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)