Chapter 08. Accessory, Shared, and Sheltered Housing Program

“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:

“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:

“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.

“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.

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.

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:

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:

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:

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:

Demonstrate that the property will be certified by the appropriate governing agency to provide sheltered care to elderly, disabled, or handicapped persons.

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:

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.

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.

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.

Loans to the following borrowers shall have interest rates of not less than 4.5 percent:

Loans to the following borrowers may have interest rates of 4.5 percent or less:

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.

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:

Flood Insurance. If the property is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development:

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.

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.

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.

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.

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.

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.

The loan documents shall provide for repayment of deferred amounts:

The Department may, but need not, charge interest on the deferred interest.

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.

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:

In addition, all sheltered housing sponsor applicants shall submit the following documentation:

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.

Each property for which an application is received shall be inspected for the purpose of:

The inspection shall be made by:

The applicant shall be provided with instructions for obtaining final contractor's proposals for the work.

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:

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 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.

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.

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.

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.

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.

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:

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.

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.

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.

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.

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.

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:

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 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.

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 local administrator may charge borrowers a fee for inspections during rehabilitation, as approved by the Department.

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 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:

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 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 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 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.

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 retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the local administrator.

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.

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.

The political subdivision shall be able to provide staff to perform adequately the functions of the following positions:

The rehabilitation staff of the political subdivision shall be capable of:

The political subdivision shall execute and comply with the terms of an agreement required by the Department.

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:

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:

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 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.

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.

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.

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.

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.

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.