# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 04 — Special Loan Programs

### Chapter 11 — Special Housing Opportunities Program

**Authority:** Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C

**Administrative History:** Effective date: June 22, 1992 (19:12 Md. R. 1132)

**Administrative History:** Regulation .01C amended effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Regulation .02B amended effective November 20, 1995 (22:23 Md. R. 1799); November 29, 1999 (26:24 Md. R. 1856)

**Administrative History:** Regulation .03D, E, F amended effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Regulation .04 amended effective January 2, 1994 (20:25 Md. R. 1942); November 20, 1995 (22:23 Md. R. 1799); April 5, 1999 (26:7 Md. R. 537)

**Administrative History:** Regulation .04G amended effective June 5, 1995 (22:11 Md. R. 818)

**Administrative History:** Regulation .06D amended effective January 2, 1993 (19:26 Md. R. 2283)

**Administrative History:** Regulation .07C, G amended effective November 7, 1994 (21:22 Md. R. 1873)

**Administrative History:** Regulation .09 amended effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Regulation .09D amended effective November 7, 1994 (21:22 Md. R. 1873); November 29, 1999 (26:24 Md. R. 1856)

**Administrative History:** Regulation .10B amended effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Regulation .11A amended effective January 2, 1994 (20:25 Md. R. 1942)

**Administrative History:** Regulation .12C amended effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Regulation .14 repealed, Regulation .18 amended, and Regulations .15—.19 recodified to .14—.18 effective November 20, 1995 (22:23 Md. R. 1799)

**Administrative History:** Chapter revised effective March 31, 2003 (30:6 Md. R. 419)

**Administrative History:** Regulation .04J amended effective February 7, 2011 (38:3 Md. R. 151)

**Administrative History:** Regulation .09E amended effective April 19, 2010 (37:8 Md. R. 614); February 7, 2011 (38:3 Md. R. 151)

**Administrative History:** Regulation .18 amended effective March 16, 2015 (42:5 Md. R. 485)

#### Regulation .01 General.

*COMAR 05.04.11.01*

A. Authority. These regulations are adopted under the provisions of the Community Development Administration Act, Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland.

B. Purpose. These regulations are intended to promote the purposes of the Act, Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, by implementing, interpreting, making specific, and otherwise carrying out the provisions of the Act within their scope. In particular, they are intended to provide basic information to nonprofit sponsors of special housing facilities which provide shelter and services to individuals with physical or mental impairments and special housing needs.

C. Scope.

  (1) These regulations apply to the program of insured or guaranteed loans made or purchased by the Administration with the proceeds of revenue bonds as authorized by , Housing and Community Development Article, §§4-227 and 4-245(a), Annotated Code of Maryland. Loans made or purchased under these regulations shall be made or purchased to finance special housing facilities undertaken by nonprofit organizations to house special needs populations.

  (2) Loans made from the proceeds of revenue bonds for special housing facilities which provide shelter and services for individuals with special housing needs will be financed ordinarily under these regulations. The Department also makes loans for individuals with special housing needs under the State-funded group home program set forth at COMAR 05.04.09. Other projects financed with the proceeds of revenue bonds which provide multifamily rental housing are financed under COMAR 05.05.02 or 05.04.10.

#### Regulation .02 Definitions.

*COMAR 05.04.11.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland.

  (2) “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development.

  (3) “Department” means the Department of Housing and Community Development.

  (4) “Director” means the Director of the Administration.

  (5) “Families of limited income” means families or individuals whose incomes do not exceed upper income limits established by the Secretary in accordance with Regulation .05 of this chapter.

  (6) “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated under it.

  (7) “Local government” means any of the 23 counties of the State, the Mayor and City Council of Baltimore, and any municipal corporation subject to the provisions of Article XI-E of the Constitution.

  (8) “Nonprofit organization” means an organization whose organizational documents include among its charitable purposes the provision of housing to special needs populations, and which is currently recognized by the Internal Revenue Service as a tax-exempt organization under §501(c)(3) of the Internal Revenue Code.

  (9) “Project” means a special housing facilities project.

  (10) “Secretary” means the Secretary of Housing and Community Development.

  (11) “Special housing facility” means a special housing facility under the Act that does not constitute residential rental housing for family units within the meaning of §145(d) of the Internal Revenue Code.

  (12) “Special needs populations” means individuals with disabilities or special housing needs, including those who are developmentally or mentally disabled, physically or mentally handicapped, elderly, or juveniles in need of direct supervision, or otherwise in need of assistance due to special personal characteristics or circumstances.

  (13) “Sponsor” means a borrower on a loan made by the Administration to finance a project and includes its successors and assigns by operation of law or as approved by the Administration or the Maryland Housing Fund.

#### Regulation .03 Eligible Sponsors.

*COMAR 05.04.11.03*

Sponsors shall meet all of the following requirements to qualify for a loan:

A. Be a nonprofit organization;

B. Be in good standing and be qualified to do business in Maryland;

C. Have all necessary legal and corporate authority to incur the obligations of the loan;

D. Either:

  (1) Be licensed to operate the project by the appropriate State agency, to the extent required by State law; or

  (2) Enter into a management agreement acceptable to the Administration, with a manager acceptable to the Administration that:

    (a) Is licensed to operate the project by the appropriate State agency, to the extent required by State law, and

    (b) Meets the requirements of §§A, B, E, F and G of this regulation;

E. Either:

  (1) Have a contract, acceptable to the Administration, with a State agency or county government; or

  (2) Have a management agreement acceptable to the Administration with a manager acceptable to the Administration who has a contract as described in §E(1) of this regulation;

F. Demonstrate:

  (1) Financial credibility and stability,

  (2) The capability to undertake the project, and

  (3) Either:

    (a) The ability to manage the project as evidenced by at least 2 years of prior management of the project or comparable projects; or

    (b) In the case of a manager acceptable to the Administration, with whom the borrower has a management agreement acceptable to the Administration, the ability of the manager to manage the project as evidenced by at least 2 years of prior management of the project or comparable project;

G. Not be under an order suspending or debarring the sponsor from participating in the Department's programs under COMAR 05.01.05, or under any similar order from any other State or federal agency; and

H. Not have defaulted under a Department or other governmental loan.

#### Regulation .04 Eligible Projects.

*COMAR 05.04.11.04*

A. The project shall be a special housing facility, as defined in Regulation .02B(11) of this chapter.

B. Fifty-one percent of the residents of the project, other than supervisory personnel, shall be families of limited income.

C. Upon closing the loan, the special housing facility shall be owned by an eligible sponsor.

D. The project shall be a single family dwelling unit.

E. The project shall comply, if necessary, with the notice, public hearing, and public approval requirements of the Internal Revenue Code.

F. The project shall conform upon completion with all applicable State and local laws, codes, and regulations, including zoning, building, and housing regulations and the regulations and requirements of any agency of State or local government governing supported housing for special needs populations.

G. The project shall be, in the determination of the Administration, economically feasible so that the loan reasonably can be expected to be repaid in full, with interest.

H. The project shall have a useful life of a length satisfactory to the Administration with reasonable maintenance.

I. The project shall be subject to a contract with an agency of State or local government under terms and conditions acceptable to the Administration.

J. For projects involving new construction or the acquisition of a newly constructed building, the project shall be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland.

#### Regulation .05 Income Limits.

*COMAR 05.04.11.05*

A. The Secretary shall establish upper income limits for families of limited income taking into consideration factors including:

  (1) The amount of the total income of the families available for housing needs;

  (2) The size of the family;

  (3) The cost and condition of housing facilities available;

  (4) The ability of the families to compete successfully in the normal private housing market; and

  (5) Standards and definitions established for pertinent federal and State housing programs.

B. The Secretary may establish income limits for individuals and households by size on a regional basis, and may establish income eligibility criteria, within limits lower than the regional limits, for particular projects.

C. For projects occupied by two or more unrelated individuals, each individual shall be considered a family of limited income for the purpose of determining compliance with the income limits established in this regulation.

D. The Secretary may determine, from time to time, the percentage of occupants in a public purpose project which shall be families of limited income in order to qualify as an eligible project. The Secretary shall take into consideration such factors as the Secretary may consider appropriate.

#### Regulation .06 Eligible Uses and Costs.

*COMAR 05.04.11.06*

A. The Administration may make loans as follows, subject to the requirements of the Internal Revenue Code if the interest on the bonds used to finance the loans is exempt from federal income taxation:

  (1) Construction mortgage loans in conjunction with permanent mortgage loans;

  (2) Rehabilitation or property improvement mortgage loans in conjunction with permanent mortgage loans;

  (3) Mortgage loans to refinance the outstanding principal balance of acquisition debt on a project; and

  (4) Permanent mortgage loans, including permanent take-out financing.

B. The Secretary may, from time to time, limit the Administration to the making of loans under selected categories of eligible uses set forth in §A of this regulation.

C. The Administration may participate with other public or private lenders in the making of loans to finance projects.

D. Loans may finance the costs associated with acquisition, construction, rehabilitation, or improvement of the project, including, subject to the requirements of the Internal Revenue Code if the interest on the bonds used to finance the loans is exempt from federal income taxation, the following:

  (1) Costs of appraisals;

  (2) Architectural and engineering costs for design and supervision;

  (3) Costs of bonds, permits, and fees;

  (4) Costs associated with site preparation and evaluation including soil borings, environmental review reports, and testing for environmental hazards;

  (5) Carrying costs during construction, including construction interest, real estate taxes, and property insurance;

  (6) Financing fees and charges imposed by the Administration or the mortgage insurer;

  (7) Legal, processing, packaging, title, and closing fees, and other fees and charges; and

  (8) Other costs and fees associated with the project acceptable to the Administration.

E. Loans associated with refinancing existing debt may finance:

  (1) The amount of existing principal debt on the property;

  (2) Lender prepayment fees and charges;

  (3) Legal, processing, packaging, title, and other closing fees;

  (4) Other fees and charges relating to the loan; and

  (5) Any other costs approved by the Administration.

F. If there are expenditures relating to the project that are to be reimbursed, directly or indirectly, from the proceeds of tax-exempt bonds, the Administration shall have adopted an official intent resolution not later than 60 days after payment of the original expenditure and otherwise have complied with the Internal Revenue Code.

G. Loans may not be used to finance salaries, services, or other operating costs of the project.

#### Regulation .07 Loan Terms—General.

*COMAR 05.04.11.07*

A. For acquisition, construction, reconstruction, rehabilitation, and improvement loans, the Administration may lend up to an amount which does not exceed the lesser of:

  (1) 75 percent of the appraised market value of the project; or

  (2) The total cost of the project.

B. For loans to refinance existing debt, the Administration may lend up to an amount which does not exceed the lesser of:

  (1) 75 percent of the appraised market value of the project; or

  (2) The amount of eligible costs under Regulation .06D of this chapter.

C. By written determination, the Secretary may establish, from time to time, the maximum dollar amount of a loan which may be made to any project under the program.

D. Term.

  (1) Loans for permanent financing of projects may be for a term not to exceed 30 years, except that if the Administration elects to fund the project initially from a source other than proceeds of revenue bonds, then the term may not exceed 31 years and 6 months.

  (2) The term of construction loans may not exceed 2 years and shall be based upon the type and size of the project and the extent of proposed construction or rehabilitation.

E. Interest Rate. The Administration shall charge interest on the construction, rehabilitation, and permanent loans at a rate that, together with fees and charges by the Administration, covers the costs of issuance and interest that it pays on the revenue bonds or other obligations issued to raise the funds for loans and the allowable expenses of the Administration, including general operating expenses of the Department.

F. Liens.

  (1) Loans shall be secured by a mortgage or deed of trust. The mortgage to the Administration shall be a first lien on:

    (a) The land and improvements; or

    (b) A leasehold interest in the land which extends at least 25 years beyond the term of the loan and a fee interest in the improvements.

  (2) The Administration may permit subordinate liens for other loans made by the Department or other lenders.

G. Cross-Default and Cross-Collateralization. If two or more program loans are made to the same sponsor, the Administration may require loan documents to contain cross-default and cross-collateralization provisions applicable.

H. Assumption and Prepayment. Loans may not be assumed without the prior written approval of the Administration and the mortgage insurer. Loans may be prepaid to the extent permitted in the loan documents. Generally, loans may not be prepaid for at least 10 years following loan closing.

I. Payment.

  (1) Sponsors shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term, except that if the term exceeds 30 years in accordance with §D of this regulation then, at the direction of the Administration, a sponsor may make initial payments of interest only for up to 18 months after the loan closing.

  (2) In addition, the sponsor shall pay mortgage insurance premiums, any reserve for replacement deposits, and any operating reserve on a monthly or annual basis, as required by the Administration.

J. Late Charges and Other Fees. Sponsors shall pay any servicing fees, loan insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law.

K. Expense Escrows. The Administration shall require the sponsor to deposit monthly with the Administration 1/12 of the annual amount of real estate taxes and property insurance, unless the sponsor is not required to pay property taxes on the project and has acceptable blanket property insurance covering multiple properties.

L. Security Requirements. The Administration may require the following instruments or guarantees to secure its loans:

  (1) For new construction or substantial rehabilitation projects:

    (a) Payment and performance bonds shall be provided each in an amount equal to 100 percent of the contract price,

    (b) Cash or an irrevocable letter of credit equal to 50 percent of the contract price,

    (c) The completion assurance required by the mortgage insurer; and

  (2) Such other sureties or guarantees of the loan as may be determined necessary by the Administration or the insurer.

#### Regulation .08 Loan Terms—Public Purpose Restrictions.

*COMAR 05.04.11.08*

A. Limited Income Occupancy. The sponsor shall execute a recorded agreement stating that as long as the loan is outstanding, or such longer period of time as the Administration may require, not less than a specified number of occupants of the project shall be families of limited income in accordance with Regulation .04B of this chapter.

B. Limited Income Distribution. The Administration may require the sponsor to agree to limits on the disposition of operating income of the project after payment of all project expenses, including loan payments and mortgage insurance premiums required by the Administration and the State or county agency which provides operating subsidies to the project.

C. Project Monitoring. The sponsor shall permit monitoring by the Administration or an approved agent of the Administration during the term of the loan of the:

  (1) Physical condition of the project;

  (2) Financial condition of the project and sponsor; and

  (3) Incomes of those residing in the project.

D. Management. The project shall be managed directly or, in special circumstances, under a type of management contract acceptable to the Administration and its bond counsel.

E. Tax Compliance Agreement. The sponsor shall execute a legally binding covenant, to be recorded among the land records, requiring for as long as the loan is outstanding that:

  (1) The sponsor shall continue to be a nonprofit organization;

  (2) No portion of the loan may be used for a private business use or in an unrelated trade or business within the meaning of §513 of the Internal Revenue Code;

  (3) The sum of the following amounts does not exceed $150,000,000:

    (a) The Administration's §501(c)(3) bonds allocated to the sponsor; plus

    (b) The outstanding tax-exempt nonhospital bonds allocated to the sponsor;

  (4) The project qualifies as a special housing facility.

F. For purposes of §E(3) of this regulation, sponsor includes any organization under common management or control as the sponsor, any related person, and any test period beneficiary within the meanings of the Internal Revenue Code.

#### Regulation .09 Loan Conditions.

*COMAR 05.04.11.09*

A. Appraisal.

  (1) The Administration shall order an appraisal or require one to be ordered by the sponsor.

  (2) The appraisal shall be performed by an appraiser acceptable to the Administration and shall show the current value of the property and the expected value of the property after completion of proposed improvements, if any.

B. Environmental Review.

  (1) A project financed by a loan shall comply with applicable local, State, and federal environmental laws and regulations.

  (2) A sponsor may be required, at the discretion of the Administration, to conduct a screening of the proposed site for environmental conditions such as man-made hazards, storm water runoff, underground storage tanks, lead-based paint, radon gas, PCBs, asbestos, and other environmental hazards within the meaning of the environmental laws referred to in §C(1) of this regulation.

  (3) If the initial screening indicates adverse or potentially adverse environmental conditions, the Administration may require a more detailed physical investigation, review of historical records, testing and treatment, or abatement of the environmental condition as a requirement of the loan.

  (4) For properties built before 1950, the sponsor shall keep the property registered with the Department of the Environment under Environment Article, Title 6, Subtitle 8, Annotated Code of Maryland.

C. Mortgage Insurance.

  (1) Before any loan closing, the Administration and sponsor shall secure a commitment acceptable to the Administration to insure the proposed loan in an amount equal to 100 percent of the principal amount of the loan.

  (2) The Administration and sponsor, as applicable, shall comply with any conditions of the insurance commitment so that the insurance shall attach from the time of closing.

  (3) If a project is initially funded from a source other than proceeds of revenue bonds, and fails to be funded from proceeds of revenue bonds within 18 months of closing, then mortgage insurance may not be required after the initial period of up to 18 months.

D. Title Insurance.

  (1) The sponsor shall provide a standard American Land Title Association (ALTA) Loan policy or other form of title insurance policy approved by the Administration and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the Administration that title to the building and the real property on which the building is located on the date of the loan closing is vested in the sponsor, and containing only exceptions and encumbrances approved by the Administration and the Office of the Attorney General.

  (2) The Administration, in its discretion, may require the title insurance policy to include the ALTA endorsement form 100, comprehensive coverage, and ALTA endorsement form 8.1, environmental coverage, and such other endorsements as may be required by the Administration.

  (3) The title insurance policy shall be accompanied by a survey certified in the manner required by the Administration and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property, except those acceptable to the Administration and the Office of the Attorney General. The title insurance policy may not contain any survey exceptions.

E. Property, Liability, and Other Insurance.

  (1) At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance:

    (a) Owner's liability;

    (b) Owner's property or hazard or contractor's builder's risk;

    (c) Contractor's liability;

    (d) Architect's errors and omissions;

    (e) Engineer's errors and omissions; and

    (f) Flood insurance, if the project is located in a flood hazard zone.

  (2) All insurance required under §E(1) of this regulation shall meet the following requirements:

    (a) 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.

    (b) Be in force at the time of closing;

    (c) Not be terminable without prior notification to the Department; and

    (d) Contain such other terms and coverage satisfactory to the Department.

  (3) In addition to the requirements of §E(2) of this regulation, owner's liability insurance shall:

    (a) Name the Department as an additional insured; and

    (b) Remain in force for the duration of the loan.

  (4) In addition to the requirements of §E(2) of this regulation, contractor's liability and contractor's builder's risk insurance shall:

    (a) Name the Department as an additional insured; and

    (b) Remain in place through final closing or such later date as the Department requires.

  (5) In addition to the requirements of §E(2) of this regulation, owner's property or hazard insurance shall:

    (a) Name the Department as an additional insured, loss payee and mortgagee; and

    (b) Remain in force for the duration of the loan.

#### Regulation .10 Loan Documentation.

*COMAR 05.04.11.10*

A. The Administration shall prescribe the form and content of all loan documents. The loan documents shall contain any terms and conditions that the Administration considers advisable. Loan documents shall be prepared by the Administration and may not be retyped or altered by the sponsor.

B. The loan documents shall include all of the following documents, as well as any other documents the Administration may require:

  (1) A deed of trust note obligating the sponsor to repay the loan;

  (2) A deed of trust, security agreement, and assignment of rents, which is a recorded instrument securing the Administration's interest in the project;

  (3) A building loan agreement for new construction and substantial rehabilitation projects, which agreement specifies the details for the construction or rehabilitation of the project, including, but not limited to those relating to construction draws, remedies, releases, and terms of construction;

  (4) A regulatory agreement which establishes the duties and obligations of the sponsor regarding reserves for replacement, construction surplus funds, savings in the amount of State operating subsidies provided to the project, occupancy requirements and income limits, and operation and maintenance of the project in the public interest;

  (5) A compliance agreement executed in recordable form containing the requirements set forth in Regulation .08E and other covenants and provisions as may be required by the Administration and its counsel;

  (6) A sponsor's counsel opinion for loans in excess of a minimum amount determined by the Administration, which is a letter as to the legal sufficiency of the sponsor's commitments and agreements as expressed in the loan documents; and

  (7) A certificate or affidavit of the sponsor concerning federal tax law compliance in the purchase and financing of the property.

#### Regulation .11 Application.

*COMAR 05.04.11.11*

A. Form and Content of Application. Applications for loans are to be made on forms prescribed by the Administration, and should include all supporting documentation specified in the check list included with the application.

B. Rejection of Applications. If the Administration determines that a project or sponsor is not eligible for a loan, the Administration shall issue a written notice of the determination of ineligibility.

C. Reconsideration. Sponsors may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act, State Government Article, Title 10, Annotated Code of Maryland, or COMAR 05.01.02.

D. Withdrawal of Application. A sponsor may withdraw an application at any time before closing of the loan by written notice to the Administration. The sponsor shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals.

#### Regulation .12 Processing Procedures.

*COMAR 05.04.11.12*

A. Commitment for Insurance. Before issuing a commitment for a loan, the Administration shall have secured a mortgage insurance commitment.

B. Commitment.

  (1) Except in the case of an emergency when urgent action is required, the Director shall submit all loans above a minimum amount, determined by the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, to the Committee for review and recommendation to the Secretary for approval, disapproval, or modification of the loan and the terms of the loan. At the discretion of the Administration, loans in an amount below the minimum amount established for the Housing Finance Review Committee need not be submitted to the Committee for review and recommendation. The Secretary, in accordance with Regulation .19E of this chapter, may delegate the review and approval of these loans.

  (2) After receipt of a recommendation of the Housing Finance Review Committee, the Secretary may approve, disapprove, or modify the loan and the terms of the loan. In an emergency, when urgent action is required and for loans below the minimum amount established for the Housing Finance Review Committee, the Secretary may approve a loan without the recommendation of the Committee.

  (3) The Secretary shall execute a written determination that each loan is to finance a special housing facility authorized by the Act, before the issuance of a commitment to make a loan or purchase a loan.

  (4) Upon approval of a loan and execution of a determination, the Administration shall issue a commitment letter setting forth:

    (a) The amount of the loan;

    (b) The interest rate on the loan; and

    (c) Other terms and conditions that the Administration considers appropriate for the loan or the project.

  (5) The Administration shall specify a time limit within which the initial closing of the loan shall occur, which time limit may be extended in the Administration's sole discretion. If initial closing does not occur within the time limit specified by the Administration, the Administration may use the moneys committed for loan for any other loan or purpose authorized by the Act.

#### Regulation .13 Loan Closing Procedures—All Loans.

*COMAR 05.04.11.13*

A. The sponsor shall furnish or cause to be furnished to the Administration and the Office of the Attorney General satisfactory evidence of compliance with the terms and conditions of the loan before closing of the loan.

B. The Administration shall require the sponsor to execute legal documents for closing in the form prescribed by the Administration. Only those modifications to the form documents necessitated by the business terms shall be approved for form and legal sufficiency by the Office of the Attorney General.

C. Upon approval by the Administration and the Office of the Attorney General of the loan documents and a binder for title insurance, loan closing shall be scheduled at a time and place acceptable to the sponsor and the Administration through an approved title company.

#### Regulation .14 Loan Procedures—Construction or Rehabilitation.

*COMAR 05.04.11.14*

A. Construction Period Disbursements. If the loan finances construction or rehabilitation, the Administration shall:

  (1) Conduct on-site inspections of the construction;

  (2) Make construction loan disbursements on the basis of work-in-place, plus materials acceptably stored on-site, less a retention of up to 10 percent of the construction request; and

  (3) Make disbursement for materials acceptably stored off-site, if the materials are:

    (a) In a bonded warehouse;

    (b) Set aside and labeled with the project's name;

    (c) Inspected by the Administration's inspector;

    (d) Insured with the Administration as a named insured; and

    (e) Documented by evidence of payment for the materials.

B. Cost Certification. For loans financing new construction and substantial rehabilitation under a cost-plus form of construction contract, the Administration shall require the sponsor and contractor to submit, upon completion of the project, a certification of project costs prepared by an independent accountant.

C. Permanent Mortgage Closing. A closing shall be arranged after construction completion and cost certification according to procedures and documentation as may be required by the Administration.

#### Regulation .15 Fees, Program Guidelines.

*COMAR 05.04.11.15*

A. Amounts and time of payment of application fees, construction financing fees, permanent loan commitment fees, closing fees, issuance fees, and other fees as may be required by the Administration shall be as provided in a fee schedule set forth and revised from time to time by the Administration.

B. The Administration may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of mortgage loans or to the program which do not directly affect the rights of the public or the procedures available to the public.

C. Copies of the fee schedule and guidelines shall be available for examination at the Administration's principal office. The Administration shall make copies available to the public upon request.

#### Regulation .16 Books and Accounts.

*COMAR 05.04.11.16*

A. Borrowers, contractors, and subcontractors shall maintain such books, accounts, and records, and shall file with the Administration such financial and other reports as the Department from time to time may require.

B. The books, accounts, and records required to be maintained by §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours.

C. Books, accounts, and records of:

  (1) 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;

  (2) Contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between them and the borrower.

#### Regulation .17 Certification of Income.

*COMAR 05.04.11.17*

A. The sponsor shall obtain verification of income from all those who occupy or apply to occupy the project, in a form acceptable to the Administration. For projects where existing residents will continue in occupancy after the loan is made, the sponsor shall obtain income verifications from not less than 51 percent of the residents who satisfy the income limitations established under Regulation .05 of this chapter before initial loan closing. The sponsor shall file with the Administration, at least annually, a report disclosing the income of all individuals in residency or selected for residency.

B. Annual recertifications of income shall be undertaken by the sponsor. Documentation and income verification shall be maintained at the project for a period of at least 3 years from the date on which the application for occupancy is submitted to the sponsor. The sponsor shall make the documentation available for review by the Administration at the Administration's request.

C. The sponsor shall submit such annual or other reports relating to the occupancy of the project and the income of residents occupying the project as may be requested by the Administration.

D. The purpose of the certification of income and the reports is to assure compliance with the upper income limits required by Housing and Community Development Article, §4-212, Annotated Code of Maryland.

#### Regulation .18 Nondiscrimination; Drug and Alcohol Free Workplace.

*COMAR 05.04.11.18*

A. A sponsor or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, sexual orientation, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the program , or in any aspect of employment by any borrower or contractor in connection with any property financed or assisted under the program.

B. Each sponsor and contractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including:

  (1) Titles VI and VII of the Civil Rights Act of 1964, as amended;

  (2) Title VIII of the Civil Rights Act of 1968, as amended;

  (3) The Fair Housing Amendments Act of 1988, as amended;

  (4) State Government Article, Title 20, Annotated Code of Maryland, as amended;

  (5) The Americans with Disabilities Act of 1990, as amended;

  (6) The Department's Minority Business Enterprise Program, as amended; and

  (7) 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.

C. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Administration and the sponsor or other appropriate parties.

#### Regulation .19 General Provisions.

*COMAR 05.04.11.19*

A. Issuance of Bonds. The Administration may obtain funds for loans to finance projects from any source authorized by law, particularly by issuing bonds payable from revenues of the projects. In the event of any conflict, whether expressly so stated, the rights of sponsors or mortgagors under any mortgage or accompanying agreement with the Administration, which mortgage is financed by notes or bonds issued pursuant to a certificate of authorization or bond resolution, are subject to the rights of holders and owners of the Administration's bonds issued under the authorizing certificate or resolution.

B. Project Selection. The Administration may, in its sole discretion, finance particular projects and decline to finance otherwise eligible projects based on its assessment of the project's overall merit and its merit relative to competing alternatives.

C. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or contrary to the provisions of any applicable bond certificate or resolution:

  (1) To conform to the requirements of the Internal Revenue Code, the bond documents, and any federal agency in connection with any project with respect to which federal assistance is sought; or

  (2) In exceptional circumstances, if, in the written determination of the Secretary, the application of these regulations in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act, and waiver or variance of the specific regulations would not adversely impact the interest of any bond holders under the bond certificate or resolution.

D. False Statements. A sponsor who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by the Act.

E. Delegation. The Secretary may delegate to the Director of the Administration or to any other official or employee of the Department or Administration the authority to execute or approve any program documents or loan documents, including commitments and letters of intent.