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)