disapprove direct payment to the contractor or the borrower. If the local administrator receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, and all loan funds have not yet been disbursed, the local administrator shall retain an amount equal to the lesser of all funds not yet disbursed and the amount sufficient to satisfy the claims until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Retainage. The local administrator shall retain until final payment 10 percent of the contract proposal costs for all projects for which the borrower is responsible for project inspections. The local administrator, at its discretion, may elect to retain until final payment 10 percent of the contract proposal costs for any other project, taking into consideration: The type of project; The contractor's experience; and Other factors the Program considers relevant. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the Department. Closeout Procedures. After final payment is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements and prepare a close-out statement. A copy of the close-out statement shall be forwarded to the Program and the servicer. General. The Department recognizes that the most effective housing rehabilitation programs are those administered at the local level. Therefore, each political subdivision is encouraged and expected to develop the capacity to originate and administer loans from its allocation. While the Department may originate and administer loans from its reserve or from the allocation to a political subdivision that is not certified under §B or C of this regulation, the Department may not operate a program for that political subdivision, and shall make loans in that case only if, and to the extent that, the Department at its sole discretion determines it to be feasible. Certification of Level I Local Administrators. The Department may certify a political subdivision to originate and administer loans when the political subdivision meets the following minimum criteria to the satisfaction of the Department: The political subdivision shall be able to perform adequately the functions of the following positions: A rehabilitation director, experienced in operating a rehabilitation program, supervising employees, and dealing with the public; A building inspector, experienced in residential rehabilitation, cost estimation, writing specifications, blueprint reading, residential inspections, and trained to understand and apply the appropriate codes and rehabilitation standards; A loan underwriter, experienced in mortgage lending and financial processing of loans; and Clerical and administrative staff trained to ensure prompt and efficient processing of applications, draw schedules, and other required items; The rehabilitation staff or the political subdivision shall be capable of: Determining local rehabilitation needs evidenced by completion of a consolidated plan, a local comprehensive plan, or a local housing plan; Establishing a rehabilitation program, evidenced by prior experience in the development and operation of a rehabilitation program; Evaluating loan applications; and Monitoring both the loans and the work done under those loans; and The political subdivision shall execute and comply with the terms of an agreement required by the Department. Certification of Level II Local Administrators: The Department may certify a political subdivision to originate and administer loans in any amount as well as approve loans in the amount of $60,000 or less, when: The political subdivision meets the criteria outlined in §B of this regulation to the Department's satisfaction; and The Department determines that the rehabilitation staff of the political subdivision is capable of: Evaluating, recommending, approving, or rejecting loans; Scheduling and executing loan closings; Monitoring construction activities; Subcontracting Program Administration. A political subdivision may subcontract its duties and responsibilities as a local administrator under this chapter, except as provided in §D(2) and (3) of this regulation, with the approval of the Department. The duties described in §§B and C of this regulation may be carried out by staff of the local administrator or its subcontractor. A political subdivision may not subcontract the holding and disbursement of loan funds described in Regulation .15B and H of this chapter except to a subcontractor which meets the following criteria to the satisfaction of the Department: The subcontractor meets the criteria of §§B and C of this regulation; Any employee of the subcontractor with access to the loan funds shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; If required by the Department, the subcontractor provides the local administrator and the Department with periodic statements of: All loan funds held and disbursed by the subcontractor under Regulation .15 of this chapter, and The balance of funds on hand; The subcontractor provides the local administrator and the Department with an annual audit conducted by an independent certified public accountant and prepared in accordance with generally accepted auditing standards; and The subcontractor complies with any other requirements established by the Department. Regardless of any subcontracting, the Department shall continue to hold the political subdivision directly responsible for fulfilling all of its duties and responsibilities as a local administrator. Revocation of Certification. The Department reserves the right and expects to monitor periodically the loan administration of certified local administrators, and may revoke certification upon determination that a local administrator is administering the loans in a manner inconsistent with the intent of the Program. Special Requirements for Certified Local Administrators and Their Subcontractors. Certified local administrators and their subcontractors shall maintain financial records of loan disbursements for at least 3 years, and shall make them available for review by the Department at all reasonable times and as set forth in Regulation .20 of this chapter. A noncomplying loan approved by a level II local administrator shall either be amended, with the borrower's concurrence, to comply with the Program's requirements, or purchased from the Department by the political subdivision. Local Administration Fee. The Department may, at its sole discretion, pay a local administrator an annual fee for administering loans made under the Program. Department Authority. When the Department, in its sole discretion, administers a loan, the Department has the authority that a local administrator would have under these regulations, in addition to its authority as the Department. Annual Allocation. The Department shall allocate annually the funds available to the Program among the political subdivisions and to a reserve held by the Department to ensure that all areas of Maryland are served. Up to 25 percent of the total monies available for the Program may be held in reserve and not allocated to the counties, out of which reserve the Department may either itself originate loans or from time to time reallocate these funds to the counties. The allocations to the political subdivisions shall take into account those factors in Housing and Community Development Article, §4-911, Annotated Code of Maryland. The Department shall notify, in writing, each political subdivision of its allocation. At the end of each calendar quarter, the Department may evaluate the allocations in relation to demand for loans as evidenced by applications for loans, and may reallocate the funds among the counties in accordance with demand. The Department may notify a county in writing of any reallocations of funds. The chief elected official of any political subdivision which has been notified of an allocation and which desires to participate in the Program shall, as a condition precedent to disbursement of funds from its allocation, submit a letter to the Department within 45 days after receipt of notice of its allocation indicating the intent of the political subdivision to participate in the program. If a political subdivision fails to comply with the provisions of §B of this regulation or is unable to comply, the Department may itself originate and administer loans from the fund allocated to the political subdivision or reallocate the funds to another political subdivision. A sponsor, nonprofit sponsor, contractor, local administrator, or subcontractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any sponsor, nonprofit sponsor, contractor, local administrator, or subcontractor in connection with any property financed or assisted under the Program. Each sponsor, nonprofit sponsor, contractor, local administrator, and subcontractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Program Guidelines. The Department may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of loans or to the Program. Copies of these guidelines shall be available for examination at the offices of any local administrator and at the Department's principal office. The Department, upon request, shall provide copies to the public for a reasonable charge. Fees. The Department may charge commitment fees, application fees, closing fees or other fees, charges, or penalties to applicants, borrowers, or other individuals or entities that participate in the Program. The Department may restrict the fees and charges that servicers, political subdivisions, local administrators, or other Program participants obtain from borrowers or applicants. Delegation. The Secretary may delegate to the Director, the Program Directors, or to any other official or employee of the Department the authority to execute or approve any program documents or loan documents, including loan commitments and agreements with the local administrators. In addition, through the agreement with the local administrator, specific staff members for the local administrator may be authorized by the Department to execute loan documents on behalf of the Department. False Statements. A borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department or the local administrator originating the loan, is subject to immediate acceleration of the loan, in addition to the penalties authorized by Housing and Community Development Article, §4-933, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal agency in connection with any rehabilitation with respect to which federal assistance is sought necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, Title 4, Subtitles 5 and 9, §§4-704—4-706,Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: August 3, 1977 (4:16 Md. R. 1207) Regulations .03, .04A, C, .05B, .06A, .07H, .08B, .09A amended effective June 16, 1978 (5:12 Md. R. 965) Regulations .03, .04A, .05B, .06A, .07G, .08, .09A, F, .10C amended effective March 23, 1979 (6:6 Md. R. 509) Regulations .03E, M, .04C, .05B, .06A, B, .07I, .08B amended effective October 5, 1979 (6:20 Md. R. 1627) Regulations .03G, M; .06A; .08B; .10C; and .12B amended effective September 5, 1980 (7:18 Md. R. 1737) Regulation .05C adopted effective June 16, 1978 (5:12 Md. R. 965) Regulation .14D repealed effective September 5, 1980 (7:18 Md. R. 1737) Chapter revised effective October 25, 1982 (9:21 Md. R. 2104) Regulation .02A amended effective February 11, 1985 (12:3 Md. R. 243) Regulation .03B amended effective February 11, 1985 (12:3 Md. R. 243); April 22, 1985 (12:8 Md. R. 800) Regulation .04 amended effective February 11, 1985 (12:3 Md. R. 243) Regulation .05B, C, E amended effective February 11, 1985 (12:3 Md. R. 243) Regulation .05D amended effective April 22, 1985 (12:8 Md. R. 800) Regulations .06—.10 amended effective February 11, 1985 (12:3 Md. R. 243) Regulation .10A amended effective April 22, 1985 (12:8 Md. R. 800) Regulations .11—.13 amended effective February 11, 1985 (12:3 Md. R. 243) Regulation .15B amended effective February 11, 1985 (12:3 Md. R. 243) Regulations .17 and .18 repealed and new Regulations .17 and .18 adopted effective February 11, 1985 (12:3 Md. R. 243) Chapter recodified from COMAR 05.01.08 to COMAR 05.04.01 Regulations .01—.18 repealed and new Regulations .01—.21 adopted effective July 22, 1991 (18:14 Md. R. 1609) Regulation .02 amended effective February 22, 1999 (26:4 Md. R. 272) Regulations .02—.19 and .21 amended effective November 9, 1992 (19:22 Md. R. 1986) Regulation .03B amended effective February 22, 1999 (26:4 Md. R. 272); November 29, 1999 (26:24 Md. R. 1855) Regulation .04B amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .05A amended effective January 2, 1994 (20:25 Md. R. 1941); February 22, 1999 (26:4 Md. R. 272); April 5, 1999 (26:7 Md. R. 537) Regulation .08E amended effective February 22, 1999 (26:4 Md. R. 272); November 29, 1999 (26:24 Md. R. 1855) Regulation .09D amended effective January 2, 1994 (20:25 Md. R. 1941); February 22, 1999 (26:4 Md. R. 272) Regulation .10C amended effective February 22, 1999 (26:4 Md. R. 272); September 29, 2003 (30:19 Md. R. 1329) Regulation .11E amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .12 amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .14B amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .15 amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .15E amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .16C amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .16D amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .19A amended effective February 22, 1999 (26:4 Md. R. 272) Chapter revised effective April 5, 2010 (37:7 Md. R. 569) Regulation .06D amended effective July 4, 2016 (43:13 Md. R. 712) Regulation .07-1 adopted effective July 4, 2016 (43:13 Md. R. 712) Regulation .15D amended effective July 4, 2016 (43:13 Md. R. 712) Regulation .19 amended effective March 16, 2015 (42:5 Md. R. 485) These standards are to be used as guidelines for property rehabilitation under the Program. The Program may, at its discretion, waive certain of these standards if needed to fulfill the intent of the Act. When suitable local standards have been developed, these standards are not applicable. General. Definitions given in this regulation are included to provide a basis for understanding the meaning of these terms, phrases, and their derivatives when they are used in these regulations. These definitions have general consistency with those used throughout the building industry, but are directed to the specific needs of rehabilitation. None is intended to nullify the provisions of any local code but the terms are furnished to provide understanding of these guidelines. Terms Defined. “Accessory building” means a secondary building, the use of which is incidental to that of the main building and which is located on the same plot. “Addition” means a construction which increases the size of a building or adds to the building, such as a porch, an attached garage, or a carport. “Alley” means a service way providing a secondary public means of access to abutting properties. “Alteration” means construction which may change the floor plan, structural parts, mechanical equipment, or location of openings, but which does not increase the size of the building. Area. “Building area” means the total ground area of each building and accessory building, but not including uncovered entrance platforms, terraces, and steps. “Floor area” means the total area of one story measured within exterior enclosing walls or between exterior walls and firewalls of a building. This area includes bays and dormers, but does not include space in garages or carports or in attics. “Attic” means the accessible space between the top of the uppermost ceiling and the underside of the roof. Inaccessible spaces are considered structural cavities. “Building line” means a line established by law or agreement usually parallel to the property line, beyond which a structure may not extend. “Carport” means a roofed space having at least one side open to the weather, primarily designed or used for motor vehicles. “Cellar” means that space of a building which is partly or entirely below grade and has more than half of its clear height below the average grade of the adjoining ground. “Chase” means an enclosed shaft in a masonry or other wall providing for the accommodation of pipes, ducts, or conduits. Construction Classification. “Construction classification” means a classification of buildings into types of construction which is based upon the fire resistance of walls, floors, roof, ceilings, and other elements. “Type 1, fire-resistive construction” means that type of construction in which the walls, partitions, columns, floors, roof, ceilings, and other structural members are noncombustible with sufficient fire resistance to withstand the effects of a fire and prevent its spread from one story to another. “Type 2, noncombustible construction” means that type of construction in which the walls, partitions, columns, floors, roof, ceiling, and other structural members are noncombustible, but which does not qualify as Type 1, fire-resistive construction (Type 2a (1 hour protected), and Type 2b, which does not require protection for certain members). “Type 3, exterior protected construction” means that type of construction in which the exterior walls are of noncombustible construction having a fire resistance rating as specified and are structurally stable under fire conditions, and in which the interior structural members and roof are wholly or partly of combustible construction. “Type 3a” means exterior protected construction in which the interior exitways, columns, beams, and bearing walls are noncombustible in combination with the floor system, roof construction, and non-load bearing partitions of combustible construction. “Type 3b” means exterior protected construction in which the interior structural members are of protected combustible materials, or of heavy timber unprotected construction. “Type 4, wood frame construction” means that type of construction in which the exterior walls, partitions, floors, roof, and other structural members are wholly or partly of wood or other combustible materials. Court. “Inner court” means an open, outdoor space enclosed on all sides by exterior walls of a building or by exterior walls and property lines on which walls are allowable. “Outer court” means an open, outdoor space enclosed on at least two sides by exterior walls of a building or by exterior walls and property lines on which walls are allowable, with one side open to a street, driveway, alley, or yard. “Damp-proofing” means a treatment of a surface or structure which retards the passage of water. “Driveway” means a private way for the use of vehicles and pedestrians. Dwelling. “Dwelling” means a building designed or used as the living quarters for one or more families. “Detached” means a dwelling which is completely surrounded by permanent open space. “Semi-detached” means a dwelling, one side wall of which is a party or lot-line wall. “Row” means a dwelling, the walls on two sides of which are party or lot-line walls. “End-row” means semi-detached. “Multifamily” means a building containing three or more living units for families living independently of each other. “Dwelling unit” (see “living unit”). “Easement” means a vested or acquired right to use land other than as a tenant, for a specific purpose, this right being held by someone other than the owner who holds title to the land. “Exit” means a continuous and unobstructed way to get from the interior of a building to the outside at grade level. A secondary exit may, under certain conditions, provide only emergency egress to an adjacent building or roof, from which safe travel can be made to grade level. “Fire division” means the interior means of separation of one part of a floor area from another part together with the floor construction to form a complete fire barrier between adjoining or superimposed floor areas in the same building. “Fire resistance” means that property of construction assemblies which under fire conditions prevents or retards the passage of excessive heat, hot gases, or flames. “Fire-resistance ratings” means time in hours or parts of hours that a material, construction, or assembly will withstand fire exposure, as determined in a recognized fire test. “Fire resistive” means that quality of materials and assemblies to resist fire and prevent its spread. “Fire retardant treated wood” means lumber or plywood treated by a recognized impregnation process to reduce its combustibility. “Fire separation” means a construction of specified fire resistance separating parts of a building horizontally or vertically as required. “Firestopping” means a barrier within concealed spaces which is effective against the spread of flames or hot gases. “Flame-resistant” means that property of a material which is flame resistant by nature or has been made so by an accepted method. “Flame spread” means the propagation of flame over a surface. “Flashing” means sheet metal or other impervious materials used in roof and wall construction to protect a building from the seepage of water. “Floor” (see “story”). “Foundation” means construction, below or partly below grade, which provides support for exterior walls or other structural parts of the building. Garage. “Garage” means a building or enclosure primarily designed or used for motor vehicles. “Attached” means a garage having all or part of one or more walls common to the dwelling or to a covered porch attached to the dwelling. “Detached” means a garage which is completely surrounded by open space. A garage connected to the dwelling by an uncovered terrace is defined as a detached garage. “Built-in” means a garage located within the exterior walls of a dwelling. “Grade, finish” means the top surface elevation of lawns, walks, drives, or other improved surfaces after completion of construction or grading operations. “Habitable room” (see “room”). “Height, building” means vertical distance measured from curb or grade level, whichever is the higher, to the highest level of a flat roof or the average height of a pitched roof, excluding penthouse or other roof appendages occupying less than 30 percent of the roof area. When a height limitation is set forth in stories, this height shall include each full story as defined there. “Joists” means a series of floor, roof, or ceiling framing members spaced not more than 30 inches on center. “Kitchen” means a space, 50 square feet or more in area, used for cooking and preparation of food. “Kitchenette” means a space, less than 50 square feet in area, used for cooking and preparation of food. “Living unit” means a dwelling or portion of a dwelling providing complete living facilities for one family, including permanent provisions for living, sleeping, eating, cooking, and sanitation. Loads. “Dead load” means the weight of all permanent construction in a building. “Live load” means the weight of all moving and variable loads that may be placed on or in a building such as snow, wind, occupancy. Lot. “Lot” means a parcel of land that is described by reference to a recorded plat or by metes and bounds. “Corner lot” means a lot abutting upon two or more streets at their intersection. “Interior lot” means a lot bounded by a street on one side only. “Double-fronted lot” means an interior lot bounded by a street on front and back. Lot coverage" means that percentage of the plot area covered by the total of all building areas. “Lot line” means a line bounding the lot as described in the title to the property. “New construction” means proposed construction or other new structures erected on cleared or vacant land, or new additions to an existing building which enlarge the floor area or height of the building. “Noncombustible” means material or a combination of materials which will not ignite or support combustion at a temperature of 1,382 degrees F during a 5 minute exposure. “Plot” means a parcel of land consisting of one or more lots or portions of it, which is described by reference to a recorded plat or by metes and bounds. “Property” means a lot or plot, including all buildings and improvements on it. “Property line” means a recorded boundary of a plot. “Rafters” means a series of roof framing members, spaced not more than 30 inches on center in roofs having slopes over 3 in 12. “Rehabilitation” means the restoration of a reuseable single structure, or group of structures, which overcomes deterioration and provides a satisfactorily improved physical condition for residential purposes. “Rehabilitation construction” means all the following: All repairs to or replacement of present elements of an existing building, such as windows, stairs, walls, floors, roof, plumbing, wiring, heating, or other equipment; Rearrangement of rooms by the relocation of partitions or by the installation of new bathrooms and kitchens; The general replacement of the interior of a building. This replacement may but does not have to include changes to structural elements such as floor systems, columns, or load-bearing interior or exterior walls. “Repair” means restore to a sound and acceptable state of operation, serviceability, or appearance. Repairs shall be expected to last as long as the replacement by new items. “Replace” means to remove an existing item or portion of a system, and to construct or install a new item of similar or improved quality as the existing item when new. Replacement will ordinarily take place when the item is incapable of repair or when repair would be more costly. Room. “Habitable room” means a space used for living, sleeping, eating, or cooking, or combinations of these, but not including bathrooms, toilet compartments, closets, halls, storage rooms, laundry and utility rooms, basement recreation rooms, and similar spaces. “Combined rooms” means two or more adjacent habitable spaces which by their relationship, planning, and openness permit their common use. “Shaft” means a vertical opening or enclosed space extending through two or more floors of a building, or through a floor and roof. “Shall” is a term that imposes obligation to act. “Should” is a term that indicates minimum good practice but does not impose an obligation to act. “Space heater (room heater)” means a self-contained above-the-floor device for furnishing heated air, through openings in its casing directly into the space in which the device is located or immediately adjacent to it. The device may be free-standing or recessed in a wall or partition. Story. “Story” means that portion of a building between a floor and the next floor above, or roof. “Basement” means a space of full story height below the first story, which is partly below grade. “First story” (“first floor”) means the lowermost story which is accessible from outside the building at grade with its floor closest to grade, and which is used as habitable space. “Half story” means a story, finished as living accommodations, located wholly or partly within the roof frame and having a floor area at least one half as large as the story below. Space with less than 4 feet clear headroom may not be considered as floor area. “Top story” means the story between the uppermost floor and the ceiling or roof above. “Street” means a public or private way which affords principal means of vehicular access to properties which abut on it. “Substandard building” means a building or portion of a building in which there exist physical conditions serious enough to endanger the life, limb, health, property, safety, or welfare of the occupants or of the public, as determined by the program. Ventilation. “Mechanical ventilation” means supply and removal of air by power-driven devices. “Natural ventilation” means ventilation by openings to outside air through windows, doors, or other openings. Wall. “Bearing wall” means a wall which supports any vertical load in addition to its own weight. “Curtain wall” means a nonbearing exterior wall supported by the structural framework of the building. “Faced wall” means a wall in which the masonry facing and backing are so bonded as to exert a common action under load. “Fire wall” means a continuous wall from foundation to roof with designated qualities of fire resistance and structural stability which subdivides a building into fire areas and which resists the spread of fire. “Non-bearing wall” means a wall which supports no vertical load other than its own weight. “Parapet wall” means that part of any wall entirely above the roof. “Party wall” means a wall used jointly by two parties under easement, erected upon a line separating two parcels of land, each of which is a separate real estate entity. “Retaining wall” means a wall used to resist lateral displacement of any material. Local Codes and Regulations. These guidelines, while setting forth basic objectives and provisions specifically related to rehabilitation, may not be construed as relieving the property owner, project sponsor, or their builder of his responsibility for compliance with local ordinances, codes, and regulations, including established requirements of a health officer or other authority having jurisdiction. When a local code, regulation, or requirement exists, it shall apply unless a political subdivision chooses to use these standards. Service and Facilities. Utilities shall be provided for each property or project. Although the normal condition is for independent utilities for each property, a concentration and combining of utilities may be acceptable when a project of a number of properties has the same sponsor or is under a single mortgage. Access. Access to the Building. Walks and steps shall be provided for all weather access to the building, and constructed to provide safety, reasonable durability, and economy of maintenance. Access to Each Living Unit. Access to each living unit shall be provided without passing through any other living unit. Real Estate Entity. The land offered as security for an insured mortgage normally will comprise a single plot. Determining the Number of Living Units. Each dwelling or portions of a dwelling providing complete living facilities for one family shall be counted as a living unit. A room or group of rooms containing complete living facilities, such as an apartment of a janitor or caretaker, shall be counted as a separate living unit. Partial Non-residential Use. A space or feature included in the property from which income is anticipated apart from the rental of living units is termed non-residential or commercial use. Non-residential use shall be of a character which is compatible with the residential character of the property or project. The extent of non-residential use shall be determined by the proper local authority. Dilapidated or Blighted Structures. All dilapidated portions of existing properties or blighted structures which are not economically repairable shall be removed (see Regulation .05G for exterior appurtenances). Site Conditions. The property should not be subject to hazards such as objectionable smoke, noxious odors, unusual noise, or the probability of flooding. Essential community facilities and services, such as employment centers, shopping centers, schools, recreation areas, and police and fire protection, should be reasonably accessible to the site or group of sites making up the project. Physically Handicapped. Any improvement necessary to accommodate the physically handicapped shall be considered a standard requirement of the Program, the cost of which shall be computed as a code cost item. The objective is to develop the individual site or group of sites so that obsolescence is overcome, and so that the development is appropriate and an asset to the neighborhood in which it is located. Every residential building shall have sufficient open space to permit convenient access for maintenance, fire protection, adequate light and ventilation of habitable rooms, and reasonable indoor privacy. In the site development of a target area, consideration should be given to the needs of the residents for non-vehicular open space for active and inactive recreation. Adequate night lighting for the safe use of streets, parking areas, walks, and steps should be provided or arrangements made for its provision by public authority. The open space of each property shall provide for the immediate diversion of water away from buildings and disposal from the lot, for the prevention of soil saturation detrimental to structures and lot use, and, when needed, for appropriate paved walks, parking areas, driveways, exterior steps, and landscaping. The objective is to assure a living unit which provides for a healthful environment and complete living facilities arranged and equipped for suitable and desirable living conditions under consideration. Space Standards. General. The standard is to provide: Each living unit with space necessary for suitable living, sleeping, cooking and dining accommodations, storage, laundry, and sanitary facilities; and Space of such size and dimensions so as to permit placement of furniture and essential equipment. Habitable rooms in basements or below grade intended for year-round occupancy shall comply with building planning standards in the same manner as rooms above grade (see §C). Room Sizes. The size of rooms shown in Table .05-1 should be minimum for the subdividing of existing spaces or for the construction of new rooms. Unremodeled existing rooms where considered of adequate size and arrangement for the intended function by the Program are acceptable. Ceiling Heights. Ceiling heights shall permit the average person to move about comfortably, and create no unpleasant sensation because of the ceiling being of insufficient height. Privacy and Arrangement. A degree of privacy shall be provided commensurate with suitable living conditions by means of the proper location of exterior conditions, and by the interior arrangement of rooms. Access to all parts of a living unit shall be possible without passing through a public hall. Every water closet, bathtub, or shower of a living unit shall be installed in a bathroom or toilet compartment which will afford privacy to the occupant. A bathroom may not be used as a passageway to a habitable room, hall, basement, or to the exterior. Access to an existing bathroom may be through a bedroom in living units having more than one bedroom, provided it is judged to be acceptable to the market. A bathroom should not be separated from all bedrooms of a living unit by locating it a full story above or below the bedrooms. A bedroom should not be used as the only means of access to another bedroom or habitable room. Kitchen Facilities. Each living unit shall have a specific kitchen space, which contains a sink with counter work space and has hot and cold running water, adequate space for installing cooking and refrigeration equipment, and for storing cooking utensils. Bath Facilities. Complete bathing and sanitary facilities shall be provided within each living unit. They shall consist of a water-closet, a tub or shower, and a lavatory. An adequate supply of hot water to the tub or shower stall, or both, and lavatory, and cold water to all fixtures shall be provided. Arrangement of fixtures shall provide for the comfortable use of each fixture and permit at least a 90-degree door swing. Wall space shall be available for a mirror or medicine cabinet and for towel bars. Space for Laundry Facilities. Adequate space should be provided for laundry equipment within each living unit, off a public corridor, or in a basement or other suitable public space for the use of all occupants of a building. If nearby public commercial laundries are available, consideration may be given as to the extent residents of the project can be expected to use them in determining laundry space needs. Closets and General Storage. Clothes closet space shall be provided within bedrooms or conveniently located nearby. In addition, each living unit should have a suitable space within the unit or a locked space elsewhere within the building for general storage. Light and Ventilation. General. A healthful environment and an acceptable degree of comfort within all rooms and hallways of the dwelling by having sufficient light and ventilation, and natural ventilation for structural spaces to minimize conditions conducive to decay and deterioration shall be provided. Habitable Rooms. All habitable rooms, except kitchens, shall have natural light, provided by means of windows, glazed doors, or skylights. A glass area of at least 8 percent of the floor area shall be provided for new or remodeled rooms, or other spaces. An existing habitable room not disturbed in the rehabilitation which is deficient or without natural light can be considered acceptable provided this is judged to be acceptable to the market. An acceptable means of natural ventilation shall exist or be provided for all habitable spaces, except that for kitchens a mechanical ventilation system may be substituted. A ventilation area of 5 percent of the floor area of the space shall be provided. Artificial light shall be provided and so distributed as to assure healthful conditions and satisfactory illumination in all rooms. Kitchens shall have artificial light provided. Ventilation shall be provided by either mechanical ventilation, or if natural means are used, by 5 percent of the floor area but not less than a 3-square-foot area. Bathrooms and Toilet Compartments. Artificial light shall be provided. Ventilation shall be provided by either mechanical means or if natural means are used, by 5 percent of the floor area, but not less than a 1-1/2 square-foot area. Public Spaces. Artificial light shall be provided in all public spaces. Public Entrance Spaces. Either natural ventilation of at least 5 percent of the floor area or mechanical ventilation shall be provided at all public entrance spaces. Ventilation of Utility Spaces. Utility spaces which contain heat producing, air conditioning, or other equipment shall be ventilated to the outer air, and air from these spaces may not be recirculated to other parts of the building. Ventilation of Structural Spaces. Natural ventilation of spaces such as attics and enclosed basement spaces shall be provided by openings of sufficient sizes to overcome dampness and minimize the effect of conditions conducive to decay and deterioration of the structure, and to prevent excessive heat in attics. Exterior ventilation openings shall be effectively screened where needed. Doors and Access Openings. The standard is to provide openings adequate in size to admit furniture and equipment to all spaces and to permit inspection for repair and maintenance. Exterior Doors. Exterior doors shall have safe locks. Interior Doors. A door for each opening to a bedroom, bathroom, or toilet compartment, with a locking device on bath and toilet compartment doors, shall be provided. Stairways. General. All stairways shall provide safety of ascent and descent, and stairs and landings shall be arranged to permit adequate headroom and space for the passage of furniture and equipment. Existing Stairways. Existing stairways in sound condition to remain or to be repaired may not be, to any serious extent, below minimum standards of good practice as to rise and run of steps, headroom, obstruction, stair width, landings, or railing protection. See Regulation .06C for related conditions. New Stairways. New stairways to be constructed shall comply with standards of good practice and be appropriate to the building and occupant load. Corridors and Hallways. Corridors and hallways shall provide adequate, safe, and unobstructed circulation from living units or other spaces to various means of exit. Exterior Appurtenances. All exterior appurtenances or accessory structures which serve no useful purpose, or those in a deteriorated condition which are not economically repairable, shall be removed. These structures include porches, terraces, entrance platforms, garages, carports, walls, fences, and miscellaneous sheds. Trash and Garbage Disposal. Every dwelling and multifamily building shall be supplied with a means of disposal or removal of trash and garbage. If disposal will not take place promptly, there shall be a convenient and appropriate temporary and sanitary storage for trash and garbage provided, which is inaccessible to rodents. Noise Control. When practical, functional areas of high noise should be separated from areas of quiet. Clothes or storage closets are useful separators. Partitions should extend to solid floor-ceiling construction and should not terminate at hung ceilings. Pipes should be caulked and wrapped and ductwork should be sealed where they penetrate sound-impeding partitions and floors. Ducts should be lined near registers or grilles, and at fan discharge. Motors, fans, and other mechanical equipment should be balanced and mounted. If kitchens or bathrooms are located back-to-back, special attention should be given to the construction to reduce noise from plumbing fixtures and noise through medicine cabinets. Where living units are adjacent to high noise areas such as boiler rooms or other mechanical equipment, the construction separating the spaces should provide a greater noise resistance than normal room separation. Notes: Abbreviations: Variations to these areas and dimensions may be permitted when existing partitions preclude precise compliance, and the available area or dimensions do not hinder furniture placement and the normal use of the space. The least dimension of each room function applies, except for the overlap or double use of space in combination rooms. Objective. The objective of this section is to assure a high degree of safety to life and property preservation, by the separation of living units and the use of materials which will retard the spread of fire and prevent the passage of flame, smoke, and hot gases through open or concealed spaces within the building. An additional objective of this section is to provide means of egress which will permit persons to leave the building with safety in an emergency, and permit access for fire control personnel. General. These provisions apply to rehabilitation construction of existing buildings. However, where the construction, plan arrangement, and approximate number of occupants of a property are to remain unchanged, and the fire protection provisions of the local code are complied with, noncompliance with the provisions of this chapter may be acceptable, when so determined by proper local authority. Exits. One- and two-family dwellings of one, two, or three stories, and one- or two-story multifamily buildings having not more than four living units above the first floor shall have the following two means of egress: One exit which is a doorway, a protected passage, or a stairway; and A second exit as provided in §C(1)(a), above, or a secondary exit such as a fire escape or openable window. Access to required exits may not necessitate passage through another living unit, nor may either exit be subject to locking by any device that would impede or prohibit ready egress. Every below-grade living unit shall have direct and convenient access to the outside of the building at grade level. All interior stairways required to be enclosed shall lead directly or through an enclosed passageway to a street, or to an open space that is accessible to a street. This passageway shall conform to the requirements applying to the stair enclosure. Interior Fire Protection. Firewall, Party, or Lot-Line Wall. Firewall, party, or lot-line walls shall be continuous from the foundation to the underside of, or through, the roof, with openings in firewalls only in corridors and where properly protected with appropriate automatic fire doors. There may not be openings in party or lot-line walls. All these walls shall effectively prevent the passage of fire at every floor-ceiling intersection with the wall. Walls, Floors, and Ceiling Construction. Existing wall, floor, and ceiling construction separating living units or separating a living unit from a public corridor where it is stripped down for new finish materials, or where it is new construction, shall have a fire resistance rating of at least 3/4-hour, or 1 hour if in condominium ownership. Interior Finish. Interior finish materials of walls, partitions (fixed or movable), ceilings, and interior trim may not be subject to excessive surface flame spread, or in burning may not give off excessive amounts of smoke or toxic gasses. If new interior wall and ceiling finish materials are used, the surface flame spread shall not exceed the class or range of rating shown in Table .06-1. Existing undisturbed finish materials where considered to have a rating above 200 should be covered with a flame retardent paint. Exterior Fire Protection. Exterior Stairways. An exterior stairway may be acceptable as a required exit, provided that its use is not impaired by ice or snow. Exterior stairs and landings shall be of noncombustible materials except on buildings two stories in height. Roof Covering. Roof coverings shall be capable of resisting fire appropriate to the type of construction and location, and new installations shall be in accordance with nationally recognized standards. Fire retardant qualities of roof coverings shall conform to the classification established by NFPA. New roof coverings on one- and two-family dwellings and on wood frame buildings shall provide a fire resistance equivalent to a Class C roof according to NFPA classification. New roof coverings on buildings of fire resistive, noncombustible, and exterior-protected construction having more than two living units shall provide a fire resistance equivalent to a Class A or Class B roof according to U.L. classification except that where the roof area of the property is less than 3,000 square feet and is well separated from adjacent properties, the roof covering may be Class C. Fire Protection System. An approved “smoke detector” shall be provided in each sleeping area of a rehabilitated unit as defined in Chapter 11 of the National Fire Protection Association Life Safety Code (1973 edition). Exclude windows, trim, and doors not more than 25 square-foot area from flame spread calculations. Finish floors and floor coverings are not included in flame spread requirements but may not be a fire hazard. Twenty-five percent of the combined wall area of any single room may be of a finish material having a flame spread rating of up to 225. Kitchen cabinets and counter tops should not exceed a 200 flame spread rating. Classification in accordance with NFPA No. 101, “Life Safety Code,” as follows: ASTM E84 (Tunnel Test) ASTM E162-62T (Radiant Panel Test) Note: Flame spread rating based on either of the following standard tests: Objective. The objective is to provide materials of such kind and quality as to assure that the dwelling will provide appropriate structural strength, adequate resistance to weather and moisture, and reasonable durability and economy of maintenance. Quality of Materials and Products. All materials and products used as replacements or additions in rehabilitation construction shall be of good quality. Second-hand materials which meet the standards for new materials may be used when approved by the proper local authority. The suitability of special materials and products not conforming to a national standard shall be determined by the proper authority, after an evaluation of its properties and performance characteristics. Objective. The objective is to assure that the construction of the rehabilitated portion of the building will provide sufficient structural strength and rigidity; adequate protection from corrosion, decay, insects, and other destructive forces; necessary resistance to the elements; reasonable durability and economy of maintenance; and acceptable quality of workmanship. Structural Soundness. All structural components of the building shall be in sound condition and considered serviceable for the expected useful life of the rehabilitated building. Sagging or out-of-plumb floors, chimneys, fireplaces, partitions, or stairs, and bulging of exterior walls shall be restored as near as practical to an acceptable level or plumb position, and supported or braced to prevent a recurrence of these conditions. Stair railings shall be rigid. Individual structural members in a seriously deteriorated condition shall be replaced. Loosely jointed structural members shall be restored to original rigidity. Thermal Protection. Necessary corrective measures shall be required to ensure that the building has the following minimum thermal protection: Thermal protection for glazing and doors is required for all habitable heated areas in locations having more than 4500 annual winter degree days. This will be effected through the installation of storm doors and storm sashes or inserts, or insulating glass. Material and installation may be the most economical locally acceptable, but shall meet the U values as prescribed for new construction. Storm doors need not be applied to double front doors, double French doors, sliding glass doors, or any other door for which the cost of custom manufacturing would be excessive. Casement and awning windows and other types of sash may be exempted on an individual basis in any instance due discontinued sizes, unusual opening configuration for which no storm sash is manufactured and for which the cost of custom manufacturing would be excessive. Ceiling insulation shall be provided over all heated areas in locations having 2500 or more annual winter degree days as follows: 2500 to 4500 degree days —R-11 insulation; 4501 to 8000 degree days —R-19 insulation; 8001 or more degree days —R-22 insulation. In all instances the adequacy of attic ventilation must be ascertained. Exemption of the ceiling insulation requirements will be allowed for buildings having flat roofs or other ceiling areas where installation is determined to be impractical unless ceiling finish is to be removed in the course of rehabilitation. Under-floor insulation shall be required beneath all heated areas over unheated spaces in localities having 2500 or more annual winter degree days. Insulation may be installed between or under floor joists as follows: 2500 to 4500 degree days -- R-7 insulation; above 4500 degree days -- R-11 insulation. Exemption of under-floor insulation will be allowed where reflective foil insulation is already installed. When the exterior wall is repaired to the extent of removing the sheathing or inside wall covering, insulation shall be installed in the exposed portion of the wall cavity. The thermal insulation shall fill the exposed wall cavity or furring space without excessive compression. A vapor barrier shall be provided on the warm side of the cavity or furring space when insulation is added. Weatherproofing. Doors and windows shall be adequately weatherstripped to reduce infiltration of air. Loose or brittle caulking around door and window frames shall be replaced. New caulking shall be installed where none is present. Exterior Walls. General. Foundations and exterior walls shall provide safe and adequate support for all loads upon them, and prevent the entrance of water or excessive moisture. Serious defects shall be repaired and cracks effectively sealed, or replaced. Basement and Foundation Walls. Basement and foundation walls should prevent the entrance of water or moisture into basement or crawl space areas. Cracks in the walls shall be effectively sealed, and loose or defective mortar joints shall be replaced. If necessary, the interior or exterior face of the walls shall be damp-proofed by bituminous coating and cement parging. Deficiencies in proper grading or paving adjacent to the building shall be corrected to assure surface drainage away from basement walls. Partitions, Columns, and Posts. Partitions and other vertical supports which are to be continued in use shall be free of splits, excessive lean, buckling, or other defects. Floor Construction. General. All floor construction shall provide safe and adequate support for all existing or probable loads and shall be reasonably free of objectionable vibration. A suitable surface for finish flooring shall exist or be provided. Basement or Cellar Floors. The floors of all basement or cellar furnace rooms, or basements containing habitable space, shall be paved in an acceptable manner, except, if the basement or cellar has existing wood floor construction over a crawl space which is in a sound undamaged condition, it may remain, provided the crawl space is adequately vented, and an acceptable ground cover material is installed on the ground in the crawl space. Chimneys, Incinerators and Vents. Chimneys and vents shall be structurally safe, durable, smoke-tight and capable of withstanding the action of flue gases. Factory-built chimneys shall be labeled by Underwriters' Laboratories Inc., and installed in accordance with the listing. Protection from Rodents, Termites, or Other Infestation. Each building and all exterior appurtenances on the site shall be effectively protected against rodents, termites, or other vermin infestation, using approved methods. Inspection and Correction. A careful inspection by qualified persons shall be made of each building and accessory structure on each property for evidence of actual or potential infestation or access channels. Existing buildings having defects that permit the entrance of rodents, termites, or other vermin shall be corrected by appropriate preventive measures. Damaged or deteriorated structural members shall be replaced. Inspection for Decay and Deterioration. An inspection shall be made of both interior and exterior construction for evidence of rot, rust, or decay damage or other hazards. If structural damage to these materials is found to exist, correction shall be provided. Objective. Acceptably prevent the entrance or penetration of moisture and weather; Be protected from damage by decay, corrosion, insects, and other destructive elements; and Provide reasonable durability and economy of maintenance. Exterior Finish. Exterior Wall Covering. Repairs or replacement shall be made to defective exterior wall finish materials. Exterior walls shall be free of holes, cracks, and broken or rotted finish materials. Roof Covering. All roofs shall have a suitable, watertight, and reasonably durable covering free of holes, cracks, excessively worn surfaces, or other defects. Exterior Surfaces. Exterior surfaces shall be treated, if necessary, to eliminate the hazards of lead-based paint poisoning in the manner determined by the Program. Gutters and Downspouts. Each dwelling shall have a controlled method of disposal of water from roofs if necessary to prevent damage to the property, and to avoid causing unsightly staining of walls and windows where adequate roof overhangs are not provided. Flashing. To prevent the entrance of water, all critical joints in exterior roof and wall construction which are exposed or partly exposed shall be protected by sheet metal or other suitable flashing material. Windows, Doors, and Other Openings. Existing windows and doors, including their hardware, shall operate satisfactorily and give evidence of continuing acceptable service. Defective glass or locking mechanisms shall be replaced or corrected. Screens shall be provided for all windows, doors, and other openings except in regions where their use is not customary or needed. Existing screens and storm sashes which are to be continued in use shall be in suitable condition to serve their intended purpose. Interior Walls and Ceiling Finish. All interior walls and ceilings shall provide the following: A finished surface without noticeable irregularities or cracking; A waterproof and hard surface in space subject to moisture; A suitable base for painting or other decoration; and Reasonable durability and economy of maintenance. Exterior surfaces shall be treated, if necessary, to eliminate the hazards of leadbased paint poisoning in the manner determined by the Program. Finish Floors. Finish floors shall be appropriate to the use of the space and in good condition, and shall provide reasonable ease of maintenance and an extended life service. Painting and Decoration. Protective and decorative finish coating or surfacing shall provide adequate resistance to weathering, protection of surfaces from moisture or corrosion, an attractive appearance, and reasonable durability. Paint may not contain more than .5 percent lead by weight calculated as lead metal in the total nonvolatile content of liquid paints or in the dried film of paint already applied. Alterations and Repairs. All alterations, repairs, and other improvements shall be harmonious with existing materials. Objective. The objective is to provide mechanical equipment for the building and its living units that will meet the needs of the intended occupants and be of quality and condition which will assure safety of operation, adequate capacity for its intended use, protection from moisture, corrosion, or other destructive elements, reasonable quietness of operation, and reasonable durability and economy of maintenance. General. All mechanical equipment should be installed so that maintenance and replacement can be performed without the removal of other equipment. Existing mechanical equipment and systems shall be inspected for faulty operation, fire, or other hazards. Needed replacement or repair shall conform to applicable code requirements. Mechanical Ventilation and Air Conditioning. If mechanical ventilation is required in rooms or other spaces, the equipment or system shall operate satisfactorily if presently in place. If new, it shall be designed and installed to good engineering practice. Heating. Heating facilities shall be provided for each living unit and other spaces that will be safe and convenient to operate, economical in performance, quiet in operation, free from objectionable drafts, and will assure interior comfort. Each heating system or device shall have a recognized approval for safety and shall be capable of maintaining a temperature of at least 70 degrees F within the living units, corridors, public spaces, and utility spaces when the outside temperature is at the design temperature. Open-flame radiant type space heaters may not be permitted except for one- and two-family detached dwellings where it is locally determined to be the predominant method of providing heat for dwellings. Unvented space heaters may not be permitted except for existing equipment in geographic areas where the use of equipment of this kind is predominant, and only for one- and two-family detached dwellings. Appropriate clearances around all room or space heaters shall be provided, and the floor shall be protected in an acceptable manner (for gas: NFPA Standard No. 54, 54A; for oil: NFPA Standard No. 31-65). Plumbing. General. The plumbing system and its appurtenances for each building shall provide satisfactory water supply, sewage, disposal, drainage, venting, and operation of fixtures in conformance with applicable codes or in the manner prescribed by the Program. Required Fixtures. For required plumbing fixtures see Regulation .05B(5) and (6). Condition of Existing Plumbing. Plumbing systems, including building sewers, shall operate free of fouling and clogging, and may not have cross connections which permit contamination of water supply or back-siphonage between fixtures. Domestic Water Heating and Storage. Each building and living unit within the building shall have domestic hot water in quantities sufficient for the needs of the occupants. Existing water heating and storage equipment shall be in good serviceable condition. Water heaters may not be installed in a room used or designed to be used for sleeping purposes. Gas- or oil-fired water heaters may not be located in a bathroom clothes closet, under any stairway, or in a confined space with access only to the above locations. All fuel burning water heaters shall be connected to a vent leading to the exterior of the building. Electrical. General. All habitable rooms and other appropriate spaces requiring electrical service shall be provided with a system of wiring, wiring devices, and equipment to safely supply electrical energy for proper illumination, appliances, resident security, and other electrical equipment. Existing Wiring and Equipment. If its continued service is contemplated, existing wiring and electrical equipment may not be a potential source of electrical hazard or ignition of combustible materials. The proper authority shall make this determination. Wherever these potential hazards are determined to be present, replacement of existing wiring and equipment shall be made. Existing facilities that are inadequate to meet anticipated demands shall be appropriately increased. New Electrical Work. The National Electrical Code shall be used as a guide for design layout and installation of new electrical work. At least two At least two general lighting circuits (15 amp.) and one appliance general lighting circuits (15 amp.) and one appliance circuit (20 amp.) shall be provided for each living unit. Heavy duty equipment shall have individual branch circuits, as required by the National Electrical Code. Note: Table .10-2 gives the recommended minimum recovery rate in gallons per hour at 100 degrees F rise according to the storage capacity (or size) of the tank, and for a designated number of living units. The blank spaces in the table mean the tank size would be either too small to provide sufficient hot water, or too large a tank to be practical. Objective. The objective is to promote adequate maintenance of dwelling units rehabilitated under the Program. General. Each dwelling unit shall be free of maintenance conditions hazardous to health and safety upon the completion of rehabilitation work, and each occupant or sponsor should be counseled as to their responsibilities for continued maintenance of the dwelling unit. Cleanliness. Every occupant of a building should keep that part of the building or premises which he occupies, controls or uses in a clean and sanitary condition. Disposal of Garbage and Rubbish. Every occupant of a building should dispose all of his garbage and rubbish in a clean and sanitary manner. Use and Operation of Plumbing Fixtures. Every occupant of a building should keep plumbing fixtures clean and sanitary and should exercise reasonable care in their use and operation. Motor Vehicles. Not more than one currently unregistered or uninspected motor vehicle, or both, may be parked on any property, and that vehicle may not at any time be in a state of major disassembly or disrepair, nor may it be in the process of being stripped or dismantled. Abandoned Ice Boxes. Abandoned ice boxes, refrigerators, or other large airtight containers may not be stored in a living unit or elsewhere on the property. Housing and Community Development Article, §4-923(b), Annotated Code of Maryland Effective date: November 18, 1977 (4:24 Md. R. 1804) Chapter recodified from COMAR 05.01.09 to COMAR 05.04.02 These regulations prescribe the policies, procedures, and authorizations for making loans for improving migratory labor camps under the Act. The basic objective of the Program is to make plans at a preferred rate of interest to owners of migratory labor camps to finance health and safety improvements to housing facilities for migratory workers. The terms appearing in the Act have the meanings defined in the Act and, in addition, the meanings used in these regulations. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, as amended. “ALTA” means the American Land Title Association. “Applicant” means any individual, partnership, corporation, or other business entity which applies for a loan under the Program. “Approved plan” means a plan which has been approved by the Department. “Assistant Director” means the Assistant Director for Home Improvement Programs, Community Development Administration. “Borrower” means an owner of a migratory labor camp who receives a loan under the Program. “Closing costs” means the total of all settlement, costs and fees and, when applicable, initial payments for taxes, property insurance, title search, percolation tests, or other expense items related to the migratory labor camp property. “Contract” means all agreements and documents between the borrower and any other person or entity for the performance of work to be financed by a loan made by the Program. “Contractor” means any person or entity who contracts with the borrower for the performance of work to be financed by a loan made by the Program. “Department” means the Department of Housing and Community Development. “Director” means the Director of the Community Development Administration. “Loan” means a migratory housing facilities loan. “MAI” means a member of the Appraisal Institute of the American Institute of Real Estate Appraisers. "MDH" means the Maryland Department of Health. “Migratory housing facilities loan” means a loan to a qualified owner of a migratory labor camp made for the purpose of improving the health and safety of migratory worker housing facilities. “Migratory labor camp” means one or more structures, buildings, tents, barracks, trailers, vehicles, mobile homes, converted buildings, and unconventional enclosures of living spaces, together with the land appertaining to it, established, operated, or used as living quarters for four or more migratory workers engaged in agricultural activities, including related food processing. “Migratory worker” means any person from within or outside the State who: Moves seasonally from one place to another for the purpose of employment; Is not a year-round employee; and Occupies living quarters other than his permanent home during the period of this work. “MOSHA” mean Maryland Occupational Safety and Health Administration. “Owner” means any individual, partnership, corporation, or other business entity which owns in fee simple a migratory labor camp located in the State. “Plan” means a proposal which has been approved by MDH and MOSHA describing the structural, mechanical, electrical, plumbing, and other work items necessary for health and safety improvements to a migratory labor camp. “Program” means the Migratory Worker Housing Facilities Program. “Secretary” means the Secretary of Housing and Community Development. “SRA” means a Senior Residential Appraiser of the Society of Real Estate Appraisers. “SREA” means a member of the Society of Real Estate Appraisers. Borrowers shall meet the following requirements, which shall be met jointly and separately if there is more than one applicant: Be an owner as defined in these regulations; If an individual, be a resident of or have a principal place of business in the State, or, if a business entity, be in good standing and be qualified to do business in Maryland; Have been denied a loan, in a comparable amount to that requested from the Program, by a private lending institution currently making similar loans, or else have received a commitment from a private lending institution for less than the amount of funds required to finance the necessary health and safety improvements; Submit a plan; and Have the legal capacity or, if applicable, all necessary legal and corporate authorization to incur the obligations of the loan. If title to the migratory labor camp property to be improved is held by more than one individual, partnership, corporation, or business entity in any form of joint tenancy, each person having an interest in the property shall be deemed to be an applicant for purposes of these regulations. If the applicant for a loan is a business entity, personal guarantees will be required from the principals of the business in accordance with Regulation .06G of this chapter. An applicant may not receive more than $200,000 in total loans from the Program. This limitation shall apply both jointly and separately if there is more than one applicant. Migratory labor camps shall meet the following requirements: Be located within the State; Provide living accommodations for four or more migratory workers engaged in agricultural activities, including related food processing; and Be, in the determination of MDH and MOSHA, in need of health or safety improvements, or both, in conjunction with a plan. All loans shall be made for the terms, and conform to the requirements, set forth below: Interest Rate. The Department shall from time to time and, in accordance with the Act, establish the interest rate to be paid on all loans at a preferred rate. Term. The Department shall establish the term of all loans which: May include a construction period of generally not more than 4 months; and May not exceed 10 years from completion of construction. Loan Amount Restrictions. Restrictions on loan amounts are as follows: The minimum approvable loan amount shall be not less than $2,000; Except as otherwise provided in these regulations, the maximum amount of loans for improvements to any one migratory labor camp may not exceed $75,000; The preceding loan amount restrictions may be varied if, in the sole determination of the Department, the improvements required pursuant to the plan cannot reasonably be financed with the loan amount restrictions; If the plan is a multi-phased plan with respect to improvements to the migratory labor camp, and the owner applies to the Program for more than one loan, the preceding loan amount restrictions shall be applied separately to each loan; and Notwithstanding any other provision of these regulations, the total maximum amount of loans to any one borrower, or for improvements to any one migratory labor camp, may not exceed $200,000. Loan-to-Value Ratio. Notwithstanding the provisions of §C of this regulation, a loan may not exceed an amount which, when added to any outstanding debts secured by or relating to the eligible migratory labor camp property, would equal 67 percent of the appraised value of the property after the proposed improvements are completed. If the total amount of outstanding debt relating to the property exceeds 67 percent of the appraised value, the borrower may pledge other assets of the borrower to satisfy the loan-to-value ratio. If other assets are pledged to secure the loan, any outstanding debts secured by or relating to the pledged assets shall be considered in determining the loan-to-value ratio. Monthly Payment. The borrower shall repay the loan by single monthly payments which shall be applied to expenses, when applicable, interest, and principal, in that order. Late Charge. Late charges, as permitted by law, will be charged. Security for Loans. All loans shall be evidenced by a promissory note and any other documents that the Department may require. All loans shall be secured by a first lien, or in the discretion of the Department a second lien, mortgage, or deed of trust in a form required by the Department, which shall be recorded in the land records of the political subdivision in which the migratory labor camp property is located. Pursuant to §D of this regulation, the Department may require the borrower to provide additional security through an indemnity mortgage or a lien covering other assets of the borrower. If the borrower is a business entity, the principals of the business entity shall guarantee repayment of the loan and the performance of the borrower's obligations under the loan documents. Disbursement. The Department shall disburse loan funds in accordance with a draw schedule approved before or at the loan closing. The draw schedule shall be based upon completion of specified items or a percentage of work. Payment shall be requested by the borrower and approved by the Assistant Director or his designee based on completed work. Change of Ownership or Use. The borrower may not sell, cease to own, assign, transfer, dispose of, lease, refinance, or encumber all or any portion of the migratory labor camp property, or the borrower's interest in the property, during the loan term, without the prior written consent of the Department. The borrower may not cease to use all or any portion of the migratory labor camp property for purposes other than housing facilities for migratory workers during the loan term, or, if the loan is prepaid in full before its maturity, within 5 years of the date of prepayment without the prior written consent of the Department. Prepayment. Borrowers may prepay a loan, in whole or in part, without penalty, at any time during the term of the loan. Assumption. Loans may not be assumed without the prior written consent of the Department. However, an assumption may not be approved unless the proposed borrower qualifies as an eligible applicant in accordance with Regulation .04 of this chapter. Insurance. The borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount not less than the sum of the loan and any prior debts secured by the migratory labor camp property. The insurance policy or policies 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 the loan closing; Name the Department as mortgagee in a standard mortgagee clause attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If the migratory labor camp is located in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, it shall be covered by a flood plain insurance policy in an amount equal to the loan, naming the Department as beneficiary. The policy may not be terminated without prior notification to the Department. Before initiation of construction of the improvements, the borrower shall secure all necessary flood plain permits from the Maryland Department of Natural Resources and the political subdivision in which the migratory labor camp is located. Title Insurance. The borrower shall provide a title insurance policy in standard ALTA form, or any other form approved by the Department naming the Department as an insured mortgagee, and containing only standard exceptions and encumbrances approved in writing by the Department. Appraisals. Before the approval of a loan, the borrower shall submit an appraisal of the migratory labor camp property which, at the discretion of the Department, shall be prepared by either of the following: A certified MAI, SREA, or SRA appraiser; or A person, financial institution, or entity acceptable to the Department with prior experience in appraising real property. The appraisal shall indicate the property's value before and after the proposed improvements and shall be in a form and conducted in a manner acceptable to the Department. If machinery, equipment, or other personal property is also proposed to secure the loan, the borrower shall submit an appraisal of the machinery, equipment, or other property performed by a licensed auctioneer or other person generally engaged in the business of valuating equipment and whose experience and qualifications are acceptable to the Department. Escrow Account. If there is no prior mortgage on the migratory labor camp property requiring the payment of expenses to the mortgagee, the Program mortgage or deed of trust shall require the borrower to make monthly expense payments to the Program in escrow consisting of 1/12 of annual real estate taxes, property insurance premiums, and when appropriate, other items for which payments are required by the Department. Interest on the escrowed expense funds shall be credited to the escrow account at the rates and terms set forth in the documents evidencing and securing the loan. Eligible Costs. The proceeds of a loan may be used to finance the following eligible costs: Construction of necessary improvements; Architectural, planning, technical, or design fees. All closing costs, together with the cost of appraisals, and any other costs incidental to loan approval shall be paid by the borrower. Compliance with Laws. The borrower shall agree to comply with all applicable State and federal laws, orders, ordinances, and regulations, including, by way of example, the laws, orders, ordinances, and regulations relating to equal opportunity. Default. A loan is in default when: Any payment required by the loan documents is 90 days delinquent; There is a default in any other term or condition of any loan document; or As set forth in §T of this regulation, a representation made by the borrower in the application or any document submitted to the Program in connection with the loan is determined to have been untrue. Remedies for default shall include all remedies provided for in the loan documents, in the Act, or by law. In the event of any default by the borrower, the Department may, after notice to the borrower, increase the interest rate of the loan to the prevailing private mortgage rate. Any borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's actions, shall be subject to the criminal penalties set forth in the Act in addition to immediate acceleration of the loan. Loan application shall be made on forms and in a manner prescribed by the Department and shall be submitted to the offices of the Program. The loan application shall include without limitation: A plan which shall be approved by the Department before the loan closing; A rejection letter from a bank or other private lending institution stating the terms and amounts applied for and the reason for rejection, or a letter of commitment from a bank or private lending institution for funding insufficient to finance the total cost of the improvements; An application fee in an amount to be determined by the Department; An appraisal of the migratory labor camp property pursuant to Regulation .06O of this chapter; and Sufficient information and documentation to determine the extent, if any, to which the plan or improvements will change the type of use or increase the intensity of the existing use of the migratory labor camp property. Applicants shall submit any additional documentation required by the Department in order to establish the eligibility and creditworthiness of the applicant. The Department shall issue a letter of commitment to an applicant to evidence the approval of a loan. The Department may not take action on a loan after issuance of a commitment letter until the applicant accepts the terms and conditions of the commitment letter by executing and returning a copy of the letter. The Department shall issue a letter of rejection to an applicant to evidence disapproval of a loan. The rejection letter shall state the reasons for disapproval and shall advise the applicant of his appeal rights. An applicant may withdraw a loan application at any time before loan closing by written notice to the Program. The applicant shall bear any costs incurred for items other than the Program's internal processing, including but not limited to title examination, credit reports, and appraisals. The loan closing shall be scheduled at a time acceptable to the applicant and the Department through an attorney selected by the applicant and approved by the Department. All taxes and assessments against the migratory labor camp property which are due and payable shall be paid at or before the loan closing. All contractors shall: Be licensed by the appropriate authority governing the type of work to be performed and meet all other State and local licensing requirements; Be, in the opinion of the Department, of good reputation, financially sound, and fully qualified to perform the required work, as evidenced by previous professional construction experience; Furnish evidence of the following: Comprehensive public liability insurance coverage protecting the borrower for not less than $100,000 for injuries sustained by any one person, and $300,000 for injuries sustained by two or more persons in any one accident, Property damage liability insurance of not less than $50,000 for each occurrence and $100,000 aggregate in the event of property damage arising out of work performed by the contractor, Workmen's compensation insurance, and With respect to loans of $50,000 or more, a payment and performance bond in an amount satisfactory to the Department and naming the Department and the borrower as dual obligees; Perform all work: In conformance with the contract and all applicable laws, local codes, ordinances, and regulations including, by way of example, those laws, local codes, ordinances and regulations relating to the protection and safety of persons and property, and In a competent, workmanlike manner equal to the standards of the industry; Furnish all labor, materials, and equipment, and obtain and pay for all permits and licenses necessary for execution and completion of the work; Not assign the contract without the prior written consent of the Department; Agree to permit the Department or its designee to examine and inspect the work; Agree to complete all work within the completion date specified in the loan documents; Indemnify and hold the Department harmless from all liability and loss because of injury to or death of any person or damage to any property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractors, or their agents, servants, and employees; Defend all claims and suits involving §A(9) at its sole cost and expense; Use its best efforts to employ contractors which are minority business enterprises; and Meet any other requirements that the Department may reasonably establish. The requirements of §A of this regulation shall also apply to subcontractors except that, with respect to §A(3), subcontractors may be included within the contractor's insurance coverage. General. Construction may not begin before the loan closing. Commencement of work before closing shall constitute an event of default under the loan documents. Except as may be otherwise approved pursuant to these regulations, construction shall be completed within 4 months of the loan closing. Work done, materials supplied, and construction procedures shall comply with the approved plan, the contract, and all applicable laws, local codes, ordinances, and regulations. There shall be no modifications of the contract without the prior written consent of the Department as evidenced by an approved change order executed by the contractor and the borrower and approved by the Department as well as MDH, and MOSHA, as applicable. The Department, through a designated agent, shall be given access to the migratory labor camp property during the normal business hours for the purpose of inspection or for any other lawful purpose. Disbursement. All disbursements of the loan shall be made: In accordance with a draw schedule approved before the loan closing; Only for work completed and in place, as determined by the Department; Only upon receipt of a certification by the borrower and the contractor of the costs for which loan funds are requested; and With respect to loans of less than $50,000, only upon receipt of a waiver of liens from all contractors, subcontractors, and materialmen under the contract for all work performed or materials included in the last previous request for disbursement within 30 days from the date of funding of the previous request for disbursement or before the next request for disbursement, whichever is earlier. The Department may not make any advances. The Department shall issue final payment after: The Department receives a certificate of completion executed by the borrower and the contractor certifying that all work has been completed and paid for in accordance with the contract; The Department makes a final inspection of the work performed and receives and approves the certificate of completion; The Department has verified and reconciled all disbursements and receipts or deposits by the borrower which may be required by the Department; The Department receives a certification by MDH and MOSHA that the improvements have been completed in accordance with the plan; and With respect to loans of less than $50,000 the Department receives final waivers of liens from all contractors, subcontractors, and materialmen under the contract. Any funds remaining in the loan account after final disbursement shall be applied to reduce the principal balance of the loan. Criteria for Appeal. A borrower or applicant may appeal to the Assistant Director from any action taken by the Department through the Program. Notice of Appeal. An appeal shall be initiated by submitting a notice of appeal to the Assistant Director, in writing, within 30 days of the action complained of or the date of the notice of the action complained of, if any, whichever is later. The notice of appeal shall: State the reason for disagreement with the action of the Department; Contain any additional information to be considered in support of the appeal, and a statement of why the information was not furnished with the original application; Attach supporting documents; State whether the borrower or applicant wants to meet with the Assistant Director; Contain the borrower's or applicant's name, address, telephone number, and, if known, the Program file number; Contain an affirmation, under oath, that the facts set forth in the notice of appeal are true and correct. Disposition. If requested, the Assistant Director will meet with the borrower or applicant to resolve the appeal. If a meeting is not requested, the Assistant Director shall decide the appeal based on the information contained in the notice of appeal and supplied to the Assistant Director by the Program staff. The Assistant Director shall issue a written decision within 15 days of receipt of the notice or the date of the meeting, if any, whichever is later. Action by the Director. If a borrower or applicant is dissatisfied with an action taken by the Assistant Director, the borrower or applicant is encouraged to seek a resolution by the Director. Borrowers or applicants may initiate action by requesting a meeting with the Director and the Assistant Director. The request shall be submitted to the Director in writing, and a copy sent to the Assistant Director. The Director shall issue a written disposition as soon as practicable after the meeting with the borrower or applicant. The Director's decision shall state the action complained of, a concise summary of the matters and facts presented at the meeting, and the Director's decision. The Director shall deliver a copy of the decision to the borrower or applicant and the Assistant Director. Appeal to the Secretary. A borrower or applicant may appeal an action of the Director to the Secretary only if the appeal is based on the alleged failure of the Director or Assistant Director, or both, to follow the regulations, rules, guidelines, standards, or loan documents of the Program. There will be no administrative appeal for any action which is not based on the failure to follow the regulations, rules, guidelines, standards, or loan documents. Procedure. The procedure for the taking of an appeal to the Secretary is set forth in COMAR 05.01.01. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal agency in connection with any improvements with respect to which federal assistance is sought necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Act. Housing and Community Development Article, §§4-910 and 4-928, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: June 6, 1983 (10:11 Md. R. 973) Chapter recodified from COMAR 05.01.14 to COMAR 05.04.03 Regulation .05 amended effective January 2, 1994 (20:25 Md. R. 1941); April 5, 1999 (26:7 Md. R. 537) Regulation .07B amended effective January 2, 1994 (20:25 Md. R. 1941) Effective date: Regulations .01—.19 adopted as an emergency provision effective November 20, 1986 (13:26 Md. R. 2796); emergency status expired May 20, 1987; adopted permanently effective July 27, 1987 (14:15 Md. R. 1657) Chapter recodified from COMAR 05.01.21 to COMAR 05.04.04 Regulations .01—.19 repealed effective May 25, 1992 (19:10 Md. R. 929) These regulations prescribe the policies, procedures, and authorizations for making loans to provide indoor plumbing connecting to supply adequate water and sewage disposal systems in residential buildings. The basic objectives of the Program are to: Make loans to or for the benefit of individuals with limited incomes to finance indoor plumbing pipes, equipment, wells, septic tanks, or other on-site sewerage systems, or connection to community water and sewerage systems; and Develop the capacity of political subdivisions to administer the Program. The terms appearing in the Act shall have the meanings defined there and, in addition, the meanings used in these regulations. Terms Defined. “Act” refers to Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, as amended. “Annual income” means total household income from all sources, including wages, investment income, Social Security, retirement, disability, and unemployment benefits less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Borrower” means an applicant who receives a loan under the Program. “Building” means any structure which satisfies the requirements of Regulation .05 of this chapter. “Closing costs” means the total of all settlement costs and fees and, when applicable, initial payment for taxes, property insurance, title examination, or other expense items as determined by the Department. “Deferred payment loan” means a loan which permits the deferral of principal or interest, or both principal and interest. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. “Director” means the Director of Single Housing Programs of the Department. Family of Extremely Low Income. “Family of extremely low income” means one or more individuals residing as a household in a dwelling unit, whose total combined annual income does not exceed the limits established from time to time by the Secretary in accordance with §4-916(b) of the Act, which income limits are less than those established for families of very low income. “Family of extremely low income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with §4-916(b) of the Act; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. Family of Limited Income. “Family of limited income” means one or more individuals residing as a household in a dwelling unit whose total combined annual income does not exceed the limits established from time to time by the Secretary in accordance with §4-915 of the Act. “Family of limited income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with §4-915 of the Act; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. Family of Lower Income. “Family of lower income” means one or more individuals residing as a household in a dwelling unit, whose total combined annual income does not exceed the limits established from time to time by the Secretary in accordance with §4-916(b) of the Act, which income limits are less than those established for families of very low income. “Family of lower income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with §4-916(b) of the Act; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. Family of Very Low Income. “Family of very low income” means one or more individuals residing as a household in a dwelling unit, whose combined total annual income does not exceed the limits established by the Secretary in accordance with §4-916(b) of the Act, which income limits are less than those established for families of lower income. “Family of very low income” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with §4-916(b) of the Act; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. “Level I local administrator” means a political subdivision certified by the Department under Regulation .16B of this chapter. “Level II local administrator” means a political subdivision certified by the Department under Regulation .16C of this chapter. “Loan” means a loan made under the Program. “Local administrator” means a level I or level II local administrator. "MDE" means the Maryland Department of the Environment. “Mobile home” means a structure transportable in one or more sections which is built on a permanent chassis and is designed to be used as a dwelling, with or without a permanent foundation, when connected to the requisite utilities. “Owner-landlord” means an owner of a building, who may or may not occupy the building, some or all of which is used for residential rental purposes. “Owner-occupant” means an owner residing or intending to reside in a building which contains one dwelling unit and no other units, residential or commercial. “Political subdivision” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, and any of the 23 counties in Maryland. “Program” means the Indoor Plumbing Loan Program. “Program Director” means the Assistant Director of Special Loan Programs in the Division of Development Finance of the Department. “Related costs” means costs related to the implementation of a rehabilitation project under the Program such as percolation tests, appraisal fees, engineering fees, permit and permit application fees, and other similar costs approved by the Program. Related costs do not include loan application fees. “Secretary” means the Secretary of Housing and Community Development. “Structurally and mechanically sound building” means a building that does not have physical conditions serious enough to endanger the life, property, or safety of the occupants or the public. A building may be structurally sound and not be in compliance with all applicable codes and standards. “Subcontractor” means an entity authorized by the Department to carry out the duties and responsibilities of a local administrator under Regulation .16D(1) of this chapter and to hold and disburse funds under Regulation .16D(2) of this chapter. Owner-occupants shall meet the following requirements which shall be met jointly and separately by all applicants if there is more than one applicant: Be a family of limited income; Reside, or intend to reside, in the building; Hold title to the building for which the loan is made in fee simple or under a freely transferable ground rent lease; Demonstrate repayment ability, in the estimation of the Department; and Have income at a level that the Secretary has determined renders the applicant unable to afford or secure private financing to rehabilitate the property. Owner-landlords shall meet the following requirements, which shall be met jointly and separately if there is more than one applicant: If a business entity, be in good standing and qualified to do business in Maryland; Hold title to the building in fee simple or under a freely transferable ground rent lease; Have the legal capacity, and all necessary legal and corporate authorizations, to incur the obligations of the loan; Demonstrate credit worthiness and repayment ability in the estimation of the Department; In the estimation of the Department, be unable to afford or secure a loan from a private lending institution to finance the improvements; Agree in writing that all of the dwelling units improved with the loan proceeds shall be occupied by and rented to either: Families of limited income until the later of the following, after completion of the improvements: The end of the loan term; The date on which all principal and interest and other sums due on the loan are fully paid; 15 years; or Such longer period as the Department or the local administrator may require; or Families of lower income until the later of the following, after completion of the improvements: The end of the loan term; The date on which all principal and interest and other sums due on the loan are fully paid; 15 years; or Such longer period as the Department or the local administrator may require; If the number of units improved with the loan proceeds is less than 2/3 of the total number of units, agree in writing to rent at least 2/3 of all units in the building to families of limited income; Agree to abide by all requirements of Titles VI and VII of the Civil Rights Act of 1964, and Title VIII of the Civil Rights Act of 1968; Agree to abide by the provisions of the Governor's Code of Fair Practices, COMAR 01.01.1987.20 and COMAR 01.01.1988.05; Agree to abide by any regulations promulgated by the Department implementing the Governor's Executive Order 01.01.1989.18 requiring recipients of State funds to maintain a workplace free of any drug and alcohol abuse; Provide satisfactory assurances to the Department that in the 12 months preceding application for a Program loan, the borrower did not cause a residential tenant to leave the building except upon good cause; and Agree in writing to assist with relocation of tenants to the extent required by the Department. Both owner-occupants and owner-landlords shall submit to the Department a proposal for the installation of the proposed improvements which complies with the requirements of MDE and other governmental entities with jurisdiction. An applicant who is suspended or debarred from the Department's programs pursuant to any action under COMAR 05.01.05 is not eligible to participate in the Program. If title to the property to be rehabilitated is held by more than one person in any form of joint tenancy, each person having an interest in the property is considered to be an applicant for purposes of these regulations. For the purposes of determining annual income, only the income of persons who permanently reside in the unit shall be used. All buildings shall meet the following requirements: Be located within the State; Be a structurally and mechanically sound building except as permitted under §B of this regulation; Be in need of indoor plumbing pipes, equipment, wells, septic tanks, or other on-site sewerage system, or connection to community water and sewerage systems; Have: No or incomplete indoor plumbing, or An existing, failing septic system; Be owned by an eligible borrower who shall provide assurance of title or evidence of ownership acceptable to the Department; and Contain not more than 20 dwelling units. Buildings which are not structurally and mechanically sound may be eligible buildings if the owner of the building provides a commitment from a public or private lender to finance improvements required to make the building structurally and mechanically sound. A manufactured housing unit is eligible if it is intended for residential use by a single household, and: Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is not independently capable of movement and is installed permanently on an engineered foundation in conformance with COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc. which are incorporated by reference under COMAR 05.02.04; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland; Complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the occupant owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to the number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. Manufactured homes which are taxed as personal property may be eligible for loans in amounts of $5,000 or less. Applications for manufactured homes shall be reviewed and approved by the Department on a case-by-case basis. Condominiums and cooperative units may be eligible buildings and shall be reviewed by the Department on a case-by-case basis. Property being purchased under a land installment contract, or other types of property are not eligible buildings. Proceeds of a loan may finance improvements which are necessary to provide adequate indoor plumbing connecting to adequate water supply and sewage disposal systems which include without limitation: Wells; Septic tanks and drain fields; Piping from the system into the buildings; Connection fees and assessments; Plumbing fixtures and equipment, including fixtures for the handicapped; Additions, modifications, and alterations required to provide adequate private space for toilet and bath facilities; Sand mound systems; Water treatment systems; For owner-occupants only, related costs described in Regulation .03B(27) of this chapter, and other costs or improvements essential to implementing the required system, and consistent with the purposes of the Act as determined by the Department; and Alternative and innovative septic and water systems which comply with the requirements of and are approved by MDE and all governmental entities having jurisdiction over those systems. Proceeds of a loan may not finance any improvements which serve a nonresidential portion of a building. Maximum Loan Amount. The maximum loan amount, when added to any prior indebtedness secured by the building, may not exceed 95 percent of the after-rehabilitation value of the building. 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. 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 may be made to cover extraordinary and unforeseen construction problems if 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(5) of this chapter may be included in loans on owner-occupied dwellings, if the loan does not exceed the limits on the maximum loan amount set forth in §A(1)—(3) of this regulation. Interest Rate. The Department may establish different interest rates for loans serving occupants who are families of: Limited income; Lower income families; and Very low income. The interest rates charged on loans may not be more than private lending rates for comparable loans. Insurance. Hazard Insurance. The owner of the building shall maintain fire and extended coverage insurance at the owner's expense in an amount not less than the sum of the loan and any other indebtedness secured by the building, and the hazard insurance policy shall: Be written by companies authorized to transact business in the State; 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 mortgagee endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If the building is in a 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the: Building 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 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. Except as provided in §§G(4)—(5) of this regulation, loans in excess of $5,000, and 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 building is located. The mortgage or deed of trust may be subordinate to other recorded mortgage liens if 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. A loan to a trust described in 42 U.S.C. §1396P (D)(4) may be secured by a mortgage or deed of trust on real property, or other security device acceptable to the Department. A loan in excess of $5,000 to a borrower in a housing cooperative unit may be secured 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. 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 of this chapter, 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 rental building, except for an owner-occupied building with four or fewer residential units, then the borrower may not sell, cease to own, assign, transfer, mortgage, pledge, encumber, grant a security interest in, or dispose of all or any part of the building or the borrower's interest in the building, or lease the dwelling unit in which the owner-occupant resides, during the loan term, without the prior written consent of the Department. If the loan finances improvements for a residential building with four or fewer units, one of which is occupied by the borrower, then the loan is 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 its 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 in lieu 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 building. In addition to the conditions and requirements of Regulation .07 of this chapter, deferred loans shall meet the requirements in §§B—F of this regulation. Eligibility. The Department may make loans with deferred payments of principal or interest or both principal and interest to: Single family owner-occupants who are families of very low income and sponsors or nonprofit sponsors of buildings occupied entirely by tenants who are families of very low income; or As determined by the Secretary, any category of borrowers necessary to achieve the purposes of the Act. Amount of Deferred Payments. The Department may defer payments of principal or interest, or both principal and interest, to the minimum extent required based on the borrower's capacity to repay. Repayment. The loan documents shall provide for repayment of deferred amounts at the maturity date or at any earlier date established by the Department or the local administrator, or upon any sale or other transfer of the building or any interest in the building other than a residential lease of less than 3 years duration. The Department may, but need not, charge interest on the deferred interest. Forgiveness of Deferred Payments. The Program may forgive deferred payments or portions of deferred payments at any time during the term of the loan if: The borrower is a family of extremely low income; The Secretary determines that the borrower does not have sufficient income to repay at that time, which determination need not be made on a case-by-case basis; and In cases of deferral, upon the transfer of the property for consideration, in the Program's estimation there is not enough equity in the property available for repayment. Limitations. The Department, from time to time, may establish limitations on percentage or amount of funding which may be used for deferred loans. In addition to the conditions and requirements of Regulations .07 and .08 of this chapter, secured loans shall meet requirements in §§B—D of this regulation. Deed of Trust. The deed of trust shall secure repayment of the loan by the granting of a valid lien on the building. Escrow Account. If there is no prior mortgage requiring the payment of expenses to a mortgagee, the borrower may be required to make monthly expense payments, in escrow, to the Department consisting of 1/12 of annual real estate taxes, ground rent, property insurance premiums and, when appropriate, other items for which payments are required by the Department. Interest need not be paid to borrowers on escrowed monies except as required by law. Title Insurance. The Department, in its discretion, may require the borrower to provide a standard American Land Title Association (ALTA) Loan Policy, with the Environmental Endorsement 8.1, or other form of title policy approved by the Department and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Department, evidencing that title to the building on the date of closing is vested in the borrower, and containing only standard exceptions and encumbrances acceptable to the Department and the Office of the Attorney General. Procedure — In General. The Department shall establish application procedures for loan administrators to follow, that will facilitate the application process and best serve the needs of the political subdivisions and the State. These procedures may be amended from time to time and are binding upon all borrowers. Alternative procedures may not be used without the prior approval of the Department. Application Forms. Applications shall be made upon standard forms prescribed by the Department. Application Fee. Upon submission of a loan application, the applicant may be required to pay an application fee in an amount set by the local administrator, subject to approval by the Department. Documentation. The applicant shall submit with the application any documentation that the Department requires, including, but not limited to, any documentation needed to establish the eligibility and credit worthiness of the applicant. Applicants shall submit supporting documentation specified in the checklist attached to the application, which may include any of the following: A copy of the deed to the property; A copy of all existing mortgages or mortgage verification requests, on the form approved by the Department, signed by the applicant for each mortgage secured by the building; A copy of the first page and declarations page of all policies for fire and extended coverage insurance and, if applicable, flood insurance; A copy of the most recent real estate tax bill which sets forth the current assessed value of the building and the property; Verification of the total assets and annual income of each person in the household of an owner-occupant applicant, or, for owner-landlord applicants, a list of all tenants in a building showing household name, address, number of persons in the household, total combined annual household income, and current monthly rent; For the 2 years immediately preceding the application: If self-employed, copies of federal income tax returns, or, if a nonprofit organization, the applicable federal reporting forms; Copies of State income tax returns; or A request signed by the applicant, on the form designated by the Department, for copies of the applicant's State income tax returns; and With the application, a description of the proposed improvements, followed by a contractor's proposal which complies with all applicable MDE and other governmental requirements. In addition, owner-landlord applicants shall submit the following documentation: If applicable, certified copies of the organizational documents of the owner-landlord and a certificate of good standing; Certified financial statements of the applicant and, if applicable, certified financial statements of its principals; 3 years of operating statements for the project; If applicable, resolutions of the board of directors or consents of all of the partners authorizing the application; For projects receiving federal subsidies, copies of all contracts or feasibility analyses prepared by the administering agency, as applicable; Photographs of the building and site; Evidence that the property is a separate subdivided lot and a separate tax lot, if the building has more than four dwelling units; and Evidence of zoning compliance. Initial Eligibility Determination. Each application shall be submitted to the local administrator for an initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible, appropriate verification forms shall be distributed, credit reports shall be obtained, and the applicant may be provided with a letter from the local administrator in the form approved by the Program acknowledging receipt of the application and notifying the applicant of the ongoing review process. If the applicant is ineligible for a loan, the applicant shall be informed in writing of the determination and the reasons for it. Building Evaluation. Each building for which an application is received shall be inspected for the purpose of determining structural and mechanical soundness and evaluating the adequacy of the proposed improvements by: The Department; The local administrator; A nonprofit corporation acceptable to the Program or the local administrator; or A licensed contractor who is acceptable to the local administrator or the Department. The applicant shall be provided with a copy of an analysis of the contractor's proposal submitted as required in Regulation .10D(2)(g) of this chapter, and instructions for obtaining the contractor's proposals to complete the work. Loan Approval. Upon receipt and approval of all acceptable contractor's proposals and all other data the Program considers relevant or necessary, the local administrator originating the loan shall undertake an analysis of each loan as to loan amount, interest rate, repayment provisions, and other loan terms and conditions. After completing the steps described in §C(1) of this regulation, a level I local administrator, or a level II local administrator evaluating a loan for more than $60,000, shall forward the application package and the analysis of the loan to the Department for approval, disapproval, or modification. Approval to make a loan is as follows: Loans in amounts of $60,000 or less may be approved by: The level II local administrator, when the level II local administrator originates the loan; or The Program Director when a level I local administrator or the Department originates a loan; Loans in amounts over $60,000 and up to $250,000 may be approved by the Director; Loans in amounts over $250,000 shall be submitted to the Housing Finance Review Committee in accordance with COMAR 05.01.07; and In an emergency, when urgent action is required, the Secretary may approve loans by written determination without the recommendation of the Housing Finance Review Committee. Before a level II local administrator gives final approval and issues a loan commitment for a loan in the amount of $60,000 or less, the level II local administrator shall contact the Program and receive confirmation that funds for the loan are available. Loan Commitments. Loan commitments shall be made on forms provided by the Program. Loan commitments shall specify a time limit for closing the loan. The time limit may be extended at the discretion of the local administrator with the approval of the Program. If the loan closing does not occur within the time specified, the local administrator shall notify the applicant that the commitment is officially canceled. Rejection. If a loan application is rejected, the Department, or the local administrator, as the case may be, shall notify the applicant in writing. The rejection letter shall state the reason the loan is rejected. Each month, the Program Director shall provide the Housing Finance Review Committee with a report listing all owner-landlord loan applications rejected by the Program during the preceding month. Reconsideration. Applicants who are rejected may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act, State Government Article, Title 10, Annotated Code of Maryland, or COMAR 05.01.01. Withdrawal of Application. An applicant may withdraw a loan application at any time before closing by delivering written notice to the Department or the local administrator originating the loan. The applicant shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals. Withdrawn applications may not be reinstated. A new application is required. Cancellation of Application. The Program or the local administrator may cancel an application at any time during processing if the applicant fails to provide any information requested. Notification of the cancellation of an application shall be in writing. A canceled application may be reinstated upon the applicant's written request within 60 days following the date of the cancellation. After that time, a new application, together with supporting documents, may be required. Time and Place. The loan closing shall be scheduled at a time and place mutually acceptable to the applicant and the local administrator, through a closing officer serving the applicant's area and otherwise acceptable to the local administrator. Loan Documents. Loan document forms shall be provided by the Program and may not be altered by the local administrator. Loan documents shall be executed on behalf of the Department by the officer or employee authorized to do so by the Department. Charges and Fees. The Department or the local administrator shall charge and collect from the borrower reasonable and customary amounts acceptable to the Department for the following items: Credit reports; Appraisal fees, if applicable; Recording fees, taxes, and charges, if applicable; Required survey charges, if applicable; The cost of title examination and title insurance premiums, if required; Administrative fees; The cost of property and judgment reports; Inspection fees; and Other reasonable and customary charges or fees authorized by the Department. Points may not be charged to the applicant on any loan under the Program. Mortgageable Items. Program charges, closing costs, and related costs may be mortgageable items for owner-occupants or for nonprofit sponsors. Sponsors that are not nonprofit organizations are required to pay for closing costs, program charges, and related costs. Taxes and Assessments. Taxes and assessments against the property which are due and payable shall be paid at or before closing. General Requirements. Contractors and subcontractors: Shall be licensed by the State, the local political subdivision, or the Maryland Home Improvement Commission, as applicable, to do the work required under the contract; Shall be qualified to do business in the State of Maryland; Shall be able to demonstrate to the satisfaction of the Department the ability to complete the rehabilitation work, which evidence may include previous professional rehabilitation experience; May not be suspended or debarred from the Department's programs pursuant to any action under COMAR 05.01.05; Shall agree in the contract to: Perform all work: In conformance with the contract and all applicable laws, local codes, and Departmental rehabilitation standards, whether or not covered by the work write-up and drawings for the work, and In a competent, workmanlike manner, equal to the standards of the industry; Comply with all applicable laws, ordinances, and regulations relating to the protection and safety of persons or property; Furnish all labor, materials, and equipment, and obtain all licenses, permits, insurance coverage, and workers' compensation as may be required to complete the rehabilitation; Not assign the contract without prior written consent of the owner and approval of the local administrator; In addition to all remedies and guarantees provided by law, and at the contractor's expense, make all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as shall become necessary by reason of faulty workmanship or material, which appear within: 1 year from the date the notice of completion is filed, A longer period if any longer guarantee period is specified for any particular materials or workmanship under the plans and specifications, under a subcontract, in connection with any manufactured unit which is installed in the structure, or A longer period, if Maryland law so provides; Complete all specifications of the proposal within the completion date as specified in the contract; Shall indemnify and hold the Department harmless from all liability and loss because of injury to or death of any person or damage to any property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractors, or their agents, servants, and employees, and defend all suits or claims involving the above at its sole cost and expense. Minority Contractors. The Department encourages the use of minority contractors for all projects in all jurisdictions, and requires compliance with the Department's Minority Business Participation Plan for all projects with rehabilitation contract costs of $200,000 or more. Copies of the Department's plan shall be made available to sponsors and contractors. Identity of Interest. Owner-landlords may act as general contractors only with the prior written approval of the local administrator. Application forms shall be provided upon request and shall be submitted and approved before submission of the proposal. Approval is conditioned on an assurance of completion acceptable to the Department. An owner-occupant may not act as general contractor. Assurance of Completion. The Department or the local administrator, in its sole discretion, may require: 100 percent performance and 100 percent payment bonds; A letter of credit in the amount of 25 percent of the rehabilitation contract cost, and an assurance of completion agreement; or Other assurances of completion acceptable to the Department. In order to be binding, all communications between the contractor and the owner concerning the content or performance of the contract shall be in writing. Contractors performing work financed by a Program loan: May not be on the unacceptable risk determination list of the Department of Housing and Urban Development or the United States Department of Agriculture Rural Development; May not be disbarred or suspended pursuant to COMAR 05.01.05; and Shall have performed all previous work financed by the Program in a manner satisfactory to the Director. Code Compliance. The Department or local administrator's preparation or approval of work write-ups, evaluation of the property, and review and approval of plans and specifications are for the benefit of the Department only. These actions are not intended to substitute for or ensure compliance with appropriate State and local building codes. Compliance with applicable codes and obtaining required permits and licenses are the responsibility of the borrower and contractor. Permits. If required by MDE or by local law, building or rehabilitation permits shall be obtained and posted at the project before the beginning of construction. Contract Documents. Work done, materials supplied, and construction procedures employed shall comply with all contract documents and applicable codes and standards, including those set forth in these regulations and any others established by the Department or MDE. Contract documents include, without limitation: Rehabilitation loan agreement; Change orders; Certification of structural and mechanical soundness; Instructions to bidders; Specifications; Drawings, if applicable; and Contractor's proposal. There shall be no modification of any contract document without the prior written consent of the Department or the local administrator, as evidenced by an approved change order executed by the: Contractor; Owner; and Local administrator. Borrower and Contractor. The borrower and the contractor shall cooperate to facilitate timely performance of the rehabilitation work and selection of materials. The borrower shall provide the contractor access to the property during normal business hours, and shall permit the contractor to use existing utilities for the execution and completion of work, at no cost to the contractor. The borrower is responsible for removing and replacing rugs, furnishings, and other personal property, unless otherwise provided in the contract documents. The borrower and the contractor shall protect and maintain the property and improvements in accordance with the contract documents. The borrower and the contractor shall each, in writing, hold and save the Department harmless from any loss, claim, cost, or damage of every kind, nature, and description arising from or related to the contract documents. Communications relating to content or performance of the contract shall be in writing, and copies sent to the Program. Inspections. The local administrator shall conduct inspections to determine the required scope of work, verify payments, mediate construction problems and disputes, and facilitate arbitration procedures. Construction Disputes. If disputes between the contractor and borrower occur, the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General. Termination of Contracts. Contracts may be terminated for cause in accordance with applicable provisions of the loan documents and contract documents. Monitoring. The local administrator shall monitor loans and disbursement of loan funds during rehabilitation to assist borrowers and to assure that loan funds are properly used. Based on Program guidelines, the local administrator shall determine the frequency and level of inspections during rehabilitation, taking into consideration the: Capability of the borrower; Demonstrated experience and reliability of the contractor; Amount of the loan; Availability of the local technical assistance; and Other factors considered relevant by the Department. The local administrator may charge borrowers a fee for inspections during rehabilitation, as approved by the Department. Payments Generally. Loan funds shall be disbursed in full at the closing of the loan to an account held on behalf of the borrower by either the political subdivision that is the local administrator for the loan or the subcontractor. The loan funds shall be held in an account established under §C of this regulation. The local administrator or the subcontractor shall disburse the loan proceeds in accordance with the following requirements: Loan funds may not be disbursed if payments of interest or escrows required by the loan documents are in arrears; Payments of draws shall be by joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Senior Manager; and Except as provided in §D of this regulation, payments shall be made only for work completed, and payments may not be made for material delivered to the site but not installed in the project. Loan Accounts. Loan funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or the subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney's trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with the statements required under §C(2) of this regulation; and Any other requirements established by the Department; or Another type of account approved by the Department. The Department may require the local administrator or the subcontractor to provide periodic statements to the Department of all loan funds in an account. If the statements do not correspond with the Department's records of loan funds in the account, the local administrator or subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any loan account established under this regulation. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or for valid purchase requisitions which do not exceed 10 percent of the contract costs. Progress Payments. Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the local administrator when the entire cost of the project is $60,000 or less, or otherwise by the Department. At a minimum, however, the local administrator shall verify completion of the work before disbursing the final payment, as described in §F of this regulation. If a borrower's request for payment is refused, the local administrator shall notify the borrower. The determination of the local administrator as to percentage of work completed is final. Final Payment. Final payment shall be made as set forth in §F(2)—(5) of this regulation. A borrower shall submit to the local administrator a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents. Final payment shall be processed upon final inspection and receipt and approval of the certificate of completion. If, in the opinion of the local administrator, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, then the local administrator may follow the procedure described below: The local administrator may require the borrower to explain in writing within 10 days why the local administrator should not make direct payment to the contractor; If the borrower responds within the 10-day period and requests a meeting, the local administrator shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment; The local administrator, in its discretion, may then either approve or disapprove direct payment to the contractor or the borrower. If the local administrator receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, and all loan funds have not yet been disbursed, the local administrator shall retain an amount equal to the lesser of all funds not yet disbursed and the amount sufficient to satisfy the claims until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor promptly shall pay or bond any liens established. Retainage. The local administrator shall retain until final payment 10 percent of the contract proposal costs for all projects for which the borrower is responsible for interim project inspections. The local administrator, at the Administrator's discretion, may elect to retain until final payment 10 percent of the contract proposal costs for any other project, taking into consideration: The type of project; The contractor's experience; and Other factors the Program considers relevant. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the local administrator. Payment for Additional Work. Payment for any additional cost to complete work not included in the approved contract proposal is the obligation of the borrower. A borrower may apply to the local administrator for a loan increase to cover some or all of the increased costs. Any loan increase is subject to approval or disapproval in accordance with the provisions of these regulations. The Department has no obligation to pay for increased costs. Construction Disputes. The local administrator and the Department shall coordinate with the borrower and the contractor to resolve any dispute concerning workmanship, the quality of materials, damaged property, the completion schedule, and other matters pertinent to the contract documents. The local administrator and the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the State Office of the Attorney General, if the dispute is submitted to their arbitration. Termination of Contracts. Contracts may be terminated for cause in accordance with the loan documents, contract documents, and Program policies and procedures. Closeout Procedures. After final payment or payout is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements. A copy of the closeout statement shall be forwarded to the Program and the servicer. General. The Department recognizes that the most effective housing programs of this kind are those administered at the local level. Therefore, each political subdivision is encouraged and expected to develop the capacity to originate and administer Program loans. While the Department has the authority to originate and administer loans, the Department does not plan to operate a program for a political subdivision. The Department reserves the right, however, to originate or administer Program loans at its discretion. Certification of Level I Local Administrators. The Department may certify a political subdivision to originate and administer loans when the political subdivision meets the following minimum criteria to the satisfaction of the Department: The political subdivision shall be able to provide staff to perform adequately the functions of the following positions: A rehabilitation director, experienced in operating a rehabilitation program, supervising employees, and dealing with the public; A building inspector, experienced in residential rehabilitation, cost estimation, writing specifications, blueprint reading, and residential inspections, and trained to understand and apply the appropriate codes and rehabilitation standards; A loan underwriter, experienced in mortgage lending and financial processing of loans; and Clerical and administrative staff trained to ensure prompt and efficient processing of applications, draw schedules, and other required items; The rehabilitation staff of the political subdivision shall be capable of: Determining local rehabilitation needs evidenced by completion of a consolidated plan, a local comprehensive plan, or a local housing plan; Establishing a rehabilitation program, evidenced by prior experience in the development and operation of a rehabilitation program; Evaluating loan applications; and Monitoring both the loans and the work done under those loans; The political subdivision shall execute and comply with the terms of an agreement required by the Department. Certification of Level II Local Administrators. The Department may certify a political subdivision to originate and administer loans in any amount, as well as approve loans in the amount of $60,000 or less, when the: Political subdivision meets the criteria outlined in §B of this regulation to the Department's satisfaction; and The Department determines that the rehabilitation staff of the political subdivision is capable of: Evaluating, recommending, approving, or rejecting loans; Scheduling and executing loan closings; Monitoring construction activities; Closing out loan accounts; and Providing financial information to loan servicers and the Department. Subcontracting Program Administration. A political subdivision may subcontract its duties and responsibilities as a local administrator, under this chapter, except as provided in §D(2) and (3) of this regulation, with the approval of the Department. The duties described in §§B and C of this regulation may be carried out by staff of the local administrator or its subcontractor. A political subdivision may not subcontract the holding and disbursement of loan funds described in Regulation .15B and K of this chapter, except to a subcontractor which meets the following criteria to the satisfaction of the Department: The subcontractor meets the criteria of §§B and C of this regulation; Any employee of the subcontractor with access to the loan funds shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The subcontractor provides the local administrator and the Department with periodic statements of: All loan funds held and disbursed by the subcontractor under Regulation .15C(2) of this chapter; and The balance of funds on hand; The subcontractor provides the local administrator and the Department with an annual audit conducted by an independent certified public accountant and prepared in accordance with generally accepted auditing standards; and The subcontractor complies with any other requirements established by the Department. Regardless of any subcontracting, the Department shall continue to hold the political subdivision directly responsible for fulfilling all of its duties and responsibilities as a local administrator. Revocation of Certification. The Department reserves the right and expects to monitor periodically the loan administration of certified local administrators, and may revoke certification upon determination that the local administrator is administering the loans in a manner inconsistent with the intent of the Program. Special Requirements for Local Administrators and Their Subcontractors. Local administrators and their subcontractors shall maintain financial records of loan disbursements for at least 3 years, and shall make them available for review by the Department at all reasonable times and as set forth in Regulation .21 of this chapter. A noncomplying loan approved by a level II local administrator shall either be amended, with the borrower's concurrence, to comply with the Program's requirements, or purchased from the Department by the political subdivision. Periodically, at the request of the Department, each local administrator shall agree in writing to administer the Program in conformance with these regulations and with any other procedures prescribed by the Department. Local Administration Fee. The Department may, at its sole discretion, pay a local administrator an annual fee for administering loans made under the Program. Department Authority. When the Department, in its sole discretion, administers a loan, the Department has the authority that a local administrator would have under these regulations, in addition to its authority as the Department. Owner-Occupants. At initial occupancy, each owner-occupant shall submit to the Department a signed certificate of annual income for each member of the household 18 years old or older, along with verification documentation acceptable to the Department. After initial occupancy, the Department may require each owner-occupant to periodically submit to the Department a signed certificate of annual income for each member of the household 18 years old or older, along with verification documentation acceptable to the Department. Owner-Landlords. Before initial occupancy, owner-landlords shall obtain, from all those who will occupy a dwelling unit, a completed and signed income certification form. Borrowers shall certify to the Department at initial closing and on the schedule described below that each household residing in a building unit has an annual income that does not exceed the then current income limits. The certification of the borrower shall show the current rent being charged for each unit. The borrower shall retain records documenting the information in the initial and annual income certifications for 3 years. The Department reserves the right to inspect income certification records held by the borrower at any time. After initial occupancy, the Department may require each owner-landlord to periodically submit to the Department a signed certificate that each household residing in a building unit has an annual income that does not exceed the then current income limits, along with verification documentation acceptable to the Department. A borrower, contractor, local administrator, or subcontractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any borrower, contractor, local administrator, or subcontractor in the connection with any property financed or assisted under the Program. Each borrower, contractor, local administrator, and subcontractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. It is the intent of the Department that Program funds be distributed Statewide. Monies appropriated to the Program shall be made available Statewide on a first-come, first-served basis. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records in §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Combining with Other Loans and Grants. Program loans may be made in conjunction with other federal or State loan or grant programs, if the requirements of the Act and these regulations are met. The Program shall be administered to the extent possible to ensure maximum use of available federal funds. Program Guidelines. The Department may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of loans or to the Program. Copies of these guidelines shall be available for examination at the offices of any local administrator and at the Department's principal office. The Department, upon request, shall provide copies to the public for a reasonable charge. Fees. The Department may charge commitment fees, application fees, closing fees, or other fees, charges, or penalties to applicants, borrowers, or other individuals or entities that participate in the Program. The Department may restrict the fees and charges that servicers, local administrators, or other Program participants obtain from borrowers or applicants. Delegation. The Secretary may delegate to the Director, the Program Director, or to any other official or employee of the Department the authority to execute or approve any program documents or loan documents, including loan commitments and agreements with local administrators. In addition, through the agreement with the local administrator, specific staff members for the local administrator may be authorized by the Department to execute loan documents on behalf of the Department. False Statements. A borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department or the local administrator originating the loan, is subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-933, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs used in connection with a loan necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §§4-910 and 4-927, Annotated Code of Maryland Effective date: Regulations .01—.15 adopted as an emergency provision effective August 28, 1986 (13:20 Md. R. 2193); emergency status extended at 14:2 Md. R. 123; emergency status expired March 1, 1987 Regulations .01—.15 adopted effective March 1, 1987 (14:4 Md. R. 413) Chapter recodified from COMAR 05.01.22 to COMAR 05.04.05 Regulations .02—.06 amended effective April 12, 1993 (20:7 Md. R. 639) Regulation .03B amended effective February 22, 1999 (26:4 Md. R. 272); November 29, 1999 (26:24 Md. R. 1855) Regulation .04A amended effective September 25, 1995 (22:19 Md. R. 1471) Regulations .07—.15 repealed and Regulations .07—.22 adopted effective April 12, 1993 (20:7 Md. R. 639) Regulation .09D amended effective February 22, 1999 (26:4 Md. R. 272); November 29, 1999 (26:24 Md. R. 1855) Regulation .11C amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .15 amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .15E amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .16C amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .16D amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .18A amended effective February 22, 1999 (26:4 Md. R. 272) Chapter revised effective July 12, 2010 (37:14 Md. R. 938) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) This chapter describes the policies and procedures for making State-funded loans and grants to finance lead hazard reduction activities in residential buildings and child care centers. The regulations set forth in COMAR 05.04.13 describe the policies and procedures for lead hazard related grants and loans to be funded through a federal grant to the Department from the United States Department of Housing and Urban Development. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 7, Annotated Code of Maryland. “Annual income” means total household income from all sources for persons who permanently reside in the unit, including wages, investment income, Social Security, retirement, disability, and unemployment benefits, less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Applicant” means a person or entity who applies for a loan or grant under the Program. “Borrower” means an owner who receives a loan under the Program. “Building” means a structure which satisfies the requirements of Regulation .04 of this chapter. “Child care center” has the meaning stated in Family Law Article, §5-570(c), Annotated Code of Maryland, and is licensed to operate as a child care center by the Department of Human Services. “Closing costs” means the total of all settlement costs and fees and, when applicable, initial payments for taxes, property insurance, title examination, or other expense items as determined by the Department. “Deferred payment loan” means a loan described in Regulation .07 of this chapter. “Department” means the Department of Housing and Community Development, a principal department of the State. “Director” means the Director of Single Family Housing Programs of the Department. “Elevated blood lead” means a quantity of lead in whole venous blood, expressed in micrograms per deciliter (µg/dl), that exceeds a threshold level which is specified by the Program and conforms with guidelines of the Centers for Disease Control. “Family of limited income” means one or more persons residing as a household in a dwelling unit whose total combined annual income does not exceed income limits established from time to time by the Secretary, in accordance with Housing and Community Development Article, §4-707, Annotated Code of Maryland. “Grant” means a grant made under the Program. “Grantee” means the recipient of a grant under the Program. “Lead-affected household” means a household that includes a child or pregnant woman who has been exposed to hazardous levels of lead, as shown by elevated blood lead levels or other medical evidence acceptable to the Department, or families at risk of lead poisoning. “Lead hazard reduction activity” means an activity described in Regulation .05A of this chapter. “Lead Poisoning Prevention Program” means the Program set forth in Environment Article, §§6-801—6-852, Annotated Code of Maryland. “Level I local administrator” means a political subdivision certified by the Department under Regulation .16B of this chapter. “Level II local administrator” means a political subdivision certified by the Department under Regulation .16C of this chapter. “Loan” means a loan made under the Program. “Local administrator” means a level I or level II local administrator. "MDE" means the Maryland Department of the Environment, a principal department of the State. “Owner-landlord” means an owner who leases all or a portion of a building, whether or not the owner resides in a dwelling unit located in the building. “Owner-occupant” means an owner who resides or intends to reside in a building which contains one dwelling unit. “Political subdivision” means: A municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution; The Mayor and City Council of Baltimore; and Any of the 23 counties in Maryland. “Program” means the Lead Hazard Reduction Grant and Loan Program described in this chapter. “Program Director” means the Assistant Director of Special Loan Programs in the Division of Development Finance of the Department. “Secretary” means the Secretary of Housing and Community Development. “Subcontractor” means an entity authorized by the Department to carry out the duties and responsibilities of a local administrator under Regulation .16D(1) of this chapter and to hold and disburse funds under Regulation .16D(2) of this chapter. “Target area” means an area determined by the Secretary to be an area with a concentration of families of limited income and either: Children who have been diagnosed with elevated blood lead; or Residential property constructed before 1950. Requirements for Loans and Grants. In order to be eligible for a loan or grant, an applicant shall meet the following requirements: Hold title to the property in fee simple or under a perpetually renewable lease; If an owner-occupant, reside, or intend to reside, in the building where the lead hazard reduction activity will take place; If an owner-landlord, meet the following requirements, which shall be met individually and together by all applicants if there is more than one applicant: If the business entity, be in good standing and qualified to do business in Maryland, Have the legal capacity, and all necessary legal and corporate authorizations, to incur the obligations of the loan or grant, Agree to abide by the nondiscrimination and alcohol-free and drug-free workplace requirements described in Regulation .18 of this chapter, Provide satisfactory assurance that, during the 12 months before making application for a loan or grant under this chapter, the borrower did not cause a residential tenant to leave the building to be abated, except upon good cause, and Agree in writing to assist with the relocation of tenants to the extent required by the Department; and Not have been suspended or debarred from the Department's programs under any action under COMAR 05.01.05. Requirements for Loans. In order to be eligible for a loan, an applicant shall: Meet the requirements of §A of this regulation; and Demonstrate creditworthiness and repayment ability to the satisfaction of the Department. If the loan is required to be secured, then all persons or entities having an ownership interest in the property shall be willing to execute documents evidencing a security interest in the property. A building shall meet the following requirements: Be located within the State; Be one of the following: Structurally and mechanically sound such that there are no physical conditions that either endanger the life, property, safety, or welfare of the occupants or the public, or undermine the effectiveness of the lead hazard reduction work, or Property for which the borrower has obtained financing for rehabilitation work to make the building structurally and mechanically sound, and for which the rehabilitation work will take place before or in conjunction with the lead hazard reduction activity; Be in need of lead hazard reduction activity as demonstrated by meeting the following criteria: Has chipping, peeling, flaking, or deteriorated lead paint on interior or exterior surface, and Has tested positive for lead paint or dust at levels determined to be hazardous under MDE regulations; Be owned by an eligible borrower who shall provide evidence of ownership acceptable to the Department; Meet one of the following criteria: Contain one or more dwelling units, Provide congregate or group housing or temporary shelters, or Provide a child care center in the portion of the building to be assisted by the loan; and If a rental property, be registered in accordance with the Lead Poisoning Prevention Program defined in Regulation .02B of this chapter and be current for all applicable fees. Condominiums and cooperatives may be eligible buildings and shall be reviewed by the Department on a case-by-case basis. Manufactured housing and mobile homes are not eligible buildings. The following lead hazard reduction activities may be financed by a Program grant or loan: Window replacement, which may include new wells, sills, and frames; Lead hazard treatment for existing windows, such as installation of new guides, guides and channels, and new well aluminum coil stock; Wall encapsulation or enclosure; Encapsulation or enclosure of lead-painted floors, stair risers, and treads; Treatment of floors and stairs to provide a smooth, clean surface that can easily be cleaned; Stabilization, repair, encapsulation, or enclosure of deteriorated or damaged lead-painted surfaces, whether interior or exterior; Repainting of all surfaces; Treatment of doors and door frames; Cleaning and HEPA vacuuming in accordance with MDE regulations; Post-treatment cleanup; Post-treatment clearance testing; Any other activity required to meet the risk reduction standards set forth in Environment Article, §6-815, or the modified risk reduction standards set forth in Environment Article, §6-819, Annotated Code of Maryland, and any regulations promulgated by MDE in connection with those provisions; Activities designed to test innovative or unproven methods of lead hazard reduction, as approved by MDE and the Program for the particular project; and Any other lead hazard reduction activity, including full abatement, relocation, or other activity authorized by the Act and approved by the Program. Work Plan. A borrower and grantee shall submit to the Department a work plan that: Describes the lead hazard reduction activity or activities to be undertaken; and Meets the other requirements of this regulation. Scope of Work. The work plan shall address all interior and exterior flaking, chipping, or peeling lead paint, whether or not the cost is financed by the Program loan or grant. If a project involves window replacement, the project shall cover window replacement for all windows and window components that have friction surfaces containing lead paint, whether or not the total cost is to be financed by the Program loan or grant. The Program may require a risk assessment or lead paint survey to determine all lead hazards present in a project. Additional Costs. For an owner-occupant borrower who is a family of limited income, the following additional costs may be financed: Closing costs described in Regulation .02B of this chapter; Charges and fees described in Regulation .12C of this chapter; and The cost of pre-treatment and post-treatment lead testing performed by parties who are accredited and trained as required by MDE under COMAR 26.16.01. For other owner-occupants and for nonprofit sponsors, the cost described in §D(1) of this regulation may be financed only if the borrower is receiving an amortizing loan. Lead hazard reduction activities shall be undertaken in accordance with the regulations, requirements, and procedures of: MDE, as set forth in COMAR 26.16.01, 26.16.02, 26.16.03, and 26.02.07; and The local jurisdiction. Inspections and Testing. The borrower shall fully cooperate in providing access to the property for inspections and for lead testing. Code Enforcement. Any actions taken by the Department or the local administrator to prepare or review work proposals, evaluate the property, or review and approve plans, are to ensure the Department and the local administrator of the adequacy of the proposed work. These actions are not intended to substitute for or ensure compliance with appropriate State and local building and housing codes. Compliance with applicable codes and obtaining required permits and licenses are the responsibility of the grantee or borrower, and the contractor. Interest Rate. The interest rate to be paid on each loan may not be more than private lending rates for comparable loans. Interest rates and repayment terms for each loan shall be set by the Department or the local administrator, as applicable, based upon the owner's ability to pay, in accordance with underwriting criteria set by the Department. Maximum Loan Amount. Except for deferred payment loans in Regulation .07 of this chapter, loans for residential buildings and child care centers may not exceed an amount which, when added to any prior debts secured by the property, would equal 100 percent of the market value of the building and property after rehabilitation, in the estimation of the Department or the local administrator, as applicable. Term. The term of a loan may not exceed 30 years from the date of completion of the lead hazard reduction work and shall be based upon the amount of the loan, expected economic life of the rehabilitated building, and the borrower's ability to repay. Periodic Payment. Except for deferred payment loans described in Regulation .07 of this chapter, loans shall be repaid on a periodic basis, with payments applied first to expenses when applicable, then to interest, and then to principal. Late Charges. Late charges may be imposed as permitted by law. Insurance. Hazard Insurance. The owner of the building shall maintain fire and extended coverage insurance at the owner's expense in an amount not less than the sum of the loan and any other indebtedness secured by the building, up to the value of the improvements. The hazard insurance policy shall: Be written by companies authorized to transact business in the State; Be in force on or before the date of the loan closing; Name the Department as insured and as loss payee as its interest may appear in a standard mortgagee endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If a building is in a 100-year flood plain, as designated by the Federal Emergency Management Agency: The building shall be covered by a flood insurance policy, naming the Department as beneficiary, in an amount not less than the sum of the loan and any other indebtedness secured by the building; and The flood insurance policy may not be terminated without the Department's prior written consent. Appraisals. At the discretion of the Program Director or the local administrator, a borrower 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. Loan Administration Fee. The Department or the local administrator may charge a loan administration fee in an amount acceptable to the Department. Change of Ownership. A borrower may not sell, cease to own, assign, transfer, dispose of, or lease all or any part of the property during the loan term, without the prior written consent of the Department, except as permitted by federal law. Default. Remedies upon loan default shall be exercised in the discretion of the Department and may be one or more of the remedies provided in the loan documents or by law, such as: Adjustments to the interest rate of the loan upward or downward; Conversion of a deferred payment loan to a loan that suspends terms of deferral and requires periodic payments; Suspension or debarment from the Department's programs; Foreclosure; Accepting a deed instead of foreclosure; Appointment of a receiver; Modification of loan terms to facilitate repayment; and Other legal action which protects the Department's interest. Deferral. In order to make a loan affordable, the Program may approve deferral of principal and interest payments for a period of time or until the transfer of the property or an interest in the property. Eligibility for a Deferred Payment Loan. The applicant shall submit evidence satisfactory to the Program that the project requires terms of deferral under the Program underwriting criteria. Security for a Deferred Payment Loan. The amount of the loan may not exceed the value of the property, less the amount of mortgage debt on the property, except that the Program may approve a higher loan-to-value ratio for owner-occupied property housing a lead-affected household. The loan shall be secured in accordance with the requirements set forth in Regulation .08 of this chapter. Maximum Loan Amount for a Deferred Payment Loan. A sponsor may not receive commitments for more than $250,000 during a fiscal year for grants and deferred payment loans combined. This limit is reduced to $75,000 for child care centers. The sponsor limit applies to the sponsor and all related corporations, partnerships, and other business entities. Forgiveness of Deferred Payment Loans. The Program may forgive a deferred payment loan at the time of transfer, to the extent that the loan exceeds equity in the property. The Program may forgive a deferred payment loan after 20 years. Security for Loans. Amortizing loans of $5,000 or less shall be evidenced by a promissory note and other documents as may be required by the Department. All deferred payment loans and all amortizing loans in excess of $5,000 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 building is located. 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. The lien of the mortgage or deed of trust: May be subordinate to other liens or recorded mortgage liens if superior mortgagees provide any consents required under the superior mortgage loan documents or by the Program; and May not be subordinate to a tax lien. Escrow Account. For an amortizing loan secured by a deed of trust, if there is no prior mortgage requiring the payment of expenses to a mortgagee, the Department may require the borrower to make monthly expense payments, in escrow, to the Department consisting of 1/12 of annual real estate taxes, ground rent, property insurance premiums, and, when appropriate, other items for which payments are required by the Department. Interest is not paid to borrowers on escrowed amounts except to the extent required by law. Title Insurance. The Department, in its discretion, may require the borrower to provide a standard American Land Title Association (ALTA) Loan policy, with the Environmental Endorsement 8.1, or other form of title policy approved by the Department and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Department, evidencing that title to the building on the date of closing is vested in the borrower, and containing only standard exceptions and encumbrances acceptable to the Department and the Office of the Attorney General. Requirements for Grants. In order to be eligible for a grant, the following requirements shall be met: A grantee shall meet the requirements of Regulation .03A of this chapter; The property shall be located in a target area as defined in Regulation .02B of this chapter, or the lead hazard reduction activity that the applicant proposes to use is one that the Program recognizes as testing an innovative or unproven method of lead hazard reduction; and A grantee shall provide evidence satisfactory to the Program to show that either: Based on Program underwriting: For an owner-occupant, there is insufficient household income to make loan payments; or For an owner-landlord, there is insufficient income from the property to make loan payments; or The property does not have sufficient value to secure other financing. Matching Funds Requirement. An owner-landlord shall demonstrate that 20 percent of the funds for the project come from another source. If the owner-landlord is a nonprofit organization, the percentage of matching funds required is 10 percent rather than 20 percent. An owner-occupant shall demonstrate that 10 percent of the funds for the project come from another source, unless the owner's household is a family of limited income. Maximum Grant Amount. A grant for a residential building may not exceed $25,000 per dwelling unit. A grant for a child care center that is not located in the operator's single family residence may not exceed $25,000. A sponsor may not receive commitments for more than $250,000 per fiscal year in grants and forgiven loans combined. The sponsor limit applies to the sponsor and all related corporations, partnerships, and other business entities. The Director may, in the Director's discretion, approve increases in the maximum grant amount to cover exceptional circumstances in an amount determined by the Director to be reasonable. Insurance. An applicant shall follow the insurance requirements outlined in Regulation .06F of this chapter, except that insurance policies are not required to name the Department as mortgagee or loss payee. The required insurance shall be in force at the time the grant is closed. Disbursement. Disbursement shall be made periodically based upon requests for disbursement submitted by the grantee in a form satisfactory to the Department. Grant Agreement. The Department shall enter into a grant agreement with each grantee. The Department may establish other terms and conditions in the grant agreement, and any other documents related to the grant, which the Department considers reasonable and necessary to accomplish the objectives of the Program or to ensure compliance with all federal, State, and local laws, ordinances, and regulations, and departmental programs and policies. Application Procedures In General. The Department shall establish application procedures for local administrators to follow. These procedures may be amended from time to time and shall be binding on all applicants. Alternative procedures may not be used without the prior approval of the Department. Application Forms. All loan and grant applications shall be made upon standard forms described by the Department. Application Fee. Upon submission of a loan or grant application, the applicant may be required to pay an application fee in an amount set by the local administrator, subject to approval by the Department. Documentation. The applicant shall submit with the application any documentation that the Department requires. The applicant ;may submit supporting documentation specified in the checklist attached to the application, including but not limited to, the following: A copy of the deed to the property; A copy of the first page and declarations page of all policies for fire and extended coverage insurance and, if applicable, flood insurance; A copy of the most recent real estate tax bill which sets forth the current assessed value of the building and the property; A copy of lead-testing results and any inspection reports for the property; Contractor's proposal outlining the cost and proposed lead hazard reduction activity to achieve compliance with MDE regulations; and Evidence that the property is registered as required under the Lead Poisoning Prevention Program. A loan applicant shall submit the following additional documentation: Any documentation required by the Department to establish the eligibility and creditworthiness of the applicant; For the 1 year immediately preceding the application: Copies of federal income tax returns; or Sufficient documentation to verify income as determined by the Program. In addition, an owner-landlord applicant shall submit the following documentation: If applicable, certified copies of the organizational documents of the owner-landlord and a certificate of good standing; If applicable, resolutions of the board of directors or consents of all of the partners authorizing the application; Photographs of the building and site; For secured loans, evidence that the property is a separate subdivided lot and a separate tax lot, if the building is nonresidential or has more than four dwelling units; and Evidence of zoning compliance. Initial Eligibility Determination. Each application shall be submitted to the local administrator for an initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible for a loan or grant, an appropriate verification form shall be distributed and credit reports shall be obtained. If an applicant is determined preliminarily to be eligible for a grant or loan, the applicant may be provided with a letter from the local administrator in the form approved by the Program acknowledging receipt of the application and notifying the applicant of the ongoing review process. If the applicant is ineligible for a grant or loan, the applicant shall be informed in writing of the determination and the reasons for the determination. Building Evaluation. Each building for which an application is received shall be inspected for the purpose of determining structural and mechanical soundness and evaluating the adequacy of lead hazard reduction proposals submitted by the applicant. The inspection shall be performed by: The Department; The local administrator; or Another inspector acceptable to the Department. Loan and Grant Approval. Upon receipt and approval of all acceptable contractor's proposals, and all other data the Program considers relevant or necessary, the local administrator originating a: Loan shall undertake an analysis of each loan as to loan amount, interest rate, repayment provisions, and other loan terms and conditions; and Grant shall undertake an analysis of the grant amount and other grant terms and conditions. After completing the steps described in §C(1) of this regulation, a Level I local administrator, or a Level II local administrator evaluating Program financing for more than $60,000, shall forward the application package and the analysis of the loan or grant, or both, to the Department for approval, disapproval, or modification. Approval to make a loan, grant, or combination of loan and grant shall be as follows: Program financing in an amount of $60,000 or less may be approved by: The Level II local administrator, when the Level II local administrator originates the loan or grant; or The Program Director when a Level I local administrator or the Department originates a loan or grant; Program financing in an amount over $60,000 and up to $250,000 may be approved by the Director; Program financing in amounts over $250,000 shall be submitted to the Housing Finance Review Committee in accordance with COMAR 05.01.07; and In an emergency, when urgent action is required, the Secretary may approve loans and grants by written determination without the recommendation of the Housing Finance Review Committee. Before a Level II local administrator gives final approval and issues a commitment for Program funding in the amount of $60,000 or less, the Level II local administrator shall contact the Program and receive confirmation that funds are available. Loan and Grant Commitments. A commitment for a loan and grant shall be made on the form provided by the Program. A commitment shall specify a time limit for closing the loan or grant. The time limit may be extended at the discretion of the loan administrator with the approval of the Program. If the closing does not occur within the time limit, the local administrator shall notify the applicant that the commitment is officially canceled. Rejection. If an application is rejected, the Department, or local administrator, as the case may be, shall notify the applicant in writing of the rejection and the reasons for it. Reconsideration. An applicant who is rejected may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Withdrawal of Application. An applicant may withdraw an application at any time before closing by delivering written notice to the Department or the local administrator originating the loan or grant. The applicant shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals. Cancellation of Application. The Program or the local administrator may cancel an application at any time during processing if the applicant fails to provide any information requested. Notification of the cancellation of an application, and the reasons for it, shall be in writing. A canceled application may be reinstated upon the applicant's written request within 60 days following the date of the cancellation. Time and Place. The loan or grant closing shall be scheduled at a time and place mutually acceptable to the applicant and the local administrator, through a closing officer serving the applicant's area and otherwise acceptable to the local administrator. Loan and Grant Documents. Loan and grant document forms shall be provided by the Program and may not be altered by the local administrator. Loan and grant documents shall be executed on behalf of the Department by the officer or employee authorized to do so by the Department. Charges and Fees. The Department or the local administrator shall charge and collect from the borrower reasonable and customary amounts acceptable to the Department for the following items: Credit reports; Application fees; Appraisal fees, if applicable; Recording fees, taxes, and charges, if applicable; Required survey charges, if applicable; The cost of title examination and title insurance premiums, if required; Loan administrative fees; The cost of property and judgment reports; Inspection fees; and Other reasonable and customary charges or fees authorized by the Department. Points may not be charged to the applicant on any loan under the Program. Taxes and Assessments. Taxes and assessments against the property which are due and payable shall be paid at or before closing. General Requirements. A contractor and subcontractor: For lead abatement and risk reduction projects, shall have successfully completed, along with all workers in the firm, any training and accreditation course on lead abatement procedures required by MDE in accordance with COMAR 26.16.01; Shall be licensed by the Maryland Home Improvement Commission, if applicable, or otherwise meet all other State and local licensing requirements; Shall be qualified to do business in the State; Shall be able to demonstrate to the satisfaction of the Department the ability to complete the lead hazard reduction activity, including any evidence of previous professional experience; May not be suspended or debarred from the Department's programs under any action under COMAR 05.01.05; Shall agree in the contract to: Perform all work: In conformance with the contract and applicable laws, local codes, and Departmental rehabilitation standards, whether or not covered by the work write-up and drawings for the work; and In a competent, workmanlike manner, equal to the standards of the industry; Comply with applicable laws, ordinances, and regulations relating to the protection and safety of persons or property; Furnish all labor, materials, and equipment, and obtain all licenses, permits, insurance coverage, and workers' compensation as may be required to complete the project; Not assign the contract without prior written consent of the owner and approval of the local administrator; In addition to the remedies and guarantees provided by law, and at the contractor's expense, make all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as shall become necessary by reason of faulty workmanship or material, which appear within: 1 year from the date the notice of completion is filed; A longer period if a longer guarantee period is specified for particular materials or workmanship under the plans and specifications; or A longer period, if Maryland law so provides; Complete all specifications of the proposal within the completion date, as specified in the contract; Shall indemnify and hold the Department harmless from all liability and loss because of injury to or death of a person or damage to property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractors, or their agents, servants, and employees, and defend all suits or claims involving these at the contractor's or subcontractor's sole cost and expense. Minority Contractors. The Department encourages the use of minority contractors for all projects in all jurisdictions, and requires compliance with the Department's Minority Business Participation Plan for all projects with rehabilitation contract costs of $250,000 or more. Copies of the Department's plan shall be made available to sponsors and contractors. Identity of Interest. An owner-landlord may act as general contractor only with the prior written approval of the Department or local administrator. An application form shall be provided upon request and shall be submitted and approved before submission of the proposal. Approval shall be conditioned on an assurance of completion acceptable to the Department. An owner-occupant may not act as general contractor. Assurance of Completion. For a loan or grant or combination loan and grant that finances lead hazard reduction costs in excess of $50,000, either the Department or the local administrator, in its sole discretion, may require: 100 percent performance and 100 percent payment bonds; A letter of credit in the amount of 25 percent of the rehabilitation contract cost, and an assurance of completion agreement; or Other assurances of completion acceptable to the Department. Binding communications between the contractor and the owner concerning the content or performance of the contract shall be in writing. A contractor performing work financed by a Program loan or grant: May not be on the unacceptable risk determination list of the Department of Housing and Urban Development or the Development; May not be disbarred or suspended under COMAR 05.01.05; and Shall have performed all previous work financed by the Program in a manner satisfactory to the Director. Permits. If required by MDE or by local law, building or rehabilitation permits shall be obtained and posted at the project before the beginning of construction. Contract Documents. Work done, materials supplied, and construction procedures employed shall comply with all contract documents and applicable codes and standards, including those set forth in this chapter and any others established by the Department or MDE. Contract documents include, without limitation: Rehabilitation loan agreement; Change orders; Certification of structural and mechanical soundness; Instructions to bidders; Specifications; Drawings, if applicable; and Contractor's proposal. There may not be modification of a contract document without prior written consent of the Department or the local administrator, as evidenced by an approved change order executed by the: Contractor; Owner; and Local administrator. Inspections. The local administrator may conduct inspections to determine the required scope of work, verify payments, mediate construction problems and disputes, and facilitate arbitration procedures. Construction Disputes. The local administrator and the Department shall coordinate with the borrower and the contractor to resolve any dispute concerning workmanship, the quality of materials, damaged property, the completion schedule, and other matters pertinent to the contract documents. The local administrator and the Department shall recognize the findings of the Maryland Home Improvement Commission or the Consumer Protection Division of the Office of the Attorney General, if the dispute is submitted to their arbitration. Termination of Contracts. A contract may be terminated for cause in accordance with applicable provisions of the loan documents and contract documents. Monitoring. The local administrator shall monitor loan and grant disbursements during lead hazard reduction work to assist the borrower and to ensure that loan funds are properly used. The local administrator shall make at least two inspections of the project, an initial inspection and an inspection before any disbursement of funds. Based on Program guidelines, the local administrator shall determine the frequency and level of inspections during lead hazard reduction work, taking into consideration: The capability of the borrower; The demonstrated experience and reliability of the contractor; The amount of the grant or loan; The availability of local technical assistance; and Other factors considered relevant by the Department. Payments Generally. Loan and grant funds shall be disbursed in full at the closing to an account held on behalf of the borrower by either the political subdivision that is the local administrator for the loan or the subcontractor. The loan or grant funds shall be held in an account established under §C of this regulation. The local administrator or the subcontractor shall disburse loan and grant proceeds in accordance with the following requirements: Loan funds may not be disbursed if payments of interest or escrows required by the loan documents are in arrears; Draws shall be paid by a joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director; Advance payments are not permitted; and Payments shall be made only for work completed. Payments may be made for material delivered to the site but not yet installed in the project. Loan Accounts. Loan funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney's trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with the statements required under §C(2) of this regulation; and Any other requirements established by the Department; or Another type of account approved by the Department. The Department may require the local administrator or the subcontractor to provide periodic statements to the Department of all loan funds in an account. If the statements do not correspond with the Department's records of loan funds in the account, the local administrator or subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any loan account established under this regulation. Progress Payments. Progress payments shall be made in accordance with a schedule setting forth payments and corresponding percentages of completed work. The schedule shall be approved by the local administrator before any payments are made, and may be revised by the local administrator from time to time. The schedule may provide for a holdback of a portion of the loan amount. If a borrower's request for payment is refused, the local administrator shall notify the borrower and give the reasons for the refusal. The determination of the local administrator as to percentage of work completed shall be final. Final Payment. Final payment shall be made as follows: The borrower shall submit to the local administrator a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents; The borrower shall submit to the local administrator documentation that the work area meets the lead dust clearance test standard set by MDE or another agency acceptable to the Department; The borrower shall submit to the local administrator documentation that the entire dwelling unit meets MDE requirements and that all work required to achieve mechanical and structural soundness has been completed; Final payment shall be processed upon satisfactory final inspection and receipt of the certificate of completion; If, in the opinion of the local administrator, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, the local administrator may employ the following procedure: The local administrator may require the borrower to explain in writing within 10 days why the local administrator should not make direct payment to the contractor; If the borrower responds within the 10-day period and requests a meeting, the local administrator shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment; The local administrator, in the local administrator's discretion, may then either approve or disapprove direct payment to the contractor or the borrower, if applicable. Retainage for Claims. If the borrower or the local administrator receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, the local administrator shall retain amounts sufficient to satisfy the claims, to the extent that loan funds have not been disbursed, until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Retainage in General. The local administrator may retain 10 percent of the loan amount until final payment. The retainage shall be released at final payment upon confirmation that: All lead hazard reduction work is complete and acceptable to the local administrator; and The lead dust clearance test standard has been met. Payment for Additional Work. Payment for any additional cost to complete work not included in the approved contract proposal is the obligation of the borrower. A borrower may apply to the local administrator for a loan increase to cover some or all of the increased costs. Any loan increase shall be subject to approval or disapproval in accordance with the provisions of this chapter. The Department has no obligation to pay for increased costs. Quality Control. Subject to the rights of tenants, if any, the Department or the local administrator may collect random samples of dust levels in a building before and after completion of the lead hazard reduction activity. Wipe samples may be analyzed by MDE, or its designee, and the local administrator and the Department may maintain records of the results of the sampling. The Department may provide MDE with a list of all buildings which undertake lead hazard reduction through the Program. Closeout Procedures. After final payment or payout is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements. A copy of the closeout statement shall be forwarded to the Program and the servicer. In General. The Department recognizes that the most effective housing programs of this kind are those administered at the local level. Therefore, each political subdivision is encouraged and expected to develop the capacity to originate and administer Program loans. While the Department has the authority to originate and administer grants and loans, the Department does not plan to operate a program for a political subdivision. The Department reserves the right, however, to originate or administer Program grants and loans at its discretion. Certification of Level I Local Administrators. The Department may certify a political subdivision to originate and administer grants and loans when the political subdivision meets the following minimum criteria to the satisfaction of the Department: The political subdivision shall be able to provide staff to perform adequately the functions of the following positions: A rehabilitation director, experienced in operating a rehabilitation program, supervising employees, and dealing with the public; A building inspector, experienced in residential rehabilitation, cost estimation, writing specifications, blueprint reading, and residential inspections, and trained to understand and apply the appropriate codes and rehabilitation standards; A loan underwriter, experienced in mortgage lending and financial processing of loans; and Clerical and administrative staff trained to ensure prompt and efficient processing of applications, draw schedules, and other required items; The rehabilitation staff of the political subdivision shall be capable of: Establishing a rehabilitation program, evidenced by prior experience in the development and operation of a rehabilitation program; Evaluating loan and grant applications; and Monitoring the loans and grants as well as the work done; and The political subdivision shall execute and comply with the terms of an agreement required by the Department. Certification of Level II Local Administrators. The Department may certify a political subdivision to originate and administer grants and loans in any amount, as well as approve grants and loans, or combination of grants and loans, in the amount of $60,000 or less, when: The political subdivision meets the criteria outlined in §B of this regulation to the Department's satisfaction; and The Department determines that the rehabilitation staff of the political subdivision is capable of: Evaluating, recommending, approving, or rejecting loans and grants; Scheduling and executing loan and grant closings; Monitoring construction activities; Closing out loan and grant accounts; and Providing financial information to loan servicers and the Department. Subcontracting Program Administration. A political subdivision may subcontract its duties and responsibilities as a local administrator under this chapter, except as provided in §D(2) and (3) of this regulation, with the approval of the Department. The duties described in §§B and C of this regulation may be carried out by staff of the local administrator or its subcontractor. A political subdivision may not subcontract the holding and disbursement of loan funds described in Regulation .15B and J of this chapter, except to a subcontractor which meets the following criteria to the satisfaction of the Department: The subcontractor meets the criteria of §§B and C of this regulation; Any employee of the subcontractor with access to the loan funds shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The subcontractor provides the local administrator and the Department with statements of: All loan funds held and disbursed by the subcontractor under Regulation .15C(2) of this chapter; and The balance of funds on hand; The subcontractor provides the local administrator and the Department with an annual audit conducted by an independent certified public accountant and prepared in accordance with generally accepted auditing standards; and The subcontractor complies with any other requirements established by the Department. Regardless of any subcontracting, the Department shall continue to hold the political subdivision directly responsible for fulfilling all of its duties and responsibilities as a local administrator. Revocation of Certification. The Department reserves the right and expects to monitor periodically the loan administration of certified local administrators, and may revoke certification upon determination that the local administrator is administering the loans in a manner inconsistent with the intent of the Program. Special Requirements for Local Administrators and Their Subcontractors. A local administrator and local administrator's subcontractors shall maintain financial records of loan disbursements for at least 3 years, and shall make them available for review by the Department at all reasonable times and as set forth in Regulation .19 of this chapter. A noncomplying loan approved by a level II local administrator shall either be amended, with the borrower's concurrence, to comply with the Program's requirements, or purchased from the Department by the political subdivision. Local Administration Fee. The Department may, at its sole discretion, pay a local administrator an annual fee for administering loans made under the Program. Department Authority. When the Department, in its sole discretion, administers a loan, the Department shall have the authority that a local administrator would have under these regulations, in addition to its authority as the Department. It is the intent of the Department that Program funds be distributed Statewide. Monies appropriated to the Program may be made available Statewide on a first-come, first-served basis, subject to §B of this regulation. If the number of applications in process is insufficient to commit all monies appropriated to the Program within 6 months of the date of the appropriation, the Department may reallocate remaining funds to other programs authorized under the Act. The Department may set aside a portion of funding for owner-occupants. From time to time, the Department may establish limitations on the percentage or amount of Program funding which may be used for grants and deferred payment loans. Reservation of Funds. The Department may provide forward commitments of funds to nonprofit sponsors and local governments to provide Program financing to eligible grantees or borrowers, in accordance with these regulations and on any additional terms set by the Department. The nonprofit sponsor shall be engaged in a project to provide affordable housing or medical treatment for lead poisoning. A borrower, contractor, local administrator, or subcontractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any borrower, contractor, local administrator, or subcontractor in connection with any property financed or assisted under the Program. Each borrower, contractor, local administrator, and subcontractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. The borrower, contractor, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. The books, accounts, and records of a local agency shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the Department. The books, accounts, and records of the contractor and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between the contractor and subcontractors and the borrower. Combining with Other Loans and Grants. A program loan or grant may be made in conjunction with other federal or State loan or grant programs, if the requirements of the Act and this chapter are met. Program Guidelines. The Department may establish from time to time detailed Program guidelines containing underwriting standards, loan and grant processing requirements, and other requirements or matters relating to the Program or to the financing of loans and grants. Copies of these guidelines shall be available for examination at the offices of a local administrator and at the Department's principal office. The Department, upon request, shall provide copies to the public for a reasonable charge. Fees. The Department may charge commitment fees, application fees, closing fees, or other fees, charges, or penalties to applicants, borrowers, or other individuals or entities that participate in the Program. The Department may restrict the fees and charges that servicers, local administrators, or other Program participants obtain from borrowers or applicants. Delegation. The Secretary may delegate to the Director, the Program Director, or to any other official or employee of the Department the authority to execute or approve Program documents or loan and grant documents, including commitments and agreements with local administrators. In addition, through the agreement with the local administrator, specific staff members of the local administrator may be authorized by the Department to execute loan and grant documents on behalf of the Department. False Statements. A borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department or the local administrator originating the loan, is subject to immediate acceleration of the loan, in addition to the penalties authorized by Housing and Community Development Article, §4-712, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of this chapter to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local program used in connection with a loan or grant necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §4-706, Annotated Code of Maryland Effective date: Regulations .01—.15 adopted as an emergency provision effective August 28, 1986 (13:20 Md. R. 2197); emergency status extended at 14:2 Md. R. 123; emergency status expired March 1, 1987 Regulations .01—.15 adopted effective March 1, 1987 (14:4 Md. R. 414) Chapter recodified from COMAR 05.01.23 to COMAR 05.04.06 Regulations .01—.15 repealed and new Regulations .01—.24 adopted effective October 12, 1992 (19:20 Md. R. 1813) Regulation .03B amended effective April 12, 1993 (20:7 Md. R. 640) Regulation .04A amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .04D amended and E adopted effective April 12, 1993 (20:7 Md. R. 640) Regulation .07C, I amended effective April 12, 1993 (20:7 Md. R. 640) Regulation .13C amended effective April 12, 1993 (20:7 Md. R. 640) Regulation .18A amended effective April 12, 1993 (20:7 Md. R. 640) Regulations .01—.24, Residential Lead Paint Abatement Program, repealed and new Regulations .01—.20, Lead Hazard Reduction Grant and Loan Program, adopted effective February 24, 1997 (24:4 Md. R. 290) Regulation .02B amended effective February 22, 1999 (26:4 Md. R. 272); March 7, 2011 (38:5 Md. R. 317) Regulation .03 amended effective April 16, 2001 (28:7 Md. R. 688) Regulation .05A amended effective April 16, 2001 (28:7 Md. R. 688) Regulation .06 amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .07B, D amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .07D amended effective April 16, 2001 (28:7 Md. R. 688); October 27, 2003 (30:21 Md. R. 1528); August 15, 2016 (43:16 Md. R. 899) Regulation .08A, C amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .08C amended effective November 29, 1999 (26:24 Md. R. 1855) Regulation .09 amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .09C amended effective April 16, 2001 (28:7 Md. R. 688); October 27, 2003 (30:21 Md. R. 1528); August 15, 2016 (43:16 Md. R. 899) Regulation .10D amended effective April 16, 2001 (28:7 Md. R. 688); March 7, 2011 (38:5 Md. R. 317) Regulation .11C, G amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .11C amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .13 amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .14 amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .15 amended effective February 22, 1999 (26:4 Md. R. 272); March 7, 2011 (38:5 Md. R. 317) Regulation .16C amended effective September 29, 2003 (30:19 Md. R. 1329) Regulation .16D amended effective February 22, 1999 (26:4 Md. R. 272); March 7, 2011 (38:5 Md. R. 317) Regulation .17A, D amended effective March 7, 2011 (38:5 Md. R. 317) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) Regulation .18A amended effective February 22, 1999 (26:4 Md. R. 272) Regulation .19C amended effective March 7, 2011 (38:5 Md. R. 317) Effective date: Regulations .01—.17 adopted as an emergency provision effective December 4, 1986 (13:26 Md. R. 2801); emergency status expired June 2, 1987; adopted permanently effective July 27, 1987 (14:15 Md. R. 1657) Chapter recodified from COMAR 05.01.24 to COMAR 05.04.07 Chapter repealed effective November 29, 1999 (26:24 Md. R. 1855) These regulations prescribe the policies, procedures, and authorizations for making loans to adapt existing housing to provide accessory, shared, and sheltered housing facilities. The basic objectives of the Program are: To make loans to or for the benefit of individuals with limited incomes to finance rehabilitation projects to provide housing opportunities for families of limited income by creating accessory, shared, and sheltered housing facilities; and To develop the capacity of political subdivisions to administer the Program. The terms appearing in the Act shall have the meanings defined there and, in addition, the meanings used in these regulations. Terms Defined. “Accessory housing facility” means a dwelling unit with complete, independent sleeping, cooking, sanitation, and living facilities which are within or attached to, or on the same parcel as, and subordinate to, but under the same ownership as, a single-family, owner-occupied dwelling. “Act” means Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, as amended. “Annual income” means total household income from all sources, including wages, investment income, Social Security, retirement, disability, and unemployment benefits less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Borrower” means an applicant who receives a loan under the Program. “Closing costs” means the total of all settlement costs and fees and, when applicable, initial payment for taxes, property insurance, title examination, or other expense items as determined by the Department. “Contract” means the written agreement between a borrower and a licensed general contractor or licensed home improvement contractor that: Is acceptable to the Department; and Describes the work to be financed by a loan made under the Program. “Deferred payment loan” means a loan which permits the deferral of principal or interest, or both principal and interest. “Department” means the Department of Housing and Community Development, a principal department of the State. “Director” means the Director of the Division of Development Finance of the Department. “Disabled” means a person having a medically determinable physical or mental impairment which is expected to last for a substantial period of time and which causes an inability to engage in regular, sustained employment or other gainful activity. “Elderly” means a person who is 62 years old or older. “Family of limited income” means one or more individuals residing as a household in a dwelling unit whose total combined annual income does not exceed the limits established from time to time by the Secretary in accordance with Housing and Community Development Article, §4-915, Annotated Code of Maryland. “Family of lower income” means one or more individuals residing as a household in a dwelling unit, whose combined total annual income does not exceed the limits established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland, which income limits will be less than those established for families of limited income. “Family of very low income” means one or more individuals residing as a household in a dwelling unit, whose combined total annual income does not exceed the limits established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland, which income limits will be less than those established for families of lower income. “Handicapped” means a person having a physical or mental impairment which is expected to be of an indefinite duration and which impedes the ability to live independently. “Level I local administrator” means a political subdivision certified by the Department under Regulation .16B of this chapter. “Level II local administrator” means a political subdivision certified by the Department under Regulation .16C of this chapter. “Loan” means a loan made under the Program. “Local administrator” means a level I or level II local administrator. “Owner-occupant” means an owner residing or intending to reside in an eligible property which is a shared housing facility or which includes an accessory housing facility. “Political subdivision” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, and any of the 23 counties in Maryland. “Program” means the Accessory, Shared, and Sheltered Housing Program. “Program Director” means the Director of Special Loan Programs in the Division of Development Finance of the Department. “Project” means the modification, addition, repair, renovation, or improvement to an existing property in order to provide accessory, shared, or sheltered housing. “Rehabilitation plan” means the rehabilitation plan described in Regulation .20 of this chapter. Related Costs. “Related costs” means costs related to the implementation of a rehabilitation project under the Program, such as appraisal fees, architect's and engineering fees, permit and permit application fees, and other similar costs approved by the Program. “Related costs” does not include loan application fees. “Secretary” means the Secretary of Housing and Community Development. “Shared housing facility” means a single-family, owner-occupied dwelling unit adapted for common and shared living use by the owner-occupant household and at least one other family of limited income, where some or all of the sleeping, cooking, living, or sanitary facilities are shared by all of the households. “Sheltered housing facility” means a single-family, owner-occupied dwelling unit that accommodates the sheltered housing sponsor and provides sleeping and living facilities, meals, and assistance with daily activities for a rental fee to not more than 15 elderly, disabled, or handicapped persons residing in the dwelling. “Sheltered housing sponsor” means an owner residing or intending to reside upon completion of the project in a sheltered housing facility. “Subcontractor” means an entity authorized by the Department to carry out the duties and responsibilities of a local administrator under Regulation .16D(1) of this chapter and to hold and disburse funds under Regulation .16D(2) of this chapter. To qualify for a loan, an owner-occupant shall meet the following requirements, which shall be met jointly and separately by all applicants if there is more than one applicant: Reside, or intend to reside, in the property after completion of the rehabilitation; Hold title to the property for which the loan is made in fee simple or under a freely transferable ground rent lease; Demonstrate creditworthiness and repayment ability, in the estimation of the Department; and Have income at a level that the Secretary has determined renders the applicant unable to afford or secure private financing to rehabilitate the property. In addition to meeting those requirements set forth in §A of this regulation, to qualify for a loan to provide accessory facilities, an owner-occupant, jointly and separately if there is more than one applicant, shall either: Be a family of lower income or a family of limited income at the time the loan is made, and agree in writing to provide the accessory housing facility financed by the loan for the longer of: The term of the loan, The time during which principal and interest are unpaid, or 10 years if a family of limited income or 15 years if a family of lower income; or Agree in writing to provide the accessory facility financed by the loan for occupancy by a family of lower income or a family of limited income for the longer of: The term of the loan, The time during which principal and interest are unpaid, or 10 years if a family of limited income or 15 years if a family of lower income. In addition to meeting the requirements set forth in §A of this regulation, to qualify for a loan to provide shared housing facilities, an owner-occupant shall meet the following requirements, which shall be met jointly and separately if there is more than one applicant: Be a family of limited income; and Agree in writing that the shared housing facility provided with the proceeds of the loan shall be occupied by a family or families of lower income or a family or families of limited income for the longer of: The end of the loan term, The date on which all principal and interest and other sums due on the loan are fully paid, or 10 years if a family or families of limited income, or 15 years if a family or families of lower income. In addition to meeting the requirements set forth in §A of this regulation, to qualify for a loan to provide sheltered housing facilities, a sheltered housing sponsor shall meet the following requirements, which shall be met jointly and separately by all applicants if there is more than one applicant: Agree in writing to provide shelter, meals, and assistance with daily activities to not more than 15 persons, all of whom shall be elderly, disabled, or handicapped persons who qualify as families of limited income for the longer of: The end of the loan term, The date on which all principal and interest and other sums due on the loan are fully paid, or 10 years if the sheltered facility residents other than the borrower are families of limited income, or 15 years if families of lower income; Demonstrate that the property will be certified by the appropriate governing agency to provide sheltered care to elderly, disabled, or handicapped persons. An applicant who is suspended or debarred from the Department's programs pursuant to any action under COMAR 05.01.05 is not eligible to participate in the Program. If title to the property to be rehabilitated is held by more than one person in any form of joint tenancy, each person having an interest in the property shall be considered to be an applicant for purposes of these regulations. For the purposes of determining annual income, only the income of persons who permanently reside in the unit will be used. All properties shall meet the following requirements: Be located within the State; Be owned by an eligible borrower who shall provide assurance of title or evidence of ownership acceptable to the Department; When the project is complete, be in compliance with zoning requirements; and Be structurally and mechanically sound, except as permitted under §B of this regulation, such that: There are no physical conditions that endanger the life, property, safety, or welfare of the occupants or the public, and The property is in full compliance with all applicable housing codes and standards. Properties which are not structurally and mechanically sound may be eligible properties if upon completion of the improvements financed by the Program loan, the property will be structurally and mechanically sound. A manufactured housing unit is eligible if it is intended for residential use, and: Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is not independently capable of movement and is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1990) which is incorporated by reference under COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc. which are incorporated by reference under COMAR 05.02.02; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland; Complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the occupant owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to the number of dwelling units, lot size, and building setbacks; Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. Condominiums may be eligible buildings and shall be reviewed by the Department on a case-by-case basis. Mobile homes which are taxed as personal property, cooperative units, property being purchased under a land installment contract, or other types of property are not eligible properties. Proceeds of a loan may finance the following improvements: Repairs, improvements, and modifications to existing dwelling units, to the extent required by applicable codes and standards relating to accessory, shared, or sheltered housing facilities; Additions, modifications, and improvements, including all fixtures and finishes, necessary to create accessory, shared, or sheltered housing facilities. Closing costs and related costs described in Regulation .03B(5) and (26) of this chapter, respectively, may be included in a loan to an owner-occupant. 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. In addition to the conditions and requirements of Regulation .07 of this chapter, deferred loans shall meet the following additional requirements in §§B—E of this regulation. Eligibility. The following borrowers may be eligible for loans which defer payment of principal or interest or both: An owner-occupant who is a family of very low income and whose accessory housing unit tenant is a family of very low income; An owner-occupant who is a family of very low income and whose shared housing facility tenant or tenants are families of very low income; and Sheltered housing sponsors of properties occupied entirely by tenants who are families of very low income. Amount of Deferred Payments. The Department may defer payments of principal or interest or both principal and interest to the minimum extent required based on the borrower's capacity to repay. Repayment. The loan documents shall provide for repayment of deferred amounts: At the maturity date or at any earlier date established by the Department or the local administrator; or Upon any sale or other transfer of the property or any interest in the property other than a residential lease of: The owner-occupied unit for less than 3 years duration, or Any other portion of the property. The Department may, but need not, charge interest on the deferred interest. Limitations. The Department, from time to time, may establish limitations on percentage or amount of funding which may be used for deferred loans. Deferred loans in amounts greater than $25,000 may not exceed an amount which, when added to any prior debts secured by or relating to the eligible building or property, or both, would equal 85 percent of the market value of the eligible building and property after rehabilitation as determined by the Department. In addition to the conditions and requirements of Regulations .07 and .08 of this chapter, secured loans shall meet the following requirements in §§B—D of this regulation. Deed of Trust. The deed of trust shall secure repayment of the loan by the granting of a valid lien on the property. Escrow Account. If there is no prior mortgage requiring the payment of expenses to a mortgagee, the borrower shall make monthly expense payments, in escrow, to the Department consisting of 1/12 of annual real estate taxes, ground rent, property insurance premiums and, when appropriate, other items for which payments are required by the Department. Interest need not be paid to borrowers on escrowed monies except as required by law. Title Insurance. For all loans in excess of $30,000, the Department, in its discretion, may require the borrower to provide a standard American Land Title Association (ALTA) Loan policy, with the Environmental Endorsement 8.1, or other form of title policy approved by the Department and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Department, evidencing that title to the building on the date of closing is vested in the borrower, and containing only standard exceptions and encumbrances acceptable to the Department and the Office of the Attorney General. Procedure—In General. The Department shall establish application procedures for local administrators to follow, that will facilitate the application process and best serve the needs of the political subdivisions and the State. These procedures may be amended from time to time and shall be binding upon all borrowers. Alternative procedures may not be used without the prior approval of the Department. Application Forms. Applications shall be made upon standard forms prescribed by the Department. Application Fee. Upon submission of a loan application, the applicant may be required to pay an application fee in an amount set by the local administrator, subject to approval by the Department. Documentation. The applicant shall submit with the application any documentation that the Department requires, including, but not limited to, any documentation needed to establish the eligibility and credit worthiness of the applicant. All applicants shall submit supporting documentation specified in the checklist attached to the application, including, but not limited to, the following: A copy of the deed to the property; A copy of all existing mortgages or mortgage verification requests, on the form approved by the Department, signed by the applicant for each mortgage secured by the property; A copy of the first page and declarations page of all policies for fire and extended coverage insurance and, if applicable, flood insurance; A copy of the most recent real estate tax bill which sets forth the current assessed value of the building and the property; One of the following: For a shared housing loan or an accessory housing loan that depends on the owner-occupant's income for eligibility, verification of the total annual income of each person in the owner-occupant's household, For a shared or accessory housing loan that depends on the tenant's income for eligibility, if there is a current tenant, the name, address, number of persons in the tenant's household, total combined annual household income, and current monthly rent, or For sheltered housing sponsor applicants a list of all current tenants in a building showing household name, address, number of persons in the household, total combined annual household income, and current monthly rent; For the 3 years immediately preceding the application: If self-employed, copies of federal income tax returns, or, if a nonprofit organization, the applicable federal reporting forms, Copies of State income tax returns, or A request signed by the applicant, on the form designated by the Department, for copies of the applicant's State income tax returns; and With the application, a description of the proposed improvements followed by a contractor's proposal that complies with all applicable governmental requirements. In addition, all sheltered housing sponsor applicants shall submit the following documentation: 3 years of operating statements for the project; For projects receiving federal subsidies, copies of all contracts or feasibility analyses prepared by the administering agency, as applicable; Photographs of the building and site; Evidence of zoning compliance; With the application, a description of the proposed improvements, followed by a contractor's proposal that complies with all applicable governmental requirements; Evidence of certification by the appropriate government agency to provide sheltered care to elderly, disabled, or handicapped persons; and Evidence of operating subsidies from other governmental agencies. Initial Eligibility Determination. Each application shall be submitted to the local administrator for an initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible, appropriate verification forms shall be distributed, credit reports shall be obtained, and the applicant may be provided with a letter from the local administrator in the form approved by the Program acknowledging receipt of the application and notifying the applicant of the ongoing review process. If the applicant is ineligible for a loan, the applicant shall be informed in writing of the determination and the reasons for it. Property Evaluation. Each property for which an application is received shall be inspected for the purpose of: Determining if the property is structurally and mechanically sound, or will be upon completion of the improvements, and Evaluating the proposal for the improvements to be financed by the loan. The inspection shall be made by: The Department; The local administrator; A nonprofit corporation acceptable to the Program or the local administrator; or A licensed contractor who is acceptable to the local administrator or the Department. The applicant shall be provided with instructions for obtaining final contractor's proposals for the work. Loan Approval. Upon receipt and approval of all acceptable contractor's proposals, and all other data the Program considers relevant or necessary, the local administrator originating the loan shall undertake an analysis of each loan as to loan amount, interest rate, repayment provisions, and other loan terms and conditions. After completing the steps described in §C(1) of this regulation, a level I local administrator, or a level II local administrator evaluating a loan for more than $30,000, shall forward the application package and the analysis of the loan to the Department for approval, disapproval, or modification. Approval to make a loan shall be as follows: Loans in amounts of $30,000 or less may be approved by: The level II local administrator, where the level II local administrator originates the loan, or The Program Director, where a level I local administrator or the Department originates a loan; Loans in amounts over $30,000 and under $100,000 may be approved by the Director; For loans in amounts of $100,000 or more, the following procedures apply: Loan proposals shall be submitted to the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, and the Housing Finance Review Committee shall review the loan proposal and make a recommendation to the Secretary, For loans in amounts greater than or equal to $100,000 but less than $250,000, the recommendation of the Housing Finance Review Committee constitutes approval unless the loan is specifically disapproved by the Secretary, For loans in amounts of $250,000 or more, the Secretary shall determine in writing whether the loan is approved and under what loan terms after receiving the recommendation of the Housing Finance Review Committee, In an emergency, when urgent action is required, the Secretary may approve loans by written determination without the recommendation of the Housing Finance Review Committee. Before a level II local administrator gives final approval and issues a loan commitment for a loan in the amount of $30,000 or less, the level II local administrator shall contact the Program and receive confirmation that funds for the loan are available. Loan Commitments. Loan commitments shall be made on forms provided by the Program. Loan commitments shall specify a time limit for closing the loan. The time limit may be extended at the discretion of the local administrator with the approval of the Program. If the loan closing does not occur within the time specified, the local administrator shall notify the applicant that the commitment is officially canceled. Rejection. If a loan application is rejected, the Department, or the local administrator, as the case may be, shall notify the applicant in writing. The rejection letter shall state the reason the loan is rejected. Each month, the Program Director shall provide the Housing Finance Review Committee with a report listing all sheltered housing sponsor loan applications rejected by the Program during the preceding month. Reconsideration. Applicants who are rejected may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Withdrawal of Application. An applicant may withdraw a loan application at any time before closing by delivering written notice to the Department or the local administrator originating the loan. The applicant shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals. Withdrawn applications may not be reinstated. Rather, a new application is required. Cancellation of Application. The Program or the local administrator may cancel an application at any time during processing if the applicant fails to provide any information requested. Notification of the cancellation of an application shall be in writing. A canceled application may be reinstated upon the applicant's written request within 60 days following the date of the cancellation. After that time, a new application, together with supporting documents, is required. Time and Place. The loan closing shall be scheduled at a time and place mutually acceptable to the applicant and the local administrator, through a closing officer serving the applicant's area and otherwise acceptable to the local administrator. Loan Documents. Loan document forms shall be provided by the Program and may not be altered by the local administrator. Loan documents shall be executed on behalf of the Department by the officer or employee authorized to do so by the Department. Charges and Fees. The Department or the local administrator shall charge and collect from the borrower reasonable and customary amounts acceptable to the Department for the following items: Credit reports; Appraisal fees, if applicable; Recording fees, taxes, and charges, if applicable; Required survey charges, if applicable; The cost of the title examination and title insurance premiums, if required; Administrative fees; The cost of property and judgment reports; Inspection fees; and Other reasonable and customary charges or fees authorized by the Department. Points may not be charged to the applicant on any loan under the Program. Mortgageable Items. At the discretion of the Department or the level II local administrator for loans to owner-occupants only, program charges, closing costs described in Regulation .03B(5) of this chapter, and related costs described in Regulation .03B(26) of this chapter, may be mortgageable items. Taxes and Assessments. All taxes and assessments against the property which are due and payable shall be paid at or before closing. General Requirements. All contractors and subcontractors: Shall be licensed by the State, the local political subdivision, or the Maryland Home Improvement Commission, as applicable, to do the work required under the contract; Shall be qualified to do business in Maryland; Shall be able to demonstrate to the satisfaction of the Department the ability to complete the rehabilitation work, which evidence may include previous professional rehabilitation experience; May not be suspended or debarred from the Department's programs pursuant to any action under COMAR 05.01.05; Shall agree in the contract to: Perform all work: In conformance with the contract and all applicable laws, local codes, and Departmental rehabilitation standards, whether or not covered by the work write-up and drawings for the work, and In a competent, workmanlike manner, equal to the standards of the industry; Comply with all applicable laws, ordinances, and regulations relating to the protection and safety of persons or property; Furnish all labor, materials, and equipment, and obtain all licenses, permits, insurance coverage, and workers' compensation as may be required to complete the rehabilitation; Not assign the contract without prior written consent of the owner and approval of the local administrator; In addition to all remedies and guarantees provided by law, and at the contractor's expense, make all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as shall become necessary by reason of faulty workmanship or material, which appear within: 1 year from the date the notice of completion is filed, A longer period if any longer guarantee period is specified for any particular materials or workmanship under the plans and specifications, under a subcontract, in connection with any manufactured unit which is installed in the structure, or A longer period, if Maryland law so provides; Complete all specifications of the proposal within the completion date, which may not exceed 12 months from the date of the loan closing unless a longer period is approved in writing by the Department; Shall indemnify and hold the Department harmless from all liability and loss because of injury to or death of a person or damage to any property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractors, or their agents, servants, and employees, and defend all suits or claims involving the above at its sole cost and expense. Minority Contractors. The Department encourages the use of minority contractors for all projects in all jurisdictions, and requires compliance with the Department's Minority Business Participation Plan for all projects with rehabilitation contract costs of $200,000 or more. Copies of the Department's plan shall be made available to sponsors and contractors. Identity of Interest. Borrowers may not act as their own general contractors. Sheltered housing sponsors may act as general contractors only with the prior written approval of the local administrator. Application forms will be provided upon request and shall be submitted and approved before submission of the proposal. Approval shall be conditioned on an assurance of completion acceptable to the Department. An owner-occupant may not act as general contractor. Assurance of Completion. For loans in excess of $50,000, either the Department or the local administrator, in its sole discretion, may require: 100 percent performance and 100 percent payment bonds; A letter of credit in the amount of 25 percent of the rehabilitation contract cost, and an assurance of completion agreement; or Other assurances of completion acceptable to the Department. In order to be binding, all communications between the contractor and the owner concerning the content or performance of the contract shall be in writing. Contractors performing work financed by a Program loan: May not be on the unacceptable risk determination list of the Department of Housing and Urban Development or the Farmer's Home Administration; May not be disbarred or suspended pursuant to COMAR 05.01.05 as amended from time to time; and Shall have performed all previous work financed by the Program in a manner satisfactory to the Director. Code Compliance. The Department or local administrator's preparation or approval of work write-ups, evaluation of the property, and review and approval of plans and specifications are for the benefit of the Department only. These actions are not intended to substitute for or ensure compliance with appropriate State and local building codes. Compliance with applicable codes and obtaining required permits and licenses are the responsibility of the borrower and contractor. Permits. If required by local law, building or rehabilitation permits shall be obtained and posted at the project before the beginning of construction. Contract Documents. Work done, materials supplied, and construction procedures employed shall comply with all contract documents and applicable codes and standards, including those set forth in these regulations and any others established by the Department. Contract documents include, without limitation: Rehabilitation loan agreement; Change orders; Certification of structural and mechanical soundness; Instructions to bidders; Specifications; Drawings, if applicable; and Contractor's proposal. There may not be modification of any contract document without the prior written consent of the Department or the local administrator, as evidenced by an approved change order executed by: The contractor; The owner; and The local administrator. Borrower and Contractor. The borrower and the contractor shall cooperate to facilitate timely performance of the rehabilitation work and selection of materials. The borrower shall provide the contractor access to the property during normal business hours, and shall permit the contractor to use existing utilities for the execution and completion of work, at no costs to the contractor. The borrower shall be responsible for removing and replacing rugs, furnishings, and other personal property, unless otherwise provided in the contract documents. The borrower and the contractor shall protect and maintain the property and improvements in accordance with the contract documents. The borrower and the contractor shall each, in writing, hold the Department harmless from all loss, claim, cost, or damage of every kind, nature, and description arising from or related to the contract documents. All communications relating to content or performance of the contract shall be in writing, and copies sent to the Program. Inspections. The local administrator shall conduct inspections to determine the required scope of work, verify payments, mediate construction problems and disputes, and facilitate arbitration procedures. Construction Disputes. If disputes between the contractor and borrower occur, the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General. Termination of Contracts. Contracts may be terminated for cause in accordance with applicable provisions of the loan documents and contract documents. Monitoring. The local administrator shall monitor loans and disbursement of loan funds during rehabilitation to assist borrowers and to assure that loan funds are properly used. Based on Program guidelines, the local administrator shall determine the frequency and level of inspections during rehabilitation, taking into consideration: The capability of the borrower; The demonstrated experience and reliability of the contractor; The amount of the loan; The availability of the local technical assistance; and Other factors considered relevant by the Department. The local administrator may charge borrowers a fee for inspections during rehabilitation, as approved by the Department. Payments Generally. Loan funds shall be disbursed in full at the closing of the loan to an account held on behalf of the borrower by either the political subdivision that is the local administrator or the subcontractor for the loan. The loan funds shall be held in an account established under §C of this regulation. The local administrator or the subcontractor shall disburse the loan proceeds in accordance with the following requirements: Loan funds may not be disbursed if payments of interest or escrows required by the loan documents are in arrears; Payments of draws shall be by joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director; Except as provided in §D of this regulation, payments shall be made only for work completed, and payments may not be made for material delivered to the site but not installed in the project; Payment of draws shall be requested by the borrower, and loan funds may be disbursed to the borrower upon request except for final draws or as otherwise provided for in §E of this regulation. Loan Accounts. Loan funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney's trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000, The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with the quarterly statements required under §C(2) of this regulation, and Any other requirements established by the Department; or Another type of account approved by the Department. The local administrator or the subcontractor shall provide the Department with quarterly statements of all loan funds in a loan account. The Department shall review these quarterly statements and shall reconcile the loan balances in the records of the local administrator or the subcontractor with the loan balances in the records of the Department. If the quarterly statements do not correspond with the Department's records of loan funds in the account, the local administrator or subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any loan account established under this regulation. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 10 percent of the contract costs. Progress Payments. Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the local administrator where the entire cost of the project is $30,000 or less, or otherwise by the Department. At a minimum, however, the local administrator shall verify completion of the work before disbursing the final payment, as described in §F of this regulation. If a borrower's request for payment is refused, the local administrator shall notify the borrower. The determination of the local administrator as to percentage of work completed shall be final. Final Payment. Final payment shall be made as set forth in §E(2)—(5) of this regulation. The borrower shall submit to the local administrator a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents. Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed. Borrower's Refusal to Make Final Payment. If, in the opinion of the local administrator, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, then the local administrator may follow the procedure in §F(4)(b)—(d) of this regulation. The local administrator may require the borrower to explain in writing within 10 days why the local administrator should not make direct payment to the contractor. If the borrower responds within the 10-day period and requests a meeting, the local administrator shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment. The local administrator, in its discretion, may then either approve or disapprove direct payment to the contractor or the borrower. If the local administrator receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, and all loan funds have not yet been disbursed, the local administrator shall retain an amount equal to the lesser of all funds not yet disbursed and the amount sufficient to satisfy the claims until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Retainage. The local administrator shall retain until final payment 10 percent of the contract proposal costs for all projects for which the borrower is responsible for interim project inspections. The local administrator, at its discretion, may elect to retain until the final payment 10 percent of the contract proposal costs for any other project, taking into consideration: The type of project, The contractor's experience, and Other factors the Program considers relevant. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the local administrator. Payment for Additional Work. Payment for any additional cost to complete work not included in the approved contract proposal is the obligation of the borrower. A borrower may apply to the local administrator for a loan increase to cover some or all of the increased costs. Any loan increase shall be subject to approval or disapproval in accordance with the provisions of these regulations. The Department has no obligation to pay for increased costs. Construction Disputes. The local administrator and the Department shall coordinate with the borrower and the contractor to resolve any dispute concerning workmanship, the quality of materials, damaged property, the completion schedule, and other matters pertinent to the contract documents. The local administrator and the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General, if the dispute is submitted to their arbitration. Termination of Contracts. Contracts may be terminated for cause in accordance with the loan documents, contract documents, and Program policies and procedures. Closeout Procedures. After final payment or payout is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements. A copy of the closeout statement shall be forwarded to the Program and the servicer. General. The Department recognizes that the most effective housing programs of this kind are those administered at the local level. Therefore, each political subdivision is encouraged and expected to develop the capacity to originate and administer Program loans. While the Department has the authority to originate and administer loans, the Department does not plan to operate a program for a political subdivision. The Department reserves the right, however, to originate and administer Program loans at its discretion. Certification of Level I Local Administrators. The Department may certify a political subdivision to originate and administer loans when the political subdivision meets the following minimum criteria to the satisfaction of the Department: The political subdivision shall be able to provide staff to perform adequately the functions of the following positions: A rehabilitation director, experienced in operating a rehabilitation program, supervising employees, and dealing with the public, A building inspector, experienced in residential rehabilitation, cost estimation, writing specifications, blueprint reading, and residential inspections, and trained to understand and apply the appropriate codes and rehabilitation standards, A loan underwriter, experienced in mortgage lending and financial processing of loans, and Clerical and administrative staff trained to ensure prompt and efficient processing of applications, draw schedules, and other required items; The rehabilitation staff of the political subdivision shall be capable of: Determining local rehabilitation needs evidenced by completion of a housing assistance plan, a local comprehensive plan, or local housing plan, Establishing a rehabilitation program, evidenced by prior experience in the development and operation of a rehabilitation program, Evaluating loan applications, and Monitoring both the loans and the work done under those loans; The political subdivision shall execute and comply with the terms of an agreement required by the Department. Certification of Level II Local Administrators. The Department may certify a political subdivision to originate and administer loans in any amount, as well as approve loans in the amount of $30,000 or less, when: The political subdivision meets the criteria outlined in §B of this regulation to the Department's satisfaction; and The Department determines that the rehabilitation staff of the political subdivision is capable of: Evaluating, recommending, approving, or rejecting loans, Scheduling and executing loan closings, Monitoring construction activities, Closing out loan accounts, and Providing financial information to loan servicers and the Department. Subcontracting Program Administration. A political subdivision may subcontract its duties and responsibilities as a local administrator under this chapter, except as provided in §D(2) and (3) of this regulation, with the approval of the Department. The duties described in §§B and C of this regulation may be carried out by staff of the local administrator or its subcontractor. A political subdivision may not subcontract the holding and disbursement of loan funds described in Regulation .15B and K of this chapter except to a subcontractor which meets the following criteria to the satisfaction of the Department: The subcontractor meets the criteria of §§B and C of this regulation; Any employee of the subcontractor with access to the loan funds shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; and The subcontractor provides the local administrator and the Department with quarterly statements of: All loan funds held and disbursed by the subcontractor under Regulation .15C(2) of this chapter, and The balance of funds on hand; The subcontractor provides the local administrator and the Department with an annual audit conducted by an independent certified public accountant and prepared in accordance with generally accepted auditing standards; and The subcontractor complies with any other requirements established by the Department. Periodically, at the request of the Department, each local administrator shall submit a rehabilitation plan satisfactory to the Department as outlined in Regulation .20 of this chapter, and shall agree in writing to administer the Program in conformance with these regulations and with any other procedures prescribed by the Department. Revocation of Certification. The Department reserves the right and expects to monitor periodically the loan administration of certified local administrators, and may revoke certification upon determination that the local administrator is administrating the loans in a manner inconsistent with the intent of the Program. Special Requirements for Local Administrators and Their Subcontractors. Local administrators and their subcontractors shall maintain financial records of loan disbursements for at least 3 years, and shall make them available for review by the Department at all reasonable times and as set forth in Regulation .21 of this chapter. Any noncomplying loan approved by a level II local administrator shall either be amended, with the borrower’s concurrence, to comply with the Program’s requirements, or purchased from the Department by the political subdivision. Periodically, at the request of the Department, each local administrator shall submit a rehabilitation plan satisfactory to the Department as outlined in Regulation .20 of this chapter, and shall agree in writing to administer the Program in conformance with these regulations and with any other procedures prescribed by the Department. Local Administration Fee. The Department may, at its sole discretion, pay a local administrator an annual fee for administering loans made under the Program. Department Authority. When the Department, in its sole discretion, administers a loan, the Department shall have the authority that a local administrator would have under these regulations, in addition to its authority as the Department. Certification of Borrower's Household Income. At initial occupancy, and at least every 5 years after that, each borrower shall submit to the Department a signed certificate of annual income for each member of the household 18 years old or older, along with verification documentation acceptable to the Department. The exception set forth in §A(1) of this regulation does not apply to accessory loan borrowers whose eligibility depends on tenant household income. Certification of Each Tenant's Household Income. Before initial occupancy and at least every 5 years after that, borrowers shall obtain a completed, signed income certification from all persons who occupy, or will occupy, the property as accessory, shared, or sheltered housing tenants. Borrowers shall certify to the Department at initial closing, and annually after that, that each household residing in a building unit has an annual income that does not exceed the then current income limits. The certification of the borrower shall show the current rent being charged for each unit. The borrower shall retain records documenting the information in the initial and annual income certifications for 3 years. The department reserves the right to inspect income certification records held by the borrower at any time. The requirement set forth in §A(2) of this regulation does not apply to accessory loans if eligibility for the loan depends on the borrower's household income. A borrower, contractor, local administrator, or subcontractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program , or in any aspect of employment by any borrower, contractor, local administrator, or subcontractor in connection with any property financed or assisted under the Program. Each borrower, contractor, local administrator, and subcontractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended. The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. It is the intent of the Department that Program funds be distributed Statewide. Monies appropriated to the Program shall be made available Statewide on a first-come, first-served basis. Applications by a political subdivision for use of Program funds shall comply with a rehabilitation plan periodically prepared by the political subdivision and submitted to the Department. A rehabilitation plan includes the following: Documentation that a political subdivision is capable of satisfying the requirements to be a level I or level II local administrator as described in Regulation .16 of this chapter; A map of the jurisdiction showing the location and boundaries of neighborhood revitalization areas, and any other areas in which loans will be used in conjunction with federal programs assisting the rehabilitation of housing; As an attachment, any locally approved plans or programs or neighborhood revitalization with supporting data, including a description of housing conditions, general social and economic characteristics, and identification of public improvements or services recently implemented or planned for the area; and A description of the manner in which funds are to be used. A rehabilitation plan shall be prepared and submitted to the Department before certification as a local administrator, and shall be updated as may be requested periodically by the Department. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of a borrower shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the Department. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between them and the borrower. Combining with other Loans and Grants. Program loans may be made in conjunction with other federal or State loan or grant programs, provided the requirements of the Act and these regulations are met. The Program shall be administered to the extent possible to ensure maximum utilization of available federal funds. Program Guidelines. The Department may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of loans or to the Program. Copies of these guidelines shall be available for examination at the offices of any local administrator and at the Department's principal office. The Department, upon request, shall provide copies to the public for a reasonable charge. Fees. The Department may charge commitment fees, application fees, closing fees, or other fees, charges, or penalties to applicants, borrowers, or other individuals or entities that participate in the Program. The Department may restrict the fees and charges that servicers, local administrators, or other Program participants obtain from borrowers or applicants. Delegation. The Secretary may delegate to the Director, the Program Director, or to any other official or employee of the Department the authority to execute or approve any program documents or loan documents, including loan commitments and agreements with local administrators. In addition, through the agreement with the local administrator, specific staff members for the local administrator may be authorized by the Department to execute loan documents on behalf of the Department. False Statements. Any borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department or the local administrator originating the loan, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-933, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs used in connection with a loan necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in any emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §§4-910 and 4-926, Annotated Code of Maryland Effective date: Regulations .01—.15 adopted as an emergency provision effective August 28, 1986 (13:20 Md. R. 2190); emergency status extended at 14:2 Md. R. 123 Regulations .01—.15 adopted effective March 1, 1987 (14:4 Md. R. 413) Chapter recodified from COMAR 05.01.20 to COMAR 05.04.08 Regulations .02, .03, .06, and .07 amended effective June 7, 1993 (20:11 Md. R. 912) Regulation .03B amended effective February 22, 1999 (26:4 Md. R. 273); November 29, 1999 (26:24 Md. R. 1856) Regulations .04, .05, and .08—.15 repealed and Regulations .04, .05, and .08—.22 adopted effective June 7, 1993 (20:11 Md. R. 912) Regulation .04A amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .09D amended effective February 22, 1999 (26:4 Md. R. 273); November 29, 1999 (26:24 Md. R. 1856) Regulation .15 amended effective February 22, 1999 (26:4 Md. R. 273) Regulation .16D amended effective February 22, 1999 (26:4 Md. R. 273) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) Regulation .18A amended effective February 22, 1999 (26:4 Md. R. 273) These regulations prescribe the policies and procedures for making loans under the Program. The objective of the Program is to provide loans to sponsors to finance or refinance the costs of acquiring, constructing, and modifying buildings which will provide group homes for low income, elderly, handicapped, disabled, and other citizens of the State with special housing needs. The terms appearing in the Act have the meaning defined there and, in addition, the meaning used in these regulations. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 6, Annotated Code of Maryland. “Annual income” means annual income as defined by the United States Department of Housing and Urban Development in 24 CFR §5.609. “Applicable codes and standards” means the applicable construction, health, safety, fire, occupancy, and other codes and standards in force in the political subdivision in which the project is located. If these codes and standards do not exist or are determined by the Secretary to be insufficient to promote the purposes of the Act, then the codes and standards prescribed in COMAR 05.02.01 or 05.04.02, as applicable, shall apply. “Applicant” means an individual, limited partnership, or other legal entity applying for a loan under the Program. “Borrower” means an applicant who receives a loan under the Program. “Closing costs” means: Financing costs such as the appraisal fee, credit report fee, survey fee, title examination fee, loan origination fee, title insurance fee, and application fee; Title fees such as the attorney's fee, documentary stamps, recording fees, State and local transfer taxes; and Prepaid expenses such as property taxes, ground rent, hazard insurance, and any mortgage insurance premiums to be paid at closing. “Contract” means the agreement, as approved by the Department, between the borrower and the entity which is doing any construction or modification work to be financed by a loan. “Department” means the Department of Housing and Community Development, a principal department of the State. “Deputy Director” means the Deputy Director of the Division of Development Finance. “Director” means the Director of the Division of Development Finance, an organizational unit within the Department established under Housing and Community Development Article, §4-103, Annotated Code of Maryland. Group Home. “Group home” means a housing facility that offers: Supportive services or supervisory personnel to individuals with special housing needs who are not related to the group home sponsor; and Common, shared, or independent living, dining, kitchen, sanitary, and sleeping facilities. “Group home” need not include all of the facilities listed §B(11)(a) of this regulation if it provides emergency and temporary housing for homeless individuals. “Group home project” or “project” means the acquisition, construction, modification, or refinancing of a building which will provide a group home. “Group home sponsor” means a borrower under the Program who: Owns and operates a group home; and Is a nonprofit organization, an individual, or a qualified limited partnership. “Housing Finance Review Committee” or “HFRC” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, as amended. “Modification” means improvement, repair, renovation, or rehabilitation of an existing building to make it suitable for use as a group home or to eliminate any housing, building, fire, safety, health, or other code violations. “Necessary services” means the minimum amount of services required by any agency licensing the group home. “Nonprofit organization” means a corporation, foundation, limited liability company, or other legal entity, no part of the net earnings of which inures to the benefit of any private shareholder, member, or other individual holding an interest in the entity. “Person of lower income” means an individual or family whose total annual income does not exceed the upper income limits established by the Secretary from time to time. Two or more unrelated individuals residing in a group home do not constitute a family. “Political subdivision” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Maryland Constitution, the Mayor and City Council of Baltimore, and any of the 23 counties in Maryland. “Program” or “GHFP” means the Group Home Financing Program established pursuant to Housing and Community Development Article, §4-602, Annotated Code of Maryland, as amended. “Program Director” means the Director of Single Family Housing in the Division of Development Finance of the Department. “Qualified limited partnership” means a limited partnership qualified to do business in Maryland, wherein: Each of the general partners of the limited partnership qualifies as a nonprofit organization or is a wholly owned subsidiary of a nonprofit organization; and The limited partnership: Was formed for the purpose of undertaking a group home project that is eligible in whole or in part for federal programs or incentives, including low income housing tax credits; and Is organized so that the nonprofit organization is managing the project or will be the recipient of net cash flow or residual sale proceeds upon sale of the group home. “Secretary” means the Secretary of Housing and Community Development. “Supervisory personnel” means an adult supervisor who may be occupying the group home part or full time as required by any agency authority which licenses and monitors the operation of the group home. “Supportive services” means any services provided as an alternative to supervisory personnel. “Work write-up” means the scope of work or other description of group home construction or modification to an existing building. Group home sponsors shall meet the following minimum requirements to receive a loan: Be: An individual; or A nonprofit organization or qualified limited partnership that is in good standing and qualified to do business in Maryland; Have the legal capacity and all necessary legal authorization to incur the obligations of the loan under the Program; Not be under a debarment or suspension order of the Department under COMAR 05.01.05 or any other State or federal agency or department; Demonstrate creditworthiness and repayment capability acceptable to the Department; Demonstrate the capacity to: Undertake the project, Manage the group home, and Provide necessary services to the group home residents as defined in Regulation .03B(16) of this chapter; Provide supervisory personnel or supportive services acceptable to the Department; Agree in writing that at least 51 percent of the group home occupants, other than supervisory personnel, will be persons of lower income; Provide evidence acceptable to the Department that any financing being obtained outside the Program is assured and acceptable to the Department; Either: Have the required license to own and operate the group home or provide evidence acceptable to the Department that the license will be issued or that no license is required under State or local law; or Have a management agreement described in §J of this regulation with a manager who: Is licensed to operate a group home, and Meets the requirements of §§A, C, E, and F of this regulation; and Agree in writing either to operate the project directly, or, in the alternative, to operate it indirectly by entering into a management agreement in a form acceptable to the Department, with a manager acceptable to the Department. Buildings or properties to be acquired, constructed, modified, or refinanced with proceeds of a loan for the purpose of providing group homes shall meet the following requirements: Be located within the State; Be in compliance with zoning requirements for the proposed use; Provide: Common, shared, or independent living, dining, kitchen, sanitary, and sleeping facilities, or Emergency and temporary housing facilities for homeless persons; Provide supportive services or supervisory personnel as may be considered necessary by the sponsor or required by any licensing agency; Be in good repair and in compliance with applicable codes and standards, or be able to be made so with the proceeds of the loan or through other sources of funds, which may be a senior or a subordinate loan with terms and conditions acceptable to the Department; and Be adaptable for use as a group home by persons with special housing needs. If the group home will be occupied by four or more individuals, other nonresidential uses which may or may not be directly related to the housing facility may be included in the project, provided that the nonresidential uses: Offer goods or services for the benefit of lower income or otherwise disadvantaged persons; Do not exceed 10 percent of the gross square footage in the building; and Are in compliance with the zoning, approval, and permitting procedures of the local jurisdiction. The proceeds of a mortgage loan may be used to finance: Purchase of a newly constructed building to provide a group home; Permanent long-term mortgage financing, including refinancing; Purchase of an existing building to provide a group home; Modifications to a building purchased with a loan if the modification improves, repairs, renovates, or rehabilitates the building to: Make it suitable as a group home; or Eliminate housing, building, fire, safety, health, or other code violations; Closing costs associated with site acquisition, purchase, or refinance of a group home; Engineering, legal, title, survey, or architectural fees associated with the rehabilitation, purchase, or modification of a group home; Costs associated with site preparation and evaluation including soil borings, environmental review reports, and testing for environmental hazards; A refinance of an existing group home; Construction costs for a new building to be used as a group home; or Other development costs considered reasonable by the Department. Maximum Loan Amount. A program loan when aggregated with any other debt secured by the group home may not exceed the lesser of: Either: 100 percent of the appraised value of the property after modification, for program loans secured by a first mortgage or subordinate to another loan made or insured by the Department or one of its units;or 95 percent of the appraised value of the property after modification, for program loans secured by a mortgage which is subordinate to debt not made or insured by the Department or one of its units; The sum of the purchase price of the property, the closing costs, and the costs of any modification; The sum of the land acquisition, the costs of construction, and any closing costs; or A maximum house price set periodically by the program for the region where the property is located, unless the Department's Housing Finance Review Committee approves an exception on the following basis: There are no other reasonably acceptable properties available within the cost limit; or The property is larger than the usual group home financed by the program and will serve more than three individuals with special housing needs. Interest Rate. The interest rate to be charged on a loan shall not exceed an annual rate of 7 percent except as provided in §B(4) of this regulation. The interest rate to be charged on a loan may be as low as zero percent in exceptional circumstances, as determined by the Department. The interest rate for each loan shall be established by the Department, after taking into consideration the: Annual income of the individuals or families expected to reside in the group home; and Amount of income from operating the group home available to repay the loan with interest after payment of the cost of operating the group home and payment of debt service on any prior mortgage secured by the group home. If the annual income of the individuals or families occupying the group home changes so that the borrower no longer would qualify for the interest rate, the Department may increase the interest rate on the loan to a rate that would be permitted given the annual income of the individuals up to the prevailing conventional interest rate. Loan Term. The term of each permanent loan may not exceed 40 years and shall be based upon the borrower's ability to repay. The term of each construction loan may not exceed 1 year unless the Program determines a longer term is necessary based upon the size or scope of the project. Periodic Payment. Except for deferred payment loans, periodic payments shall be charged and applied first to escrows, when applicable, second to interest, and third to principal. Late Charge. Late charges, as permitted by law, may be imposed. Security for Loans. Program loans 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 applicable to the property. Except as provided in §F(2) of this regulation, the Department shall have a first position lien on the project property. A program loan may be secured by a subordinate lien mortgage or deed of trust if the borrower complies with Regulation .09 of this chapter and either: Obtains: Private financing for a portion of the project costs; and Any required consent of the superior mortgagee; or Receives a loan under: A federal program, other than the federal Section 202 Program, which requires a first mortgage or deed of trust; or The Department's Special Housing Opportunities Program. Loans may not be subordinate to loans made under the Federal Section 202 Program. Liens subordinate to the loan may be placed on the property provided that the Department and any superior mortgagee give any required consents. Change of Borrower Eligibility. If at any time at least 51 percent of the individuals or families residing in the group home are not persons of lower income or if the borrower ceases to satisfy the requirements of Regulation .04 or Regulation .11 of this chapter, the Department may, in accordance with the terms of the loan documents between the Department and the borrower, either: Increase the interest rate up to the then prevailing conventional mortgage rate; or Accelerate the payment of the entire principal and interest due under the loan. Change of Ownership. If at any time during the term of the loan the borrower sells, ceases to own, assigns, transfers, or otherwise disposes of all or any part of the group home or the borrower's interest in the group home without the Department’s prior written consent, the Department, in accordance with the terms of the loan documents between the Department and the borrower, may accelerate the payment of the entire principal and interest due under the loan. Escrow Account. The borrower shall make periodic escrow payments to the Department or its agent to ensure payment when due of any annual real estate taxes, ground rent, property insurance premiums, and, when appropriate, other items for which payments are required by the Department. Interest need not be paid to borrowers on escrowed monies. The Department may waive this requirement under any of the following circumstances: Such amounts are paid in escrow to a superior mortgagee; With respect to insurance premiums, the Department has adequate evidence that the borrower and the project are sufficiently covered under a blanket policy then in effect held by the borrower; or The Department has consented in writing to waive this requirement. Environmental Review. A Project financed by a program loan shall comply with applicable local, State, and federal environmental laws and regulations. Group home sponsors may be required, at the discretion of the Department, to conduct a screening of the proposed site for environmental conditions such as man-made hazards, storm water runoff, underground storage tanks, lead-based paint, radon gas, PCB's, and asbestos. If the initial screening indicates adverse or potentially adverse environmental conditions, the Department may require a more detailed physical investigation, review of historical records, testing, and treatment, or abatement of the environmental condition as a requirement of the loan. Title Insurance. The borrower shall provide an American Land Title Association (ALTA) Loan policy or other form of title policy approved by the Department and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Department, evidencing that title to the building and real property in and on which the group home is located on the date of closing is vested in the borrower, and containing only exceptions and encumbrances approved by the Department and the Office of the Attorney General. The title insurance policy shall be accompanied by a survey, certified in the manner required by the Department and the title company issuing the title insurance, showing that there are no easements or encroachments upon, or other matters pertaining to, the property, except those acceptable to the Department. The title insurance policy may not contain any survey exceptions. Property, Liability, and Other Insurance. At or before closing of a loan, and at such other times as required by the Department, the borrower shall provide evidence that the borrower, contractor, and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §C(1) of this regulation shall meet the following requirements: Be written by a company that has a currently issued certificate of authority or other evidence of appropriate registration or licensure from the Maryland Insurance Administration; Be in force at the time of closing; Not be terminable without prior notification to the Department; and Contain such other terms and coverage satisfactory to the Department. In addition to the requirements of §C(2) of this regulation, owner's liability insurance shall: Name the Department as an additional insured; and Remain in force for the duration of the loan. In addition to the requirements of §C(2) of this regulation, contractor's liability and contractor's builder's risk insurance, if applicable, shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §C(2) of this regulation, owner's property or hazard insurance shall: Name the Department as a loss payee and mortgagee; and Remain in force for the duration of the loan. In addition to the requirements of Regulations .07 and .08 of this chapter, for program loans secured by a subordinate mortgage or deed of trust, the borrower shall obtain from each superior mortgagee a written agreement, in the form acceptable to the Department and the Office of the Attorney General, as follows: Acknowledging and consenting to the subordinate lien of the Department; Agreeing to provide timely notice to the Department in the event of default by the borrower on the superior mortgage; and Agreeing to suspend acceleration and foreclosure of the superior lien for a reasonable period of time if the Department brings current and maintains timely payment due on the superior mortgage. In addition to the conditions and requirements of Regulations .07—.09 of this chapter, deferred loans shall comply with the requirements of §§B—D of this regulation. Deferrals. The loan documents may provide for deferred payments of principal or interest or both principal and interest. Term. The loan documents shall provide for repayment of deferred amounts at: The earliest possible date established by the Department; A sale or other transfer of the property or an interest in the property; Discontinuance of use of the property as a group home; or Maturity of the loan. The Department may, but need not, charge interest on deferred interest payments. As a condition of any group home loan, the borrower is required to meet the conditions of §B, C, or D of this regulation. Equity Participation. Except as provided in §B(2) of this regulation, the borrower shall remit to the Department, an amount of money at least equal to 25 percent of the difference between: The greater of: The gross sales proceeds from a resale of the group home, if any; or The appraised value of the group home; and The sum of: The current principal balance of the loan; The borrower's initial equity contribution; Payments of principal made by the borrower on the loan; and The documented cost of capital expenditures which directly benefited the group home. If the Department provides less than 1/2 of the total financing for the project, the percentage to be applied under the provisions of §B(1) of this regulation shall be the percentage of the total financing provided by the Department. Except as provided in §B(4) and (5) of this regulation, the borrower is obligated to remit the equity participation at the earliest to occur of: A default under any of the loan documents; Prepayment of the outstanding principal balance of the loan; Loan maturity; or Sale or other transfer of the group home or transfer without the Department’s consent of a controlling interest in the borrower. Equity Proceeds. The Department, in its discretion, may agree to defer receiving its share of equity proceeds in the following situations: The borrower is maintaining the project as a group home after the loan has been prepaid or matured; or The borrower has sold the project to a buyer that has agreed to continue the project as a group home, assume the program loan and the equity participation obligation, and comply with all applicable program requirements. If the Department defers its receipt of equity proceeds, the borrower or the subsequent buyer, as applicable, shall remit the deferred amount of the equity proceeds upon the occurrence of any of the following events: The current owner fails to operate the project as group home in accordance with the program requirements; The sale or other transfer of the group home or a transfer, without the Department's consent, of a controlling interest in the owner of the group home; or In the case of an assumed loan, any of the events listed in §B(3) of this regulation. The Department, in its discretion, may agree to defer receiving its share of equity proceeds for a project that the borrower is selling under the following conditions: The purpose of the deferral is to facilitate the purchase of a new group home property that the Department will finance; The equity payment may be deferred one time only; Either the borrower shall apply: All of its equity in the group home that is sold to the purchase of a new group home; or The same percentage of its equity share to the new group home as the percentage of the Department's equity share that is deferred and applied to the purchase of the new group home; If the existing group home is sold before the new purchase is made, then the equity to be rolled over into the purchase of a new group home shall be held in escrow by a third party acceptable to the Program director until the new property is purchased; The borrower may withdraw from escrow, with the written consent of the Program director, an amount needed for a down payment or other preclosing costs approved by the Program director, up to the amount of the borrower's share of equity in the group home that has been sold; If the funds held in escrow are not applied to the new purchase within 6 months from the sale of the existing group home, then the equity shall be paid to the Department and the borrower, in accordance with their respective shares, after the 6-month period has elapsed; An equity participation agreement or deed of trust shall be recorded against the new property to secure the Department's deferred equity contribution; and The value of the property to be purchased shall be greater than or equal to the deferred equity contribution plus any liens superior to the equity contribution. The Department may, in its discretion, require the borrower to remit all or a portion of the equity participation upon: Prepayment of a portion of the loan; or Subsequent financing secured by the group home. Deferred Interest. The Department may require the borrower to pay deferred interest at an interest rate which is up to 4 percent over the interest rate at which the loan amortizes. The deferred and accrued interest is payable at the time of sale, transfer, or conveyance of the project, maturity of the loan, or failure to maintain the group home in accordance with the requirements of the loan documents. The deferred interest shall accrue annually on the anniversary date of the loan based on simple interest on the outstanding principal balance of the loan. If accrued and deferred interest exceeds the profit from the sale of the group home, the Department may forgive that portion of accrued and deferred interest which exceeds the sale profit. Limited Annual Return. If the Department requires the borrower to enter into an agreement that limits the profit and rate of return on investment, a sponsor may realize an annual return not to exceed 5 percent of its initial equity investment. Initial equity investment is the difference between the replacement cost, as approved by the Department, and the amount of the mortgage loan. Limitations. The Department may specify, from time to time, the type of applications it will consider, and may limit, during any period, the type of applications it will receive. Applications may be limited on the basis of: The type of sponsor or type of equity providing primary financing of the project; The amount of local governmental contributions; The number or proportion of eligible residents who will reside in the project; Areas of the State; or Other factors the Department considers relevant. Procedure. The Department shall establish application and loan processing procedures that will facilitate the application and financing process. These procedures may be amended from time to time and shall be binding upon all applicants. Forms. Applications shall be made upon standard forms prescribed by the Department. Documentation. Applicants shall submit any documentation the Department requires including: A copy of the purchase contract, option, letter of intent, or other indication of ability to acquire property; For nonprofit organizations and qualified limited partnerships, executed and certified copies of organizational documents; For a nonprofit organization or qualified limited partnership, evidence acceptable to the Department of the nonprofit status of the entity, the members, or the general partners of the entity, as applicable; Financial statements or certified tax returns of the applicant for the preceding 3 years; Certified personal financial statement of individual applicants; For nonprofit organizations, a resolution from the appropriate governing body of the borrower, authorizing the loan application and signatories; For projects providing housing for four or more individuals, evidence of zoning compliance or submission of an application for zoning approval; Evidence of availability of other capital funds proposed for the acquisition or modification; Copies of contracts from governmental or other agencies for operating funds; A schedule of rates to be charged to residents; A list of other facilities owned or operated by the applicant including: Name of facility, Address, Number of residents/households served, Annual operating budget amount, Length of time owned/operated, and Mortgages secured by projects; A description of current or proposed residents showing: Names, Monthly payment, Household size, and Gross annual income; Photographs of the building and site; Preliminary plans and specifications, if available, or a contractor's proposal for any modifications to be funded by the loan; Sufficient information and documentation to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the building or property; A list of credit references if requested by the Department; and Other documentation the Department may specifically request. Eligibility Determination. An application is subject to an initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is eligible, appropriate verification forms shall be distributed, credit reports shall be obtained, and the applicant shall be provided with a letter acknowledging receipt of the application. If the applicant is ineligible for a program loan, the applicant shall be informed in writing of the determination and the reasons for it under §H of this regulation. Building and Site Evaluation. Each building or site shall be inspected by the Department to determine if the: Building is structurally sound or will be structurally sound upon completion of the improvements; Proposed improvements are eligible; and Site is suitable for construction, if applicable. Construction Cost Evaluation. The Program may make a determination that the costs of new construction are comparable to the costs of the proposed acquisition and rehabilitation of an existing structure, or that new construction would better serve the special needs of those who will occupy the group home. Appraisals. The Department may require an appraisal of the property showing the property's value after installation of the modification or completion of the construction. Appraisals may be performed by staff of the Program. Loan Analysis. Upon receipt and approval of contractor's proposals, if applicable, and all documentation and credit information, the Program shall undertake a commitment analysis of each loan as to loan amount, interest rate, repayment provisions, and other loan terms and conditions. Loan Approval. Program loans must be approved by the Secretary or the Director and, if so required by the Housing Finance Review Committee policies then in effect, receive a recommendation of approval from the Housing Finance Review Committee. If authorized by the Secretary or the Director, the Deputy Director may approve a loan in lieu of the Secretary or the Director. In an emergency when urgent action is required, program loans which would otherwise require Housing Finance Review Committee review may be approved by the Secretary or the Director without the recommendation of the Housing Finance Review Committee. Loan Commitment. Upon approval of a program loan, the Department shall issue a commitment letter setting forth the interest rate on the loan, the repayment provisions, and any other terms and conditions that the Department considers appropriate for the loan or the project. The Department shall specify a time limit within which the initial closing of the loan shall occur, which time limit may be extended at the Department's sole discretion. If initial closing does not occur within the time limit specified by the Department, the Department may use the monies committed for the loan for any other loan or purpose authorized by the Act and these regulations. Loan Rejection. If a loan application is rejected, the Department shall notify the applicant in a letter which states the reason the loan is rejected. Loan Reconsideration. An applicant may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Application Fee. The Department may require applicants for loans, except in hardship cases, to pay an initial application fee to cover some portion of the cost of processing the loan, including any credit reports. Withdrawal of Application. An applicant may withdraw an application at any time before closing of the loan, by written notice to the Department. The applicant shall bear any costs incurred for items other than internal processing including, but not limited to, title examinations, credit reports, and appraisals. Loan Closing. Time and Place. The loan closing shall be scheduled at a time and place acceptable to the borrower, the Department, and the Office of the Attorney General. Closing shall be conducted by a title company acceptable to the Department. Charges and Fees. The Department may charge the borrower the following items, if applicable, which may be financed by the loan: Recording fees and recording taxes or other charges incident to recordation; Survey charge and appraisal fee; Title examination and title insurance; An initial administrative fee to cover the costs of servicing the loan; and A closing fee. Mortgageable Items. At the Department's discretion, all closing costs are mortgageable items. General Requirements. A contractor entering into a contract for a project shall: Meet all applicable State and local licensing requirements; Be of good reputation, financially sound, and fully qualified to perform the required work outlined in the work write-up as evidenced by previous professional rehabilitation experience; Provide insurance coverage for comprehensive public liability, property damage liability, and worker's compensation in the form and amounts required by the Department; Perform all work in a competent, workmanlike manner equal to the standards of the industry, in conformance with the contract, applicable codes and rehabilitation standards, and any other applicable laws, local codes, and Departmental rehabilitation standards, whether covered by the work write-up and drawings for the work; Comply with all applicable laws, ordinances, and regulations relating to the protection and safety of persons and property; Furnish all labor, materials, and equipment, and obtain and pay for all licenses and permits required to construct or modify the group home in accordance with the contract documents and the work write-up; Not assign the contract without the prior written consent of the borrower and the Department; Agree to complete all construction or modification specified in the work write-up by the date required by the contract; Indemnify and hold the Department harmless from all liability and loss because of injury to or death of any person or damage to any property which may occur or be alleged to occur during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractors, or their agents, servants, and employees; and Defend all suits or claims involving those in §A(9) of this regulation at its sole cost and expense. Guarantees. In addition to all remedies and guaranties provided by law, a contractor entering into a contract for a project shall agree to make, at its sole cost and expense, all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as becomes necessary by reason of faulty workmanship or material, which appear within a period of 1 year from the date that the required form of certificate of completion is filed with the Department. If any longer guarantee period is specified for any particular materials or workmanship under the work write-up, or under any subcontract, in connection with any manufactured unit which is installed in the building, or under the laws of the State, the longer period governs. Identity of Interest Contractors. Group home sponsors may act as general contractors only with the prior written approval of the Department. Application forms to the Department to obtain the approval shall be provided upon request by the Department and shall be submitted and approved before submission of the bid proposal. Completion Assurances. Performance and payment bonds, each in an amount equal to 100 percent of the contract price or, alternatively, cash or an irrevocable letter of credit equal to 25 percent of the contract price, and an assurance of completion agreement or other assurance of completion, may be required on any project at the option of the Department. General. As required by applicable codes and rehabilitation standards, building permits shall be obtained before loan closing, and are required to be posted at the project before the beginning of construction or modification. Work done, materials supplied, and construction procedures employed shall comply with all contract documents, applicable codes and rehabilitation standards, and these regulations. The Department's general requirements and specifications guidelines will be furnished on request. Contract Documents. Contract documents may include, but are not limited to the following: Structural soundness certification; Building or rehabilitation loan agreement; Specifications or work write-ups; Contractor's proposal; Architectural or engineering drawings, or both; Construction or rehabilitation contract; Change orders. There shall be no modification of any contract document without the prior written consent of the Department, as evidenced by an approved change order, executed by the Program, the contractor, and the borrower. The Borrower and the Contractor. The borrower and the contractor shall cooperate to facilitate timely performance of the construction or modification work and selection of materials. The borrower shall provide the contractor access to the property during normal business hours, and shall permit the contractor to use existing utilities for the execution and completion of work, at no cost to the contractor unless specified otherwise. The borrower is responsible for removing and replacing rugs, furnishings, and other personal property, unless otherwise provided in the contract documents. The borrower and the contractor shall protect and maintain the property and improvements in accordance with the contract documents. The borrower and the contractor, and each of them, shall hold and save the Department harmless from any and all loss, claim, cost, or damage of every kind, nature, and description arising from or related to the contract documents. Communications relating to content or performance of the contract shall be in writing, and copies sent to the Program. Inspections. The Department, in its sole discretion, shall determine the frequency and level of inspections during construction or modification, taking into consideration: The capability of the borrower; The demonstrated experience and reliability of the contractor; The amount of the loan; The availability of local technical assistance; and Other factors considered relevant by the Department. The Department may charge borrowers a fee for inspections during construction or modification. Construction Disputes. If disputes between the contractor and borrower occur, the Department shall recognize the findings of the Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General. Termination of Contracts. Contracts may be terminated for cause in accordance with the loan documents, contract documents, and Program policies and procedures. Payments Generally. Loan funds may not be disbursed if there is any arrearage of interest payments or escrows required by the loan. Loan proceeds designated to finance modification or construction costs shall be held in escrow by the Department and disbursed at the discretion of the Department either upon completion of the modification or construction, or in accordance with a payment schedule approved by the Department. Payments of construction draws shall be by joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director. Except as provided in §C of this regulation, payments shall be made for work completed only. Payments may not be made for materials delivered to the site but not installed in the project. Payment of construction draws shall be requested by the borrower. Loan funds may be disbursed to the borrower upon request, except for final draws or as otherwise provided for in §F(1), (2), or (3) of this regulation. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 10 percent of the contract costs. Initial Payments. The portion of the loan used to finance the purchase of the building or land closing costs shall be disbursed at loan closing. Progress Payments. Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipt or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the Department. If a request for payment is refused, the Program shall notify the borrower. The determination of the Program as to percentage of work completed is final. Final Payment. Final payment shall be made as set forth in §E(2)—(5) of this regulation. The borrower shall submit to the Program a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents. Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed. If, in the opinion of the Department, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, then the Program may follow the procedures described below: The Program may require the borrower to explain in writing, within 10 days, why the Department should not make direct payment to the contractor; If the borrower responds within the 10-day period and requests a meeting, the Program Director shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment; The Program may then approve direct payment to either the contractor or the borrower. If the Program receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, and all loan funds have not yet been disbursed, the Department shall retain an amount equal to the lesser of all funds not yet disbursed and the amount sufficient to satisfy the claims until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Retainage. The Program shall retain until final payment 10 percent of the construction costs for all projects for which the borrower is responsible for project inspections. The Program, at its discretion, may elect to retain until final payment 10 percent of the construction costs for any other project, taking into consideration: The type of project; The contractor's experience; and Other factors the Program considers relevant. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the Department. Closeout Procedures. After final payment is made, the Department shall reconcile all receipts and disbursements. Funds remaining in the loan amount shall be disbursed to the borrower or applied to the principal balance of the loan, as determined by the Department. A shortage due to overpayment shall be remitted by the borrower. If reimbursement of the overpayment is not made by the borrower within 60 days of receipt of the letter, the Department shall pursue any appropriate legal remedies for collection. The group home sponsor shall obtain, before initial occupancy and every year after that, a completed income certification form from all persons of lower income who will occupy the group home. Initial certification and periodic certification of income shall contain such information as may be required by the Department. Certificates are subject to review by the Department at any time. For projects when existing tenants will continue occupancy during modification, the group home sponsor is required to obtain income certificates from income eligible persons of the group home before initial closing of the loan. The purpose of the certificates of income and the reports is to assure compliance with the upper income limits established in accordance with Housing and Community Development Article, §4-601(d), Annotated Code of Maryland. In the case of a project which receives federal assistance, the procedures for the certification of income prescribed by the federal agency may be employed to meet the Department's income certification requirement. The group home sponsor shall retain all certificates of income and documents verifying the information contained in them for a period of at least 3 years from the date on which the income certification is submitted to the group home sponsor. A borrower or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the program, or in any aspect of employment by any borrower or contractor in connection with any property financed or assisted under the program. A borrower or contractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18 Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may require from time to time. The books, accounts, and records in §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of the borrower shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the Department. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between the contractors and subcontractors and the borrower. Funding. The Department shall publicize from time to time the availability of moneys to make loans. However, the Department may consider an application for a loan or may establish beginning and ending dates for the receipt of applications. Program Guidelines. The Department may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of loans or to the Program. Copies of these guidelines shall be available for examination at the Department's principal office. The Department, upon request, shall provide copies to the public for a reasonable charge. Fees. The Department may: Charge any commitment fees, application fees, closing fees or other fees, charges, or penalties to applicants, servicers, borrowers, or other individuals or entities that participate in the Program; and Restrict the fees and charges that servicers or other Program participants obtain from borrowers or applicants. Delegation. The Secretary may delegate to the Director of the Division of Development Finance of the Department, the Program Director, or any other official or employee of the Department or the Program the authority to execute or approve any Program documents or loan documents, including loan commitments and eligibility letters. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act, if in the written determination of the Secretary: Conformance to the requirements of any federal, state, or local programs in connection with providing financing to the project necessitates waiver or variance of a regulation; or The application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. An applicant who knowingly makes or causes to be made a false statement or report for the purpose of influencing any action of the Department on a loan application or for the purpose of influencing any action of the Department affecting a loan already made is guilty of a misdemeanor and, on conviction, is subject to the criminal penalties authorized by Housing and Community Development Article, §4-612, Annotated Code of Maryland. Housing and Community Development Article, §4-606, Annotated Code of Maryland; Executive Order 01.01.1992.27C Effective date: Regulations .01—.15 adopted as an emergency provision effective February 23, 1987 (14:6 Md. R. 704); adopted permanently effective July 27, 1987 (14:15 Md. R. 1657) Chapter recodified from COMAR 05.01.19 to COMAR 05.04.09 Regulations .01—.15 repealed and new Regulations .01—.21 adopted effective May 25, 1992 (19:10 Md. R. 929) Regulation .02 amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .03B amended effective November 29, 1999 (26:24 Md. R. 1856); February 7, 2011 (38:3 Md. R. 151) Regulation .04A, I, J amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .04E, F amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .05A amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .05C adopted effective January 2, 1994 (20:25 Md. R. 1942) Regulation .05C amended effective June 5, 1995 (22:11 Md. R. 818) Regulation .05C repealed effective April 5, 1999 (26:7 Md. R. 537) Regulation .06 amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .07 amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .08 amended effective April 19, 2010 (37:8 Md. R. 614) Regulation .08A, C amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .08B amended effective November 29, 1999 (26:24 Md. R. 1856) Regulation .09 amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .11B amended effective November 7, 1994 (21:22 Md. R. 1873) Regulation .11B, C amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .12D amended effective January 2, 1994 (20:25 Md. R. 1942); February 7, 2011 (38:3 Md. R. 151) Regulation .13 amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .13F amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .16 amended effective November 29, 1999 (26:24 Md. R. 1856) Regulation .16F amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .17A amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) Regulation .18B amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .20D amended effective November 29, 1999 (26:24 Md. R. 1856) These regulations prescribe the policies, procedures, and authorizations for establishing and administering a program to assist in financing improvements to residential dwellings throughout the State through the purchase of loans from lending institutions or through the making of loans by the Administration. The objective of the program is to provide financing assistance to encourage improvements to residential dwellings including the installation of property improvements, energy conservation improvements, and solar energy systems to upgrade and improve the livability and habitability of residential property, to reduce energy consumption in residential property, and to promote utilization of solar energy in residential property. Terms defined in the Act have the meanings set forth in the Act. In addition, the terms set forth below have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, as amended. “Administration” means the Community Development Administration, a division of the Department of Housing and Community Development. “Borrower” means a natural person or persons, partnership, corporation, or other business entity that is eligible for a loan under the program. Applicants for a loan are borrowers until they are determined ineligible for a loan. “Code” means the Internal Revenue Code of 1954, as amended, and the regulations issued under that Code. “Department” means the Department of Housing and Community Development. “Energy loan” means a loan or a portion of a loan, the proceeds of which are used exclusively to finance energy conservation or solar energy improvements set forth in Regulation .06B, below. “Families of limited incomes” means families or persons whose incomes do not exceed the income limits established by the Secretary for the program pursuant to the Act. “FHA” means the Federal Housing Administration of the Department of Housing and Urban Development. “Lender” means any lending institution that: Maintains an office in the State; Originates and services home improvement loans in the State; Is a member of, or subject to regulation by, the Federal Savings and Loan Insurance Corporation, the Federal Deposit Insurance Corporation, the National Credit Union Administration, or Maryland Savings Share Insurance Corporation, or any successor, or is qualified to sell deeds of trust to and service deeds of trust for the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; Has a contract of insurance from the appropriate loan insuring entity; As determined by the Administration, is able to repurchase property improvement loans if required to do so; and As determined by the Administration, is able to make any representations and warranties that the Administration requires. “Loan” means any loan made under the program. “Mortgage” means any mortgage or deed of trust on a residential property, improvements to which are financed by a loan. “MHF” means the Maryland Housing Fund, a division of the Department of Housing and Community Development. “Multifamily property” means any residential property containing: One or more dwelling units which are occupied by families other than the owner; or Two or more units, one of which is occupied by the owner. “Program” means the Administration's Home and Energy Loan Program. “Property improvement loan” means a loan or portion of a loan, the proceeds of which are used to finance any eligible improvements set forth in Regulation .06A, below. “Residential property” means any building that is used or proposed for use primarily for human dwelling purposes on a year-round basis. “Secretary” means the Secretary of Housing and Community Development. “Single family property” means any residential property containing not more than one unit which is the principal residence of the owner or which will be the principal residence of the owner by the earlier of the date of completion of improvements financed by the loan or 60 days from the date of the loan. “Title I” means Title I of the National Housing Act as amended. “Trust indenture” means any trust indenture, bond resolution, certificate, or other similar document, including amendments and supplements, that authorize the issuance and sale of bonds or other obligations of the Administration, the proceeds of which finance the loans. For loans made to improve single family properties, each borrower shall meet the following requirements: Be a natural person; Own the property in fee simple or under a ground lease; Occupy or intend to occupy, by the earlier of the date of completion of improvements financed by the loan or 60 days from the date of the loan, the property as a principal residence; Have the legal capacity to incur the obligations of the loan; Demonstrate creditworthiness and repayment ability acceptable to the Administration; If the loan is a property improvement loan, be a family of limited income. For loans made to improve multifamily properties, each borrower shall meet the following requirements: If a business entity, be in good standing and be qualified to do business in Maryland; Own the property in fee simple or under a ground lease; Have all necessary legal and corporate authorizations to incur the obligations of the loan; Demonstrate creditworthiness and repayment ability acceptable to the Administration; If the loan is a property improvement loan, agree in writing that not less than 51 percent of the total dwelling units shall be occupied by families of limited incomes; Except in the case of a multifamily property of two or four units, one unit of which is occupied by the owner, covenant and agree in writing that not less than 20 percent (15 percent if the property is located within a “targeted area” within the meaning of §103 of the Code) of the units in each property are to be occupied by individuals of low or moderate income as determined by the Secretary of the United States Treasury in accordance with §103 of the Code. The Administration may require that this covenant be recorded among the land records of the jurisdiction in which the property is located. All properties for which a borrower receives a loan under the program shall meet the following requirements: The property shall be located in Maryland; The property shall be a permanent structure used primarily for year-round residential use; The property shall need property improvements or shall benefit from energy conservation measures in order to improve its habitability, livability, and energy efficiency; The property shall be owned by an eligible borrower who shall provide assurance of title or evidence of ownership acceptable to the program; and In the case of a multifamily property containing two to four dwelling units, one unit of which is occupied by the owner, all units shall have been used exclusively for residential purposes at least 5 years before the execution of the loan. Condominiums and cooperatives may be eligible if the requirements of §A of this regulation are met. Improvements to a multifamily property, except an owner-occupied multifamily property of two to four units, may not be financed by a loan unless the improvements to the property comply with the notice, public hearing, and public approval requirements of §103 of the Code. Improvements to multifamily properties may not be financed by loans unless the: Secretary has issued a determination that the improvements constitute a community development project within the meaning of the Act. Administration has received a certified copy of an approving ordinance or resolution duly adopted by the legislative body of the municipal corporation or county, or Board of Estimates in Baltimore City, in which the properties are located, and approving the making of loans under the program. The chief executive officer of the municipal corporation or county, except when the officer is a member of the legislative body, shall approve the ordinance or resolution. Proceeds of property improvement loans may finance any improvement, alteration, addition, and repair that substantially protects or improves the basic livability of a residential property and that is eligible for financing under the regulations and requirements of any loan insurer. Eligible home improvements include without limitation the following: Enlarging structure; Repairing or replacing plumbing and electrical systems; Improving or replacing heating systems; Painting and plastering; Installing new bathrooms, kitchens, living rooms, bedrooms, and closets; Repairing or replacing roofs, ceilings, windows, stairways, and floors; Constructing private sidewalks, curbs, fences, or driveways; Installing a septic tank or cesspool; Drilling a well and installing pumping equipment and piping; Installing fire safety equipment; and Making any other improvements determined by the Administration to be consistent with the purpose of the program and the Act. Proceeds of energy loans may finance energy conservation or solar energy improvements that reduce the consumption of energy or increase the use of solar energy, including without limitation the following: Caulking; Weatherstripping; Insulation, including ceilings, walls, floors, ducts, pipes, or water heaters; Furnace efficiency modifications, including replacement burner, furnace or boiler, vent dampers, or intermittent pilot ignition device; Replacement air conditioner; Storm or thermal doors or windows; Siding; Heat reflecting and absorbing door or window materials; Devices associated with electric load management techniques; Clock thermostats; Automatic energy control system; Machinery, equipment, or a facility for using ground water as a heat source for a heating system or as a heat sink for an air-conditioning system; Any other improvement bearing a manufacturer's certification that the product has energy conserving properties or any improvement that the Administration determines provides energy savings with a pay-back within the term of the loan; Solar domestic hot water systems; Active or passive solar space heating systems; Additions, alterations, or improvements designed to use wind energy, energy produced by a wood burning appliance, or solar energy to reduce the energy requirements of the building; Earth sheltering in which the sheltering substantially reduces the consumption of energy by the building; Heating systems or appliances using renewable sources of energy; Planning and technical services, an energy audit, and conversion from master utility meters to individual utility meters, any of which are related to or undertaken with the installation of any of the energy conservation or solar energy improvements described above; Roof replacement to reduce energy loss caused by defective roofing materials where the replacement includes the installation of adequate attic or ceiling insulation; Other energy conservation projects or solar energy projects within the meaning of the Act; Other improvements determined by the Administration with the approval of the Secretary to conserve energy and to be consistent with the purposes of the Program and the Act. Installation of fireplaces, except as integral parts of a system that is designed to use solar energy, is not eligible for financing by an energy loan. Ineligible improvements include such items as barbecue pits, bathhouses, dumbwaiters, fire extinguishers, flower boxes, greenhouses, airplane hangars, kennels, kitchen appliances which are designed and manufactured to be free-standing and are not built-in and permanently affixed as an integral part of the kitchen in a residential structure, outdoor fireplaces or hearths, penthouses, photo murals, radiator covers or enclosures, stands, swimming pools, television antennas, tennis courts, tree surgery, waterproofing of a structure by pumping or injecting any substance in the earth adjacent to or beneath the basement or foundation or floors, entertainment facilities, landscaping, lawn sprinkling systems, saunas, and recreational facilities. The Administration may require that each loan be subject to a loan insurance policy that provides coverage for the Administration in the case of a loan default with terms and conditions that the Administration approves. If loan insurance is provided by the FHA Title I Property Improvement Loan Program or any insurance program of the MHF or of any other insurer approved by the Administration, the purchase or making of loans by the Administration shall be regulated by the regulations, handbooks, or guidelines of the insurance programs. Loans originated or purchased by the Administration shall meet the following terms and conditions: The Administration shall establish or determine an interest rate or rates and other charges and fees, if any, for loans that, together with other moneys made available for those purposes, are sufficient to meet the interest and other costs payable by the Administration for its revenue bonds or other obligations financing the loans, administrative expenses of the program, and possible losses due to loan defaults in the program. The interest rate or rates on loans may not exceed the maximum permitted by §103 or 103A of the Code as applicable. The Administration shall set maximum and minimum terms for loans taking into account the terms of the revenue bonds or other obligations issued to fund loans. Loans may be made in any amounts that are necessary to finance eligible improvements, but may not exceed the lesser of the limits set by any loan insurance program, if applicable, or: $15,000 for each property containing from one to four units, one unit of which is occupied by the owner; or $30,000 for the first dwelling unit and $20,000 for each additional dwelling unit for each property containing: One to four units, all units of which are occupied by families other than the owner, or Five or more units. Borrowers shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term. Borrowers shall pay any servicing fees, loan insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law. Securing of Loans. Loans shall be secured as required by the Administration and any loan insurer. Property improvement loans shall be secured by a mortgage. Energy loans in an original principal amount greater than $5,000 shall be secured by a mortgage. The Administration may require that energy loans in an original principal amount of $5,000 or less be secured by a mortgage. Borrowers shall maintain fire and extended insurance coverage in an amount not less than the outstanding principal amount of the loan and any other prior debt secured by the property. The Administration may prohibit assumptions of loans. Borrowers may prepay a loan to the extent permitted by the trust indenture. Borrowers may not refinance existing debt or work in place before approval of the loan. The loan shall comply with any restrictions or requirements of the trust indenture. Borrowers shall execute a note, a mortgage (if required), a borrower's affidavit, and any other documents that the Administration requires in order to evidence or secure the loan or to comply with the Code, the Act, these regulations, or the policies of the Department, Administration, or Program. Lenders participating in the Program shall be approved as originators in the FHA Title I Property Improvement Program, or the applicable loan insurance program of the MHF, or any other approved loan insurer, and be in compliance with all applicable State and federal laws, rules and regulations governing the business of the lender and the making of residential property improvement loans. The Administration may issue invitations to lenders to participate in the Program and to sell loans to the Administration if there are funds available to conduct the Program. Invitations will be mailed to all eligible lenders who request them or who are known to the Administration to be interested in participating in the Program. These invitations will include: The date by which the application and other documents shall be submitted to be considered for acceptance and the date by which the Administration shall issue a notice of acceptance or approval if the application is accepted; The time period during which the lender must commit to make loans and deliver loans to the Administration for purchase; The time or times, if any, within which the Administration must sell and deliver bonds on terms satisfactory to it, as a condition of any obligation to purchase loans; Other information which is necessary or desirable to inform lenders of the terms of the invitation. Lenders wishing to participate in the Program shall file an application with the Administration in response to the invitation. The application will include the aggregate principal amount of loans which the lender desires to originate and sell. The Administration may require commitment fees. Also, the Administration may require other information necessary or desirable to assist in approving applications and allocating funds. The Administration shall enter into a loan purchase agreement with lenders who are notified that their application has been accepted or approved. The agreement shall include detailed terms and conditions under which the lender will offer loans to the Administration for purchase and by which the Administration shall purchase the loans. The agreement shall require that as a condition of purchase of a loan that the loan satisfy all of the applicable requirements of §§103 and 103A of the Code. Political subdivisions or public utility companies may be authorized as agents of the Administration if they evidence the staff capacity and capability to evaluate loan applications and monitor rehabilitation undertaken pursuant to the loans. Political subdivisions or public utility companies seeking approval as agents shall submit a written application to the Administration on a form prescribed by the Administration specifying: Staff capacity and financial experience in lending, and experience in residential inspections; Prior experience in operating loan programs; Other relevant information the Administration may request which is necessary or desirable to assist in approving applications. Political subdivisions or public utility companies approved as agents of the Administration shall perform the following functions on behalf of the Administration: Marketing and promotion; Loan application intake; Evaluation of financial and rehabilitation proposals; Making recommendations to the Administration for loan approval or disapproval; Coordination with borrowers for execution of closing documents; and Monitoring rehabilitation and making recommendations to the Administration for release of construction draws. Political subdivisions or public utility companies approved as agents shall agree in writing to perform the functions in §C, above, in conformance with these regulations, the appropriate Program handbooks, and other procedures prescribed by the Administration. Political subdivisions or public utility companies approved as agents shall be required to secure the approval of the Administration or loan insurer, as applicable, before a loan is approved. The Administration may, in its sole discretion, allocate funds in aggregate amounts to lenders, political subdivisions, or the Administration between loans for single family properties and loans for multifamily properties. When applicable, funds will be allocated to targeted areas for the purposes of §103A of the Code. The Administration may accept or reject an application, and may specify in its notice of acceptance a lesser aggregate amount of loans than the amount requested in the application. All allocations will be made on the basis of need, population, demand for funds, and any other criteria that the Administration determines from time to time. Allocation of funds available or expected to be available among lenders will also be based on factors including: Aggregate amounts and distribution by county of loans and commitments requested by all lenders and by each lender; Financial condition of each lender; Amount and number of property improvement loans made in the State by each lender in the 2-year period preceding the application; and Previous participation of the lender in housing programs of the State or its subdivisions. The Administration will notify the lender of the aggregate principal amount of loans that the Administration will purchase from the lender; subject to the conditions of the loan purchase agreement and interest rate to be charged on the loans. Loans for multifamily properties insured by the MHF multifamily insurance program shall meet the following requirements: The sum of the original principal amount of the loan and total amount of prior outstanding indebtedness encumbering the property at the time of the closing of the loan may not exceed the then applicable limits for MHF multifamily insurance. The appraisal of the property as rehabilitated shall be sufficient to meet the ratio of the loan plus the amount of prior indebtedness encumbering the property to the value of the property determined by the: Administration in its applicable Program handbook; and MHF in accordance with its regulations or guidelines. The Administration shall examine any prior indebtedness encumbering the property to ascertain that the prior indebtedness resulted from reasonable and responsible underwriting and evaluation. The mortgage may be subject to indebtedness encumbering the property having priority to the mortgage. The Administration may prohibit encumbrances junior to the mortgage. Applications shall be made upon form documents required by the Administration. Sufficient information and documentation shall be provided to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property. Lenders, or the Administration, as applicable, shall be responsible for originating loans under the program. This responsibility shall include the: Acceptance of applications from borrowers; Review of applications for completeness and compliance with program eligibility standards; Determination of creditworthiness of the borrower using normal underwriting standards; Execution by the borrower of a note, mortgage (if required), and all other documents required by the Administration and the disbursal of all loan proceeds; Reporting of the loan for loan insurance and, in the case of lenders, the submission of the loan to the Administration for purchase. The Administration shall purchase all loans submitted by lenders for purchase after examination of the loans for compliance with the terms and conditions of the loan purchase agreement. Loans found not to be in conformance with the requirement of the agreement shall be returned to the lender. The Administration may delegate to political subdivisions some or all of the functions described in §A, above, in accordance with terms and conditions of the appropriate Program handbook. Loans found not to be in conformance with requirements of the Program handbook shall be returned to the political subdivisions. The Secretary may delegate to the Director of the Administration, or to other appropriate employees of the Department or the Administration, the execution or approval of any commitments to borrowers or lenders and any contracts, arrangements, agreements, or other documents that the Administration determines are necessary to evidence or secure any loan. Loans shall be subject to a loan servicing agreement to be prepared by the Administration. The agreement shall establish the procedures for the servicing of loans and may permit the deduction of a servicing fee by the servicer from the proceeds of loan repayments. This Program is intended to work in conjunction with local, State, and federal programs to the maximum degree possible. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or the trust indenture if: Conformance to the requirement of any federal agency in connection with any rehabilitation with respect to which federal assistance is sought necessitates waiver of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: Regulations .01—.16 adopted as an emergency provision effective June 1, 1983 (10:12 Md. R. 1065); emergency status extended at 10:25 Md. R. 2262 Regulations .01—.16 adopted effective December 5, 1983 (10:24 Md. R. 2184) Chapter recodified from COMAR 05.01.15 to COMAR 05.04.10 Regulation .05A amended effective January 2, 1994 (20:25 Md. R. 1942); April 5, 1999 (26:7 Md. R. 537) Regulation .06B amended effective April 25, 1994 (21:8 Md. R. 671) Regulation .13 amended effective January 2, 1994 (20:25 Md. R. 1942) Authority. These regulations are adopted under the provisions of the Community Development Administration Act, Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. Purpose. These regulations are intended to promote the purposes of the Act, Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, by implementing, interpreting, making specific, and otherwise carrying out the provisions of the Act within their scope. In particular, they are intended to provide basic information to nonprofit sponsors of special housing facilities which provide shelter and services to individuals with physical or mental impairments and special housing needs. Scope. These regulations apply to the program of insured or guaranteed loans made or purchased by the Administration with the proceeds of revenue bonds as authorized by , Housing and Community Development Article, §§4-227 and 4-245(a), Annotated Code of Maryland. Loans made or purchased under these regulations shall be made or purchased to finance special housing facilities undertaken by nonprofit organizations to house special needs populations. Loans made from the proceeds of revenue bonds for special housing facilities which provide shelter and services for individuals with special housing needs will be financed ordinarily under these regulations. The Department also makes loans for individuals with special housing needs under the State-funded group home program set forth at COMAR 05.04.09. Other projects financed with the proceeds of revenue bonds which provide multifamily rental housing are financed under COMAR 05.05.02 or 05.04.10. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development. “Department” means the Department of Housing and Community Development. “Director” means the Director of the Administration. “Families of limited income” means families or individuals whose incomes do not exceed upper income limits established by the Secretary in accordance with Regulation .05 of this chapter. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated under it. “Local government” means any of the 23 counties of the State, the Mayor and City Council of Baltimore, and any municipal corporation subject to the provisions of Article XI-E of the Constitution. “Nonprofit organization” means an organization whose organizational documents include among its charitable purposes the provision of housing to special needs populations, and which is currently recognized by the Internal Revenue Service as a tax-exempt organization under §501(c)(3) of the Internal Revenue Code. “Project” means a special housing facilities project. “Secretary” means the Secretary of Housing and Community Development. “Special housing facility” means a special housing facility under the Act that does not constitute residential rental housing for family units within the meaning of §145(d) of the Internal Revenue Code. “Special needs populations” means individuals with disabilities or special housing needs, including those who are developmentally or mentally disabled, physically or mentally handicapped, elderly, or juveniles in need of direct supervision, or otherwise in need of assistance due to special personal characteristics or circumstances. “Sponsor” means a borrower on a loan made by the Administration to finance a project and includes its successors and assigns by operation of law or as approved by the Administration or the Maryland Housing Fund. Sponsors shall meet all of the following requirements to qualify for a loan: Be a nonprofit organization; Be in good standing and be qualified to do business in Maryland; Have all necessary legal and corporate authority to incur the obligations of the loan; Either: Be licensed to operate the project by the appropriate State agency, to the extent required by State law; or Enter into a management agreement acceptable to the Administration, with a manager acceptable to the Administration that: Is licensed to operate the project by the appropriate State agency, to the extent required by State law, and Meets the requirements of §§A, B, E, F and G of this regulation; Either: Have a contract, acceptable to the Administration, with a State agency or county government; or Have a management agreement acceptable to the Administration with a manager acceptable to the Administration who has a contract as described in §E(1) of this regulation; Demonstrate: Financial credibility and stability, The capability to undertake the project, and Either: The ability to manage the project as evidenced by at least 2 years of prior management of the project or comparable projects; or In the case of a manager acceptable to the Administration, with whom the borrower has a management agreement acceptable to the Administration, the ability of the manager to manage the project as evidenced by at least 2 years of prior management of the project or comparable project; Not be under an order suspending or debarring the sponsor from participating in the Department's programs under COMAR 05.01.05, or under any similar order from any other State or federal agency; and Not have defaulted under a Department or other governmental loan. The project shall be a special housing facility, as defined in Regulation .02B(11) of this chapter. Fifty-one percent of the residents of the project, other than supervisory personnel, shall be families of limited income. Upon closing the loan, the special housing facility shall be owned by an eligible sponsor. The project shall be a single family dwelling unit. The project shall comply, if necessary, with the notice, public hearing, and public approval requirements of the Internal Revenue Code. The project shall conform upon completion with all applicable State and local laws, codes, and regulations, including zoning, building, and housing regulations and the regulations and requirements of any agency of State or local government governing supported housing for special needs populations. The project shall be, in the determination of the Administration, economically feasible so that the loan reasonably can be expected to be repaid in full, with interest. The project shall have a useful life of a length satisfactory to the Administration with reasonable maintenance. The project shall be subject to a contract with an agency of State or local government under terms and conditions acceptable to the Administration. For projects involving new construction or the acquisition of a newly constructed building, the project shall be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. The Secretary shall establish upper income limits for families of limited income taking into consideration factors including: The amount of the total income of the families available for housing needs; The size of the family; The cost and condition of housing facilities available; The ability of the families to compete successfully in the normal private housing market; and Standards and definitions established for pertinent federal and State housing programs. The Secretary may establish income limits for individuals and households by size on a regional basis, and may establish income eligibility criteria, within limits lower than the regional limits, for particular projects. For projects occupied by two or more unrelated individuals, each individual shall be considered a family of limited income for the purpose of determining compliance with the income limits established in this regulation. The Secretary may determine, from time to time, the percentage of occupants in a public purpose project which shall be families of limited income in order to qualify as an eligible project. The Secretary shall take into consideration such factors as the Secretary may consider appropriate. The Administration may make loans as follows, subject to the requirements of the Internal Revenue Code if the interest on the bonds used to finance the loans is exempt from federal income taxation: Construction mortgage loans in conjunction with permanent mortgage loans; Rehabilitation or property improvement mortgage loans in conjunction with permanent mortgage loans; Mortgage loans to refinance the outstanding principal balance of acquisition debt on a project; and Permanent mortgage loans, including permanent take-out financing. The Secretary may, from time to time, limit the Administration to the making of loans under selected categories of eligible uses set forth in §A of this regulation. The Administration may participate with other public or private lenders in the making of loans to finance projects. Loans may finance the costs associated with acquisition, construction, rehabilitation, or improvement of the project, including, subject to the requirements of the Internal Revenue Code if the interest on the bonds used to finance the loans is exempt from federal income taxation, the following: Costs of appraisals; Architectural and engineering costs for design and supervision; Costs of bonds, permits, and fees; Costs associated with site preparation and evaluation including soil borings, environmental review reports, and testing for environmental hazards; Carrying costs during construction, including construction interest, real estate taxes, and property insurance; Financing fees and charges imposed by the Administration or the mortgage insurer; Legal, processing, packaging, title, and closing fees, and other fees and charges; and Other costs and fees associated with the project acceptable to the Administration. Loans associated with refinancing existing debt may finance: The amount of existing principal debt on the property; Lender prepayment fees and charges; Legal, processing, packaging, title, and other closing fees; Other fees and charges relating to the loan; and Any other costs approved by the Administration. If there are expenditures relating to the project that are to be reimbursed, directly or indirectly, from the proceeds of tax-exempt bonds, the Administration shall have adopted an official intent resolution not later than 60 days after payment of the original expenditure and otherwise have complied with the Internal Revenue Code. Loans may not be used to finance salaries, services, or other operating costs of the project. For acquisition, construction, reconstruction, rehabilitation, and improvement loans, the Administration may lend up to an amount which does not exceed the lesser of: 75 percent of the appraised market value of the project; or The total cost of the project. For loans to refinance existing debt, the Administration may lend up to an amount which does not exceed the lesser of: 75 percent of the appraised market value of the project; or The amount of eligible costs under Regulation .06D of this chapter. By written determination, the Secretary may establish, from time to time, the maximum dollar amount of a loan which may be made to any project under the program. Term. Loans for permanent financing of projects may be for a term not to exceed 30 years, except that if the Administration elects to fund the project initially from a source other than proceeds of revenue bonds, then the term may not exceed 31 years and 6 months. The term of construction loans may not exceed 2 years and shall be based upon the type and size of the project and the extent of proposed construction or rehabilitation. Interest Rate. The Administration shall charge interest on the construction, rehabilitation, and permanent loans at a rate that, together with fees and charges by the Administration, covers the costs of issuance and interest that it pays on the revenue bonds or other obligations issued to raise the funds for loans and the allowable expenses of the Administration, including general operating expenses of the Department. Liens. Loans shall be secured by a mortgage or deed of trust. The mortgage to the Administration shall be a first lien on: The land and improvements; or A leasehold interest in the land which extends at least 25 years beyond the term of the loan and a fee interest in the improvements. The Administration may permit subordinate liens for other loans made by the Department or other lenders. Cross-Default and Cross-Collateralization. If two or more program loans are made to the same sponsor, the Administration may require loan documents to contain cross-default and cross-collateralization provisions applicable. Assumption and Prepayment. Loans may not be assumed without the prior written approval of the Administration and the mortgage insurer. Loans may be prepaid to the extent permitted in the loan documents. Generally, loans may not be prepaid for at least 10 years following loan closing. Payment. Sponsors shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term, except that if the term exceeds 30 years in accordance with §D of this regulation then, at the direction of the Administration, a sponsor may make initial payments of interest only for up to 18 months after the loan closing. In addition, the sponsor shall pay mortgage insurance premiums, any reserve for replacement deposits, and any operating reserve on a monthly or annual basis, as required by the Administration. Late Charges and Other Fees. Sponsors shall pay any servicing fees, loan insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law. Expense Escrows. The Administration shall require the sponsor to deposit monthly with the Administration 1/12 of the annual amount of real estate taxes and property insurance, unless the sponsor is not required to pay property taxes on the project and has acceptable blanket property insurance covering multiple properties. Security Requirements. The Administration may require the following instruments or guarantees to secure its loans: For new construction or substantial rehabilitation projects: Payment and performance bonds shall be provided each in an amount equal to 100 percent of the contract price, Cash or an irrevocable letter of credit equal to 50 percent of the contract price, The completion assurance required by the mortgage insurer; and Such other sureties or guarantees of the loan as may be determined necessary by the Administration or the insurer. Limited Income Occupancy. The sponsor shall execute a recorded agreement stating that as long as the loan is outstanding, or such longer period of time as the Administration may require, not less than a specified number of occupants of the project shall be families of limited income in accordance with Regulation .04B of this chapter. Limited Income Distribution. The Administration may require the sponsor to agree to limits on the disposition of operating income of the project after payment of all project expenses, including loan payments and mortgage insurance premiums required by the Administration and the State or county agency which provides operating subsidies to the project. Project Monitoring. The sponsor shall permit monitoring by the Administration or an approved agent of the Administration during the term of the loan of the: Physical condition of the project; Financial condition of the project and sponsor; and Incomes of those residing in the project. Management. The project shall be managed directly or, in special circumstances, under a type of management contract acceptable to the Administration and its bond counsel. Tax Compliance Agreement. The sponsor shall execute a legally binding covenant, to be recorded among the land records, requiring for as long as the loan is outstanding that: The sponsor shall continue to be a nonprofit organization; No portion of the loan may be used for a private business use or in an unrelated trade or business within the meaning of §513 of the Internal Revenue Code; The sum of the following amounts does not exceed $150,000,000: The Administration's §501(c)(3) bonds allocated to the sponsor; plus The outstanding tax-exempt nonhospital bonds allocated to the sponsor; The project qualifies as a special housing facility. For purposes of §E(3) of this regulation, sponsor includes any organization under common management or control as the sponsor, any related person, and any test period beneficiary within the meanings of the Internal Revenue Code. Appraisal. The Administration shall order an appraisal or require one to be ordered by the sponsor. The appraisal shall be performed by an appraiser acceptable to the Administration and shall show the current value of the property and the expected value of the property after completion of proposed improvements, if any. Environmental Review. A project financed by a loan shall comply with applicable local, State, and federal environmental laws and regulations. A sponsor may be required, at the discretion of the Administration, to conduct a screening of the proposed site for environmental conditions such as man-made hazards, storm water runoff, underground storage tanks, lead-based paint, radon gas, PCBs, asbestos, and other environmental hazards within the meaning of the environmental laws referred to in §C(1) of this regulation. If the initial screening indicates adverse or potentially adverse environmental conditions, the Administration may require a more detailed physical investigation, review of historical records, testing and treatment, or abatement of the environmental condition as a requirement of the loan. For properties built before 1950, the sponsor shall keep the property registered with the Department of the Environment under Environment Article, Title 6, Subtitle 8, Annotated Code of Maryland. Mortgage Insurance. Before any loan closing, the Administration and sponsor shall secure a commitment acceptable to the Administration to insure the proposed loan in an amount equal to 100 percent of the principal amount of the loan. The Administration and sponsor, as applicable, shall comply with any conditions of the insurance commitment so that the insurance shall attach from the time of closing. If a project is initially funded from a source other than proceeds of revenue bonds, and fails to be funded from proceeds of revenue bonds within 18 months of closing, then mortgage insurance may not be required after the initial period of up to 18 months. Title Insurance. The sponsor shall provide a standard American Land Title Association (ALTA) Loan policy or other form of title insurance policy approved by the Administration and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Administration that title to the building and the real property on which the building is located on the date of the loan closing is vested in the sponsor, and containing only exceptions and encumbrances approved by the Administration and the Office of the Attorney General. The Administration, in its discretion, may require the title insurance policy to include the ALTA endorsement form 100, comprehensive coverage, and ALTA endorsement form 8.1, environmental coverage, and such other endorsements as may be required by the Administration. The title insurance policy shall be accompanied by a survey certified in the manner required by the Administration and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property, except those acceptable to the Administration and the Office of the Attorney General. The title insurance policy may not contain any survey exceptions. Property, Liability, and Other Insurance. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §E(1) of this regulation shall meet the following requirements: Be written by a company that has a currently issued certificate of authority or other evidence of appropriate registration or licensure from the Maryland Insurance Administration. Be in force at the time of closing; Not be terminable without prior notification to the Department; and Contain such other terms and coverage satisfactory to the Department. In addition to the requirements of §E(2) of this regulation, owner's liability insurance shall: Name the Department as an additional insured; and Remain in force for the duration of the loan. In addition to the requirements of §E(2) of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §E(2) of this regulation, owner's property or hazard insurance shall: Name the Department as an additional insured, loss payee and mortgagee; and Remain in force for the duration of the loan. The Administration shall prescribe the form and content of all loan documents. The loan documents shall contain any terms and conditions that the Administration considers advisable. Loan documents shall be prepared by the Administration and may not be retyped or altered by the sponsor. The loan documents shall include all of the following documents, as well as any other documents the Administration may require: A deed of trust note obligating the sponsor to repay the loan; A deed of trust, security agreement, and assignment of rents, which is a recorded instrument securing the Administration's interest in the project; A building loan agreement for new construction and substantial rehabilitation projects, which agreement specifies the details for the construction or rehabilitation of the project, including, but not limited to those relating to construction draws, remedies, releases, and terms of construction; A regulatory agreement which establishes the duties and obligations of the sponsor regarding reserves for replacement, construction surplus funds, savings in the amount of State operating subsidies provided to the project, occupancy requirements and income limits, and operation and maintenance of the project in the public interest; A compliance agreement executed in recordable form containing the requirements set forth in Regulation .08E and other covenants and provisions as may be required by the Administration and its counsel; A sponsor's counsel opinion for loans in excess of a minimum amount determined by the Administration, which is a letter as to the legal sufficiency of the sponsor's commitments and agreements as expressed in the loan documents; and A certificate or affidavit of the sponsor concerning federal tax law compliance in the purchase and financing of the property. Form and Content of Application. Applications for loans are to be made on forms prescribed by the Administration, and should include all supporting documentation specified in the check list included with the application. Rejection of Applications. If the Administration determines that a project or sponsor is not eligible for a loan, the Administration shall issue a written notice of the determination of ineligibility. Reconsideration. Sponsors may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act, State Government Article, Title 10, Annotated Code of Maryland, or COMAR 05.01.02. Withdrawal of Application. A sponsor may withdraw an application at any time before closing of the loan by written notice to the Administration. The sponsor shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals. Commitment for Insurance. Before issuing a commitment for a loan, the Administration shall have secured a mortgage insurance commitment. Commitment. Except in the case of an emergency when urgent action is required, the Director shall submit all loans above a minimum amount, determined by the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, to the Committee for review and recommendation to the Secretary for approval, disapproval, or modification of the loan and the terms of the loan. At the discretion of the Administration, loans in an amount below the minimum amount established for the Housing Finance Review Committee need not be submitted to the Committee for review and recommendation. The Secretary, in accordance with Regulation .19E of this chapter, may delegate the review and approval of these loans. After receipt of a recommendation of the Housing Finance Review Committee, the Secretary may approve, disapprove, or modify the loan and the terms of the loan. In an emergency, when urgent action is required and for loans below the minimum amount established for the Housing Finance Review Committee, the Secretary may approve a loan without the recommendation of the Committee. The Secretary shall execute a written determination that each loan is to finance a special housing facility authorized by the Act, before the issuance of a commitment to make a loan or purchase a loan. Upon approval of a loan and execution of a determination, the Administration shall issue a commitment letter setting forth: The amount of the loan; The interest rate on the loan; and Other terms and conditions that the Administration considers appropriate for the loan or the project. The Administration shall specify a time limit within which the initial closing of the loan shall occur, which time limit may be extended in the Administration's sole discretion. If initial closing does not occur within the time limit specified by the Administration, the Administration may use the moneys committed for loan for any other loan or purpose authorized by the Act. The sponsor shall furnish or cause to be furnished to the Administration and the Office of the Attorney General satisfactory evidence of compliance with the terms and conditions of the loan before closing of the loan. The Administration shall require the sponsor to execute legal documents for closing in the form prescribed by the Administration. Only those modifications to the form documents necessitated by the business terms shall be approved for form and legal sufficiency by the Office of the Attorney General. Upon approval by the Administration and the Office of the Attorney General of the loan documents and a binder for title insurance, loan closing shall be scheduled at a time and place acceptable to the sponsor and the Administration through an approved title company. Construction Period Disbursements. If the loan finances construction or rehabilitation, the Administration shall: Conduct on-site inspections of the construction; Make construction loan disbursements on the basis of work-in-place, plus materials acceptably stored on-site, less a retention of up to 10 percent of the construction request; and Make disbursement for materials acceptably stored off-site, if the materials are: In a bonded warehouse; Set aside and labeled with the project's name; Inspected by the Administration's inspector; Insured with the Administration as a named insured; and Documented by evidence of payment for the materials. Cost Certification. For loans financing new construction and substantial rehabilitation under a cost-plus form of construction contract, the Administration shall require the sponsor and contractor to submit, upon completion of the project, a certification of project costs prepared by an independent accountant. Permanent Mortgage Closing. A closing shall be arranged after construction completion and cost certification according to procedures and documentation as may be required by the Administration. Amounts and time of payment of application fees, construction financing fees, permanent loan commitment fees, closing fees, issuance fees, and other fees as may be required by the Administration shall be as provided in a fee schedule set forth and revised from time to time by the Administration. The Administration may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of mortgage loans or to the program which do not directly affect the rights of the public or the procedures available to the public. Copies of the fee schedule and guidelines shall be available for examination at the Administration's principal office. The Administration shall make copies available to the public upon request. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Administration such financial and other reports as the Department from time to time may require. The books, accounts, and records required to be maintained by §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of: The borrower shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the Department; Contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between them and the borrower. The sponsor shall obtain verification of income from all those who occupy or apply to occupy the project, in a form acceptable to the Administration. For projects where existing residents will continue in occupancy after the loan is made, the sponsor shall obtain income verifications from not less than 51 percent of the residents who satisfy the income limitations established under Regulation .05 of this chapter before initial loan closing. The sponsor shall file with the Administration, at least annually, a report disclosing the income of all individuals in residency or selected for residency. Annual recertifications of income shall be undertaken by the sponsor. Documentation and income verification shall be maintained at the project for a period of at least 3 years from the date on which the application for occupancy is submitted to the sponsor. The sponsor shall make the documentation available for review by the Administration at the Administration's request. The sponsor shall submit such annual or other reports relating to the occupancy of the project and the income of residents occupying the project as may be requested by the Administration. The purpose of the certification of income and the reports is to assure compliance with the upper income limits required by Housing and Community Development Article, §4-212, Annotated Code of Maryland. A sponsor or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, sexual orientation, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the program , or in any aspect of employment by any borrower or contractor in connection with any property financed or assisted under the program. Each sponsor and contractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; The Americans with Disabilities Act of 1990, as amended; The Department's Minority Business Enterprise Program, as amended; and Executive Order 01.01.1989.18 Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Administration and the sponsor or other appropriate parties. Issuance of Bonds. The Administration may obtain funds for loans to finance projects from any source authorized by law, particularly by issuing bonds payable from revenues of the projects. In the event of any conflict, whether expressly so stated, the rights of sponsors or mortgagors under any mortgage or accompanying agreement with the Administration, which mortgage is financed by notes or bonds issued pursuant to a certificate of authorization or bond resolution, are subject to the rights of holders and owners of the Administration's bonds issued under the authorizing certificate or resolution. Project Selection. The Administration may, in its sole discretion, finance particular projects and decline to finance otherwise eligible projects based on its assessment of the project's overall merit and its merit relative to competing alternatives. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or contrary to the provisions of any applicable bond certificate or resolution: To conform to the requirements of the Internal Revenue Code, the bond documents, and any federal agency in connection with any project with respect to which federal assistance is sought; or In exceptional circumstances, if, in the written determination of the Secretary, the application of these regulations in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act, and waiver or variance of the specific regulations would not adversely impact the interest of any bond holders under the bond certificate or resolution. False Statements. A sponsor who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Administration or to any other official or employee of the Department or Administration the authority to execute or approve any program documents or loan documents, including commitments and letters of intent. Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: June 22, 1992 (19:12 Md. R. 1132) Regulation .01C amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .02B amended effective November 20, 1995 (22:23 Md. R. 1799); November 29, 1999 (26:24 Md. R. 1856) Regulation .03D, E, F amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .04 amended effective January 2, 1994 (20:25 Md. R. 1942); November 20, 1995 (22:23 Md. R. 1799); April 5, 1999 (26:7 Md. R. 537) Regulation .04G amended effective June 5, 1995 (22:11 Md. R. 818) Regulation .06D amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .07C, G amended effective November 7, 1994 (21:22 Md. R. 1873) Regulation .09 amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .09D amended effective November 7, 1994 (21:22 Md. R. 1873); November 29, 1999 (26:24 Md. R. 1856) Regulation .10B amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .11A amended effective January 2, 1994 (20:25 Md. R. 1942) Regulation .12C amended effective November 20, 1995 (22:23 Md. R. 1799) Regulation .14 repealed, Regulation .18 amended, and Regulations .15—.19 recodified to .14—.18 effective November 20, 1995 (22:23 Md. R. 1799) Chapter revised effective March 31, 2003 (30:6 Md. R. 419) Regulation .04J amended effective February 7, 2011 (38:3 Md. R. 151) Regulation .09E amended effective April 19, 2010 (37:8 Md. R. 614); February 7, 2011 (38:3 Md. R. 151) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) These regulations prescribe the policies, procedures, and authorizations for making construction, preconstruction, and land bank loans to nonprofit organizations and local governments. The basic objectives of the program are to provide: Construction-only financing to sponsors to acquire, construct, or rehabilitate adequate, safe, and sanitary single family and rental properties for occupancy by families of limited income, when permanent financing is assured; Financing to sponsors for preconstruction costs for the development of housing for occupancy by families of limited income, to eligible properties where construction and permanent financing is assured; and Land bank financing to local governments for the acquisition of land or interests in land to be held for future development of housing for occupancy by families of limited income. The terms appearing in the Act have the meanings defined there and, in addition, the meanings used in these regulations. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, inclusive, Annotated Code of Maryland, as amended. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development. “Applicable codes and standards” means construction, health, safety, fire, occupancy, and other codes and standards in force in the political subdivision in which an eligible building is located and which are applicable to that building or to the construction of that building. If these codes and standards do not exist or are deemed by the Secretary to be insufficient to promote the purpose of the program, then the codes and standards prescribed in COMAR 05.04.02 shall apply to rehabilitation projects and the Model Performance Code set forth in COMAR 05.02.01.03 shall apply to new construction projects. “Closing costs” means: Financing costs such as the credit report fee, survey fee, title examination, loan origination fee, title insurance fee, and application fee; Title fees such as the attorney's fee, documentation and preparation fee, recording fee, State and local transfer tax, and documentary stamps; and Prepaid expenses such as taxes, ground rent, hazard insurance, and any mortgage insurance premiums to be paid at closing. “Contract” means the written agreement between the sponsor and a licensed general contractor for the performance of work to be financed in whole or in part by the loan. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. “Director” means the Director of the Administration. “Family of limited income” means an individual or family whose income does not exceed the income limits established by the Secretary for the program from time to time in accordance with Housing and Community Development Article, §4-218, Annotated Code of Maryland. “Family of very limited income” means an individual or family whose income does not exceed the income limits established by the Secretary for the program from time to time in accordance with Housing and Community Development Article, §4-218, Annotated Code of Maryland. “Homeownership property” means any residential property containing one self-contained unit which is the principal year-round residence of the owner and which may be a condominium, townhouse, or single family residence. “Housing Finance Review Committee” means the Housing Finance Review Committee established pursuant to Housing and Community Development Article, §4-208, Annotated Code of Maryland. “Land bank” means land or interests in land which have been or are to be acquired by a local government and which are being or will be held for future development of housing for families of limited and very limited incomes. “Local government” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, and any of the 23 counties in Maryland. “Local government” may include any board, commission, agency, department, or authority of any municipal corporation or county designated by its chief executive officer to carry out the rehabilitation or construction of housing. “Modular or manufactured home” means a structure transportable in one or more sections which: In the traveling mode is 8 body feet or more in width and 40 body feet or more in length and, when erected on site, is 320 or more square feet; Is built on a permanent chassis which is permanently fixed to real property, or will be permanently fixed upon completion of the work financed by the loan; Is designed to be used as a dwelling; and Includes self-contained plumbing, heating, air conditioning, and electrical systems. “Mortgage” means a written instrument including a deed of trust evidencing or creating a lien against real property for the purpose of providing collateral to secure the repayment of a debt. “Nonprofit organization” means a corporation, partnership, joint venture, foundation, or other legal entity, a part of the net earnings of which does not inure to the benefit of any private shareholder or individual holding any form of interest in the entity. “Plans and specifications” means the drawings and written listing of all materials used in, or a detailed work write-up which describes, the structural, mechanical, electrical, and other work items for the construction or rehabilitation of a project. “Preconstruction costs” means all development costs, other than the cost of acquiring the property, incurred before the start of construction, reconstruction, or rehabilitation. “Program” means the Construction Loan Program. “Program Director” means the Director of the Program as assigned by the Administration. “Project” means any undertaking or project, or portion of it, including land, buildings, and improvements, and which otherwise constitutes a community development project as defined in the Act. “Project” includes a scattered site project. “Rental property” means any residential property containing one or more dwelling units which are occupied by families other than the owner. “Secretary” means the Secretary of Housing and Community Development. “Sponsor” means a nonprofit organization, local government, individual, corporation, or partnership which receives a loan to acquire, rehabilitate, or construct a project. Sponsors shall meet the following requirements to qualify for a loan: Be a nonprofit organization, local government, individual, corporation, or partnership, except that only a local government is eligible for a land bank loan. If a nonprofit organization, corporation, or partnership, be in good standing and qualified to do business in Maryland. Have the legal capacity and all necessary authorization to incur the obligations of the loan. Own the project, have a valid sales contract to purchase the project, or have an option on or agreement of understanding acceptable to the Administration to purchase the project. In the determination of the Administration, be unable to secure a construction, preconstruction, or land bank loan from a private lending institution without impairing the feasibility of the project's serving the income levels of the proposed future occupants, or be ineligible for land bank financing or for combination construction and permanent financing through other public lending programs or programs of the Administration or Department. If the loan is for a rental property project, agree in writing that 100 percent of the dwelling units will be occupied upon completion of the project by families of limited income, and that best efforts will be undertaken to ensure that 50 percent of the dwelling units are occupied by families of very limited income. If the loan is for homeownership properties, agree in writing that all the residences will be sold initially to families of limited or very limited income who will occupy them as their principal residence. Except for land bank loans, have a commitment in a form acceptable to the Administration for permanent mortgage financing or have a letter of intent, from a lender or public program, acceptable to the Administration, to provide permanent financing upon completion of construction or rehabilitation of the project. Agree in writing to abide by all requirements of: Title VI and VII of the Civil Rights Act of 1964 and Title VIII of the Civil Rights Act of 1968; The provisions of the Governor's Code of Fair Practices, as amended; The Department's Minority Business Enterprise Program, as amended. Agree in writing to provide and abide by a relocation assistance plan acceptable to the Department if occupants will be temporarily displaced during rehabilitation. Agree in a recordable document that a rental property project will be rented to families of limited income until the last to occur of: Repayment of the loan in full; Recordation of a document, recorded for the benefit of a permanent lender, with equivalent or more restrictive low income occupancy requirements, as determined by the Administration. Projects shall be properly zoned for the proposed use. Projects other than land banking projects shall meet these additional requirements: Have available a safe, sanitary, and adequate water supply and sewage system; Be rehabilitated or constructed in accordance with the applicable codes and standards; and Provide homeownership or rental property to families of limited or very limited income. Condominiums and cooperatives may be eligible projects. Modular or manufactured homes conforming with Regulation .03B(13) of this chapter may be eligible projects. Conversions of existing buildings to change the use to residential or to increase the number of residential units may be eligible projects. If a project is new construction, the project is eligible only if the: Department has complied with COMAR 05.01.06.06; and Secretary has issued the written determination required under COMAR 05.01.06.07. Interest Rate. The interest rate to be paid on loans may not exceed 8 percent annual interest. The Administration may establish a lower interest rate if the Administration determines that a lower interest rate is required for the feasibility of the project to serve occupants of a specified income level. Term. The term of each loan generally may not exceed 2 years. The Administration may permit a loan term of greater than 2 years depending upon the size and nature of the project. Maximum Loan Amount. The maximum loan may not exceed the lesser of the: Amount of permanent financing approved for the project; or Total development costs, meaning the total costs as approved by the Administration, incurred in carrying out all works and undertakings which the Administration deems reasonable and necessary for the acquisition, construction, or rehabilitation of a project, including but not limited to the costs of: Acquisition of land and any buildings on it, Acquisition closing costs, Necessary studies, surveys, plans, and specifications, Architectural, engineering, or special services, Site preparation and development, Labor and materials for construction, reconstruction, or rehabilitation, Acquisition, repair, or improvement of such machinery, equipment, and furnishings as may be deemed necessary by the Administration, Expenses incurred in connection with initial occupancy or operation of the project as deemed necessary by the Administration, Fees incurred in connection with financing the project, Construction period interest on the loan, Indemnity and surety bonds, Premiums on insurance, Relocation costs, Contingency allowance deemed necessary by the Administration, if the loan is for a rehabilitation project, in an amount not to exceed 10 percent of the total cost of development, and Other costs the Administration deems reasonable and necessary. Preconstruction Loans. The Administration may make a loan for preconstruction costs alone if: There is a commitment in place from the Administration, or other lender acceptable to the Administration, to finance the rehabilitation or construction of the project; or The sponsor has received a written assurance that a commitment will be issued for construction and permanent financing through the: Farmers Home Administration Section 502 Rural Homeownership Loan Program, Farmers Home Administration Section 515 Rural Rental Housing Loan Program, or Other public loan program acceptable to the Administration. In either case, the loan shall be evidenced by a promissory note and, if the sponsor has title to the project, be secured by a mortgage. Land Bank Loans. The Administration may make a loan for acquisition only of land, and improvements if any, if: The sponsor is a local government; The sponsor agrees that within 2 years of the date of acquisition of the property it will: Submit to the Administration a detailed plan for the development of the acquired land, and Prepare and submit an application for construction and permanent financing to a governmental or private financial institution; The loan is evidenced by a note and secured by a mortgage on the property. If the sponsor is unable to submit a plan within the required 2-year period, the Administration may grant an extension if it determines that an extension is in the best interest of the State. The maximum amount of a land bank loan may not exceed the fair market value of the property plus reasonable closing costs. Repayment. The loan shall be repaid at the earliest of the stated loan maturity date, 90 days after the date the project is completed, or the closing of the permanent mortgage financing. For homeownership properties, loan repayment may be staged to coincide with the sale of individual units to families of limited or very limited income. Security for Loans. Loans shall be secured by a mortgage, except as otherwise provided in §D. All mortgages shall be in the form required by the Administration and shall be recorded in the land records of the county in which the project is located. Disbursement. Loan funds shall be held by the Administration and disbursed in accordance with a draw schedule approved by the Administration. Change of Ownership. The sponsor shall agree not to sell, cease to own, assign, transfer, or dispose of all or any part of the project or the sponsor's interest in it, during the loan term, without the prior written consent of the Administration. Insurance. Multi-Peril Insurance. The sponsor shall maintain fire and extended coverage insurance on the buildings comprising a project both during and after construction, which shall include such endorsements as the Administration may require, such as: Collapse; Explosion; Loss of rents; Vandalism. Liability Insurance. The sponsor shall maintain comprehensive general liability insurance with such endorsements as the Administration may require, both during construction and upon occupancy of a project. Flood Insurance. If the project is located on real property which is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. Before loan closing, permits shall be secured from the Maryland Department of Natural Resources and the political subdivision in which the project is located. Other Insurance. The sponsor shall provide at loan closing such other insurance, including builders' risk, boiler insurance, comprehensive automobile liability, and broad form workers' compensation as may be required by the Department. Title Insurance. For all secured loans the sponsor shall provide a standard American Land Title Association (ALTA) Loan policy or other form of title policy approved by the Administration and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Administration, evidencing that title to the project on the date of closing is vested in the sponsor, and containing only standard exceptions and encumbrances approved by the Administration and the Office of the Attorney General. Terms and Conditions. Each insurance policy shall meet the following minimum requirements: Be written by companies acceptable to the Administration; Be written by companies which are reputable and financially sound, as determined by the Administration; Be in force at the time of loan closing; Name the Administration as loss payee and additional insured as its interest may appear in a standard mortgagee endorsement attached to or printed in the policy; Not be terminable without prior notification to the Administration; and Contain terms and coverage satisfactory to the Administration. Loan Documents. The Administration shall provide the sponsor with copies of relevant standard form loan documents which may include: A promissory note or deed of trust note; A deed of trust and security agreement; A loan agreement; An agreement and declaration of covenants and restrictions; A building loan agreement; A guaranty of completion or loan payments, or both; A completion assurance agreement; An assignment of the construction contract; An opinion of sponsor's counsel for nonprofit organizations; An opinion of contractor's counsel; A contractor's letter and certification; An assurance of compliance with civil rights requirements; A fair practices certification; and Such other documents as the Administration may find it desirable or necessary to require. Taxes. Taxes and assessments against the property which are due and payable shall be paid at or before closing. Contractors and subcontractors shall meet the following requirements: Meet all applicable State and local licensing requirements. Provide insurance coverage for comprehensive public liability, property damage liability, and workers' compensation in form and amounts required by the Administration. Perform all work in a competent, workmanlike manner equal to the standards of the industry in conformance with the contract and applicable codes and standards. Comply with all applicable laws, ordinances and regulations relating to the protection and safety of persons and property. Furnish all labor, materials, and equipment, and obtain and pay for all licenses and permits required to rehabilitate or construct the project in accordance with the contract and the plans and specifications. Not assign the contract without the prior written consent of the sponsor and the Administration. In addition to all remedies and guarantees provided by law, make at its sole cost and expense all necessary repairs, replacements, and corrections of any nature or description, interior or exterior, structural or nonstructural, as shall become necessary by reason of faulty workmanship or material, which appear within a period of 1 year from the date that a certificate of completion, on the Administration's approved form, is filed with the Administration. However, if any longer guarantee period is specified for any particular materials or workmanship under plans and specifications, or under any subcontract, in connection with any manufactured unit which is installed at the project, or under the laws of the State, the longer period shall govern. Agree to complete all work specified in the construction contract or plans and specifications, as the case may be, by the date required. Indemnify and hold the Administration harmless from all liability and loss because of injury to or death of any person or damage to any property which may occur or be alleged to have occurred during performance of the contract as a direct or indirect result of any act or omission, whether intentional, negligent, or otherwise, by the contractor, subcontractor, or their agents and employees. The contractor shall defend all suits or claims at its sole cost and expense. Sponsors may act as general contractors only with the prior written approval of the Administration. The Administration's approval will be granted only if, in the opinion of the Administration, the sponsor has the capacity and expertise to perform as general contractor as evidenced by prior completion of projects of comparable or greater size and type. General contractors shall provide: Performance and payment bonds, each in an amount equal to 100 percent of the contract price; An irrevocable letter of credit equal to 25 percent of the contract price on assurance of completion agreement; or Other assurances as may be acceptable to the Administration. Loan Application. A loan application shall be made upon standard forms prescribed by the Administration. Each application shall be fully completed and properly executed and be accompanied by the following items: A copy of the articles of incorporation, bylaws, and most recent financial statements of the sponsor, if the sponsor is a nonprofit organization, or a letter of designation from the chief executive officer of the locality to carry out the project, if the sponsor is a local government; A copy of: The deed to the property, A contract or option agreement to purchase the property, or An agreement of understanding or letter of intent to purchase the property; Photographs of the site and any existing buildings; and Sufficient information and documentation to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property. In the case of a land bank loan, the sponsor shall furnish the following: A preliminary description of the sponsor's plans for the development of the land; An explanation of the sponsor's housing development experience and current activity which demonstrates the sponsor's capacity to develop the land for occupancy by families of limited or very limited income; and Identification of how the land is presently zoned. Feasibility Notification. Upon receipt of all documentation necessary to determine the feasibility of a project and the primary loan structure and terms, the Administration shall issue a written notification letter to the sponsor. The feasibility notification letter shall outline anticipated loan terms and shall specify any additional documentation which shall be provided or other conditions which shall be met in order for the Administration to recommend a loan for commitment, including: Plans and specifications or a detailed scope of work for the rehabilitation or construction of the project. The Administration shall review the plans and specifications or a detailed scope of work to ensure compliance with applicable codes and standards. A copy of the contract for the work. The Administration shall review the contract to determine if the contract and the licensed contractor are acceptable to the Administration. Evidence of zoning compliance. A resolution from the local government authorizing the construction or rehabilitation of the project. If the project is to be newly constructed, a soil test of the land upon which the project is to be constructed. A copy of a commitment or letter of intent to provide permanent financing which, at a minimum, shall state the amount, rate, and terms of the permanent financing. A schedule of proposed sales prices or rents. A plan to market the units to families of limited income and, if applicable, to families of very limited income. A relocation plan, if the loan is for rehabilitation of occupied residential units. Approval. Upon satisfaction of all the requirements and conditions of the feasibility notification letter, the Administration shall undertake an analysis of each application as to the final recommended loan amount, structure, and terms. Except in the case of an emergency when urgent action is required, all loans above a minimum amount, determined by the Housing Finance Review Committee established pursuant to Housing and Community Development Article, §4-208, Annotated Code of Maryland, shall be submitted by the Administration to the Committee for review and recommendation to the Secretary for approval or disapproval of a loan and the terms of the loan. At the discretion of the Director, loans in an amount below the minimum amount established by the Housing Finance Review Committee need not be submitted to the Committee for review and recommendation. The Secretary, in accordance with Regulation .11B, may delegate the review and approval of these loans. Before the issuance of any commitment letter obligating the Administration to provide a loan, regardless of the loan amount, the Secretary shall execute a determination that the loan is a community development project authorized by the Act. The execution of a determination by the Secretary shall constitute an approval of the loan and authorize the issuance of a commitment letter obligating the Administration to provide the loan. In an emergency when urgent action is required, the Secretary may execute a determination approving a loan for a project without the recommendation of the Housing Finance Review Committee. Commitment Letter. Upon the issuance of a Secretarial determination approving a loan, the Director or Program Director is authorized to issue a commitment letter setting forth the amount of the loan, the interest rate on the loan, and the other terms and conditions under which it will be made. Expiration of Commitment. For any loan approved by the Secretary, the Administration shall specify in the commitment letter a time limit within which the sponsor shall execute the documents evidencing the loan, which time limit may be extended in the Administration's sole discretion. If execution of the documentation by the sponsor does not occur within the time limit specified by the Administration, the commitment shall expire and the Administration may withdraw the moneys encumbered for the project and use them for any other project authorized by the Act. Rejection of Applications. If the Administration determines that a project or sponsor is not eligible for a loan, the Administration shall issue a written notice of the determination of ineligibility. The Administration shall provide the Housing Finance Review Committee with a report listing all loan applications rejected during the month preceding each Housing Finance Review Committee meeting. Reconsideration. Sponsors may request reconsideration of a rejection in accordance with the procedures contained in the program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Loan Closing. The loan closing shall be scheduled at a time acceptable to the sponsor, the Administration and the office of the Assistant Attorney General, or its designee. Release. Upon repayment in full of the loan, the Administration shall release its mortgage. Partial releases shall be made for single family properties as units are sold and proportionate amounts of the loan repaid. A sponsor, developer or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in selling, leasing, or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the program, or in any aspect of employment by any sponsor, developer or contractor in the construction, repair, or maintenance of any property financed or assisted in whole or in part under the program. A sponsor, developer or contractor shall comply with all applicable federal, State, and local laws, and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Administration and other parties. Program Handbook. The Administration may establish from time to time operational handbooks or manuals containing internal underwriting standards and loan processing requirements which do not directly affect the rights of the public or the procedures available to the public. Copies of these handbooks shall be available for examination at the Administration's principal office. The Administration, upon request, may make copies available to the public at a reasonable charge. Delegation. The Secretary may delegate to the Director of the Administration or to any other official or employee of the Department or Administration the authority to execute or approve any program documents or contract documents. Waiver. The Secretary may waive or vary particular provisions of these regulations in writing to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with providing financing to the project necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in any emergency situation would be inequitable or contrary to the purposes of the Act. A sponsor who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-255, Annotated Code of Maryland. The provisions of these regulations are severable. A judgment by any court of competent jurisdiction finding or declaring that any provision of these regulations or the application of any provision to any person or circumstance is invalid does not affect the validity of the remaining provisions of the regulations, and the remaining regulations shall have full force and effect as if no judgment had been entered. Housing and Community Development Article, §§4-225 and 4-226, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: February 20, 1989 (16:3 Md. R. 340) Regulation .02A, B amended effective April 15, 1991 (18:7 Md. R. 771) Regulation .03B amended effective April 15, 1991 (18:7 Md. R. 771); November 29, 1999 (26:24 Md. R. 1856) Regulation .04A, B amended effective April 15, 1991 (18:7 Md. R. 771) Regulation .05F adopted effective January 2, 1994 (20:25 Md. R. 1942) Regulation .05F amended effective April 5, 1999 (26:7 Md. R. 538) Regulation .06J amended effective November 29, 1999 (26:24 Md. R. 1856) Regulation .08A amended effective January 2, 1994 (20:25 Md. R. 1942) Regulation .09 amended effective March 16, 2015 (42:5 Md. R. 485) This chapter describes the policies and procedures for lead hazard reduction grants and loans to be funded through a federal grant to the Department from the United States Department of Housing and Urban Development. The regulations set forth in COMAR 05.04.06 describe the policies and procedures for making State-funded loans and grants to finance certain lead hazard reduction activities in residential buildings. The purpose of the Program is to make grants and loans to owner-occupants and sponsors of privately owned, owner-occupied, and rental housing property to fund certain lead hazard reduction activities. The Program will emphasize evaluating cost-effective and innovative treatment methods. In this chapter, the following terms have the meanings indicated. Terms Defined. Abatement. “Abatement” means a set of measures designed to eliminate lead-based paint hazards in accordance with standards established by the Department. “Abatement” includes: The removal of lead-based paint and lead-contaminated dust, the permanent containment or encapsulation of lead-based painted surfaces or fixtures, and the removal or covering of lead-contaminated soils; and All preparation, cleanup, disposal, worker protection, and post-abatement clearance testing activities associated with these measures. “Annual income” means total household income from all sources, including wages, investment income, Social Security, retirement, disability, and unemployment benefits, less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Borrower” means an owner who receives a loan under the Program. “Building” means a structure that satisfies the requirements of Regulation .04 of this chapter. Certified Contractor. “Certified contractor” means a contractor, inspector, or supervisor who has successfully completed the MDE State certification program set forth in COMAR 26.16.01. “Certified contractor” includes a certified inspector. “Clearance testing” means a wipe test, performed in accordance with HUD guidelines, that a dwelling unit shall pass before it may be reoccupied, showing that lead dust levels are below HUD's maximum allowable standards, as follows: For floors, 100 micrograms per square foot; For window sills, 500 micrograms per square foot; and For window wells, 800 micrograms per square foot. “Closing costs” means the total of all settlement costs and fees and, when applicable, initial payments for taxes, property insurance, title examination, or other expense items as determined by the Department. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. “Director” means the Director of the Division of Development Finance of the Department. Encapsulation. “Encapsulation” means a method of abatement that involves the coating and sealing of surfaces with durable surface coatings specifically formulated to be elastic, able to withstand sharp and blunt impacts, long-lasting, and resilient, while also resistant to cracking, peeling, algae, fungus, and ultraviolet light, so as to prevent any part of lead-containing paint from becoming part of house dust or otherwise accessible to children. “Encapsulation” does not mean coating and sealing surfaces with paint, which is not an encapsulant. “Enclosure” means the resurfacing or covering of surfaces with durable materials such as gypsum board or paneling, and sealing or caulking the edges and joints so as to prevent or control chalking, flaking, peeling, scaling, or loose lead-containing substances from becoming part of house dust or otherwise accessible to children. “Grant” means a grant made under the Program. “Grantee” means the recipient of a grant under the Program. “Hazardous waste” means liquid or solid waste, or combination of solid wastes, which because of its quantity, concentration, or physical, chemical, or infectious characteristics may: Cause, or significantly contribute to, an increase in mortality or in serious, irreversible, or incapacitating illness; or Pose a substantial current or potential hazard to human health or the environment, when improperly treated, stored, transported, disposed of, or otherwise managed. “HEPA (high efficiency particulate accumulator)” means a vacuum cleaner fitted with a filter capable of filtering out particles of 0.3 micron or greater from a body of air at 99.97 percent efficiency or more. “Housing programs” means the acquisition, construction, rehabilitation, refinancing, and other housing financing programs operated by the Department. “HUD” means the United States Department of Housing and Urban Development. “HUD guidelines” means any guidelines or manuals issued by HUD in connection with HUD's lead-based paint hazard reduction practices and requirements. “Interim controls” means a set of measures designed to reduce temporarily human exposure or likely exposure to lead-based paint hazards, including: Specialized cleaning; Repairs; Maintenance; Painting; Temporary containment; Ongoing monitoring of lead-based paint hazards or potential hazards; and The establishment and operation of management and resident education programs. “Lead-based paint hazard” means any condition that causes exposure to lead from lead-contaminated dust, lead-contaminated soil, or lead-contaminated paint that is deteriorated or present in accessible surfaces, friction surfaces, or impact surfaces, that would result in adverse human health effects as established by the appropriate federal agency. “Lead paint abatement services” means the risk assessment, inspection, or abatement of lead-containing substances. “Loan” means a loan made under the Program. “Local administrator” means a Level I or Level II local administrator certified under the Maryland Housing Rehabilitation Program, as set forth in COMAR 05.04.01.16. "MDE" means the Maryland Department of the Environment, a principal department of the State. “NOFA” means, collectively, Notices and Super Notices of Funding Availability covering the Lead-Based Paint Hazard Control Program, published by HUD in the Federal Register, including those published at 58 FR 13848—13857 and at 63 FR 15490—15620. “Program” means the Federal Lead Hazard Reduction (FLHR) Program. “Program Director” means the Director of Special Loan Programs for the Department. “Replacement” means a strategy of abatement that removes components such as windows, doors, and trim that have lead-based painted surfaces, and installs new or deleaded components free of lead-based paint. “Residential dwelling” means: A single-family dwelling, including attached structures, such as porches and stoops; or A single-family dwelling unit in a structure that contains at least one separate residential dwelling unit, and in which each unit is, or is intended to be, used or occupied, in whole or in part, as the home or residence of one or more persons. “Risk assessment” means an on-site investigation to determine and report the existence, nature, severity, and location of lead-based paint hazards in residential dwellings, including: Information-gathering regarding the age and history of the housing and occupancy by children younger than 6 years old; Visual inspection; Limited wipe sampling or other environmental sampling techniques; Other activity as may be appropriate; and Provision of a report explaining the results of the investigation. “Secretary” means the Secretary of Housing and Community Development. “State certification program” means the MDE program for accrediting, certifying, and licensing contractors, inspectors, and supervisors, and training workers, as set forth in COMAR 26.16.01. “Subcontractor” means an entity authorized by the Department to carry out the duties and responsibilities of a local administrator under the Maryland Housing Rehabilitation Program, as stated in COMAR 05.04.01.16. “Target housing” has the meaning stated in Regulation .04A of this chapter. “Testing” means the measurement of lead in painted surfaces by State-certified personnel using a portable XRF analyzer, laboratory analysis of paint samples, or other method approved by HUD. “Title X” means the federal Residential Lead-Based Hazard Reduction Act of 1992, found in Title X of Public Law 102-550, approved October 28, 1992, and any regulations promulgated under the statute. “Trained worker” means a worker who has successfully completed the State certification program defined in this section. “Wipe test” means the testing of a surface for the presence of lead dust by the patterned wiping of the surface, followed by analysis of the wipe by atomic absorption spectroscopy, giving the result in micrograms of lead per square foot of surface. “XRF analyzer” means a portable instrument that: Determines lead concentration in milligrams per square centimeter using the principle of X-ray fluorescence; Measures mean lead content or lead content plus a spectrum of other elements; Is used in accordance with the rules for interpretation of the XRF sampling data for multifamily or scattered-site housing, as provided in HUD guidelines; and Is a model approved by the Program. Eligible housing shall be target housing, which is housing that meets the following criteria: Was constructed before 1950, except that housing constructed after that but before 1978 may be approved if the Program Director determines that a lead-based paint hazard is present; Is not housing for the elderly or persons with disabilities, unless a child younger than 6 years old resides or expects to reside there; and Consists of residential dwellings with at least one bedroom each. Eligible housing shall be target housing under §A of this regulation that meets the following additional criteria: Is owner-occupied housing that meets the income requirements set forth in Regulation .13 of this chapter or rental housing for tenants who meet the requirements set forth in Regulation .13 of this chapter; and Is not public housing (whether federal or locally supported), federally owned housing, or federally assisted housing, except for tenant-based housing that receives assistance under §8(b) or 8(a) of the United States Housing Act of 1937. Each project building shall: Be located within the State; and Contain at least one residential unit, with each unit having at least one bedroom. Preferences for funding shall be given to housing that is target housing with evidence of a lead-based paint hazard or rental housing which will give rental priority to families with a child younger than 6 years old, or a child with an elevated blood lead level, and that meets the following criteria: Has an existing lead violation; Has a child with an elevated blood lead level in residence; Has a child younger than 6 years old in residence; or Has a child younger than 6 years old or a child with an elevated blood lead level who is expected to spend a significant amount of time visiting. A project shall meet the property standards set forth in Regulation .12 of this chapter. The Department in its discretion may approve a forward commitment reserving Program funds to a nonprofit organization, in connection with the organization's research into lead paint abatement or lead paint medical issues, for Program loans or grants. A project is ineligible for funding if any part of the property is located in: A federal Coastal Barrier Resource System; or An area identified by the Federal Emergency Management Agency as having special flood hazards, unless flood insurance is obtained in accordance with the federal Flood Disaster Protection Act. A project shall be reviewed and approved by the Maryland Historical Trust. Owner-occupants and sponsors shall meet all of the following requirements to qualify for Program financing: Either own the eligible housing, and be current for all mortgage and property tax and assessment payments, or have an agreement to purchase the eligible housing; Be an individual or a business entity; Be in good standing and qualified to do business in Maryland; Have the legal capacity and all necessary legal authorization to incur the obligations of the financing; Not have been barred or suspended by: The Department under COMAR 05.01.05, or HUD; Demonstrate: Financial credibility and stability, and The ability to successfully complete the project in a timely and satisfactory manner; and Agree in writing to: Fully cooperate with any related research and evaluation sponsored by HUD and associated with this grant program, including preservation of the data and records of the project and compiling requested information in formats provided by the researchers or evaluators, Allow clearance testing of assisted units before units are re-occupied, Participate in education programs as required by the Department, and encourage participation in these programs, Use certified contractors and trained workers to perform lead paint abatement services in accordance with Regulation .17 of this chapter, Perform lead abatement work on the assisted unit as required by the Department, Make good faith efforts to assist the Department in obtaining blood lead tests for children younger than 6 years old who reside in the units to be abated within 3 months before abatement, Assist with relocation of tenants to the extent required by the Department in accordance with the Federal Uniform Relocation Act, and Assist in monitoring the tenant income as required by the Department. If any of the following federal funding sources were or may be used in a residential dwelling unit, Program funding may not be used for that unit: Shelter Plus Care; Emergency Shelter Grants Program; Surplus Property for Use to Assist the Homeless; Homeownership Assistance for Low- and Moderate-Income Families (§221(d)(2)); Rent Supplements (§101); Multifamily Rental Housing for Moderate-Income Families (§221(d)(3)); Supportive Housing for Persons with Disabilities (§811); HOPE 2: Homeownership of Multifamily Units (Title IV); Low-Income Housing Preservation and Resident Homeownership (Title VI); Emergency Low-Income Housing Preservation (Title II); Flexible Subsidy (§201); Lower Income Rental Assistance (§8); Section 8 Moderate Rehabilitation Program; Public Housing Development; Public Housing Operating Subsidy; and Public Housing Modernization (Comprehensive Grant Program and Comprehensive Improvement Assistance Program). If Program funds are used for other units in the building, the Program may require the sponsor to secure other funding for lead abatement for the units ineligible under §A of this regulation. The Program shall determine the level of lead abatement treatment for each residential dwelling unit, and the type of work to be done. The four levels of treatment are: Level I, which includes: Installing caps of vinyl, aluminum, or any other material in all window wells, in order to make window wells smooth and cleanable, in a manner and under conditions approved by the Department, Removing and repainting chipped, peeling, or flaking paint on exterior and interior painted surfaces, HEPA-vacuuming and washing of the interior of the property with high phosphate detergent or its equivalent, as determined by MDE, and Educational and other requirements of the Program; Level II, which includes all of the following: Any Level I treatment, Stripping and repainting, replacing, or encapsulating all interior windowsills with vinyl, metal, or any other material in a manner and under conditions approved by the Department, Except for a treated or replacement window that is free of lead-based paint on its friction surfaces, fixing the top sash of all windows in place in order to eliminate the friction caused by movement of the top sash, Rehanging all doors where necessary in order to prevent the rubbing together of a lead-painted surface with another surface, Making all bare floors smooth and cleanable, and Ensuring that all kitchen and bathroom floors are overlaid with a smooth, water-resistant covering; Level III, which includes: Any Level II treatment, Window replacement, and abatement of exterior window trim, Doorway treatments such as use of sealants and encapsulants following reworking and removal of peeling paint, Stairway treatments such as enclosure of treads and risers, and Encapsulation or enclosure of designated wall and trim surfaces; Level IV, which consists of one of the other levels of treatment combined with new and innovative techniques, as approved for the project by the Program Director and MDE. Biological Testing. For every unit to be assisted with Program funds, the sponsor shall make a good faith effort to ensure that each child younger than 6 years old receives a blood lead test within the 3-month period before the beginning of lead abatement treatment. Testing shall be performed by the local health department or other party approved by MDE. The project sponsor shall assist in obtaining the cooperation of tenants for the blood testing. Environmental Testing. The testing in §§C—E of this regulation is required for each unit receiving abatement treatment under the Program. Initial Testing. Every room or area in a dwelling unit planned for abatement shall: Receive a risk assessment as defined in Regulation .03B of this chapter; and Undergo testing as defined in Regulation .03B of this chapter. Risk assessment, initial wipe tests, and other testing shall be performed by certified contractors and trained workers selected by the sponsor and acceptable to the Program. Clearance Testing. Before a dwelling unit may be re-occupied, the unit shall undergo a wipe test showing that lead dust levels are below HUD's maximum allowable standard for floors (currently 100 micrograms per square foot), window sills (currently 500 micrograms per square foot), and window wells (currently 800 micrograms per square foot). All lead dust samples shall be collected directly by MDE personnel or others approved by the Program. Test results shall be analyzed by the Maryland Department of Health or another entity acceptable to MDE. MDE shall be permitted to perform inspections during abatement work, after visual clearance and before repainting, and at final clearance. Program funds may be used to pay the cost of the lead abatement treatment required by the Program, as described in Regulation .07 of this chapter, to the extent permitted under Regulation .11B of this chapter. Program funds may also be used to pay all or a portion of the following costs, the extent of the coverage to be determined for each project in the discretion of the Program: Post-treatment cleanup costs; Costs of testing required under Regulation .08 of this chapter; Costs of interim controls, defined in Regulation .03B of this chapter, as approved by the Program for the project; Costs of risk assessment, defined in Regulation .03B of this chapter, and costs of inspections; and Other costs determined by the Program to be permitted under the federal grant that provides the funds for the Program. Program funds may not be used: For chelation or other medical treatment; or To meet the costs of repairing a structural defect that causes paint to chip, peel, or flake. The Department may reserve a portion of Program funding for projects that are also receiving funding through the Department's Housing Development Programs. Program funds may not be used in jurisdictions that receive HUD funds to operate a lead abatement program, unless the project meets one of the following criteria: The following requirements are in connection with the project: Either the jurisdiction has committed all of its HUD lead abatement funds, or the project is ineligible for HUD lead abatement funding from that jurisdiction, and Program funding for that jurisdiction, including funding for the applicant's project, may not exceed $500,000, unless the Secretary determines the need for project funding is exceptional; The project previously received funding or mortgage insurance through the Department and the property is in need of lead abatement; or The project meets the criteria of Regulation .04G of this chapter. Form of Financing. The Department may offer grants and loans. Maximum Amount of Program Financing. Except as provided in §B(2) of this regulation, Program financing may not exceed: $2,000 per dwelling unit for Level I treatment described in Regulation .07 of this chapter; $4,000 per dwelling unit for Level II treatment described in Regulation .07 of this chapter; or $6,000 per dwelling unit for Level III or IV treatment described in Regulation .07 of this chapter. The Program may approve an increase in the per unit cost for a particular project based on site conditions, size of units, or innovative methods. A project may not receive more than $500,000 of Program financing, except as provided in §B(4) of this regulation. In the discretion of the Department, a project may receive more than $500,000 of Program funding if: Other Departmental financing for the project is in default and the Department in its discretion determines that the default workout requires Program funds; or The Program approves an increase for a particular project based on the size of the project, use of innovative methods, availability of other funding, or other special features of the project. Loan Terms. Term. The term of a loan may not exceed the term of any other funding for the project provided by the Department. Interest Rate. In its discretion, the Department may require interest to be paid on a loan at a rate set by the Program. The Department may defer payment of interest. Repayment. At the discretion of the Department, repayment of principal and interest, or either, may be deferred for a period of time or until the earlier to occur of: Maturity; Sale of the project; or Such time as the project fails to qualify as priority housing. Security for Loans. Program loans shall be secured by a recorded mortgage or deed of trust. Property Standards. All housing assisted with Program funds shall: Meet the minimum livability code set forth in COMAR 05.02.03, as adopted by the jurisdiction; or Be property for which the owner-occupant or sponsor has obtained financing for rehabilitation work to ensure that the building will meet the minimum livability code and, if necessary, repair any structural defect that is causing paint to chip, peel, or flake. Insurance Requirements. Hazard Insurance. The owner of the building shall maintain fire and extended coverage insurance at the owner's expense in the amount not less than the sum of the loan and any other indebtedness secured by the building, up to the value of the improvements. 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 on or before the date of the loan closing; For loans, name the Department as insured and as loss payee as its interest may appear in a standard mortgagee endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If the building is in a 100-year flood plain, as designated by the United States Department of Housing and Urban Development: The building shall be covered by a flood insurance policy, naming the Department as beneficiary, in an amount not less than the sum of the loan and any other indebtedness secured by the building; and The flood insurance policy may not be terminated without prior notification to the Department. In order to qualify for Program funds, a rental housing project shall meet the requirements of this regulation. Income Requirements for Tenants. At least 50 percent of the project units shall be occupied by households whose annual income does not exceed 50 percent of the HUD area median income adjusted for household size. The remaining project units shall be occupied by households whose annual income does not exceed 80 percent of the HUD area median income adjusted for household size. Notwithstanding the requirements set forth in §B(2) of this regulation, for buildings with five or more units, 20 percent of the project units may be occupied without regard to household income level. In renting a project unit, the landlord shall give priority to households with children younger than 6 years old. Each project is subject to the requirements set forth in §§B and C of this regulation for a period of at least 3 years, under covenants and restrictions in the form required by the Department. Annual Review. Owners shall examine the income of each tenant household annually for 3 years. The Program may require owners to report the results. If noncompliance with the occupancy requirements is caused by an increase in tenant income, all vacancies shall be filled with income eligible households until the noncompliance is corrected. Income Requirements for Owner-Occupants. All owner-occupied units shall be the principal residence of families whose annual income does not exceed 80 percent of the HUD area median income adjusted for household size. Not less than 90 percent of owner-occupied units shall be occupied by a child younger than 6 years old or shall be units where a child younger than 6 years old spends a significant amount of time visiting. Property Maintenance. The owner shall maintain the premises in compliance with all applicable local requirements. Housing Programs Application. If the applicant is also applying for funding through a housing program described in Regulation .03B of this chapter, the applicant shall supply the information and supporting documentation specified on the application form for the housing program. Application for Program Funding Only. Application Procedures in General. Applicants for Program financing in amounts less than $100,000 may apply through local administrators in accordance with procedures established by the Program. All applicants may also apply directly to the Department through the Special Loan Programs, unless an alternative procedure has been approved on a case-by-case basis. Application Forms. All loan and grant applications shall be made on standard forms described by the Department. Documentation. The applicant shall submit with the application any documentation that the Department requires. The applicant shall submit supporting documentation specified in the checklist attached to the application, including but not limited to the following: A copy of the deed to the property; A copy of all existing mortgages or mortgage verification requests, on the form approved by the Department, signed by the applicant for each mortgage secured by the building in need of abatement or verification of income, as required by the Department; A copy of the first page and declarations page of all policies for fire and extended coverage insurance and, if applicable, flood insurance; A copy of the most recent paid real estate tax bill which sets forth the current assessed value of the building and the property; Evidence of a lead-based paint hazard in each project building; Contractor's proposal outlining proposed cost and proposed lead hazard reduction activity in accordance with MDE regulations, if available; Results of any environmental testing for the presence of lead, and biological testing of occupants for blood lead content; Relocation plan for tenants that complies with the federal Uniform Relocation Act; and Hazardous waste disposal plan, if applicable. The loan applicant shall submit the following additional documentation: Any documentation required by the Department to establish the eligibility and credit worthiness of the applicant; For the 3 years immediately preceding the application: Copies of federal income tax returns, or Sufficient documentation to verify income as determined by the Program; If applicable, certified copies of the organizational documents of the owner-landlord and a certificate of good standing; Certified financial statements of the applicant and, if applicable, certified financial statements of its principals; 3 years of operating statements for the project; If applicable, resolutions of the board of directors or consents of all of the partners authorizing the application; Photographs of the building and site; Evidence of subdivision and zoning compliance. Initial Eligibility Determination. An application may be submitted to the local administrator for an initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible for a loan or grant, verifications and reports deemed appropriate by the Program Director or the local administrator, as the case may be, will be obtained. If an applicant is determined preliminarily to be eligible for a loan or grant, the applicant may be provided with a letter from the local administrator in the form approved by the Program acknowledging receipt of the application and notifying the applicant of the ongoing review process. If the applicant is ineligible for a grant or loan, the applicant shall be informed in writing of the determination. Building Evaluation. Each building for which an application is received shall be inspected for the purposes of determining compliance with the minimum livability code and evaluating the adequacy of lead hazard reduction proposals submitted by the applicant. The inspection shall be performed by: The Department; The local administrator; or Another inspector acceptable to the Department. Loan and Grant Approval. All loan applications shall be evaluated by the Special Loan Programs operated by the Department. Upon receipt and approval of all acceptable contractors' proposals, and all other data the Program considers relevant or necessary, the local administrator originating a grant shall undertake an analysis of the grant and other grant terms and conditions. After completing the steps described in §C(2) of this regulation, the local administrator shall forward the application package and the analysis of the loan or grant, or both, to the Department for approval, disapproval, or modification. Approval to make a loan, grant, or combination of loan and grant shall be as follows: A loan, grant, or combination of loan and grant in an amount of $30,000 or less may be approved by: The Level II local administrator, when the Level II local administrator originates the loan or grant, or The Program Director when a Level I local administrator or the Department originates the loan or grant; A loan, grant, or combination of loan and grant in an amount over $30,000 and less than $100,000 may be approved by the Director; For a loan, grant, or combination loan and grant in an amount of $100,000 or more, the following procedures shall apply: The loan/grant proposal shall be submitted to the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, For a loan, grant, or combination loan and grant in an amount greater than $100,000 but less than $250,000, the recommendation of the Housing Finance Review Committee constitutes approval unless the loan is specifically disapproved by the Secretary, For a loan, grant, or combination loan and grant in amounts of $250,000 or more, the Secretary shall determine in writing whether the loan is approved and under what loan terms after receiving the recommendation of the Housing Finance Review Committee, In an emergency when urgent action is required, the Secretary may approve loans and grants by written determination without the recommendation of the Housing Finance Review Committee. Before a Level II local administrator gives final approval and issues a commitment for Program funding in the amount of $30,000 or less, the Level II local administrator shall contact the Program and receive confirmation that funds are available. Rejection. If an application for Program funds through a Housing Program is rejected, the Director of the Housing Program processing the application shall notify the applicant in writing of the rejection. If a direct application for Program funds only is rejected, the Director of the Special Loan Programs or local administrator, as the case may be, shall notify the applicant in writing of the rejection. Reconsideration. An applicant may request reconsideration of a rejection in accordance with the procedures contained in Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Loan and Grant Documents. Loans and grants shall be closed on standard form documents required and provided by the Program and may not be altered by the local administrator. Monitoring. The local administrator shall monitor loan and grant disbursements during lead hazard reduction work to assist the Program funding recipient and to ensure that loan funds are properly used. The local administrator shall make at least two inspections of the project, including: An initial inspection; and An inspection before any disbursement of funds. Based on Program guidelines, the local administrator shall determine the frequency and level of inspections during lead hazard reduction work, taking into consideration: The capability of the Program funding recipient; The demonstrated experience and reliability of the contractor; The amount of the grant or loan; The availability of local technical assistance; and Other factors considered relevant by the Department. Payments Generally. Loan and grant funds shall be disbursed in full at the closing to an account held on behalf of the Program funding recipient by either the political subdivision that is the local administrator for the loan or the subcontractor. The loan or grant funds shall be held in an account established under §C of this regulation. The local administrator or the subcontractor shall disburse loan and grant proceeds in accordance with the following requirements: Loan funds may not be disbursed if payments of interest or escrow required by the loan documents are in arrears; Draws shall be paid by a joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director; Advance payments are not permitted; and Payments shall be made only for work completed. Payments may not be made for material delivered to the site but not yet installed in the project. Loan Accounts. Loan funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney's trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000, The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with the quarterly statements required under §C(2) of this regulation, and Any other requirements established by the Department; or Another type of account approved by the Department. The local administrator or the subcontractor shall provide the Department with quarterly statements of all loan funds in a loan account. The Department shall review these quarterly statements and shall reconcile the loan balances in the records of the local administrator or the subcontractor with the loan balances in the records of the Department. If the quarterly statements do not correspond with the Department's records of loan funds in the account, the local administrator or subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any loan account established under this regulation. Progress Payments. Progress payments shall be made in accordance with a schedule setting forth payments and corresponding percentages of completed work. The schedule shall be approved by the local administrator before any payments are made, and may be revised by the local administrator from time to time. The schedule may provide for a holdback of a portion of the loan amount. If a Program funding recipients' request for payment is refused, the local administrator shall notify the Program funding recipient and give the reasons for the refusal. The determination of the local administrator as to the percentage of work completed is final. Final Payment. Final payment shall be made as follows: The Program funding recipient shall submit to the local administrator a certificate of completion, executed by the Program funding recipient and contractor, certifying that all work has been completed in accordance with the contract documents; The Program funding recipient shall submit to the local administrator documentation that the work area meets the lead dust clearance test standard set by MDE or another agency acceptable to the Department; The Program funding recipient shall submit to the local administrator documentation that the entire dwelling unit meets MDE requirements and that all work required to achieve mechanical and structural soundness has been completed; Final payment shall be processed upon satisfactory final inspection and receipt of the certificate of completion; and If, in the opinion of the local administrator, the contractor has satisfied the contract and the Program funding recipient refuses to request or release the final payment, the local administrator may employ the following procedure: The local administrator may require the Program funding recipient to explain in writing within 10 days why the local administrator should not make direct payment to the contractor, If the Program funding recipient responds within the 10-day period and requests a meeting, the local administrator shall hold a meeting at which the Program funding recipient shall present the borrower's objections to requesting or releasing the final payment, and The local administrator, in the local administrator's discretion, may then either approve or disapprove direct payment to the contractor or the Program funding recipient, if applicable. Retainage for Claims. If the Program funding recipient or the local administrator receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, the local administrator shall retain amounts sufficient to satisfy the claims, to the extent that loan funds have not been disbursed, until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Retainage in General. The local administrator may retain 10 percent of the loan amount until final payment. The retainage shall be released at final payment upon confirmation that: All lead hazard reduction work is complete and acceptable to the local administrator; The lead dust clearance test standard has been met; and Verification has been made by a county health department, MDE, or other agency acceptable to the Program that the lead hazard reduction was successful. Payment for Additional Work. Payment for any additional cost to complete work not included in the approved contract proposal is the obligation of the Program funding recipient. A Program funding recipient may apply to the local administrator for a loan increase to cover some or all of the increased costs. Any loan increase shall be subject to approval or disapproval in accordance with the provisions of this chapter. The Department has no obligation to pay for increased costs. Quality Control. Subject to the rights of tenants, if any, the Department or the local administrator may collect random samples of dust levels in a building before and after completion of the lead hazard reduction activity. Wipe samples may be analyzed by MDE, or its designee, and the local administrator and the Department may maintain records of the results of the sampling. The Department may provide MDE with a list of all buildings which undertake lead hazard reduction through the Program. Closeout Procedures. After final payment or payout is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements. A copy of the closeout statement shall be forwarded to the Program and the servicer. All individuals involved in lead paint abatement services for the lead hazard reduction activity shall be fully trained and accredited in accordance with the MDE State certification program outlined in COMAR 26.16.01. Recipients of Program funds, contractors, local administrators, and subcontractors may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any recipient of Program funds, contractors, local administrators, or subcontractors in connection with any property financed or assisted under the Program. Each recipient of Program funds, contractor, local administrator, and subcontractor shall comply with applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Except for a waiver under §E of this regulation, any action or decision required or permitted to be taken or made by the Department under these regulations may be taken or made by the Director, Division of Development Finance, or the Director's designee. The Department may terminate an approval of funds or refuse to make disbursements under a loan or grant agreement if the Department finds that the sponsor is not complying with any of the requirements of the Program or the financing documents. The Department may establish from time to time operational handbooks or manuals governing matters relating to the Program including descriptive statements of Program procedures available to the public. Because a federal grant is the source of funding for the Program, federal laws and regulations such as Title X, NOFA, and HUD guidelines constitute Program requirements and take precedence over these regulations in the event of a conflict. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver or variance is not inconsistent with the requirements of HUD, if in the written determination of the Secretary: Application of the regulation would violate HUD requirements for administering the federal grant; The application of the regulations in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Program or the HUD grant to the Department; or Conformance with the requirements of any federal, State, or local programs in connection with the Program necessitates waiver or variance of a regulation. The Secretary may delegate to the Director, the Program Director, or to any other official or employee of the Department the authority to execute or approve Program documents, including commitments and agreements with local administrators. In addition, through the agreement with the local administrator, specific staff members of the local administrator may be authorized by the Department to execute loan and grant documents on behalf of the Department. The Program may charge fees such as application fees, commitment fees, loan processing fees, and financing fees. The fees for sponsors may not be included in Program financing. Fees for owner-occupants may be included in Program financing. A person may not knowingly make or cause to be made any false statement or report in any documents required to be furnished to the Department or the local administrator by any agreement relating to the Program. Housing and Community Development Article. §4-211(a)(8) and (9), Annotated Code of Maryland Effective date: July 1, 1996 (23:13 Md. R. 939) Regulation .03B amended effective May 5, 1997 (24:9 Md. R. 655); November 29, 1999 (26:24 Md. R. 1856) Regulation .04B amended effective May 5, 1997 (24:9 Md. R. 655) Regulation .13 amended effective May 5, 1997 (24:9 Md. R. 655) Regulation .18A amended effective November 29, 1999 (26:24 Md. R. 1856) Chapter revised effective February 21, 2000 (27:3 Md. R. 327) Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485) The Maryland Weatherization Program, subject to the availability of funds, provides assistance as part of a national energy conservation effort through an agency in a political subdivision of the State, for installation of heat-conserving materials in residential buildings in the State. In this chapter, the following terms have the meanings indicated. Terms Defined. “Agency” means a local administering agency, including a governmental unit, community action agency, Office on Aging, or other nonprofit agency. “Applicant” means a representative member of the family unit in the dwelling unit, the owner, or designated agent of the owner, of a dwelling unit. “Benefit” means the amount of assistance that is provided to an eligible applicant. “Department” means the Department of Housing and Community Development. “Dwelling unit” means any of the following: An individual house, including a semidetached house, or stationary mobile home; An apartment in an apartment complex; An apartment within a home; A unit in public housing; A unit in subsidized housing; or A single room occupied as separate living quarters. “Fair hearing” means a procedure established to provide the applicant with the opportunity to have a dispute reviewed by a hearing officer. “Family unit” means an individual or group of individuals who are living together as one economic unit. “Hearing officer” means a person designated by the Department to preside at a fair hearing. “Landlord-tenant agreement” means a document signed by the agency, the owner as landlord, and the applicant when the applicant is a tenant, specifying consent to provide access to the premises, and an agreement by the owner not to increase the rent of the premises on account of the weatherization improvements. “Material vendor” means a supplier of weatherization material. “Owner” means the person or persons listed in the land records of the State who holds title to the property, or the governmental agency that owns the dwelling unit. “Program” means the Maryland Weatherization Program. “Public housing” means a dwelling unit owned and operated by a municipality or governmental agency. “Subsidized housing” means a privately owned dwelling unit where rental fees are subsidized by local or federal funds. “Weatherization material” means any energy-conserving device or technology used in a dwelling unit. A local governmental unit qualifies as a local administering agency for the Program without participating in the selection process. Under 10 CFR §440.15, an administering agency shall be a private or public nonprofit entity as recognized by federal and State laws. A nonprofit entity shall have an active Board of Directors organized in accordance with the laws governing the corporate structure under which the organization was founded. Rating and Ranking. The Department shall rate and rank an agency that is not a local governmental unit based on the: Agency's experience in the administration of weatherization or similar programs in the area to be served; Agency's plan for managing the Program including production oversight, inventory, outreach, and other sources of funds leveraged; Education, background, and experience of Agency personnel assigned to the Program; Agency's knowledge and understanding of the nature and scope of the work to be performed; and Economic benefit to the State of Maryland from the use of the agency. In the agency rating and ranking process, the Department may give preference to an agency that has, or is currently administering, a weatherization assistance program. A hearing may be held to receive public comment on any agency new to the Program. A dwelling unit is eligible when occupied by a family unit which: Is resident in Maryland, has an income within the maximum income limits set in Regulation .12 of this chapter, and provides proof of ownership or a signed landlord-tenant agreement; or Contains a member who has received cash assistance payments under TPA, SSI, GPA-E, GPA-PW, food stamps, or veteran benefits during the 12-month period preceding the determination of eligibility. A dwelling unit is not eligible if it: Has been previously weatherized under this Program unless the dwelling unit has been damaged by fire, flood, or other disaster and repair of damage to weatherization materials is not paid for by insurance; Within 12 months of the completion of weatherization, would be acquired by a federal, State, or local program for acquisition or clearance; Is in a designated special flood hazard area unless it complies with flood insurance purchase requirements; Would be adversely affected by weatherization activity and defeat the purpose of any historic federal or State conservation or restoration activity; Is unoccupied, except as provided in §C of this regulation; or Is in a state of disrepair that without more than $150 of repairs, the installation of weatherization materials would not achieve the purpose of the Program to conserve energy. An unoccupied dwelling unit may become eligible for weatherization if the Agency can certify that within 180 days of the date of application for weatherization the dwelling: Is being or will be rehabilitated through a federal, State, or locally funded program; and Will be occupied by an eligible family unit. The applicant shall apply at the Agency. If the applicant is unable to come to the Agency, the Agency shall send a representative to take the application. A completed application includes: A completed application form provided by the Agency; Verification of countable income; Proof of ownership or a landlord-tenant agreement; and Household data sheet. Countable income is annualized and includes: Money wages; Net income from self-employment; Social Security or Supplemental Social Security Income (SSI) or both; Dividends, interest received, estate or trust income, rental income, or royalties; Public assistance or welfare; Pension and annuities including veterans' or railroad retirement; Workers' Compensation Insurance payments; Alimony or child support; Compensation payments including unemployment and Criminal Injuries Compensation Board awards; and Armed forces support payments. Countable income excludes the following income: Third party payments for rent or other purposes over which the household has no control; In-kind contributions, such as food, furniture, clothing, and service from persons in the community; Money wages of the children under 18 years old, or persons who are students and are not employed full time; Grants and loans to undergraduate students made or insured by the Commissioner of Education under the Higher Education Assistance Act, 20 U.S.C.S. §§1070—1098, such as Basic Education Opportunity Grants and guaranteed student loans, and under the National Defense Education Act, 20 U.S.C.S. §401 et seq., as well as veterans' educational benefits; Payments under the Federal Action Program made to participants in the Retired Senior Volunteer Program, Foster Grandparents and Senior Companion Program; Job Training Partnership Act Program; Maryland Service Corps; or The value of any food stamp allotment. The Agency shall receive the application. Incomplete Application. If the application is not complete, the agency shall notify the applicant within 5 working days as to information needed and that the application will be denied if the information is not supplied within 30 days of the date of this notice. Completed Application. If the application is complete, the Agency shall decide within 5 working days if the applicant is eligible. The Agency shall use the income guideline that corresponds to the requirements of the source of funds used. If the Agency decides the applicant is eligible, the Agency shall notify the applicant within 5 working days of the decision. The notice shall include the: Fact that applicant is eligible; Funding source income eligibility requirements used to determine the applicant's eligibility; Approximate schedule for estimation of cost, installation, and completion; and Requirement that the applicant sign a final inspection form. Estimation of Cost and Determination of Type and Amount of Weatherization. The Agency shall make an inspection of the premises and decide within 15 working days after the decision of eligibility whether the dwelling is eligible and if so, for what type and amount of weatherization. If the Agency decides that the dwelling is eligible, the Agency shall notify the applicant within 5 working days of the decision. The notice shall include the: Fact that the dwelling unit is eligible; Type and amount of weatherization to be installed; Approximate schedule for installation and completion; Right to appeal the decision and the method to obtain a fair hearing; and Legal services that are available to provide representation. If the Agency decides to deny the application because the applicant or the dwelling unit is ineligible, the Agency shall notify the applicant within 5 working days of the decision. The notification shall include the: Reason for denial; Specific regulation supporting the denial; Right to appeal the decision, and the means to obtain a fair hearing; and Legal services that are available to provide representation. The Agency may establish a waiting list when there is expectation of additional funding from a source whose income guideline requirements would include the applicant as eligible. The Agency shall contact the applicant to arrange the specific date for installation of the materials. Final Inspection. The Agency shall contact the applicant to arrange the date for final inspection. If the inspector finds that the installation is incomplete, the inspector shall return to the Agency and arrange for the job to be completed. If the installation is complete, the inspector shall request the applicant to sign the final inspection form. If the applicant does not sign the final inspection form, the inspector shall note whether the applicant was available or was unavailable, or was available but declined to sign. If the applicant declined to sign the form, the inspector shall attempt to discover the reason. The inspector shall return the completed form and, if appropriate, include an explanation of the reasons why the applicant did not sign the form. If the applicant did not sign the final inspection form, the Agency shall contact the applicant within 7 working days to review the reason why the applicant did not sign. If the applicant did not sign because the applicant: Considered the job incomplete or improperly done, the Agency shall decide within 7 working days whether the applicant is correct. If the Agency decides that the: Work is incomplete or improperly installed, the Agency shall make appropriate reinstallation; Applicant is incorrect, the Agency shall inform the applicant in writing within 7 working days of the decision and include notification of the right to appeal the decision and the method to obtain a fair hearing. Complained of the behavioral problems of the installers or damage to a person or to property, the Agency shall decide whether the applicant is correct. If the Agency decides that the: Applicant is incorrect, the Agency shall inform the applicant in writing within 7 working days of the decision and include notification of right to appeal the decision and the method to obtain a fair hearing; Applicant's complaint about the installers' behavioral problems is correct, the Agency shall follow the Agency's procedures on reporting and correcting the problem; Applicant's complaint of damage or injury is correct, the Agency shall file a claim with its insurance carrier. Was not available, the Agency shall contact the applicant within 7 working days of the receipt of the unsigned final inspection form and attempt to obtain the signature. The Agency shall complete the installation through the final inspection form within 90 days of the decision to provide the weatherization benefit. Types of Weatherization. Full Weatherization. The amount of benefit depends on the type and amount of the weatherization provided up to a maximum of $1,800 for labor and program support. Low-Cost/No-Cost Weatherization. The Agency may also provide low-cost/no-cost weatherization up to a maximum amount set by the Agency without regard to the $1,800 limitation on full weatherization as a stop-gap measure when an applicant in an eligible dwelling unit requests it. The low-cost weatherization part of the program includes: Workshops on weatherization; In-home demonstrations to install low-cost weatherization materials; Pamphlets, information, and material kits to guide the applicant in the application of low-cost materials for weatherization; and Installation of low-cost weatherization materials in dwelling units where there are elderly or handicapped individuals or dwelling units where labor sources are not available. The Agency may not authorize an expenditure for full weatherization in which the total cost exceeds $1,800 unless the Agency has been granted a waiver by the Department based on established criteria and sufficient documentation. The Agency may not authorize installation if: A dwelling unit has been previously fully weatherized; A dwelling unit is determined to be ineligible; or An applicant refuses weatherization services. The Agency shall notify the applicant that the case is closed when the: Installation is complete and the final inspection form is signed; Applicant moves or the dwelling becomes unoccupied before the weatherization materials are installed; Dwelling unit is destroyed or rendered uninhabitable before the weatherization materials are installed; Applicant does not submit required information to complete the application within the 30-day time limit; Applicant cannot be contacted for inspection and the cost estimation of the job within the 15 working day time limit; Applicant intentionally furnished false information on the application form; or Applicant requests cancellation before the weatherization materials are installed. The Agency shall have a grievance procedure and shall attempt to resolve a grievance at the local level. An applicant may appeal to the Department for a fair hearing in the following situations: The applicant's complaint is not resolved by the Agency's grievance settlement procedures; The applicant is denied assistance; The applicant is neither certified nor denied assistance within 5 days from the date that the required documentation is presented according to Regulation .06C of this chapter; The applicant disagrees with the Agency decision that the work is incomplete or improperly installed; The applicant disagrees with the Agency decision regarding behavioral problems of installers or damage to person or property; or The applicant disagrees with type or amount of weatherization provided or to be provided. The applicant has 15 working days from the date that the notice of a right to a fair hearing was sent by the Agency to file a request. The Agency shall establish a process by which the request forwarded to the Department contains the following basic information: Date of request; Name and address of the applicant making the request; The reason for making the request; and The date of the action or decision being appealed or the date the notice of the action or decision was mailed to the applicant. The Agency shall assist the applicant in completing the required form for the request to ensure that all the information required by the Department to process the request is present. The applicant shall file the completed form requesting a fair hearing at the Agency. At the time of the filing the applicant shall be informed that the: Applicant may be represented at the hearing by a lawyer, a relative, a friend, or other person; Department shall provide an interpreter if the applicant does not speak English or is hearing impaired; Applicant may present witnesses, documentary evidence, and oral argument, and cross-examine any employee required to be present. The applicant may examine any documents introduced in the hearing by any party to the hearing. The Agency shall, within 2 working days, forward the completed request for a fair hearing form and pertinent case information to the Program. The Agency shall also include all pertinent information regarding the case that is part of the Agency's records. The Department shall decide within 7 working days of the date the request was received to accept or deny the applicant's request for a fair hearing. The Department may deny the request for a hearing if the: Sole issue is one of either State or federal law or policy and the issue is not one of incorrect determination of ineligibility or computation; Request has not been filed within the required time limits; or Issue is not one of those allowed in Regulation .09B of this chapter. The Department may dismiss a request for a fair hearing if the applicant: Withdraws the request in writing; Dies; or Without good cause, does not appear at the hearing. If the Department accepts the request, the hearing officer shall record the date that the request was filed with the Agency and shall schedule the hearing within 10 working days of the date of the request. The hearing officer shall notify the applicant and the Agency of the date and place of the fair hearing at least 15 days prior to the scheduled fair hearing. The notice to the applicant shall include: A summary of the regulations governing the fair hearings process, including the legal authority and jurisdiction under which the hearing is to be held; A reference to the particular statute or rule, including a rule of procedure, involved; A short and simple statement of the matters asserted; The right of the applicant to be represented by a lawyer or other person at the hearing; The availability of free legal services; The right of the applicant to present documents and witnesses to support the case at the hearing; The right of the applicant to examine the case record in the preparation for the hearing; The name and phone number of the person to call if the applicant cannot attend the hearing or wishes to change the time and place of the hearing; and The fact that the hearing will be dismissed if the applicant fails, without good cause, to attend the hearing. The Agency may be represented by the Director or the Director's designee. The hearing shall be recorded. The recordings, together with all papers and requests filed in the proceedings and the findings and conclusions constitute the exclusive record of the hearing. The record is kept available to the applicant for a period of 3 years or until litigation involved in the decision is ended, whichever is later. The hearing officer shall render a written decision within 45 days after the hearing is held. The hearing officer shall mail the written decision to the applicant, a representative, and the Agency. The decision shall include a statement of the applicant's right to judicial review of the decision. If the decision is favorable to the applicant, the local agency shall comply with the decision by taking corrective action promptly, but not later than 60 days from the date of the decision. The Agency shall notify the hearing officer promptly or within the time given in the decision that it has completed all required action. The income guidelines to be used by each agency for certifying applicant eligibility are the federal poverty income guidelines that are published annually in the Federal Register. Housing and Community Development Article, §4-211(c), Annotated Code of Maryland Effective date: April 22, 1985 (12:8 Md. R. 801) Regulation .11 amended effective September 8, 1986 (13:18 Md. R. 2019) Chapter recodified from COMAR 07.06.05 to COMAR 05.07.03 Chapter recodified from COMAR 05.07.03 to COMAR 05.04.14 effective September 6, 1999 (26:18 Md. R. 1373) Regulations .02B, .03B, .07A, .09B, and .10 amended effective September 6, 1999 (26:18 Md. R. 1373) Chapter revised effective January 31, 2005 (32:2 Md. R. 145) These regulations prescribe the policies, procedures, and authorizations for making grants to elderly homeowners to finance accessibility-related modifications to make the owner’s dwelling unit more accessible to or functional for the elderly. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland, as amended. “Annual income” means total household income from all sources, including wages, investment income, Social Security, retirement, disability, and unemployment benefits, less: Unusual or temporary income items as determined by the Department; and Abnormal expenses of a long-term nature, such as extraordinary medical, rehabilitation, or special education expenses. “Applicant” means any person applying for a grant under the Program. “Authorized officer”, for purposes of executing the Program documents, means any of the following: The Director and any Deputy Director of the Community Development Administration, an agency within the Division of Development Finance of the Department; The Director of Single Family Housing Programs; and The Deputy Director of Single Family Housing Programs. “Contract” means the agreements between a grantee and a licensed general contractor or licensed home improvement contractor accepted by the Department setting forth the terms of performance of work to be financed by a grant made under the Program. “Department” means the Department of Housing and Community Development. “Director” means the Director of Single Family Housing Programs of the Department. “Deputy Director” means the Deputy Director of Single Family Housing Programs of the Department. “Elderly” means the age limit specified by the Secretary, which is 55 years old or older. Family of Limited Income. “Family of limited income” means one or more individuals permanently residing as a household in a dwelling unit in an eligible building whose combined annual income does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-915, Annotated Code of Maryland. “Family of limited income” includes a trust described in 42 U.S.C. §1396P(D)(4), or a trust established for the benefit of an individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-915, Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the residential building owned by the trust. “Grantee” means a single family owner-occupant who receives a grant to make modifications to an eligible building. “Household” means an individual or a group of individuals who occupy a dwelling unit as their permanent residence. “Level I local administrator” means a political subdivision certified by the Department under COMAR 05.04.01.16. “Level II local administrator” means a political subdivision certified by the Department under COMAR 05.04.01.16. “Local administrator” means a level I or level II local administrator. Modification. “Modification” means any improvement, addition, repair, renovation, or alteration to the interior or exterior of a grantee’s residence to make it more accessible or functional for the elderly owner. Modification includes any improvement or repair that is: Directly related to making the dwelling unit more accessible or functional; and Necessary to ensure the modification can appropriately be made or installed. “Program” means the Accessible Homes for Senior Homeowners Grant Program. “Program Director” means the Assistant Director of Special Loan Programs in the Division of Development Finance of the Department. “Secretary” means the Secretary of Housing and Community Development. Single Family Owner-Occupant. “Single family owner-occupant” means an eligible grantee that owns and resides, or intends to reside, in an eligible building. “Single family owner-occupant” includes a trust described in 42 U.S.C §1396P(D)(4), or a trust established for the benefit of an elderly individual with a disability by an individual other than the beneficiary and that is funded with the assets that were never owned or controlled by the beneficiary, if: The income of the trust does not exceed an amount established by the Secretary in accordance with Housing and Community Development Article, §4-916(b), Annotated Code of Maryland; and The beneficiary of the trust is an individual who resides in the eligible building owned by the trust. “Structurally sound” means not having any physical conditions serious enough to endanger the life, property, or safety of the occupants or their invitees, whether or not the building is in compliance with applicable codes and rehabilitation standards. “Work write-up” means a description of the modifications, and other work items needed for the modification of an eligible building. To qualify as an eligible grantee under the Program, single family owner-occupants shall: Be a “family of limited income” as defined in Regulation .02B of this chapter; Own the eligible property in fee simple or under a freely transferable ground rent lease; Have at least one of the owners meet the definition of elderly in Regulation .02B of this chapter who resides in or intends to reside in the property to be modified; Have the legal capacity to incur the obligations of the grant; and Demonstrate to the Department that they cannot undertake the modifications without a grant. Buildings shall meet the following requirements: Be located within the State; Contain not more than four residential units; Be properly zoned for the proposed use; Be in need of modifications considered eligible under this chapter; Be owned by an eligible grantee who shall provide assurance of title or evidence of ownership acceptable to the Department; Be covered by property insurance; and If the building is in the 100-year flood plain, as designated by the U.S. Department of Housing and Urban Development, be covered by a flood plain insurance policy. A grant may not be approved unless: Safe, sanitary, and adequate water supply and sewage disposal are available; and The building is structurally sound and free of health and safety hazards. A manufactured housing unit is eligible if it is intended for residential use by a single household, and meets the conditions of COMAR 05.04.01.05B. Manufactured homes which are taxed as personal property may be eligible buildings and shall be reviewed by the Department on a case-by-case basis before grant approval. Condominiums and cooperative units owned by an eligible grantee may be eligible buildings and shall be reviewed by the Department on a case-by-case basis before grant approval. Grant proceeds may only be used for the cost, labor and materials for modifications to an eligible building. Grant proceeds may not be used to pay for taxes, insurance, mortgage payments, or nonessential repairs. If a building contains between 2—4 dwelling units, grant proceeds may only be used for: Modifications to the interior of the eligible grantee’s dwelling unit; and Modifications to the exterior of the eligible building necessary to make the grantee’s dwelling unit more accessible. Modifications to the exterior of a condominium or cooperative unit that serves the eligible grantee’s dwelling unit may be eligible and shall be reviewed by the Department on a case-by-case basis. The Department shall enter into a grant agreement with each grantee. The Department may establish other terms and conditions in the grant agreement, and any other documents related to the grant, which the Department considers reasonable and necessary to accomplish the objectives of the Program or to ensure compliance with all federal, State, and local laws, ordinances, and regulations, and departmental programs and policies. Maximum Grant Amount. A grant for a residential building may not exceed $25,000. The Director or Deputy Director may, in their discretion, approve increases in the maximum grant amount to cover exceptional circumstances in an amount determined to be reasonable but not exceeding $60,000. The Department may require that the grant be secured by an instrument recorded in the land records of the county in which the property is located. Insurance. A grantee shall provide evidence that fire and extended coverage insurance are in effect for 1 year from the date of closing for not less than the replacement value of the home. If applicable, a grantee shall provide evidence that flood insurance on the home is in effect for 1 year based on the current Federal Emergency Management Administration’s requirements. Appraisals. At the discretion of the Program Director or the local administrator, a grantee may be required to obtain an appraisal in a form and manner acceptable to the Department from an acceptable independent fee appraiser showing a building’s value before and after the proposed modification. Default. Remedies upon grant default shall be exercised in the discretion of the Department and may be one or more of the remedies provided for in the grant documents or by law, which may include: Repaying all or a portion of the grant; and Any other legal action which protects the Department’s interests. The Department may operate the Program or establish procedures that allow a local administrator to accept applications and approve grants under the Program. Application Forms. Grant applications shall be made upon standard forms prescribed by the Department. Application Fee. An applicant may be required to pay an application fee as designated by the Department from time to time. Documentation. An applicant shall submit with the application any documentation that the Department requires, including, but not limited to, any documentation needed to establish the eligibility of the applicant. An applicant shall provide evidence satisfactory to the Program demonstrating that the applicant could not undertake the modification without a grant due to: Insufficient household income to make loan payments; or The property not having sufficient value to secure private financing. An applicant shall submit supporting documentation required by the Program guidelines. Initial Eligibility Determination. Each application shall be submitted to the Department or local administrator, as applicable, for initial review to make a preliminary determination of the eligibility of the applicant and the project. If an applicant is determined preliminarily to be eligible, the applicant will be provided with a letter acknowledging receipt of the application and notifying the applicant of the ongoing review process. If an applicant is ineligible for a grant, the applicant shall be informed in writing of the determination and the reasons for it. Building Evaluation. Each building for which an eligible application is received shall be inspected for the purpose of preparing a work write-up by: The Department; The local administrator; A nonprofit corporation that acceptable to the Program; or A licensed contractor who is acceptable to the Program. The applicant shall be provided with a copy of the work write-up or an analysis of the modification and instructions for obtaining the contractor’s proposals to complete the work. Grant Approval. Upon receipt and approval of all documentation and the contractor’s proposals, the local administrator or the Department shall undertake an analysis of each grant as to amount and other grant terms and conditions. Approval to make a grant is as follows: Grants in amounts of $25,000 or less may be approved by the: Level II local administrator, when a level II local administrator originates the grant; or Program Director, when a level I local administrator or the Department originates a grant; and Grants or a combination of Program grants in amounts greater than $25,000 and up to a maximum of $60,000 may be approved by the Director or Deputy Director. Grant Commitments. Grant commitments shall be made on forms provided by the Program. Grant commitments shall specify a time limit for closing the grant which may be extended with the approval of the Program. If the grant closing does not occur within the specified time, the local administrator or Department, as applicable, shall notify the applicant that the commitment is officially canceled. If a grant application is rejected, the Department or the local administrator, as the case may be, shall notify the applicant in writing stating the reason the grant is rejected. Reconsideration. Applicants may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Withdrawal of Application. An applicant may withdraw a grant application at any time before closing by delivering written notice to the Department or the local administrator originating the grant. The applicant shall bear any costs incurred for items other than internal processing including, but not limited to, title examinations, credit reports, and appraisals. Cancellation of Application. The Program or the local administrator may cancel an application at any time during processing if the applicant fails to provide information requested by the Program which is required to evaluate the request. Notification of the cancellation of an application shall be made in writing. A canceled application may be reinstated upon the applicant’s written request within 60 days following the date of the cancellation. Any time after 60 days following cancellation, a new application with supporting documents may be required. The grant closing shall be scheduled by the Department or the local administrator. Grant Documents. Grant document forms shall be provided by the Program and may not be altered. Grant documents shall be executed on behalf of the Department by an Authorized Officer of the Department or an authorized local administrator. Charges and Fees. The Department or the local administrator may charge and collect from the grantee reasonable and customary amounts acceptable to the Department. Contractors and their subcontractors shall meet the requirements of COMAR 05.04.01.13. Work done, materials supplied, and construction procedures employed shall comply with all contract documents, applicable codes and standards, including those set forth in these regulations, and those general specifications established by the Department. Permits. If required by State codes or local codes, all building permits shall be obtained and posted at the project before the beginning of construction. Compliance with applicable codes and obtaining required permits and licenses are the responsibility of the grantee and contractor. Any action taken by the Department or the local administrator to prepare or review work write-ups, evaluate the property, or review and approve plans and specifications is: To assure the Department and the local administrator of the adequacy of the proposed work; and Not intended to substitute for or ensure compliance with appropriate State and local building codes. There shall be no modification of any contract documents without the prior written consent of the Department or the local administrator, as evidenced by an approved change order, executed by: The contractor; and The grantee. Contract documents are listed and described in Program guidelines. Inspections. The Department or local administrator, or an agent authorized by the local administrator and acceptable to the Program, may conduct inspections to determine the required scope of work, to verify payments, and to facilitate construction problems and disputes and arbitration procedures. Construction Disputes. If disputes between the contractor and the grantee occur, the Department shall recognize the findings of the Maryland Home Improvement Commission and the Consumer Protection Division of the Office of the Attorney General. Termination of Contracts. Contracts may be terminated for cause in accordance with the grant documents and contract documents Monitoring of Disbursements. The local administrator or Department shall monitor grants and disbursement of grant funds during rehabilitation to assist grantees and to assure that grant funds are properly used. The local administrator or Department shall determine the frequency and level of inspections during rehabilitation based on Program guidelines. Payments Generally. If a grant is originated by a local administrator, Grant funds may be disbursed in full at the closing of the grant to an account established under §C of this regulation. Grant proceeds shall be disbursed for modifications in accordance with the requirements of §B(3)—(5) of this regulation. The local administrator shall return any unused grant proceeds to the Department. Payments of draws shall be by joint payee check issued to the grantee and contractor unless an alternative payment method is approved by the Program Director. Except as provided in §D of this regulation, payments shall be made only for work completed. Grant accounts established by a local administrator shall comply with the following: Grant funds shall be held in a non-interest-bearing account established by the local administrator or the subcontractor and approved by the Department. The account may be: An account with a depository institution that is separate from the other operating accounts of the local administrator or subcontractor; An account with a depository institution that is not separate from the other operating accounts of the local administrator or subcontractor using a separate reconciled general ledger account for all Program funds; An escrow account or attorney’s trust account held and managed by an escrow agent if the escrow agent meets the following minimum criteria to the satisfaction of the Department: Any employee of the escrow agent with access to the account shall be covered by a fidelity bond, or insured with employee dishonesty liability insurance, in an amount not less than $100,000; The escrow agent shall provide the local administrator or the subcontractor, if any, and the Department with any statements required under this subsection; and Any other requirements established by the Department; or Another type of account approved by the Department. The Department may require the local administrator or the subcontractor to provide periodic statements to the Department of all grant funds in an account. If the statements do not correspond with the Department’s records of grant funds in the account, the local administrator or the subcontractor shall work with the Department to reconcile the differences. The Department may revoke, at any time, its approval of any grant account established under this regulation. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 10 percent of the contract costs. Progress Payments. Progress payments may not be made until the grantee has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the Department or the local administrator. A grantee shall be notified in writing by the Department or the local administrator, as applicable, if their request for payment is refused. Final Payment. Final payment shall be made as follows: A grantee shall submit a certificate of completion, executed by the grantee and contractor, certifying that all work has been completed in accordance with the contract documents. Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed. If, in the opinion of the local administrator or Department, the contractor has satisfied the contract and the grantee refuses to request or release the final payment, then the following procedures shall apply: The grantee shall be notified in writing by the local administrator or Department; The grantee shall explain in writing within 10 days of receiving the written notification why direct payment to the contractor should not be made; If the grantee responds within the 10-day period and requests a meeting, the local administrator or Department shall hold a meeting at which the grantee shall present the grantee’s objections to requesting or releasing the final payment; and The local administrator or Department may then either approve or disapprove direct payment to the contractor or the grantee. If the local administrator or Department receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, it shall retain an amount equal to the lesser of all funds not yet disbursed and the amount needed to satisfy the claims. Retainage. The local administrator or Department may retain until final payment 10 percent of the contract costs. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the Department. Closeout Procedures. After final payment is made, the local administrator or the subcontractor shall reconcile all receipts and disbursements and prepare a close-out statement. A copy of the close-out statement shall be forwarded to the Program. A contractor, local administrator, or subcontractor may not discriminate against any person on the basis of race, color, religion, national origin, sex, sexual orientation, gender, marital status, physical or mental handicap, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program. Each contractor, local administrator, and subcontractor shall comply with all applicable federal, State, and local laws and Department policies regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Title VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18 relating to Drug and Alcohol Free Workplaces, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Grantees, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. The Department may establish from time to time Program guidelines containing underwriting standards, grant processing requirements, and other requirements or matters relating to the financing of grants or to Program requirements. The Department shall ensure that Program guidelines, fee information, and application forms are publically available on its website and at its offices. Delegation. In addition to authorized officers identified in Regulation .02B of this chapter, the Secretary may delegate to any other official or employee of the Department or Administration the authority to execute or approve any Program documents or grant documents. Through the agreement with the local administrator, specific staff members for the local administrator may be authorized by the Department to execute grant documents on behalf of the Department. False Statements. A grantee who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department or the local administrator originating the grant, is subject to immediate acceleration of the grant, in addition to the penalties authorized by Housing and Community Development Article, §4-933, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal agency in connection with any modification with respect to which federal assistance is sought necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §§4-910 and 4-931, Annotated Code of Maryland Effective date: September 29, 2014 (41:19 Md. R. 1076)