This chapter prescribes the policies, procedures, and authorizations for making loans from and administering the Rental Housing Program. This chapter is applicable to the Maryland HOME Program (rental housing development only) as set forth under COMAR 05.12.01. Projects which receive funding under this chapter may also receive low-income housing tax credits, which are governed by COMAR 05.05.06 and by federal law. For these projects, if any provision of this chapter conflicts with any law or regulation related to low-income housing tax credits, the more restrictive provision shall apply. The basic objectives of the Rental Housing Program are to: Increase or preserve the supply of decent, safe, and sanitary rental housing in the State for occupancy by households of limited income by providing financial assistance for certain costs of acquiring, constructing, or rehabilitating rental housing; and Revitalize designated neighborhoods through the conversion of office and other commercial space to rental housing. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Annotated Code of Maryland, as amended. “Administration” means the Community Development Administration, a unit of the Division of Development Finance of the Department. “Annual income” means annual income as defined by HUD at 24 CFR §5.609, as amended. “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 a project is located; or If the codes and standards under §B(4)(a) of this regulation 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. “Applicant” means a person, partnership, corporation, limited liability company, or other entity applying for a loan under the Program. “Bridge loan” means an interim loan used during the construction or rehabilitation of a project and repaid with cash proceeds realized from a syndicated sale of the project or with the proceeds of permanent loans from other sources. “Capital assistance loan” means a loan to a sponsor to finance all or a portion of a project’s development costs. “Closing costs” means: Financing costs such as a credit report fee, title examination, loan origination fee, title insurance fee, application fee, survey fee, recording fees, State and local transfer taxes, and recording taxes; Prepaid expenses such as property taxes, ground rent, and any mortgage insurance premiums to be paid at closing; and Other costs incidental to the closing of a loan and acceptable to the Department. “County” means a county of the State or Baltimore City. Department. “Department” means the Department of Housing and Community Development, a principal department of the State. “Department” includes the Administration. “Development costs” means costs incurred to acquire, construct, or rehabilitate a project, as approved by the Department, including: Necessary studies, surveys, plans, and specifications; Reasonable fees for architectural, engineering, legal, accounting, or other special services; Special studies, including: Appraisals; Compaction tests; Test borings; Market analyses; Construction cost estimates; and Environmental or other special engineering studies; Acquisition of land and improvements; Site preparation; Cost of labor and materials for new construction or rehabilitation, ancillary demolition and installation of improvements as set forth in approved plans and specifications; Acquisition of necessary machinery, equipment, and furnishings installed at the project, including household appliances normally supplied to tenants in the rental market; Initial occupancy expenses of the project including marketing and advertising costs; Indemnity and surety bonds; Premiums on hazard and liability insurance; Relocation expenses; Closing costs; Program administrative expenses; and Other costs and fees acceptable to the Department. “Development team” means the applicant, the sponsor, the developer or co-developer, the guarantors, and the owner, including general partners or managing members, but not including limited partners and nonmanaging members of the foregoing, and architects, general contractors, management agents, and consultants affiliated with the project and any officer, director, or principal of any of the foregoing. “Director” means the Director of the Division of Development Finance of the Department. “Elderly Household” means: One or more individuals who occupy the same residential dwelling unit, at least one of whom is 62 years old or older; For projects which also receive funding through one or more programs administered by HUD, an elderly family, elderly person, or elderly household, all as defined by HUD; Such other definition established by the Secretary pursuant to Housing and Community Development Article, §4-101, Annotated Code of Maryland; or Such other definition established for a specific project in accordance with the standards established in the Program Guide. “Equity” means the difference between the total project costs and the aggregate amount of indebtedness of the project, whether secured by the project or otherwise, from all sources including the Program, all as determined by the Department. “Fund” means the Rental Housing Fund established under Housing and Community Development Article, §4-504, Annotated Code of Maryland, which is a nonlapsing special fund consisting of all moneys appropriated or otherwise available and allocated to the Program. Household. “Household” means one or more individuals who occupy the same residential dwelling unit as their permanent residence. “Household” includes a family as defined in 24 CFR §5.403, as amended. “Household of limited income” means a household whose total household annual income does not exceed the upper income limits established by the Secretary in accordance with Housing and Community Development Article, §§4-402(c) and 4-404(b), Annotated Code of Maryland, and Regulation .11 of this chapter. “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland. “HUD” means the United States Department of Housing and Urban Development. “Income-restricted project” means the acquisition, construction, rehabilitation, or operation of land and improvements that will be rented and occupied entirely or in part by households of limited income. “Internal Revenue Code” means the Internal Revenue Code, Title 26 of the United States Code, as amended. “Limited equity cooperative housing” means limited equity cooperative housing as defined in §143(K)(9)(C) of the Internal Revenue Code and the regulations adopted under it. “Loan” means a loan made by the Department from the Fund under the Act and this chapter. “Loan documents” means those documents required by the Department to evidence or secure the loan or enforce the requirements of the Act and this chapter. Nonprofit Organization. “Nonprofit organization” means a corporation, foundation, or other legal entity, no part of the net earnings of which inures to the benefit of a private shareholder or individual holding an interest in the entity. “Nonprofit organization” includes a qualified nonprofit organization as defined in §42(h)(5)(C) of the Internal Revenue Code. “Office or other commercial space conversion” means the conversion to rental housing of a building that: Is located in a sustainable community as defined in Housing and Community Development Article, §§6-301(b) and 6-305,Annotated Code of Maryland; Was built more than 30 years before an application is submitted to the Department to finance the conversion; Consists of at least two floors at or above ground level; and Was last used as office or other commercial space, including any improvements that might otherwise be considered residential rental property but were last used on a transient basis, such as hotels, motels, dormitories, fraternity and sorority houses, rooming houses, hospitals, nursing homes, sanitariums, rest homes, and assisted living facilities. Office and Commercial Space Conversion Project. “Office and commercial space conversion project” means the acquisition or rehabilitation, or both, of land and improvements for office or other commercial space conversion. “Office and commercial space conversion project” includes a project that is part of a larger development that may include nonresidential uses. “Operating assistance loan” means a loan to a sponsor to pay some or all of the operating expenses as described in Regulation .05A(3) of this chapter of a completed project. “Political subdivision” means a county or municipal corporation of the State. “Program” means the Rental Housing Program established under Housing and Community Development Article, Title 4, Subtitle 4, Annotated Code of Maryland. “Program Director” means the Director of Multifamily Housing in the Division of Development Finance of the Department. “Program Guide” means the Multifamily Rental Financing Program Guide adopted by the Department, as amended from time to time. Project. “Project” means the acquisition, construction, or rehabilitation of buildings and improvements. “Project” includes income-restricted projects and office and commercial space conversion projects. “Relocation expenses” means compensation given to tenants displaced either temporarily or permanently by the acquisition, demolition, or rehabilitation of existing structures in connection with a project. “Residual receipts” means any cash remaining at the end of an annual fiscal period for a project after deducting from gross income all: Sums due under the loan documents and any liens superior to the lien or other liens approved by the Department; Operating costs necessary to maintain or operate the project, including real estate taxes but excluding reserve for replacement deposits and debt service payments; and Amounts distributed to a sponsor as a permitted return on equity. “Scattered site development” means noncontiguous residential units developed and operated under a common plan of ownership and financing. “Secretary” means the Secretary of Housing and Community Development. “Shared living unit facility” means a dwelling which will accommodate two or more households when some or all of the living, dining, kitchen, or sanitary facilities are to be shared by the households, which shall include a single room occupancy unit. Sponsor. “Sponsor” means all of the following: A borrower or obligor on a loan made by the Department to finance a project; The person or entity principally responsible for the project and loan application before the loan closing; Any person or entity who has an ownership interest in, or identity of interest with, a person or entity under §B(40)(a)(i) or (ii) of this regulation; and An applicant that develops a project and qualifies under §B(40)(a)(i), (ii), or (iii) of this regulation. “Sponsor” includes a nonprofit sponsor. “State” means the State of Maryland. Sponsors shall meet the following minimum requirements to qualify for a loan: Be in good standing and qualified to do business in the State; Have the legal capacity and all necessary legal authorization to incur the obligations of the loan; and Meet all threshold criteria under Regulation .22 of this chapter. Loan funds may be used for: Capital assistance loans to sponsors for financing development costs of projects; Loans to finance acquisition only of existing or completed: Vacant projects; or Occupied projects, if: The rental units are not occupied before acquisition or rehabilitation by households of limited income; The number of units to be subject to income restrictions will be increased substantially; Existing income limits will be reduced from current levels; Units have been condemned or cited for code violations and the tenants are likely to be subject to displacement; or Any existing federal capital or operating subsidies will be lost without financing through the Program; Operating assistance loans to sponsors for existing or completed income-restricted projects including: Buy down of the interest rate on a conventional permanent loan; Payments of principal and interest on superior mortgage liens; Maintenance and repair costs; Property taxes; Hazard and liability insurance premiums; Utilities; Permits and licenses; Reasonable management fees and expenses as determined by the Department; Rent subsidies; Closing costs; Department administrative expenses; and Other project operating expenses or fees approved by the Department; Acquisition by the Department of a completed project or the land for a project, and subsequent transfer of the project or land, or both, to a sponsor; Purchase or lease by the Department of a project and, after construction or rehabilitation by the Department, sale or transfer of the project to a sponsor upon terms or conditions which make it economically feasible for the sponsor to rent to households of limited income; or Bridge loans. Loan funds may not be used for: Work-out financing for troubled projects; Refinancing of existing debt; Financing for a project for which the application is received after: Acquisition; Assumption by the sponsor of the liability for the costs of acquisition or rehabilitation; or Completion of rehabilitation intended to be financed in whole or in part by the loan; Financing only minor improvements which are not required to make the housing decent, safe, and sanitary in accordance with applicable State and local codes; Transaction costs and fees associated with the offering and syndication of a project; or Developer fees. Land and Improvements. Land and improvements comprising a project shall meet the following minimum requirements: Be located within the State; When the project is complete, be in compliance with zoning requirements and applicable codes and standards; Be owned by the Department or a sponsor in fee simple or a leasehold estate, with title acceptable to the Department; If the project is contained within a larger undertaking, provide equal access to tenants of the project to any amenities and common areas within the larger undertaking; Provide: Five or more traditional rental housing units; Two or more units in a shared living unit facility; or Emergency or temporary shelter to multiple persons. Land and improvements comprising a project may be a scattered site development. A project is eligible only if: The Department has complied with COMAR 05.01.06.06; and The Secretary has issued the written determination required under COMAR 05.01.06.07. Loans for office and commercial space conversion projects shall meet the requirements of §§A and B of this regulation and the following additional requirements: The sponsor shall have a commitment of funds for the project from private, local, or federal sources so that upon receipt of financial assistance from the Program there will be adequate funding to assure completion of the project; Sufficient funds to complete the project would not be available to the sponsor without the financial assistance from the Program; The financial assistance requested from the Program is the least amount of money necessary to complete the project as determined by the Department; The project shall be ready to proceed upon receipt of financial assistance from the Program; The project will provide substantial economic development to a sustainable community as defined in Housing and Community Development Article, §§6-301(b) and 6-305, Annotated Code of Maryland; and The amount of the loan does not exceed the maximum loan amount in Regulation .14C of this chapter. An income-restricted project may include structures suitable for use by households of limited income residing in the project or in surrounding communities such as cafeterias or dining halls, community rooms or buildings, and workshops or other essential services facilities. A project may not be: A nursing home; A hospital; A sanitarium; A life care facility; A retirement home providing significant services other than housing unless licensed under Maryland law as an assisted living facility; A dormitory; Housing solely for members of a social organization, such as a fraternity or sorority house; Housing provided by an employer solely for its employees; or A trailer park. The project shall meet all threshold criteria under Regulation .22 of this chapter. Notice. For each project for which an application is received under this chapter, the Department shall provide written notice and reasonable opportunity to comment on the project to the chief executive officer or the equivalent officer and the head or president of the legislative body of the political subdivision in which the proposed project is located. If a proposed project is in a municipal corporation, the notice required under §A(1) of this regulation shall be sent to the chief executive officer and the head or president of the legislative body of the municipal corporation, not the surrounding county. The notice provided under §A(1) of this regulation shall contain the following information about the proposed project: Date of application; Name and description of project; Address of project; Sponsor of the project and sponsor’s contact information; Amount of funding requested; Amount, type, and provider of other sources of funding; Total number of units; Number of units reserved for households of limited income, including the income and rent limits; and Such other information as the Department deems relevant. Contribution. In reviewing applications for funding under the Act and this chapter, the Department shall consider the degree of political subdivision support provided to the proposed project, including contribution of land, abatement of taxes or fees, direct or indirect rental subsidies, and grants. It is the intent of the Department that Program funds be distributed and made available Statewide. The Department shall undertake best efforts to ensure some Program funds are distributed Statewide, including the following geographic areas of the State: Eastern Shore counties; Western Maryland counties; Baltimore metropolitan area counties; and Washington, D.C., metropolitan area counties and Southern Maryland counties. For income-restricted projects, the Department may establish requirements for the amount of equity a sponsor must contribute to a project which may vary for different types of sponsors, including nonprofit sponsors. Sponsors of office and other commercial space conversion projects shall make an equity contribution of at least 10 percent of the residential development costs of the project. Projects may be subject to a limitation on return of equity or an equity participation agreement, at the discretion of the Department. Periodically, at the convenience and discretion of the Department, residual receipts held by the Department in connection with a limitation on return on equity imposed under this regulation, if any, shall be credited to the Fund. At the option of the Department, residual receipts may be disbursed for the project which generated the receipts or for any other project. Sponsors of office and commercial space conversion projects are not subject to any limitation on return of equity. The Secretary shall establish income limits for households of limited income and may revise the limits from time to time. The Secretary may establish different limits for different areas of the State and may establish lower limits within any area or for a particular project. In establishing or revising income limits under this regulation, the Secretary shall consider: The median income for the area; The minimum income needed to afford available standard rental units in the area; Federal income guidelines, including the requirements of the federal low-income housing tax credit program; and Any other relevant factor. Limits for Shared Housing. For the purpose of determining compliance with the income limits, the Department may not aggregate the income of two or more individuals or households living together in one unit if the unit is to provide a shared living unit facility, group housing, congregate housing, or temporary shelters. Change of Ownership. During the loan term, the sponsor of the project may not sell, cease to own, assign, transfer, or dispose of all or any part of the sponsor’s interest in the project or the real property on which it is situated, without the prior written consent of the Department, except for leases of individual units or as set forth in the loan documents. Income-restricted projects are subject to the occupancy requirements set forth in §§C—G of this regulation, which occupancy restrictions shall be evidenced by a covenant running with the land which shall be recorded in the land records of the county where the project is located. Minimum Restricted Occupancy Period. The project shall be maintained as rental housing for households of limited income for a minimum of the greater of: 15 years; or The number of years required by federal law. Limited Income Occupancy Requirements. The minimum number of rental units set aside under this regulation shall be the greater of: The number that bears the same ratio to the whole number of rental units in the project as the amount the Program loan bears to the whole financing of the project or undertaking; or The number of rental units chosen by the sponsor to satisfy federal occupancy requirements if the project receives federal low-income housing tax credits or is financed in part with government-issued, federally tax-exempt revenue bonds. Units restricted for occupancy to meet other federal, State or local occupancy requirements may be counted toward the minimum number of units required under §D(1) of this regulation. Units occupied by households that continue to meet applicable federal occupancy restrictions under §D(1) of this regulation shall be deemed to continue to meet the applicable restrictions of this regulation. The maximum rent for each unit in a project shall equal the difference between: 30 percent of the imputed tenant income as calculated in §F of this regulation; and A utility allowance based on standards established by the Department in accordance with Treasury Regulation 1.42-10, as amended, for the low-income housing tax credit program. The imputed tenant income shall equal the restricted unit income limit for: A household which is considered to have a size of 1.5 times the number of bedrooms in the unit for units with one or more bedrooms; and One person for efficiency and single room occupancy units. For units occupied by elderly households, the imputed household size under §F(1) of this regulation may not exceed three persons regardless of the number of bedrooms. If fewer than all of the units in a project are income-restricted, the location of the income-restricted units may change from time to time as tenants move, and the rental housing units in a project which are not income-restricted units are not required by the Program to be occupied by persons meeting income restrictions. Limited Equity Cooperative Housing. The units in a limited equity cooperative housing project shall be occupied by households of limited income at the time of initial occupancy, and following any subsequent sale, resale, or transfer of shares, or subletting which results in a change in the household occupying the unit. If existing rental housing is converted to limited equity cooperative housing through the assistance of a loan from the Program, an existing tenant may not be required to vacate the premises solely because the tenant does not elect to become a stockholder in the corporation owning the limited equity cooperative housing. For an income-restricted project, if the prepayment operates to terminate the occupancy covenants for households of limited income, with the prior written approval of the Department, a sponsor may prepay a loan subject to any prohibition on prepayment contained in the loan documents and if the sponsor complies with the following requirements: Provide written notice to each tenant residing in the project which describes the impact of the prepayment on the tenant, and, if applicable, any assistance to which the tenant is entitled; Provide written notice of the prepayment to the Department, the political subdivision in which the project is located, and any interested parties registered with the Department; Offer a right of first purchase to the Department, the political subdivision in which the project is located, the local public housing authority, if any, and any interested parties registered with the Department; Provide a lease extension for at least 1 year following the notice of the prospective prepayment action to each tenant residing in an assisted unit; Make relocation assistance payments to each tenant in an amount determined by the Department; Provide 3-year lease extensions or 3 months rent equivalent payments to 20 percent of the tenants who live in assisted units and qualify as elderly households, disabled, or households with minors; and Comply with any procedural requirements of the Department with respect to the right of first purchase, relocation payments, and lease extensions. A sponsor of an office and commercial space conversion project may prepay a loan at any time. Interest Rates. Interest rates for each loan shall be established based on the underwriting of each project. The maximum interest rate on a loan shall be a rate which does not impair the financial viability of the project or the capability of the sponsor to provide rents which are affordable to households of limited income. The interest rate on a loan may be as low as zero percent, based upon projected cash flows for the proposed project. Bridge loans or portions of loans which will be repaid with the cash proceeds realized from a syndicated sale of the project shall have interest rates equal to private lending rates for bridge loans, unless in the determination of the Department a lower interest rate is required to ensure the financial feasibility and viability of the project. A lower rate approved by the Department under this subsection may not be less than the interest rates permitted under §A(1) and (2) of this regulation based upon the use and occupancy of the project. For income-restricted projects, the Department may establish additional provisions related to interest rates in the Program Guide. Repayment. Terms for repayment of principal and interest shall be established based on the underwriting for each project and in a manner which does not impair the financial viability of the project or the capability of the sponsor to provide rents which are affordable to households of limited income. Repayment of principal and interest may be deferred at the discretion of the Department to meet the goals of this regulation. For income-restricted projects, the Department may establish additional provisions related to repayment terms in the Program Guide. Maximum Loan Amount. The maximum amount of funds to be provided to an income-restricted project from the Program or the Maryland HOME Program under COMAR 05.12.01 may not exceed $2,000,000, unless the Housing Finance Review Committee has recommended and the Secretary has approved an exception on the basis that: The following three conditions are met: Other potential sources of funds have been sought and clearly are unavailable; It is not feasible to reduce the size or scope of the project; and The project serves a high public purpose, such as serving a significant percentage of very low-income households or being located in a high cost area; or An increase in the loan amount addresses administrative or programmatic needs of the Department and will result in an effective and appropriate use of DHCD resources. The maximum amount of funds to be provided to an office and commercial space conversion project: From the Program, shall be the lesser of: 20 percent of the total costs for the project; or $1,500,000; and From all State-funded and State-administered programs, may not exceed 30 percent of the total costs of the undertaking, with the following limitations: State historic tax credits are excluded from the 30 percent limit; and No other funds from the Fund, federal low-income housing tax credits, or State bond-allocated funds may be used on the project. Term. The permanent loan term of each capital assistance loan may not exceed 40 years from the later of the date of acquisition or completion of construction or rehabilitation of the project, except when other sources of financing require a longer term. The term of a bridge loan generally may not exceed the greater of 2 years or the equity payment schedule and shall be based on the size and complexity of the project. The term of a loan during rehabilitation or construction generally may not exceed 2 years and shall be based on the size of the project and the nature of the rehabilitation or construction financed by the loan. The term of an operating assistance loan generally may not exceed 15 years and may be subject to renewal at the Department’s discretion. Late Charges. Late charges, as permitted by law, may be imposed. Mortgage Insurance. Mortgage insurance is not required for loans made from the Program. Property, Liability, and Other Insurance. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance: Owner’s liability; Owner’s property or hazard or contractor’s builder’s risk; Contractor’s liability; Architect’s errors and omissions; Engineer’s errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §B(1) of this regulation shall meet the following requirements: Be written by a company registered with 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 §B(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 §B(2) of this regulation, contractor’s liability insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §B(2) of this regulation, owner’s property or hazard or contractor’s builder’s risk insurance shall: Name the Department as a loss payee, and mortgagee; and Remain in force for the duration of the loan. For sponsors that are political subdivisions, the Department shall evaluate any self-insurance program to determine if adequate coverage and terms acceptable to the Department can be provided and accept coverage under the self-insurance program subject to this determination. Each project shall comply with applicable local, State, and federal environmental laws and regulations. Sponsors may be required, at the discretion of the Department, to conduct a screening of the proposed site for environmental conditions, including man-made hazards, storm water runoff, underground storage tanks, lead-based paint, radon gas, PCBs, 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. Reserve for Replacement. The Department may require the sponsor to make periodic payments to the Department or a senior lender for a reserve for replacement account for future repairs, maintenance, and improvement of the project. Appraisal. The sponsor or the Department, in the Department’s discretion, shall obtain an appraisal by an appraiser acceptable to the Department, showing the value of the land and any improvements on the land before and after the proposed rehabilitation or construction in a form and manner acceptable to the Department. The sponsor shall bear the cost of the appraisal. Escrow Account. If there is no prior mortgage or deed of trust requiring the payment of expenses to the mortgagee, the mortgage or deed of trust securing the loan shall require monthly payments to the Department in escrow, consisting of 1/12 of annual real estate taxes, ground rent, property insurance premiums, and, when appropriate, other items for which payments are required by the Department. Interest may or may not be paid to the sponsors on escrows, in the Department’s discretion. Additional Security. The Department may require additional security from the sponsor both to assure completion of the construction or rehabilitation of the project, and to assure repayment of the loan. The additional security may be in the form of one or more of the following: A cash escrow; A letter of credit in an amount, in a form, and from a financial institution acceptable to the Department; Depository accounts pledged to the Department; Payment and performance bonds from a surety acceptable to the Department; A completion assurance agreement executed by the sponsor and backed by some form of monetary collateral; A guaranty of completion or loan payments, or both, executed by a third party acceptable to the Department; A pledge of syndication proceeds; A pledge of the developer’s fee; or Other collateral acceptable to the Department. Superior Mortgagee’s Agreement. For loans secured by a subordinate lien, the sponsor shall obtain the written agreement of each superior lender: 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 sponsor on the superior mortgage; and Agreeing to either suspend acceleration and foreclosure of the superior lien for a reasonable period of time if the Department brings current and maintains timely payments due on the superior mortgage or permitting the Department to cure the event of default. Capital assistance loans shall meet the following additional requirements: Loans shall be secured by a mortgage lien, which may be subordinate to other mortgage liens; and The Department shall require the sponsor to provide a standard American Land Title Association Loan Policy, or other form of title policy acceptable to 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 improvements and the real property on which the improvements are located on the date of closing is vested in the sponsor; and Containing only standard exceptions and encumbrances approved by the Department. Operating Assistance Loans. Security. The loans shall be made subject to either: The terms of a loan and security agreement, which need not be recorded; or A recorded mortgage lien which may be subordinate to other mortgage liens. Investment Account. Loan funds disbursed subject to a loan and security agreement shall be deposited into an interest-bearing account for the benefit of the project and shall be invested, reinvested, and disbursed in accordance with the terms of an agreement between the sponsor and the Department. The Department shall maintain control over the investment account. Insurance. At the discretion of the Department, a project receiving an operating assistance loan is not required to satisfy the insurance provisions of Regulation .15 of this chapter. Deferred Payment Loans. Amount of Deferred Payments. The Department may defer payments of principal or interest, or both, in the Department’s discretion, to the minimum extent necessary based on: The sponsor’s ability to repay the loan and the financial feasibility and viability of the project; Conformance with the requirements of the terms and conditions of any prior mortgage or deed of trust; or Such additional provisions related to deferred payment loans established in the Program Guide. Repayment of Deferred Loans. The loan documents shall provide for repayment of deferred amounts at the maturity date or at any earlier date established by the Department, or upon any default, sale, or other transfer of the project, or sale or other transfer of any interest in the project. The Department may, but need not, charge interest on deferred interest. The Department may, in its discretion, require sponsors who receive bridge loans and who receive and syndicate an allocation of federal low-income housing tax credits or historic investment tax credits to share a portion of the proceeds of the syndication of the tax credits with the Department to repay deferred interest or pay all or a portion of the principal amount of the loan. Applications for income-restricted projects shall be accepted: In one or more competitive rounds to be announced by the Department annually in accordance with the procedures established in Regulation .20 of this chapter; and At any time, subject to availability of funding for: Projects requesting financing from the Department’s Multifamily Bond Program; or Pilot programs or other special initiatives in accordance with processing procedures established by the Department. Applications for office and commercial space conversion projects shall be accepted in accordance with processing procedures established by the Department and shall be submitted by the political subdivision in which the project is located. If the project is located in a municipal corporation, the application shall be submitted by the municipal corporation, not the surrounding county. Forms. Applications shall be made upon standard forms prescribed by the Department. Documentation. Applications shall be accompanied by all documentation in the form and containing the information specified by the application procedures adopted by the Department, which may vary depending on the type of loan. Fees and Charges. Amounts and time of payment of application fees, administration fees, financing fees, closing fees, and other fees as may be required by the Department shall be as provided in a fee schedule set forth in the Program Guide, or as otherwise provided by the Department. The Department may charge sponsors for the following items, if initially paid for by the Department: Market studies; Construction cost estimates; Recording fees and recording taxes or other charges incidental to recordation; Survey; Appraisal; Title examination and title insurance; and Investment fees. The Department may charge penalties to applicants, lenders, servicers, sponsors, or other individuals or entities that participate in the Program. The Department may restrict the fees and charges that servicers, political subdivisions, or other Program participants obtain from sponsors. Fees and charges referenced in this regulation may be financed by the Program loan. Each application for an income-restricted project competing in a funding round pursuant to Regulation .19A(1) of this chapter shall be reviewed in accordance with Regulations .21 through .23 of this chapter. Each application for an income-restricted project not competing in a funding round pursuant to Regulation .19A(2) of this chapter shall be reviewed in accordance with Regulation .22 of this chapter or such other procedures established by the Department. Applications for office and commercial space conversion projects shall be reviewed in accordance with procedures established by the Department. The Department may establish project priority categories which must be satisfied prior to review of a project for threshold criteria pursuant to Regulation .22 of this chapter. The project priority categories under §A of this regulation shall be established by the Department in the Program Guide and may be modified from time to time to eliminate or add categories or criteria. The Department shall establish detailed threshold criteria, including the following categories: Development team requirements; Occupancy requirements; Marketing requirements; Tenant services; Provisions for persons with disabilities or special needs; Other financing commitments; Underwriting requirements; Readiness to proceed; Site requirements; Market studies; and Development quality. The threshold criteria under §A of this regulation shall be established by the Department in the Program Guide and may be modified from time to time to eliminate or add categories or criteria. All projects in a round which meet the requirements of Regulations .21 and .22 of this chapter shall be evaluated on a point basis, which may include the following criteria: Capacity of the development team; Community context; Public purpose; Leveraging and cost-effectiveness; and Development quality. At the completion of the review of projects under §A of this regulation, the Department may award bonus points to one or more projects based on one or more of the following considerations: Project priority categories; Geographic distribution; Unique or time sensitive financing opportunities; Urgent or recent changes in housing needs; Economic development opportunities; Changes in the equity or debt market related to low-income housing tax credits or other funding sources; Critical policy directives or goals; or Fair housing considerations. The project selection criteria and bonus points under §§A and B of this regulation shall be established by the Department in the Program Guide and may be modified from time to time to eliminate or add categories or criteria. For income-restricted projects competing in a competitive round, after considering the scores under the project evaluation criteria of Regulation .23 of this chapter and the availability of resources, the Program staff shall select projects for review and recommendation for funding by the Housing Finance Review Committee. The number of projects selected will vary depending on the availability of funds. For income-restricted projects not competing in a competitive round, the Program staff shall select projects for review and recommendation for funding by the Housing Finance Review Committee based on the availability of funding and such other procedures established by the Department. For office and commercial space conversion projects, the Program staff shall select projects for review and recommendation for funding by the Housing Finance Review Committee based on the availability of funding and such other procedures established by the Department. The Housing Finance Review Committee shall review the projects selected by Program staff under §A, B, or C of this regulation and recommend projects to the Secretary for reservation of funds and loan commitments, as appropriate, pursuant to Regulation .25 of this chapter. Upon receipt of the recommendation of the Housing Finance Review Committee, the Secretary shall approve or disapprove the loan and the terms of the loan. A written determination that each loan, regardless of the loan amount, is statutorily authorized and approved by the Secretary shall be executed before the issuance of a reservation of funds or loan commitment, as appropriate, pursuant to Regulation .25 of this chapter. The Secretary may approve a loan without the recommendation of the Housing Finance Review Committee: In an emergency, when urgent action is required; or For loans below the minimum amount established by the Housing Finance Review Committee. Reservations. All projects competing in a funding round and approved by the Secretary pursuant to Regulation .24 of this chapter shall be issued a reservation letter by the Department. The reservation letter shall include basic proposed loan terms, a list of all additional information to be submitted for further review, and a processing schedule setting forth dates for the submission and review of all requested information and documentation. Commitments. For projects competing in a funding round, upon satisfaction of all requirements in the reservation letter and the Secretary’s determination, if any, or as otherwise required by the Program, the Program shall issue a commitment letter setting forth the terms and conditions of the loan. For projects not competing in a funding round, upon satisfaction of the requirements in the Secretary’s determination, or as otherwise required by the Program, the Program shall issue a commitment letter setting forth the terms and conditions of the loan. Rejection. If a loan application is rejected, the Department shall notify the sponsor in writing. The rejection letter shall state the reason the loan is rejected. Reconsideration. A sponsor of an office and commercial space conversion project or an income-restricted project not competing in a round may request reconsideration of a rejection within 7 days of receipt of notice of the rejection. The request shall be in writing and submitted to the Program Director. 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. A sponsor of an income-restricted project competing in a round may not request reconsideration of a rejection but may resubmit an application in a subsequent round or in accordance with the procedures established by the Department for income-restricted projects not competing in a round. Modifications. A sponsor may not modify a project in a manner that affects any of the following factors without the prior review and approval of the Department: The project cannot proceed in accordance with the schedule established by the Department and the sponsor; The project changes substantially from the initial submission, including: A change resulting in a score reduction of the lesser of 3 percent or an amount sufficient to lower the score below the cut off score for the round in which the project was approved; A significant change in the project’s design, financing, or amenities; A material reduction in the project’s income targeting or unit count; A change of the project’s sponsor or other member of the development team; or A change in the project’s site; The project no longer meets the requirements of Regulations .21 and .22 of this chapter, as applicable; or Such other reasons as may be established in the Program Guide. If a project is modified in violation of §C(1) of this regulation, the sponsor shall provide to the Department a detailed explanation of the modification, along with a written request for approval of the modification. After review of the sponsor’s request and explanation, the Department may permit the modification or notify the sponsor that the modification is not acceptable to the Department. If an unacceptable modification is not cured within a time period acceptable to the Department, the reservation or commitment, as applicable, shall be withdrawn from processing. Withdrawal of Application. An applicant may withdraw an application at any time before closing of the loan by written notice to the Department. An applicant that withdraws its application may be required to bear any costs incurred by the Department, including, but not limited to: Title examinations; Credit reports; Appraisals; Market analyses; Fees attributable to the Department’s processing costs; and Legal fees. The Department may withdraw an application from processing for the following reasons: The project’s developer, sponsor, or owner or any general partner or managing member of the foregoing files for bankruptcy or is the subject of an involuntary bankruptcy; The project is, for any other reason, no longer feasible; The project’s developer, sponsor, or owner submits false, misleading, or incomplete information to the Department; The sponsor has failed to cure a modification unacceptable to the Department in the time frame provided under §C of this regulation; The project fails to meet the established time frames for processing or otherwise fails to make reasonable progress toward closing; or Such other reasons as may be established in the Program Guide. Initial Loan Closing. The sponsor shall furnish to the Department and its counsel satisfactory evidence of compliance with the terms and conditions of the loan before the closing of the loan. When all procedures and requirements are completed, a closing shall be arranged by counsel to the Department. Loan Documents. The Department shall prescribe or approve the form and content of all documents, which may include a note, deed of trust, regulatory agreement, and other instruments that the Department may require to evidence or secure the loan or enforce the requirements of the Act or this chapter. The loan documents shall be executed at the loan closing. Early Start. Construction or rehabilitation undertaken by the sponsor before the closing of the loan is at the risk of the sponsor, and does not bind or obligate the Department to make the loan. In certain circumstances and upon the request of a sponsor who has applied for a loan which has been approved by the Secretary, the Program may issue an early start letter which sets forth the conditions under which the Program may authorize the beginning of construction or rehabilitation of a project before the closing of the Department’s loan. The early start approval letter sets forth various conditions, such as receipt by the Program of acceptable plans and specifications or scope of work and evidence of the availability of acceptable assurance of completion, which shall be complied with before beginning construction or rehabilitation. If the conditions are complied with and the Program approves the beginning of construction or rehabilitation, then, when the loan is closed, loan proceeds shall be used to reimburse the sponsor, as specified in the loan closing documents, for the approved costs incurred before loan closing. Construction or Rehabilitation Period Disbursement. The Department shall: Conduct regular on-site inspections of the construction or rehabilitation; and Make loan disbursements on the basis of work in place plus materials acceptably stored on site, less a retention of 10 percent or any other amount required by the loan documents. Disbursement. Loan funds shall be held by the Department and disbursed in accordance with a draw schedule approved by the Department before initial closing. The draw schedule, which may be revised at the discretion of the Department during construction, shall be based upon completion of specified items or a percentage of rehabilitation work. Payment of draws shall be requested by the sponsor and approved by the Department based on completed work. Loan funds may be withheld if there is any arrearage of interest payments or escrows required by the loan documents. Final Closing. A final closing of the loan shall be arranged after completion of the rehabilitation or construction and cost certification, if required, according to the procedures and documentation required by the Department. If requested by the Department, each sponsor shall install a sign identifying the Department as a lender on the project. The sign, at the discretion of the Department, may be supplied by the Department, but in any case shall comply with the design specifications of the Department. The sponsor shall bear all costs of acquisition, delivery, and installation of a conforming sign, which costs may be included in the loan. Sponsors, contractors, and subcontractors shall maintain the books, accounts, and records, and shall file with the Department the financial and other reports that the Department may from time to time require. The books, accounts, and records in §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of sponsors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the sponsor and the Department. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between them and the sponsor. Income-restricted projects are subject to the requirements set forth in §§B—F of this regulation. The sponsor shall obtain signed certificates of annual income from all tenants occupying a project and shall certify annual incomes of all tenants to the Department. The Department may require annual recertifications of income as well as periodic occupancy reports containing the information required by the Department. Leases and certifications are subject to periodic review by the Department. For projects where existing tenants continue in occupancy during rehabilitation, the sponsor shall obtain signed income certifications from income-eligible tenants of at least the number of units required by Regulation .12 of this chapter, before loan closing. The purpose of the certification of annual income and the reports is to assure compliance with the upper income limits established in accordance with the Act and Regulation .11 of this chapter. In the case of a project which receives federal assistance, including low-income housing tax credits, the procedures for the certification of income prescribed by the federal agency are acceptable, including recertification waivers under §42(g)(8)(B) of the Internal Revenue Code. The sponsor shall verify the information contained in the certificate of income, upon the consent of the individual, with the source of income, and file with the Department a report disclosing the income of all individuals selected for occupancy unless the sponsor obtained a waiver under the federal low-income housing tax credit program, as provided in §1.42-5 of the Federal Income Tax Regulations. The 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 sponsor. A sponsor 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 leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the Program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, repair, or maintenance of any property financed or assisted under the Program. A sponsor or contractor shall comply with all applicable federal, State, and local laws and Departmental policies and programs regarding discrimination, equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Title VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; 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; State Government Article, Title 20, Annotated Code of Maryland, as amended; and The Americans with Disabilities Act of 1990, as amended. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Each project shall submit for review and approval by the Department an affirmative fair housing marketing plan in accordance with the requirements of the Program Guide. The Department shall monitor the project’s compliance with the approved plan. 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 Housing and Community Development Article, §4-411, Annotated Code of Maryland. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is consistent with the Act, if: In the determination of the Secretary, the application of a regulation in a specific case, or in an emergency situation, would be inequitable or contrary to the purposes of the Act; or Conformance to the requirements of any federal, State, or local agency in connection with any federal, State, or local assistance sought necessitates waiver or variance of a regulation. Delegation. The Secretary may delegate to the Director, the Program Director, or any other official or employee of the Department the authority to execute or approve any loan documents, including loan commitments and early start letters, after approval of a loan by the Secretary. Housing and Community Development Article, §§4-401—4-411, Annotated Code of Maryland Effective date: November 19, 1984 (11:23 Md. R. 1991) Chapter recodified from COMAR 05.01.17 to COMAR 05.05.01 Regulations .01—.13 repealed and new Regulations .01—.29 adopted effective March 4, 1991 (18:4 Md. R. 446) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1942); April 5, 1999 (26:7 Md. R. 538); January 21, 2002 (29:1 Md. R. 20) Regulation .09E amended effective January 2, 1994 (20:25 Md. R. 1942) Regulation .10 repealed and Regulation .11 amended and recodified to Regulation .10 as an emergency provision effective August 24, 1995 (22:19 Md. R. 1456); emergency status extended at 23:7 Md. R. 547) Regulation .10 repealed effective August 26, 1996 (23:17 Md. R. 1246) Regulation .11 amended effective August 26, 1996 (23:17 Md. R. 1246) Regulation .16C amended effective May 31, 1999 (26:11 Md. R. 853) Regulation .18D amended effective November 7, 1994 (21:22 Md. R. 1873) Regulation .20 amended effective August 26, 1996 (23:17 Md. R. 1246) Regulations .01—.23 Rental Housing Program repealed and new Regulations .01—.32 Multifamily Rental Financing Program adopted effective March 13, 2006 (33:5 Md. R. 518) Regulation .15B amended effective April 19, 2010 (37:8 Md. R. 614) Regulations .01—.32 Multifamily Rental Financing Program repealed and new Regulations .01—.34 Rental Housing Program adopted effective December 22, 2014 (41:25 Md. R. 1476) Regulation .13 amended effective October 8, 2018 (45:20 Md. R. 917) 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, as amended. 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 sponsors of community development projects, public purpose projects, energy conservation projects, solar energy projects, and home improvement projects and will be supplemented by manuals and program directives from time to time. Scope. This chapter applies to loans made or purchased by the Administration with the proceeds of revenue bonds and those funds derived from payments or prepayments on these loans, as authorized by Housing and Community Development Article, Annotated Code of Maryland, §§4-211(a)(10) and (b), 4-225—4-227, and 4-244—4-252. Loans made or purchased under this chapter shall be made or purchased to finance multi-family community development projects, public purpose projects, energy conservation projects, solar energy projects, and home improvement projects undertaken by private, public, or quasi-public sponsors, consistent with the intent of local governing bodies. This chapter also applies to loans financed by the Administration by purchase of a security guaranteed by the Government National Mortgage Association which security is backed by an insured loan financing a multi-family community development project or public purpose project. Ordinarily subject to these regulations are loans for home improvement projects, solar energy projects, or energy conservation projects when the project is being acquired and improved with revenue bond proceeds. The Administration will have a first lien security position in the project. Other home improvement, solar energy, and energy conservation loans for existing projects secured by subordinate liens will be financed ordinarily under COMAR 05.04.10. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, as amended. “Administration” means the Community Development Administration, a unit of the Division of Development Finance of the Department of Housing and Community Development. “Annual income” means annual income as defined by the United States Department of Housing and Urban Development at 24 CFR §5.609. Community Development Project. “Community development project”: Means any undertaking or project, or portion of an undertaking or project, including lands, buildings, and improvements, real, mixed, and personal properties or interest that is planned, acquired, owned, developed, constructed, reconstructed, rehabilitated, repaired, renovated, or improved for the purpose of promoting sound community development; Shall provide for existing or new housing which is or which will be occupied in substantial part by families of limited incomes, or if the project is financed with taxable bonds, at least 20 percent are families of limited incomes; and Shall provide improvements such as streets, roads, sewer and water lines, and other public or private facilities intended for commercial, educational, cultural, recreational, community, or other civic purpose, as may be needed to support new or existing housing. If other public or private facilities as referred to in §B(4)(a)(iii) of this regulation are not needed to support new or existing housing, they may be included in a community development project if they comprise less than a substantial part of the community development project, unless it is determined by the Secretary that sound community development is promoted by including a greater proportion of public or private facilities. “Construction completion” means satisfactory completion of all items in the construction contract, as approved by the Administration, and the acceptance of the project by the local jurisdiction as evidenced by final certificates of occupancy or their equivalent. “Construction loan closing” means that time at which a sponsor executes a note, a building loan agreement, regulatory agreement, mortgage, and other security instruments deemed necessary by the Administration to secure the repayment of the Administration's construction loan. “Department” means the Department of Housing and Community Development, a principal department of the State. “Distressed area” means a geographically defined area or areas of any municipality or county designated by the Secretary at the request of the municipality or county, taking into consideration factors including: The availability, cost, and condition of housing and neighborhood facilities, including the age and number of abandoned and substandard structures; The income of residents relative to the State or area wide regional median incomes, including the number of individuals who are welfare recipients, unemployed, and in poverty; The need for financing for housing or public or private facilities to upgrade the social and economic conditions of the distressed area; The plans and financial commitment of the municipality or county to undertake improvements in the distressed area; and Other standards and criteria considered relevant by the Secretary, including standards established for other relevant State or federal programs. “Energy conservation project” means any undertaking or part of an undertaking without regard to the incomes of the occupants or owners of the buildings for the purpose of installing certain energy improvement items and establishing certain conservation services in residential and commercial buildings. “Home improvement project” means an undertaking for any improvement, alteration, addition, or repair that substantially protects or improves the basic liveability of a residential building of more than four units that will be occupied in substantial part by families of limited incomes. Household. “Household” means one or more individuals who occupy the same residential dwelling unit as their permanent residence. “Household” includes a family as defined in 24 CFR §5.403, as amended. “Household of limited income” means a household whose total household annual income does not exceed the upper income limits established by the Secretary in accordance with Housing and Community Development Article, §4-212, Annotated Code of Maryland, and Regulation .04B of this chapter. “Internal Revenue Code of 1986” means the Internal Revenue Code of 1986, as amended, and any applicable regulations and rulings. “Internal Revenue Code of 1954” means the Internal Revenue Code of 1954, as amended (before amendment by the Internal Revenue Code of 1986), and the applicable regulations and rulings. Nonprofit entity. “Nonprofit entity” means any corporation, foundation, or other legal entity which has been declared exempt from taxation by the Internal Revenue Service under §501 of the Internal Revenue Code, or any other entity in which no part of the net earnings inures to the benefit of any private shareholder or individual holding an interest in the entity. “Nonprofit entity” does not mean limited dividend corporations as defined in Housing and Community Development Article, §4-220, Annotated Code of Maryland. “Permanent loan closing” means that time, after construction completion, when cost certification is complete, the amount of the permanent mortgage loan is determined, and all necessary documents are provided by the sponsor. “Profit-motivated entity” means an individual, individuals, or legal entity which is not a nonprofit entity. “Program Guide” means the Multifamily Rental Financing Program Guide adopted by the Department, as amended from time to time. “Project” means a community development project, public purpose project, energy conservation project, or home improvement project. “Public purpose project” means any undertaking or project which: Is eligible, in whole or in part, for federal low-income housing credits; Is located in a distressed area including land, buildings, and other improvements, real, mixed, and personal properties, or an interest in these properties, that is planned, acquired, owned, developed, constructed, reconstructed, rehabilitated, repaired, renovated, or improved with the financial assistance of the Administration or the assistance of federal low-income housing tax credits as may be authorized by the Internal Revenue Code; May include improvements such as streets, roads, sewer and water lines, and other public or private facilities intended for commercial, educational, cultural, recreational, community, or other civic purposes; Shall provide in substantial part for existing or new housing, unless it is determined by the Secretary that sound community development is promoted by including a greater proportion of public or private facilities; and Provides that the housing portion of a public purpose project shall be occupied in whole or in part by families of limited incomes. “Secretary” means the Secretary of Housing and Community Development of Maryland. “Section 8” means Section 8 of the United States Housing Act of 1937, as amended. “Solar energy project” means any addition, alteration, or improvement to a residential or commercial building that is designed to use wind energy, energy produced by a wood-burning appliance, or solar energy, either of the active type based on mechanically forced energy transfer or of the passive type based on convective, conductive, or radiant energy transfer (or some combination of these types), to reduce the energy requirements of the building. Solar energy project includes: A solar process heat device, solar electric device, and any earth sheltered building in which the sheltering substantially reduces the consumption of energy by the building; and Only those fireplaces that are integral parts of a system that is designed to use passive type solar energy. “Sponsor” means: A borrower on a loan made by the Administration to finance a project; The person or entity principally responsible for the project and application for the loan before construction loan closing. “Targeted area” means any: Census tracts in which 70 percent or more of the families have income which is 80 percent or less of the Statewide median family income, based on the most recent decennial census for which data are available; or Area of chronic economic distress designated by the State and approved by the United States Secretary of the Treasury and the United States Secretary of Housing and Urban Development. Each sponsor shall meet all of the applicable requirements set forth in §§ B—I of this regulation. If the sponsor is a business entity, the entity shall be in good standing and be qualified to do business in Maryland. The sponsor shall own the property in fee simple or under a ground lease acceptable to the Administration. The sponsor shall have all necessary legal and corporate authorizations to incur the obligations of the loan. The sponsor shall demonstrate creditworthiness and repayment ability acceptable to the Administration. For community development, public purpose, and home improvement projects, a sponsor shall agree in a recordable document that the percentage of the total dwelling units in the project to be occupied by families of limited incomes, as determined in accordance with Regulation .04B, below, shall be occupied for so long as the loan is outstanding or such longer period of time as the Administration may require. If a sponsor is subject to the occupancy requirements of §F or §G, the units restricted for those purposes may also be used to meet the occupancy requirements of this section. If the project is funded with proceeds that are subject to the occupancy requirements of the Internal Revenue Code of 1986, the sponsor shall agree in a recordable document that: Not less than: 20 percent of the dwelling units in the project will be occupied by households whose gross incomes do not exceed 50 percent of the area median gross income, adjusted for household size as published from time to time by the United States Department of Housing and Urban Development, or 40 percent of the dwelling units in the project will be occupied by households whose gross incomes do not exceed 60 percent of the area median gross income, adjusted for household size as published from time to time by the United States Department of Housing and Urban Development; The project will have the applicable percentage of occupied dwelling units actually occupied by individuals or families whose gross incomes do not exceed the applicable percentage of the area median gross income as soon as 10 percent of the dwelling units in the project are first occupied unless, in the case of a project occupied at closing, the Administration permits a reasonable period for compliance based on an opinion of bond counsel that this reasonable period is permitted under applicable federal tax law; The applicable occupancy percentage will be maintained until the latest of the: Date which is 15 years after the date on which 50 percent of the dwelling units in the project are occupied, First day on which no tax-exempt bond, including any refunding bond in certain instances when a loan is made from the funds derived from payments or prepayment on loans made with the proceeds of revenue bonds, issued with respect to the project is outstanding, or Date on which any assistance provided with respect to the project under Section 8 terminates. If the project is funded with proceeds that are subject to the occupancy requirements of the Internal Revenue Code of 1954, the sponsor shall agree in a recordable document that: Not less than 20 percent of the dwelling units will be occupied by households whose gross incomes do not exceed 80 percent of area median gross income as published from time to time by the United States Department of Housing and Urban Development; or if the project is located in a targeted area, not less than 15 percent of the dwelling units will be occupied by households whose gross incomes do not exceed 80 percent of area median gross income, as published from time to time by the United States Department of Housing and Urban Development; The project will have the applicable percent of occupied dwelling units actually occupied by individuals or families whose gross incomes do not exceed 80 percent of area median gross income as soon as 10 percent of the dwelling units in the project are first occupied; The applicable occupancy percentage will be maintained until the latest of the: Date which is 10 years after the date on which 50 percent of the dwelling units in the project are occupied, Last day of a period starting with the date the first unit is occupied and continuing for half the life of the longest bond issued in connection with the project financing (for a refunding issue, in certain instances when a loan is made from the funds derived from payments or prepayment on loans made with the proceeds of revenue bonds, the life of the longest bond equals the sum of the period the prior issue was outstanding and the longest term of any of the refunding bonds), or Date on which any assistance provided with respect to the project under Section 8 terminates. If a project is funded with proceeds that are subject to the requirements of either the Internal Revenue Code of 1986 or 1954, a sponsor shall agree to comply with the most restrictive requirement of the Internal Revenue Code which applies to the project or to the sponsor in connection with the financing and as determined by opinion of the bond counsel of the Administration. To qualify as an eligible project for a loan, the project shall meet the following requirements: The project shall provide rental units used primarily for year-round residential use; If the project is a: Community development or home improvement project, it shall be constructed or rehabilitated for use as rental housing, Solar energy or energy conservation project, it shall be rental housing in need of property or energy conservation improvements to improve its habitability, liveability, and energy efficiency, or Public purpose project, more than half of the project shall be constructed or rehabilitated for use as housing to be occupied in whole or part by families of limited income, unless the Secretary determines in writing that a smaller portion of housing and a greater proportion of public or private facilities such as streets, roads, sewer and water lines, and other public or private facilities intended for commercial, educational, cultural, recreational, community or other civic purpose will promote sound community development; The project shall be owned by an eligible sponsor; The Secretary shall have issued a determination that the improvements constitute a community development project, public purpose project, energy conservation project, solar energy project, or home improvement project within the meaning of the Act; The project shall comply, if necessary, with the notice, public hearing, and public approval requirements of the applicable Internal Revenue Code; The project shall conform to the statutory definitions and criteria for a community development project, public purpose project, home improvement project, solar energy project, or energy conservation project; If the project is a public purpose project, it either shall be: Qualified for federal low income housing tax credits, or Located in a distressed area designated by the Secretary in accordance with Regulation .09 of this chapter; The sponsor is capable of and can be expected to achieve successful completion of the project; Other than construction financed by the proceeds of revenue bonds issued on behalf of a county, the project shall be eligible only if: The Department has complied with COMAR 05.01.06.06, and The Secretary has issued the written determination required under COMAR 05.01.06.07; The project conforms or will conform to all applicable State and local laws, codes, and regulations, including zoning, building, and housing regulations; The project is economically feasible so that the loan reasonably can be expected to be repaid in full on such terms and conditions as determined by the Administration; The project has a useful life of a length satisfactory to the Administration with reasonable maintenance; The project promotes the purposes of the Act and these regulations; and The project is located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland, unless, for existing construction, the Secretary determines in the Secretary's sole discretion that the project is necessary to: Protect public safety or health; Alleviate personal economic hardship in an emergency situation; Promote economically integrated housing; Avoid a conflict with federal law; or Relieve an inequity or carry out the purposes of the Program, consistent with the purposes of State Finance and Procurement Article, Title 5, Subtitle 7B, Annotated Code of Maryland. Establishment of Limits. The Secretary shall establish upper income limits for households of limited income taking into consideration factors including: The amount of the total annual income of the households available for housing needs; The size of the household; The cost and condition of housing facilities available; The ability of the households to compete successfully in the normal private housing market; and Standards and definitions established for pertinent federal housing programs. Limits may be established by household size. Limits also may be established from time to time on a regional basis. Income eligibility criteria, within limits lower than the regional limits, may be established for particular projects. The Secretary may determine, from time to time, the percentage of units in a project which are occupied by families of limited income in order to qualify as an eligible project. The Secretary shall take into consideration such factors as the Secretary may deem appropriate, which may include: Housing needs in the region within which the project is to be located; Availability and cost of alternative housing within that region; and The economic feasibility of the project. Community development and home improvement projects shall be required to be occupied by families of limited income in not less than 51 percent of the total dwelling units in a project, unless the project is financed with taxable bonds, in which case at least 20 percent of the dwelling units shall be occupied by families of limited income. Public purpose projects which are eligible for federal low income housing tax credits shall be occupied and rented in accordance with all federal requirements governing the continuing qualifications for the tax credits. Public purpose projects located in distressed areas shall be occupied in whole or in part by families of limited income. The percentage of dwelling units to be regulated for each particular project shall be determined by the Secretary in writing. Solar energy and energy conservation projects are not subject to income or occupancy requirements unless otherwise determined by the Secretary. 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. The Administration may make loans as follows: Construction loans; Rehabilitation loans; Acquisition and rehabilitation loans; Home improvement project loans; and Permanent or refinancing loans. The Administration may participate with other lenders in the making of loans to finance projects. The Administration may purchase securities issued by the Government National Mortgage Association which are backed by loans which comply with the requirements of: Regulation .03B—D, F, and G; Regulation .04; Regulation .06B, E, F, and P(5); Regulation .08E and F; and Regulations .11—.14. The Administration may issue revenue bonds, on a pooled or stand-alone basis, which are secured only by a pledge of a housing authority's funding from the United States Department of Housing and Urban Development's Capital Fund Program as amended from time to time or other similar program of the United States Department of Housing and Urban Development. Loans made to housing authorities with the proceeds of revenue bonds shall comply with the requirements of this chapter except: Regulation .03F; Regulation .06D, F, K, and L; Regulation .08D; Regulation .09D; and Regulation .13. Before closing a construction loan where the Administration does not provide permanent financing, the sponsor shall provide a permanent loan commitment from a mortgagee approved by the Administration containing terms satisfactory to the Administration or cash or cash equivalent acceptable to the Administration in its sole discretion. Loans may finance the costs associated with undertaking construction or substantial rehabilitation of the project, including without limitation the following: Costs of appraisals and market studies; Architectural and engineering costs for design and supervision; Costs of bonds, permits, and fees; Carrying costs during construction, including construction interest, real estate taxes, and property insurance; Financing fees and charges imposed by the Administration, the mortgage insurer, guarantor, letter of credit provider, or any entity servicing or providing credit enhancement with respect to the loan or the bonds financing the loan; and Legal, processing, packaging, and marketing fees and charges. Amount. The Administration may lend up to 100 percent of the approved replacement cost of any project. “Replacement cost” for this purpose means development costs including those costs of construction, carrying charges, financing costs, and professional fees approved by the Administration, plus the market value of the land on which the project was built or is to be constructed. Term. The terms of loans for financing of projects shall be established by the Administration based on underwriting and market conditions at the time of financing. Interest Rate. The Administration may charge interest at a rate in accordance with the underwriting factors for the project including the term of the loan and income and operating projections. Enhancement of Mortgage or Bonds. After consideration of underwriting, market conditions, and the requirements of the bond issuance, the Administration shall determine and notify the sponsor whether the sponsor will be required to insure or guarantee the proposed loan, or otherwise insure or enhance the bonds financing the loan. If required by the Administration, the sponsor shall engage a credit enhancer and secure a commitment to insure or guarantee the proposed loan, or otherwise insure or enhance the bonds financing the loan. This commitment shall be secured before any loan closing or at an earlier time as required by the Administration in its sole discretion. The sponsor shall comply with any conditions of the insurance or guarantee commitment so that the insurance or guarantee will be in effect from the time of loan closing, with respect to loan insurance, or from the time of the issuance of the bonds, with respect to bond insurance. Local Governments. For each project for which an application is received under this chapter, the Department shall provide written notice and reasonable opportunity to comment on the project to the chief executive officer or the equivalent officer and the head or president of the legislative body of the political subdivision in which the proposed project is located. If a proposed project is in a municipal corporation, the notice required under §E(1) of this regulation shall be sent to the chief executive officer and the head or president of the legislative body of the municipal corporation, not the surrounding county. The notice provided under §E(1) of this regulation shall contain the following information about the proposed project: Date of application; Name and description of project; Address of project; Sponsor of the project and sponsor’s contact information; Amount of funding requested; Amount type and provider of other sources of funding; Total number of units; Number of units reserved for households of limited income, including the income and rent limits; and Such other information as the Department deems relevant. Lien Priority. Except for liens held in connection with public purpose projects, any lien held by the Administration on property shall be a lien superior to all other liens on the property except liens for taxes owed to the State or any subdivision of the State and earlier mortgage liens. The Administration, in its discretion, may require the release and repayment of any liens. Property, Liability, and Other Insurance At or before closing of a loan, and at such other times as required by the Administration, the sponsor shall provide evidence that the sponsor, contractor and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §G(1) of this regulation shall meet the following requirements: Be written by a company registered with the Maryland Insurance Administration; Be in force at the time of closing; Not be terminable without prior notification to the Administration; and Contain such other terms and coverage satisfactory to the Administration. In addition to the requirements of §G(2) of this regulation, owner's liability insurance shall: Name the Administration as an additional insured; and Remain in force for the duration of the loan. In addition to the requirements of §G(2) of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Administration as an additional insured; and Remain in place through final closing or such later date as the Administration requires. In addition to the requirements of §G(2) of this regulation, owner's property or hazard insurance shall: Name the Administration as an additional insured, loss payee and mortgagee; and Remain in force for the duration of the loan. Payment. Sponsors shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term or in amounts which ensure timely payments of interest and principal to the bondholders. In cases where loans are made from proceeds derived from payments or prepayments on loans made or purchased by the Administration with the proceeds of revenue bonds, the Administration may set repayment terms in accordance with the terms and conditions as determined by the Administration which will promote the economic feasibility of its project. Late Charges and Other Fees. Sponsors shall pay any servicing fees, loan insurance premiums, bond insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law. Expense Escrows. The Administration may require the sponsor to deposit monthly with the Administration 1/6 of the annual amount of real estate taxes, insurance, mortgage insurance premiums, a reserve for replacements, and other expenses of the project. While the loan is outstanding, the Administration may require additional amounts to be deposited into the reserve for replacements. Title Insurance. The sponsor shall provide a standard American Land Title Association Loan policy or other form of title policy acceptable to the Administration and to 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 construction loan closing is vested in the sponsor, and containing only standard exceptions and encumbrances approved by the Administration. Appraisal. Sponsors shall provide or pay for an appraisal performed by an appraiser acceptable to the Administration which shows the current value of the property and the expected value of the property after completion of the improvements. Security Requirements. The Administration may require the following instruments or guarantees to secure its loans: Such sureties or guarantees of the loan as may be determined necessary by the Administration. Cash or an unconditional, irrevocable letter of credit from a financial institution approved by the Administration to meet working capital, operating deficit, and off-site improvement completion requirements. Payment and performance bonds for rental projects 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. For FHA-insured multi-family rental projects, compliance with FHA requirements for completion assurance normally will be accepted. Guarantees of completion as may be deemed necessary or desirable by the Administration. Escrows of syndication proceeds when appropriate. An unconditional, irrevocable letter of credit from a financial institution approved by the Administration to secure any costs of negative arbitage. Disclosure. All directors, officers, principals, members, general partners, and limited partners of the sponsor shall be identified, and the proportionate share of each in the proposed project so indicated in the application. Subsequent changes in either a general partner, a limited partner having more than a 25 percent interest in the sponsor, a managing member, or member owning more than a 25 percent interest in the sponsor shall be subject to the written approval of the Administration. The sponsor is responsible for providing any disclosure required by the Administration or any credit enhancer relating to the project, the sponsor, the syndication, and the construction team. Financial Statements. The Administration shall require certified financial statements for all general partners or corporate sponsors acceptable to the Administration in its sole discretion. Furthermore, at the discretion of the Administration, financial statements may be required for all limited partners or any other individuals or entities having an interest in the project. Documentation. The Administration shall prescribe the form and content of all loan documents which may include a note, deed of trust, regulatory agreement, or other instruments that the Administration may, from time to time, require to evidence or secure the loan or enforce the requirements of the Act or this chapter. Change of Ownership. The sponsor may not sell, cease to own, assign, transfer, or dispose of all or any part of the property, or the sponsor's interest in the property, except for leases of less than 3 years to tenants, during the loan term, without the prior express written consent of the Administration, as set forth in the loan documents. Assumption. A loan may not be assumed without the prior written approval of the Administration. Prepayment. If the prepayment operates to terminate the occupancy covenants for households of limited income, with the prior written approval of the Administration, a sponsor may prepay a loan subject to any prohibition on prepayment contained in the loan documents and if the sponsor complies with the following requirements: Provide written notice to each tenant residing in the project, which describes the impact of the prepayment on the tenant, and, if applicable, any assistance to which the tenant is entitled; Provide written notice of the prepayment to the Administration, the political subdivision in which the project is located, and any interested parties registered with the Administration; Offer a right of first purchase to the Administration, the political subdivision in which the project is located, the local public housing authority, if any, and any interested parties registered with the Administration; Provide a lease extension for at least 1 year following the notice of the prospective prepayment to each tenant residing in an assisted unit; Make relocation assistance to each tenant in an amount determined by the Administration; Provide 3-year lease extensions or 3 months rent equivalent payments to 20 percent of the tenants who live in assisted units and qualify as elderly, disabled, or households with minors; and Comply with any procedural requirements of the Administration with respect to the right of first purchase, relocation payments, and lease extensions. Continuing Occupancy Income Limits. If after initial occupancy the annual income of a family of limited income exceeds the income limits set by the Secretary, and thereby causes the project to not meet the requirements of the Internal Revenue Code and regulations promulgated under the Internal Revenue Code, as amended from time to time (considering any limited increases permitted by this chapter or applicable federal tax law), the sponsor shall notify the Administration upon the Administration's next subsequent income certification request and shall rent the next available unrestricted rental housing unit to a family of limited income. Application. Applications for loans are to be made on forms prescribed by the Administration, and shall include all supporting documentation required by the Administration. Review of Applications. Each application shall be subject to an initial review to make a preliminary assessment of the eligibility of the sponsor and the project in accordance with Regulations .03 and .04 and in accordance with the Program Guide. The Administration shall notify the sponsor in writing upon completion of its assessment of eligibility. 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. Commitment for Insurance. Before issuing a commitment for a loan, the Administration shall receive a commitment from the appropriate mortgage insurer for approval for mortgage insurance, as may be required by Regulation .06D of this chapter. Commitment. Upon satisfaction of all the requirements and receipt of an approval or commitment from a credit enhancer, if required, the Administration may undertake a commitment analysis of each loan as to final loan amount, structure, and terms. Except in the case of an emergency when urgent action is required, the Director of the Administration 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 or disapproval of the loan and the terms of the loan. At the discretion of the Administration, loans in an amount below the minimum amount established by the Housing Finance Review Committee need not be submitted to the Committee for review and recommendation. The Secretary, in accordance with Regulation.16E of this chapter, may delegate the review and approval of these loans. After receipt of a recommendation of the Housing Finance Review Committee, the Secretary may approve or disapprove the loan and the terms of the loan. In an emergency, when urgent action is required or for loans below the minimum amount established by the Housing Finance Review Committee, the Secretary may approve a loan without the recommendation of the Committee. The Secretary shall execute a written determination that each loan is for a community development project, energy conservation project, solar energy project, public purpose project, or home improvement project authorized by the Act, before the issuance of a commitment to make, purchase, or finance a loan or purchase a security backed by a loan. Upon approval of a loan and execution of a determination, the Administration shall issue a commitment letter setting forth: The interest rate on the loan; The repayment provisions; and Other terms and conditions that the Administration considers appropriate for the loan or the project. The Administration will 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 monies committed for the loan for any other loan or purpose authorized by the Act. Reconsideration. Sponsors may request reconsideration of a rejection in accordance with the procedures contained in the Program Guide. 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. Early Start. In certain circumstances and upon the request of a sponsor who has applied for a loan which has been recommended for approval by the Housing Finance Review Committee and approved by the Secretary, the Administration may approve the beginning of construction of a project before the initial loan closing. All construction undertaken by the sponsor before initial loan closing is at the risk of the sponsor, and does not bind or obligate the Administration to make the loan. The early start approval letter sets forth various conditions, such as receipt by the Administration of acceptable plans and specifications and delivery of payment and performance bonds, which shall be complied with before beginning construction. If the conditions are complied with and the loan is closed, the loan reimburses the sponsor, as specified in the loan closing documents, for a portion of the costs incurred in the construction undertaken before initial loan closing. Construction Loan Closing. The sponsor shall furnish or cause to be furnished to the Administration and its counsel satisfactory evidence of compliance with the terms and conditions of the loan before the closing of the loan. The Administration shall request the sponsor to have its attorney review the required legal documents for closing in the form prescribed by the Administration, and to submit comments for the Administration's and its counsel's review. When all procedures and requirements are completed, initial loan closing shall be arranged by counsel to the Administration. The sponsor shall tender an off-site bond, cash, or an unconditional, irrevocable letter of credit to the Administration at the time of construction loan closing to assure completion of any off-site improvements. Construction Period Disbursements. The Administration may: Conduct regular on-site inspections of construction; Make construction loan disbursements on the basis of work-in-place plus materials acceptably stored on site, less 10 percent retention; and Make disbursement for materials acceptably stored off-site, if the materials are: In a bonded warehouse, Set aside and labeled with the project's name, Inspected by the Administration's inspector, Insured, with the Administration as a named insured, and Documented by evidence of payment for the materials. Permanent Loan Closing. Permanent loan closing shall be arranged after construction completion and cost certification according to such procedures and documentation as may be required by the Administration. Request for Designation. A municipality or county may request in writing at any time that a geographically defined area of the municipality or county be designated by the Secretary as a distressed area. The request may be made before or in conjunction with the request of a sponsor for financing for a public purpose project. Application. The request for designation shall include information with respect to the following: The availability, cost, and condition of housing and neighborhood facilities, including the age and number of abandoned and substandard structures; The income of residents relative to State or area median incomes, including the number of persons who are welfare recipients, unemployed, and in poverty; The need for financing for housing or public or private facilities to upgrade the social and economic conditions of the distressed area; The plans and financial commitment of the municipality or county to undertake improvements in the distressed area; and Such other information as may be requested by the Secretary, including standards established for other relevant State or federal programs. Consideration. The Secretary, after considering the information supplied in accordance with §B, above, and other information and criteria deemed relevant by the Secretary, may, upon the basis of the information, issue a written determination designating any specific geographically defined area as a distressed area for purposes of these regulations and the Act. Amounts and time of payment of application fees, construction financing fees, permanent loan commitment fees, nonusage bond issuance fees, and other fees as may be required by the Administration shall be as provided in a fee schedule set forth in the Program Guide. The Administration shall establish underwriting standards, loan processing requirements, and other requirements or matters relating to the financing of mortgage loans or to the program in the Program Guide. Copies of the fee schedule and Program Guide shall be available for examination at the Administration’s principal office. The Administration shall make copies available to the public upon request. Sponsors, contractors, and subcontractors shall: Maintain such books, accounts, and records and file with the Administration such financial and other reports as the Administration may from time to time require; Ensure all of these books, accounts, and records are open to the inspection of representatives of the Administration or other agencies of the State during reasonable working hours; Maintain and make available for inspection for 7 years past the date of termination of the contractual relationship between: The sponsor and the Administration, all books, accounts, and records of the sponsor, The contractors, the subcontractors, and the sponsor, all books, accounts, and records of contractors and subcontractors. The sponsor shall obtain signed certificates of annual income from all persons who apply to occupy a project unit, on a form furnished or approved by the Administration. For projects where existing tenants will continue in occupancy during rehabilitation, the sponsor shall obtain signed income certifications from the required percentage of eligible tenants prior to the initial loan closing. Upon the consent of the person applying, the sponsor shall verify with the employer the information contained in the certificate of income. The sponsor shall file with the Administration, at least annually, a report disclosing the annual income of all persons in occupancy or selected for occupancy. 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 the extent the procedures are consistent with the applicable income limitations of the Internal Revenue Code. Annual recertifications of income, semi-annual market rate tenant data reports, as well as periodic occupancy reports shall be submitted to the Administration, containing information as may be required by the Administration. The 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 application to occupy a project unit is submitted to the sponsor. The purpose of the certification of annual income and the reports is to assure compliance with both the upper income limits required by Housing and Community Development Article, §4-212, Annotated Code of Maryland, and any upper income limits and occupancy requirements imposed by federal tax law in order to maintain the tax-exempt status of the bonds or notes, the proceeds of which financed the loan for the project. The requirements of this section are in addition to any other requirements imposed under federal tax law, including, without limitation, §142(d)(7) of the Internal Revenue Code of 1986 as amended. Sections A—C of this regulation do not apply to a project occupied by juveniles, placed in the project by court order or by any federal, State, or local agencies, and not occupied by other persons, provided that the projects are funded with the proceeds of taxable bonds and do not receive an allocation of low income housing tax credits. A sponsor 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 leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, repair, or maintenance of any property financed or assisted under the program. A sponsor or contractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination, equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; The Department’s Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Administration and the sponsor or other appropriate parties. If required by the Administration, each sponsor shall install a sign identifying the Administration as a lender on the project. The sign, at the discretion of the Administration, may be supplied by the Administration, but in any case shall comply with the design specifications of the Administration. The sponsor shall bear all costs of acquisition, delivery, and installation of a conforming sign, which costs may be included in the loan. Issuance of Bonds and Notes. Timing. The Administration may obtain funds for loans to finance projects from any source authorized by law, particularly by issuing bonds or notes to be repaid from revenues of the project, federal subsidies made in connection with the project, or payments made by an insurer, guarantor, or credit enhancer of the loans or the bonds. The timing of any bond or note sale and the acceptability of the interest rate to be paid by the Administration are solely within the discretion of the Secretary. Letter of Intent. The Administration generally requires a sponsor whose loan will be funded out of the proceeds of tax-exempt bonds or notes to execute a letter of intent to use a minimum amount of bond or note proceeds for an acquisition or construction loan to undertake a project at a specified location. The letters shall be accompanied by any required nonusage fee. If the sponsor fails to close a loan with the proceeds of bonds issued in whole or in part on behalf of the sponsor or the bonds or notes are not issued, the Administration will retain the fee. Rights of Bond and Note Holders. In the event of any conflict, whether expressly as stated, the rights of sponsors or borrowers under any agreement with the Administration, which loan 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 or notes issued under that authorizing certificate or resolution. 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 the Internal Revenue Code, or contrary to the provisions of any applicable bond certificate or resolution: To conform to the requirements of any federal agency in connection with any project with respect to which federal assistance is sought; or In exceptional circumstances, if, in the written determination of the Secretary, the application of these regulations in a specific case, or in an emergency situation, would be inequitable or contrary to the purposes of the Act. Severability Clause. If any clause, sentence, paragraph, section, or part of these regulations is adjudged invalid, the judgment does not affect, impair, or invalidate the remainder of them, but shall be confined in its operation to the clause, sentence, paragraph, section, or part of it directly involved in the controversy in which the judgment is rendered. 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, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Administration or to any other official or employee of the Department or Administration the authority to execute or approve any program documents or loan documents, including commitments and letters of intent. Each project shall submit for review and approval by the Administration an affirmative fair housing marketing plan in accordance with the requirements of the Program Guide. The Administration shall monitor the project’s compliance with the approved plan. Housing and Community Development Article, §2-111 and Title 4, Subtitle 2; State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of Maryland;Executive Orders 01.01.1992.27C and 01.01.1998.04 Effective date: August 20, 1975 (2:18 Md. R. 1234) Regulations .02C—M and .04A, A-1 amended effective August 2, 1982 (9:15 Md. R. 1511) Regulation .04B amended effective June 2, 1978 (5:11 Md. R. 881) Regulation .04N amended effective August 3, 1977 (4:16 Md. R. 1207) Regulations .06, .07, .09, .18, .20 amended and new Regulation .21 adopted as an emergency provision effective November 1, 1982 (9:23 Md. R. 2253) (Emergency provisions are temporary and not printed in COMAR) Regulations .06, .07I, .18B, and .20 amended, and new Regulation .21 adopted effective March 14, 1983 (10:5 Md. R. 463) Regulations .06—.17 adopted effective March 9, 1979 (6:5 Md. R. 443); repealed effective October 11, 1982 (9:20 Md. R. 1981) Regulations .06—.20 adopted effective October 11, 1982 (9:20 Md. R. 1981) Regulations .06—.21 repealed effective July 30, 1984 (11:15 Md. R. 1329) Regulations .10A and .16 amended as an emergency provision effective April 23, 1980 (7:10 Md. R. 949); adopted permanently effective September 5, 1980 (7:18 Md. R. 1735) Annotation: COMAR 05.01.05.04H(2) is within the scope of Article 41, §266DD-5 and is valid. Forestville Park v. State, 50 Md. App. 570, 439 A.2d 46 (1982). Chapter recodified from COMAR 05.01.05 to COMAR 05.05.02 Regulations .01—.05, Community Development Financing Program, repealed and new Regulations .01—.14, Multi-Family Housing Revenue Bond Financing Program, adopted effective October 30, 1989 (16:21 Md. R. 2260) Regulation .04A amended effective January 2, 1994 (20:25 Md. R. 1942); April 5, 1999 (26:7 Md. R. 538); January 21, 2002 (29:1 Md. R. 21) Regulation .06 amended effective April 12, 1993 (20:7 Md. R. 640); May 31, 1999 (26:11 Md. R. 853) Regulations .07 and .13 amended and recodified to Regulations .08 and 14, respectively, effective April 12, 1993 (20:7 Md. R. 640) Regulation .07 adopted effective April 12, 1993 (20:7 Md. R. 640) Regulations .08—.12 and .14 recodified to Regulations .09—.13 and .17, respectively, effective April 12, 1993 (20:7 Md. R. 640) Regulation .08A amended effective January 2, 1994 (20:25 Md. R. 1942) Regulation .13D adopted effective December 5, 1994 (21:24 Md. R. 1987) Regulations .15 and .16 adopted effective April 12, 1993 (20:7 Md. R. 640) Chapter revised effective July 19, 2004 (31:14 Md. R. 1077) Regulation .02 amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .04B amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .06E amended effective December 22, 2014 (41:25 Md. R. 1476) Regulations .06G amended effective April 19, 2010 (37:8 Md. R. 614) Regulation .07C amended effective October 8, 2018 (45:20 Md. R. 917) Regulation .08B, F amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .11 amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .14 amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .17 adopted effective December 22, 2014 (41:25 Md. R. 1476) Effective date: Regulations .01—.17 adopted as an emergency provision effective February 23, 1987 (14:6 Md. R. 707); emergency status extended at 14:20 Md. R. 2138 Regulations .01—.17 adopted effective November 30, 1987 (14:24 Md. R. 2554) Chapter recodified from COMAR 05.01.29 to COMAR 05.05.03 Regulation .03B amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .06A amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .06A amended as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; amended permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .06B amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .06D adopted effective February 20, 1989 (16:3 Md. R. 340) Regulation .07B amended as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; amended permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .08B amended as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; amended permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .08E repealed effective February 20, 1989 (16:3 Md. R. 340) Regulation .09A amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .09B amended as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; amended permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .09C amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .09E adopted as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; adopted permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .10 amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .11D amended effective February 20, 1989 (16:3 Md. R. 340) Regulation .12 amended as an emergency provision effective July 1, 1995 (22:14 Md. R. 1044); emergency status expired January 1, 1996; amended permanently effective March 25, 1996 (23:6 Md. R. 474) Regulation .13 amended effective February 20, 1989 (16:3 Md. R. 340) Chapter revised effective June 28, 1999 (26:13 Md. R. 1018) Regulation .05B amended effective September 12, 2005 (32:18 Md. R. 1518) Regulation .06A, D amended effective April 30, 2001 (28:8 Md. R. 759) Regulation .09B amended effective April 30, 2001 (28:8 Md. R. 759) Regulation .09C amended effective September 12, 2005 (32:18 Md. R. 1518) Regulation .13 repealed and new Regulation .13 adopted effective April 30, 2001 (28:8 Md. R. 759) Chapter revised effective February 26, 2007 (34:4 Md. R. 398) Chapter revised effective April 6, 2009 (36:7 Md. R. 521) Regulation .14 amended effective March 16, 2015 (42:5 Md. R. 485) Chapter repealed effective August 13, 2018 (45:16 Md. R. 774) Effective date: Regulations .01—.17 adopted as an emergency provision effective July 21, 1987 (14:17 Md. R. 1863); emergency status extended at 15:4 Md. R. 469; emergency status expired April 30, 1988 Chapter recodified from COMAR 05.01.18 to COMAR 05.05.04 Regulations .01—.17 adopted effective May 30, 1988 (15:11 Md. R. 1329) Chapter revised effective February 18, 1991 (18:3 Md. R. 302) Regulation .03B amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .05A amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .06A amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .06B amended effective April 5, 1999 (26:7 Md. R. 538) Regulation .08C amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .09 amended as an emergency provision effective August 24, 1995 (22:19 Md. R. 1457); emergency status extended at 23:7 Md. R. 547 Regulation .09 amended effective August 26, 1996 (23:17 Md. R. 1249) Regulation .09H amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .11H amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .13D amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .15 repealed and new Regulation .15 adopted effective November 9, 1992 (19:22 Md. R. 1987) Chapter revised effective March 5, 2001 (28:4 Md. R. 417) Regulation .06A amended effective January 21, 2002 (29:1 Md. R. 21) Regulation .11B amended effective June 11, 2001 (28:11 Md. R. 1053) Chapter repealed effective March 13, 2006 (33:5 Md. R. 518) This chapter prescribes the policies, procedures, and authorizations for providing capital assistance from the Partnership Rental Housing Fund and administering the Partnership Rental Housing Program. The objective of the Program is to provide financing for all or a portion of the development costs of rental housing that will be occupied by households of lower income and is either: Owned, or to be owned, by local governments, or local government entities, for which the applicable local government provides a site or funds to acquire a site and any necessary off-site improvements; or Owned by private sector entities and is occupied by households of lower income that include one or more individuals with disabilities or special needs. The Program intends to provide financing to projects that: Will be financially self-sufficient so that they do not require further State, local, or federal governmental funding for maintenance, renovation, or operating subsidies, other than as anticipated at the time the Program financing is provided; and Can be maintained economically as rental housing for households of lower income in perpetuity if the sponsor so wishes. Projects financed by the Program are intended to provide rental housing to households with income, assets, or other resources sufficient to pay rent in amounts necessary to maintain the financial self-sufficiency of the project. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Annotated Code of Maryland. “Administration” means the Community Development Administration, a unit of the Division of Development Finance of the Department. “Annual Income” means annual income as defined by the United States Department of Housing and Urban Development at 24 CFR §5.609, as amended. “Applicable codes and standards” means the zoning, construction, health, safety, fire, occupancy, and other codes and standards applicable to the project in the political subdivision in which the project is located. “Capital assistance” means funding provided by the Program used by a sponsor to finance development costs of a project. “Capital assistance documents” means all documents either executed or supplied by a sponsor in connection with the application for and closing of capital assistance financing. Department. “Department” means the Department of Housing and Community Development, a principal department of the State. “Department” includes the Administration. “Development costs” means those costs incurred for the acquisition, construction, or rehabilitation of rental housing that are eligible for financing under the Program in accordance with, and as limited by, Regulation .07 of this chapter. “Elderly household” means: One or more individuals who occupy the same residential dwelling unit, at least one of whom is 62 years old or older; For projects which also receive funding through one or more programs administered by HUD, an elderly family, elderly household, or elderly person, as defined by HUD; or Such other definition established by the Secretary pursuant to Housing and Community Development Article, §4-101, Annotated Code of Maryland. “Fund” means the Partnership Rental Housing Fund, which is a special, continuing, nonlapsing fund composed of moneys appropriated by the State for the Program or made available to the Program from the sale of general obligation or other bonds. Household. “Household” means one or more individuals who occupy the same residential dwelling unit as their permanent residence. “Household” includes a family as defined in 24 CFR §5.403, as amended. Household of Lower Income. “Household of lower income” means a household whose annual income, upon initial occupancy, does not exceed 50 percent of the Statewide median income for a household of similar size or such lesser income level as may be established by the Secretary for any particular project or for partnership units to be occupied by one or more individuals with disabilities or special needs. “Household of lower income”, for the purpose of continuing occupancy, includes a household whose annual income does not exceed an income level that the Secretary establishes or any applicable federal requirement. “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland. “Local contribution” means a contribution to the project by a local government that is consistent with the requirements set forth in Regulation .17 of this chapter. “Local government” means: Any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution; The Mayor and City Council of Baltimore; Any of the 23 counties in Maryland; and Any housing authority authorized under the Act. “Local government entity” means a corporation, limited partnership, limited liability company, or other legal entity in which a local government has an ownership interest. “Moderately priced dwelling unit (MPDU)” means a residential rental unit that is newly constructed by a private sector entity and sold to a local government under a local regulatory land use program. “Partnership units” means the residential rental units in a rental housing project that are financed with capital assistance. “Private sector entity” means any for-profit or nonprofit partnership, corporation, limited liability company, organization, or other legal entity that is not a local government or a local government entity. “Program” means the Partnership Rental Housing Program. “Project” means any undertaking for the acquisition, construction, or rehabilitation of land, buildings, and improvements, or any portion thereof, financed by the Program, that will be used for rental housing to be occupied entirely by households of lower income, except for any units occupied by management personnel. “Rental housing” means any rental housing facilities, including apartments, condominiums, cooperatives, townhouses, single-family homes, or single-room occupancy facilities, for which rent is charged to the household occupying the housing, including improvements directly related to providing rental housing, such as: Community spaces; Maintenance work areas; Administrative offices; Laundry facilities; and Units occupied by management personnel. “Scattered site project” means noncontiguous units of rental housing developed and operated under a common plan of ownership and financing. “Secretary” means the Secretary of Housing and Community Development. “Sponsor” means all of the following: A borrower or obligor on a loan made by the Department to finance a project; The person or entity principally responsible for the project and loan application before the loan closing; Any person or entity that has an ownership interest in, or identity of interest with, a person or entity under §B(25)(a) or (b) of this regulation; and An applicant that develops a project and qualifies under §B(25)(a), (b), or (c) of this regulation. “Treasurer” means the Maryland State Treasurer. A local government or local government entity shall meet the requirements in §§B—F of this regulation to qualify for capital assistance. The local government shall provide a local contribution that meets the requirements of Regulation .17 of this chapter. The local government or local government entity shall assure that any off-site improvements necessary for a project are provided without capital assistance from the Program. The local government or local government entity shall develop a project or contract with a qualified for-profit or nonprofit developer to develop the project. The local government or local government entity shall own the project. A local government entity shall also meet the requirements of Regulation .05A(1)—(4) of this chapter. If a project is owned by a private sector entity, the entity shall meet the following requirements to qualify for capital assistance: Be in good standing and qualified to do business in Maryland; Have the legal capacity and all necessary legal authorizations to incur the obligations of the capital assistance; At the time the assistance is provided, not be debarred or suspended by the Department under COMAR 05.01.05; Demonstrate: Financial credibility and stability; The capability of achieving successful completion of the project; and The ability to manage the project; and Agree in writing to rent all partnership units to households of lower income that include one or more individuals with disabilities or special needs. Private sector entities that intend to sell a project to a local government or local government entity under Regulation .09 of this chapter shall: Meet the requirements of §A(1)—(4) of this regulation; and Have a binding contract to sell the housing financed by the capital assistance to the local government. The sponsor shall directly manage or contract with a qualified for-profit or nonprofit management agent for the management of the operation of a project. The management contract: Shall be acceptable to the Department and its counsel; If the capital assistance is funded from the proceeds of tax-exempt revenue bonds, shall have a duration not greater than 1 year, unless a longer term is approved by counsel to the Treasurer, and shall contain such other provisions necessary to ensure the tax-exempt status of the bonds; and May be renewed at 1-year intervals, or such longer intervals as approved by counsel to the Treasurer, at the option of the parties. The sponsor shall agree in writing that as long as the capital assistance is outstanding, the sponsor shall: Maintain the project in good physical and financial condition; Cooperate with the Department in periodic monitoring of the: Physical condition of the project; Financial condition of the project; Incomes of households residing in the project; and Contributions of the households in the project to enhance and maintain the project or the community; Maintain project accounts as required by the loan documents, including accounts for operating costs, tenant security deposits, insurance, taxes, and reserves for replacements, and a residual receipts account containing all project revenues in excess of allowable project expenses; and Operate the project in accordance with the requirements of the Act and this chapter. Program funds may be used to provide capital assistance for financing development costs, including: Acquisition of buildings and land, provided, if the sponsor is a local government or local government entity, it has met the local contribution requirements of Regulation .17 of this chapter; Labor and materials for construction, rehabilitation, and installation of improvements as set forth in approved plans and specifications; Necessary studies, surveys, tests, plans, and specifications, including: Appraisals; Market analysis studies; Construction cost estimates; Test borings; and Compaction tests; Reasonable fees for architectural, design, engineering, and other special services; Site preparation, including the costs of: Running services from public utilities abutting the site to the buildings in the project; Public utility connection fees; Roads from public roads abutting the site to the buildings in the project; Installing wells or septic systems on the site; and Parking areas, play areas, and landscaping; Indemnity and surety bonds; Premiums on title, mortgage, and hazard insurance; An allowance for start-up costs such as marketing and leasing expenses, as approved by the Department; Costs associated with obtaining environmental assessments and testing for the presence of environmental hazards; and Other costs and fees acceptable to the Department. Program funds may be used in accordance with Regulation .10 of this chapter to purchase MPDUs. Program funds may not be used for: Acquisition of the site, except as permitted in §A(2) of this regulation; or Off-site improvements. If a capital assistance from the program loan is funded with the proceeds of general obligation bonds issued by the State of Maryland, additional limitations on eligible uses may be applicable. General Requirements. Buildings and improvements comprising a project shall meet the following requirements: Be located within the State; When the project is complete, be in compliance with applicable codes and standards; Be owned by an eligible borrower, with title and title insurance insuring the Department that are acceptable to the Department; and For projects involving new construction, be located within a priority funding area as described in State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. A project is eligible only if: The Department has complied with COMAR 05.01.06.06; and The Secretary has issued the written determination required under COMAR 05.01.06.07. Project Income. Rents charged for partnership units shall be in amounts adequate for total income from the partnership units plus any funds contributed under §C(2) of this regulation, to be sufficient to: Pay all operating costs, insurance premiums, and payments instead of taxes, if any, that may be due; and Fund a reserve account for future maintenance, renovation, and improvement of the project by periodic deposits in amounts, as determined by the Department, that are adequate for the long-term maintenance and renovation of the project. The local government in its discretion may increase total income with operating or rent subsidies appropriated by the local government from its funds specifically for the project. The total income collected under §C(1) and (2) of this regulation shall be of such an amount that it is reasonable to anticipate that additional State and federal subsidies will not be required to maintain, on a long-term basis, occupancy of the partnership units by households of lower income. Occupancy Limitation. Throughout the term of the capital assistance financing, all of the residential rental units in a project that are financed with the capital assistance, other than units occupied by management personnel, shall be: Occupied by households of lower income; or If the project is owned by a private sector entity, occupied by households of lower income that include one or more individuals with disabilities or special needs. A household whose annual income after initial occupancy exceeds the income limit set by the Secretary for continuing occupancy for households of lower income shall be given notice requiring it to vacate on or before that date which is 24 months after the date of the notice. The sponsor or its management agent shall deliver the required notice within 2 months of the date of the certification showing that the annual income of the household exceeded the income limit for continuing occupancy for households of lower income. Notwithstanding §D(2) of this regulation, a lease renewal may be entered into with a household that is required to receive a notice to vacate, but the term of the renewal may not exceed 24 months after the date of the notice, unless conflicting federal requirements apply. Partial Financing. If capital assistance is used to partially finance a project, there shall be a minimum number of partnership units, other than units occupied by management personnel, that shall be occupied by households of lower income throughout the term of the capital assistance financing. Except as provided in §D(4)(c) of this regulation, the minimum number of partnership units shall be equal to the amount of the loan divided by $75,000 or such other per unit cap as may be established by the Secretary. For capital assistance to private sector entities for rental housing for households that include one or more individuals with disabilities or special needs, the minimum number of partnership units shall be as set by the Program. The income levels and the disabilities or special needs of households not residing in the partnership units may not be restricted by the Program. Only those households that reside in partnership units in a project are subject to the tenant participation requirements as provided under Regulation .18 of this chapter. The sponsor shall provide equal access for all tenants to any amenities and common areas in a project that is partially funded with capital assistance from the Program. A household having excess income may stay in its rental unit if, within 12 months of the income certification showing excess income: There is another residential rental unit in the project that is not a required partnership unit; The nonpartnership unit is either vacant and will be rented to an income eligible household, or is occupied by an income eligible household; and Converting the nonpartnership unit to a partnership unit would not otherwise cause a violation of this regulation. If the sponsor or its management agent has not identified a substitute partnership unit in accordance with §D(4)(g) of this regulation within the 12-month period, the household having excess income shall be given a notice requiring it to vacate the partnership unit on or before that date which is 24 months after the date of the notice. If a nonpartnership unit becomes available before the 24-month date, the sponsor or its management agent may convert the available nonpartnership unit under the same restrictions identified in §D(4)(g) of this regulation and allow the household having excess income to remain in its rental unit, which shall be converted to nonpartnership status. A lease renewal may be entered into with a household that is scheduled to receive or has received a notice to vacate under §D(4)(h) of this regulation, but the term of the lease renewal may not extend beyond 24 months after the date of the household's notice of excess income. Capital assistance may be provided to private sector entities to construct, acquire, reconstruct, or rehabilitate projects that are, upon completion, to be sold to a local government or local government entity, if, upon completion of the project, the private sector entity is required to: Transfer legal title to the local government or local government entity without additional capital assistance from the Department; and Unless the local government has contributed the land, pay an amount not to exceed the cost of the land and any off-site improvements paid for by the private sector entity. If the capital assistance is for partnership units that are part of a larger rental housing project or homeownership development project, the minimum number of units in the project that are required to be sold to the local government shall be determined by the formula specified in Regulation .08D(4) of this chapter. MPDU projects that are constructed or rehabilitated by third parties and then sold to a local government or local government entity under a local regulatory land use program shall be eligible for financing under the Program, provided that the following requirements are satisfied, instead of the requirements set forth in Regulations .04 and .07A and C of this chapter: The local government or local government entity is or will be the legal or equitable owner of the project not later than the time that capital assistance funds are disbursed; and The amount of financing provided by the Program to the project does not exceed the amount of the acquisition cost of the completed project, less the sum of: The market value of the land on which the project is located as set forth in or determined from the most recent tax assessment; and Any additional contribution from the local government as may be required in accordance with Regulation .17 of this chapter. The Department may impose additional requirements pertinent to any unique factors of MPDU projects. Projects with Commercial or Other Nonresidential Space. The Department, in its discretion, may allow capital assistance for projects that are located on sites with improvements that are not eligible for financing under the Program in that the improvements are not for the purpose of providing rental housing, such as government offices or commercial space. If a project of this type does receive capital assistance, the Department may impose additional requirements pertinent to any unique factors of the project. Projects for the Elderly. Projects restricted to occupancy by elderly households may receive funding under the Program. Conditional Repayment Obligation. Except as provided in §B of this regulation, a repayment of principal or interest on the capital assistance is not required unless the project ceases to be owned by the sponsor or operated in accordance with the requirements of the Act and this chapter and the terms and conditions of the capital assistance documents. If necessary to comply with, or receive the benefit of, federal or other financial assistance, capital assistance provided under the program may be made available as a deferred payment loan repayable on the later of: The sale of the project; The failure of the sponsor to operate the project for the benefit of households of lower income in accordance with the agreements between the Department and the local government; or A maturity date set by the Department. Amounts Due upon Sale of Project. If a project or any interest in it is sold or transferred by the sponsor, other than to a local government or local government entity in accordance with Regulations .09 and .10 of this chapter, or to another eligible borrower approved by the Department, the sponsor shall pay to the Department the principal amount of the financing, plus simple interest, if any, at the rate set forth in the capital assistance documents. The capital assistance documents may require that the sponsor or the Department apply any proceeds of the sale of a project or any other loan repayment funds plus all sums held in any project accounts to the housing needs of low-income and moderate-income persons. Amounts Due upon Default. In the event of default, the Department has the right to accelerate the indebtedness, and the amounts set forth in §C(1) of this regulation shall then be due and payable by the owner. The Department shall have the right to demand a deed in lieu of foreclosure, or to foreclose, if the financing is secured by a mortgage or deed of trust. An obligation to repay the financing under the Program is secured only by the project property or other security device acceptable to the Department, and a deficiency judgment against the owner may not be sought or obtained following foreclosure. A local government is not required to pledge its faith or credit for the repayment of capital assistance. Voluntary Repayment. A sponsor may voluntarily repay Program financial assistance at any time if the sponsor complies with the following requirements: If the financing was made with State bond proceeds, provides the Department with an opinion of bond counsel, prior to or simultaneously with the voluntary prepayment, that the prepayment does not adversely affect the interest of the bondholders under the pertinent State bonds and the State’s bond counsel for the bonds agrees; Provides written notice to each tenant residing in the project which describes the impact of the prepayment on the tenant and, if applicable, any assistance to which the tenant is entitled; Provides notice of the prepayment to the Department, the political subdivision, if not an owner of the project, the local public housing authority, if any and if not an owner of the project, and any parties registered with the Department; Offer a right of first purchase to the Department, the political subdivision, if not an owner of the project, the local public housing authority, if any and if not an owner of the project, and any interested parties registered with the Department; Provides a lease extension for at least 1 year following the notice of the prospective prepayment action to each tenant residing in an assisted unit; Makes relocation assistance payments to each tenant in an amount determined by the Department; Provides 3-year lease extensions or payments equal to 3 months rent to 20 percent of the tenants who live in assisted units and qualify as senior citizens, disabled, or households with minors; and Complies with any procedural requirements of the Department with respect to the right of first purchase, the relocation payments, and lease extensions. Project Income. A sponsor shall charge rents in amounts sufficient to pay all project expenses and fund project accounts as provided in the capital assistance documents and in this chapter. Project revenues, including all income from the rental of dwelling units, parking, and laundry, shall be placed in project accounts as provided in §B of this regulation and may not be withdrawn except to pay project expenses. If the total amount in the accounts in §B of this regulation reaches a level that the Secretary and the sponsor agree exceeds the reasonable foreseeable needs of a project, the sponsor and the Secretary may enter into an agreement to use the excess moneys for the housing needs of low-income and moderate-income individuals who need not reside in the project. Project Accounts. The sponsor shall establish and maintain accounts for a project in a manner satisfactory to the Department and as required by the capital assistance documents. The accounts may include funds for: Tenant security deposits; Operating costs; Insurance; Taxes or payment in lieu of taxes; Reserves for maintenance, renovation, and improvements in amounts satisfactory to the Department; and A residual receipts account containing all project revenues in excess of allowable project expenses. The sponsor shall file periodic reports with the Department regarding those accounts required by the capital assistance documents. Tenant Selection Procedures. The sponsor may establish tenant selection preferences for applicants living or working in the area. Tenant selection preferences may not be based upon the length of time the applicant has lived or worked in the area. Local residency requirements are prohibited. Security Deposits. The sponsor may collect security deposits as permitted by Maryland law. Rental Period. For the entire period during which the capital assistance, or any part of it, is outstanding, the partnership units shall be maintained: If the project is owned by a local government or local government entity, as rental housing for households of lower income; or If the project is owned by a private sector entity, as housing for households of lower income that include one or more individuals with disabilities or special needs. Payments in Lieu of Taxes. A project owned by a local government as a governmentally owned facility is not subject to property taxes and may only be charged a payment in lieu of taxes if there is a preexisting agreement between the sponsor and the local government providing for payments instead of taxes. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §A of this regulation shall meet the following requirements: Be written by a company registered with 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 §B 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 §B of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §B of this regulation, owner's property or hazard insurance shall: Name the Department as an additional insured, loss payee and mortgagee; and Remain in force for the duration of the loan. For local governments, the Department shall: Evaluate any self-insurance program to determine if adequate coverage and terms acceptable to the Department can be provided; and Accept coverage under the self-insurance subject to this determination. Construction Standards. Construction, reconstruction, and rehabilitation funded with capital assistance shall comply with applicable codes and standards. Construction Wages. The wages paid for construction, reconstruction, or rehabilitation are not subject to the requirements of the prevailing wage rates law for public work contracts, State Finance and Procurement Article, Title 17, Subtitle 2, Annotated Code of Maryland, if: More than 50 percent of the cost of the construction, reconstruction, and rehabilitation is contracted and paid for by a sponsor out of the proceeds of a loan from the Fund; and The sponsor has not by resolution or ordinance required that it shall be covered by the prevailing wage rates law for public work contracts, State Finance and Procurement Article, Title 17, Subtitle 2, Annotated Code of Maryland. At the request of the local government or local government entity, the Department may defer to the local government for construction review and approval of construction draws if the Department determines that such deference will avoid duplication of effort while ensuring appropriate fiduciary oversight and controls. The Department shall prescribe or approve the form and content of all documents, which may include a note, deed of trust, regulatory agreement, and other instruments that the Department may require to evidence or secure the capital assistance or enforce the requirements of the Act and this chapter. For each project undertaken by a local government or local government entity, the local government shall contribute from non-State sources: All or a portion of the land for the project; Funds equal to the proportion of the acquisition cost of the property attributable to the value of the land as set forth in, or determined from, the most recent tax assessment; A contribution towards development costs that equals or exceeds the value of the land, as set forth in, or determined from, the most recent tax assessment; or A combination of the above. In determining the amount of the local contribution the Department shall consider: The value of land contributed by the local government which shall be equal to the: Amount paid for the land, if the land is acquired in conjunction with undertaking the project; or Market value of the land, if the land is contributed from the local government's existing inventory of land; Cash contributions that pay for capital costs; The value of contributed services such as design, architectural, or engineering services; The value of foregone or waived fees required for newly developed housing such as water and sewer tap fees, front footage fees, impact fees, and building or other permit fees; The value of locally installed infrastructure on and off the site that reduces costs normally attributable to a rental housing project; and Other contributions that in the determination of the Department reduce the amount of Program funding required for the project. A local contribution is not required for projects owned by private sector entities. Except as provided in §C of this regulation, as a condition of capital assistance, a sponsor shall provide a plan, acceptable to the Department, to ensure that households residing in partnership units contribute services to enhance or maintain the project or community in which the project is located, such as: Participation in a tenants association, which may be responsible for activities such as: Evaluation of tenant complaints with recommendations to project management for resolution; Participation in formulating operating policies for the project; or Organization of tenant or community activities; Project maintenance, upkeep, or management that enhances the project and reduces operating costs, such as: Snow removal from sidewalks, lawn maintenance, and exterior painting; Interior unit painting undertaken on a regular schedule with materials, supplies, and supervision provided by the project management; Community room activity scheduling and post-activity cleanup; Grounds or building decorating including flower gardens and lobby decorations; Tenant assignments to answer project management office telephones or staff a reception desk; or Minor repairs, including window and screen repairs, undertaken in conjunction with a management-sponsored training program; or Community activities that benefit the community in which the project is located on a continuing basis or on a periodic schedule, such as: Participation in recycling programs, neighborhood crime watch, or neighborhood community associations; or Participation in periodic neighborhood cleanups or fund-raising activities to benefit community charities or nonprofit activities. Tenant Participation Encouragement. For a rental housing project where not all of the rental units are partnership units, the sponsor shall be encouraged to require tenants who do not reside in partnership units to participate in activities specified in the tenant participation plan. Tenant participation may not be required in connection with capital assistance if: Private sector entities receive financial assistance to provide rental housing for individuals with disabilities or special needs; or Such a requirement is prohibited by a federal program applicable to the project. Applications for capital assistance shall be made upon standard forms prescribed by the Department and shall include the information and documentation required by the Department to assess whether the project meets the requirements of the Act and this chapter. Approval. After considering the application and the availability of resources, the Program staff shall select projects for review and recommendation for funding by the Housing Finance Review Committee. The Housing Finance Review Committee shall review the projects selected by Program staff and recommend projects to the Secretary for reservation of funds and capital assistance commitments. Upon receipt of the recommendation of the Housing Finance Review Committee, the Secretary shall approve or disapprove the capital assistance and the terms of the capital assistance. A written determination that each instance of capital assistance, regardless of the capital assistance amount, is statutorily authorized and approved by the Secretary shall be executed before the issuance of a reservation of funds or capital assistance commitment. In an emergency, when urgent action is required, the Secretary may approve capital assistance that would otherwise have been forwarded to the Housing Financing Review Committee, without the recommendation of the Housing Financing Review Committee. For capital assistance below the minimum amount established by the Housing Finance Review Committee, the Director of Development Finance may approve the capital assistance. Commitment Letter. Upon the issuance of a determination by the Secretary approving capital assistance financing, the Director of Development Finance or Director of Multifamily Housing is authorized to issue a commitment letter setting forth the amount of the capital assistance and the terms and conditions under which the capital assistance will be made. Expiration of Commitment. The Department shall specify in the commitment letter a time limit within which the execution of the commitment letter and the documents evidencing the financing shall occur. The time limits may be extended in the Department's sole discretion. If execution of the commitment and loan documentation do not occur within the time limits specified by the Department, the commitment shall expire, and, upon written notification to the sponsor, the Department may withdraw the moneys encumbered for the project and use them for any other project authorized by the Act. Rejection of Applications. If Program staff determines not to recommend approval of a project for capital assistance, or if the Housing Finance Review Committee or the Secretary rejects a project for financing, the Director of Multifamily Housing shall issue a written notice of rejection. Reconsideration. A sponsor may request reconsideration of a rejection by submitting a written request to the Director of Development Finance, to be received within 15 days following the date of the rejection notice. The request for reconsideration shall address each reason for the rejection and provide documentation supporting reasons for reconsideration of the issues. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02. It is the intent of the Department that Program funds be made available Statewide. Funds generally shall be available on a first-come, first-served basis and be based upon the readiness of projects to initiate construction or rehabilitation. If a project application is submitted, but funding is not then available under the Program, the Program, in its discretion, may continue to process the application until funding is available, and then may authorize the capital assistance without the necessity of a new application. If applications for capital assistance exceed available financing, the Department, in approving projects for funding, may give priority to projects that provide: A greater percentage of housing for families with children; or An equitable distribution of funds Statewide. Funding Availability. The Department shall publicize the Program on the Department's website or by such other means as the Department determines to be appropriate. Any publications shall provide general information about the availability of funding. The Department may at any time consider applications for a loan or loans or may establish beginning and ending dates for the receipt of applications. The Department shall provide notice on the Department's website, or by such other means as the Department determines to be appropriate, of the lack of funding availability that would result in closing of the Program or restrictions on the acceptance of applications. Limitations. The Department may specify the type of applications it will consider, and may limit during any period the type of applications that it will receive on the basis of: The type of entity providing primary financing of the undertaking; The amount of local government contributions; The number or proportion of eligible residents who will reside in the undertaking; The areas of the State in which the undertaking is located; or Other factors the Department considers relevant. The Department may also establish priorities among applications. Funds shall be maintained in the State Treasurer's collection account and may be withdrawn by the Department upon the request of the Director of Multifamily Housing or the Director's designee to reimburse or pay for development costs. Sponsors shall requisition funds on forms prescribed by the Department in accordance with the terms of the capital assistance documents for approved development costs. Guidelines. The Program may establish from time to time detailed Program guidelines containing underwriting standards, processing requirements, and other requirements or matters relating to providing capital assistance. Delegation. The Secretary may delegate to the Director of Development Finance, or to any other official or employee of the Department or Program, the authority to execute or approve any capital assistance documents or other documents governing capital assistance, except waivers pursuant to Regulation .28 of this chapter and determinations under Regulation .20B of this chapter. A sponsor 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 leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, repair, or maintenance of any property financed or assisted under the program. Each sponsor 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 Act Amendments of 1988, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; The Americans with Disabilities Act of 1990, as amended; The Department's Minority Business Enterprise Program, as amended, if the local government does not have its own minority business participation program that is acceptable to the Department; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that order. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. If requested by the Department, each sponsor shall install a sign identifying the Department as a lender on the project. The sign, at the discretion of the Department, may be supplied by the Department, but in any case shall comply with the design specifications of the Department. The sponsor shall bear all costs of acquisition, delivery, and installation of a conforming sign, which costs may be included in the loan. Sponsors, contractors, and subcontractors shall maintain books, accounts, and records and shall file with the Department financial and other reports as the Department may require. All of these books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the contractor and the sponsor. The sponsor shall obtain signed certificates of annual income from all tenants occupying a partnership unit and shall certify the annual incomes to the Department. The Department requires annual recertifications of income as well as periodic occupancy reports containing the information required by the Department. Leases and certifications are subject to periodic review by the Department. For projects where existing tenants continue in occupancy during rehabilitation, the sponsor shall obtain signed income certifications from income-eligible tenants in partnership units before the loan closing. The purpose of the certification of annual income and the reports is to assure compliance with the upper income limits established in accordance with the Act, and Regulation .08D of this chapter. In the case of a project that receives federal assistance, including low-income housing tax credits, the procedures for the certification of income prescribed by the federal agency are acceptable, including recertification waivers under 26 U.S.C. §42(g)(8)(B). The sponsor shall verify the information contained in the certificate of income, upon the consent of the individual, with the source of income, and file with the Department a report disclosing the income of all individuals selected for occupancy unless the sponsor obtained a waiver under the federal low-income housing tax credit program, as provided in 26 CFR §1.42-5. The 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 sponsor. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is consistent with the legal authorizations for the Program, if: In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act; and The Secretary's determination is approved for form and legal sufficiency by the Office of the Attorney General. A sponsor that 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 Housing and Community Development Article, §4-1209, Annotated Code of Maryland. Housing and Community Development Article, Title 4, Subtitle 12;State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of Maryland;Executive Orders 01.01.1992.27C and 01.01.1998.04 Effective date: Regulations .01—.16 adopted as an emergency provision effective December 13, 1988 (15:27 Md. R. 3116); emergency status extended at 16:10 Md. R. 1101; emergency status expired July 24, 1989; adopted permanently effective August 7, 1989 (16:15 Md. R. 1650) Regulations .01—.16 repealed and new Regulations .01—.27 adopted effective November 11, 1991 (18:22 Md. R. 2393) Regulation .03B amended effective January 2, 1994 (20:25 Md. R. 1943); November 20, 1995 (22:23 Md. R. 1800) Regulation .04E amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .07 amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .07A amended effective January 21, 2002 (29:1 Md. R. 21) Regulation .07G amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .07H amended effective May 20, 1996 (23:10 Md. R. 730) Regulation .08A amended effective May 31, 1999 (26:11 Md. R. 853) Regulation .10B amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .11A—C amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .11D amended effective February 1, 1993 (20:2 Md. R. 111) Regulation .12F amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .13A amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .18B amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .19 amended effective January 2, 1994 (20:25 Md. R. 1943) Regulations .01—.27 repealed and new Regulations .01—.29 adopted effective December 15, 2008 (35:25 Md. R. 2150) Regulation .02A, B amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .03B amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .04E amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .05A amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .06B amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .07A amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .07D adopted effective December 22, 2014 (41:25 Md. R. 1476) Regulation .08D amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .12 amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .13E amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .14 amended effective April 19, 2010 (37:8 Md. R. 614); December 22, 2014 (41:25 Md. R. 1476) Regulation .16 amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .18C amended effective December 22, 2014 (41:25 Md. R. 1476) Regulation .24 amended effective December 22, 2014 (41:25 Md. R. 1476) These regulations prescribe the policies, procedures, and authorizations for allocating federal low-income housing tax credits to eligible housing projects. The credits are created by the federal Tax Reform Act of 1986 and are allocated to each state on a per capita basis. The Governor of Maryland has designated the Department of Housing and Community Development as the housing credit agency with the responsibility for allocating the tax credits. The objective of the Program is to administer and make reservations and allocations of tax credits to eligible housing projects in order to promote the development of housing for low-income families. In this chapter, the following terms have the meanings indicated. Any terms also appearing in the Internal Revenue Code have the meanings defined there as well. Terms Defined. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and any successor statute as it applies to the tax credits, together with all regulations promulgated under it. “Plan” means the Administration's Qualified Allocation Plan (formerly known as the “Plan for the Allocation of Low-Income Housing Tax Credit in Maryland”) currently in effect, as approved by the Governor of the State of Maryland and required by the Internal Revenue Code. “Program” means the low-income housing tax credit program as established by the Internal Revenue Code and as administered by the Administration. “Tax credits” means the low-income housing tax credits allocated under this chapter and the Internal Revenue Code. The Administration shall administer the Program according to the Plan. At intervals to be determined by the Secretary, the Administration shall revise the Plan according to the procedures in the Plan and as required by the Internal Revenue Code. The Administration shall have copies of the Plan available for public inspection at the offices of the Administration and on the Department's website (www.dhcd.state.md.us). All projects receiving an allocation of tax credits and federal financial assistance shall be reviewed by the Administration for consistency with federal subsidy layering requirements. The review shall be conducted as set forth in the Plan. The Department and the Administration make no representations as to any tax or other consequences to a sponsor or related entities resulting from any notice of reservation of tax credits to a sponsor. The Department and the Administration accept no responsibility for any tax or other consequences to any recipient or related entities arising out of any allocation of tax credits. The Administration has sole and complete discretion to make any decision or take any action for which discretion has been granted to the Administration by the Plan or this chapter. A sponsor or recipient who knowingly makes or causes to be made a false statement or report is subject to withdrawal of its reservation of a credit, or cancellation of its allocation of a credit, by the Secretary, in addition to the criminal penalties authorized by law. Housing and Community Development Article, §2-111; State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of Maryland;Executive Orders 01.01.1987.26K and 01.01.1998.04 Effective date: December 11, 1989 (16:24 Md. R. 2617) Regulations .01—.12 repealed and new Regulations .01—.17 adopted effective April 25, 1994 (21:8 Md. R. 671) Regulation .03B amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .04 amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .05B amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .07B—D amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .08 amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .09B, C amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .11A amended effective September 25, 1995 (22:19 Md. R. 1471) Regulation .13A amended effective September 25, 1995 (22:19 Md. R. 1471) Chapter revised effective May 20, 1996 (23:10 Md. R. 730) Regulation .05B amended effective July 24, 2000 (27:14 Md. R. 1340); January 21, 2002 (29:1 Md. R. 21) Chapter revised effective October 25, 2004 (31:21 Md. R. 1544) Effective date: September 30, 1991 (18:19 Md. R. 2098) Regulation .04B amended effective May 23, 1994 (21:10 Md. R. 840) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1943); April 5, 1999 (26:7 Md. R. 538); January 21, 2002 (29:1 Md. R. 21) Regulation .09A amended effective May 20, 1996 (23:10 Md. R. 730) Regulation .10A amended effective May 20, 1996 (23:10 Md. R. 730) Regulation .10-1 adopted effective November 20, 1995 (22:23 Md. R. 1800) Regulation .10-1A amended effective September 6, 1999 (26:18 Md. R. 1374) Regulation .11C amended effective April 19, 2010 (37:8 Md. R. 614) Regulation .13 amended effective February 1 , 1993 (20:2 Md. R. 111) Regulation .13C amended effective December 5, 1994 (21:24 Md. R. 1987) Regulation .13D amended effective May 23, 1994 (21:10 Md. R. 840) Regulation .15 amended effective May 20, 1996 (23:10 Md. R. 730) Regulation .16 amended effective May 20, 1996 (23:10 Md. R. 730) Regulation .18E amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .19 repealed as an emergency provision effective August 24, 1995 (22:19 Md. R. 1458); emergency status extended at 23:7 Md. R. 547 (Emergency provisions are temporary and not printed in COMAR) Regulation .19 repealed effective August 26, 1996 (23:17 Md. R. 1246) Regulation .20 amended as an emergency provision effective August 24, 1995 (22:19 Md. R. 1458); emergency status extended at 23:7 Md. R. 547 (Emergency provisions are temporary and not printed in COMAR) Regulation .20 amended effective August 26, 1996 (23:17 Md. R. 1246); March 13, 2006 (33:5 Md. R. 518) Chapter repealed effective December 22, 2014 (41:25 Md. R. 1476) Effective date: May 25, 1992 (19:10 Md. R. 929) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1943); April 5, 1999 (26:7 Md. R. 538); January 21, 2002 (29:1 Md. R. 22) Regulation .11C amended effective April 19, 2010 (37:8 Md. R. 614) Regulation .12C amended effective February 1, 1993 (20:2 Md. R. 111) Regulation .17E amended effective January 2, 1994 (20:25 Md. R. 1943) Regulation .18 repealed as an emergency provision effective August 24, 1995 (22:19 Md. R. 1458); emergency status extended at 23:7 Md. R. 548 (Emergency provisions are temporary and not printed in COMAR) Regulation .18 repealed effective August 26, 1996 (23:17 Md. R. 1248) Regulation .19 amended as an emergency provision effective August 24, 1995 (22:19 Md. R. 1458); emergency status extended at 23:7 Md. R. 547 (Emergency provisions are temporary and not printed in COMAR) Regulation .19 amended effective August 26, 1996 (23:17 Md. R. 1248); March 13, 2006 (33:5 Md. R. 518) Chapter repealed effective December 22, 2014 (41:25 Md. R. 1476) This chapter describes the policies, procedures, and authorizations for providing capital grants funded with State moneys for shelter, transitional, or other housing facilities for homeless households, and administering the Shelter and Transitional Housing Facilities Grant Program. The objective of the Program is to provide capital financing for local governments and nonprofit organizations to develop shelter, transitional, or other housing facilities for homeless individuals and families. In this chapter, the following terms have the meanings indicated. Terms Defined. “Applicable codes and standards” means the zoning, construction, health, safety, fire, occupancy, and other codes and standards applicable to the project in the political subdivision in which the project is located. “Capital assistance” means Program funding provided to a sponsor to finance the development costs of a project. “Capital assistance documents” means all documents either executed or supplied by a sponsor in connection with the application for and closing of capital assistance financing. “Capital equipment and furnishings” means permanently affixed equipment or other equipment, machinery, fixtures, and furnishings necessary to operate a shelter, transitional, or other housing facility for homeless households, including HVAC systems, stoves, refrigerators, washers, dryers, and playground equipment. “Department” means the Department of Housing and Community Development of the State of Maryland. Development Costs. “Development costs” means those costs incurred for the acquisition, new construction, reconstruction, or rehabilitation of shelter, transitional, or other housing facilities for homeless households that are eligible for financing under the Program in accordance with Regulation .05 of this chapter. “Development costs” includes the value of any labor provided by the sponsor for the project. “Development costs” does not include the costs of off-site improvements. “Homeless” means a household without permanent housing and lacking the resources to obtain permanent housing, or a household in imminent danger of homelessness. “Household” means an individual or group of individuals who occupy or intend to occupy a shelter, transitional, or other housing facility unit for homeless households in a project. “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland. “Local government” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, any of the 23 counties in Maryland, and any housing authority authorized under Housing and Community Development Article, Annotated Code of Maryland. “Nonprofit organization” means a corporation, foundation, or other legal entity no part of the net earnings of which inures to the benefit of any private shareholder or individual holding an interest in the entity. “Nonprofit sponsor” means a: Nonprofit organization; or Limited partnership formed for the purpose of undertaking a project which is eligible in whole or in part for federal programs or incentives, including low-income housing tax credits, if: Each of the general partners qualifies as a nonprofit organization, or The general partner of the limited partnership is a wholly owned subsidiary of the nonprofit organization and a nonprofit organization manages the development of the project or will be the recipient of net cash flow of the residual sale proceeds upon sale of the project. “Program” means the Shelter and Transitional Housing Facilities Grant Program. “Project” means any undertaking for the acquisition, construction, reconstruction, or rehabilitation of buildings or improvements or any portion of them, financed by the Program, which will be occupied by homeless households, except for any units occupied by management personnel. “Secretary” means the Secretary of Housing and Community Development. “Service provider” means a sponsor or a person or entity that contracts with a sponsor to provide services to a shelter, transitional, or other housing facility for homeless households. Shelter, Transitional, or Other Housing Facility for Homeless Households. “Shelter, transitional, or other housing facility for homeless households” means a housing facility, including apartments, condominiums, townhouses, single-family homes, single-room occupancy facilities, and shared housing facilities which: If a shelter facility, provides sleeping accommodations and support services for homeless households on a short-term basis, but for a period not to exceed 6 months, while other arrangements are being explored; If a transitional facility, provides housing for up to 24 months, and support services to help homeless households achieve stable, permanent housing; or If another type of housing facility for homeless households, provides housing with no length of stay requirement, and support services as appropriate to help homeless households. “Shelter, transitional, or other housing facility for homeless households” includes improvements directly related to providing shelter, transitional, or other housing facilities for homeless households, including but not limited to: Community spaces; Maintenance work areas; Administrative and support service offices; Laundry; and Units occupied by management and service personnel. “Shelter, transitional, or other housing facility units for homeless households” means the shelter, transitional, or other housing units in a shelter, transitional, or other housing facility for homeless households that are financed with capital assistance. Support Services. “Support services” means services that help the household achieve as high a level of self-sufficiency as possible. “Support services” may include case management, child care, life skills assistance, and linkage to services in the community. Nonprofit sponsors and local governments are eligible to receive capital assistance for shelter, transitional, or other housing facilities for homeless households. Each nonprofit sponsor or local government shall meet all of the following requirements that are applicable: If the nonprofit sponsor is a business entity, the entity shall be in good standing and be qualified to do business in Maryland; The sponsor shall: Own the property in fee simple or under a lease acceptable to the Department, or Have a valid purchase contract to acquire the property and secure acceptable title before or upon receipt of the capital assistance; The sponsor shall have all necessary legal and corporate authorizations to incur the obligations of the capital assistance; Sponsors shall be in good standing and may not be under suspension or debarment from the Department of Human Services or from any of the Department's programs. Each sponsor shall agree in writing: That all of the shelter, transitional, or other housing facility units for homeless households financed with the capital assistance shall be maintained for homeless households for not less than 15 years; To abide by all nondiscrimination requirements set forth in Regulation .16 of this chapter; To monitoring by the Department during the term of the capital assistance of: The physical condition of the project, Occupancy information and records for the project, and Management and operational activities at the project. Each sponsor shall provide evidence acceptable to the Department that any financing being obtained outside the Program is assured and acceptable to the Department. Program funds may be used for: The cost of acquiring land and buildings; Necessary studies, surveys, plans, specifications, appraisals, compaction tests, test borings, construction cost estimates, and environmental impact reports; Site preparation; Cost of labor and materials, including reasonable overhead and profit, for construction, rehabilitation, and installation of improvements as set forth in approved proposals or plans and specifications; Acquisition of capital equipment and furnishings to be installed at the project; or Fees and premiums normally incurred in real estate development including indemnity and surety bonds, hazard and liability insurance, legal and closing costs, and other costs and fees acceptable to the Department. Program funds may not be used: To refinance existing debt on projects; To finance the costs of any portion of a building or undertaking that does not provide shelter, transitional, or other housing units for homeless households and the necessary space and facilities required to operate the project; For transaction costs associated with the offering and syndicated sale; and For replacement of capital equipment and furnishings, such as beds, furniture, and floor coverings, and noncapital items in existing shelter, transitional, or other housing facilities for homeless households except under certain circumstances. To qualify as an eligible project for capital assistance, the project shall meet the following requirements: Be located within the State; When the project is complete: Be in compliance with zoning requirements and applicable codes and standards; and Be in compliance with the Minimum Livability Code required in COMAR 05.02.03; Be owned by a nonprofit sponsor or local government; and When complete, provide a shelter, transitional, or other housing facility for homeless households. If a project includes uses other than shelter, transitional, or other housing for homeless households, such as traditional rental housing or nonresidential uses, the number of transitional housing units may not be less than the amount of capital assistance provided to the project divided by the total development costs of the project multiplied by the total number of units in the project. Conditional Repayment Obligation. Repayment of capital assistance may not be required unless the project ceases to be owned by a sponsor or operated in accordance with the requirements of this chapter and the terms and conditions of the capital assistance documents. Conditions for Repayment. The Department may recover capital assistance from the sponsor if: The sponsor terminates the project before completion; or Within 15 years following completion of the project: The sponsor refinances, assigns, conveys, sells, or transfers an interest in all or some portion of the project or property: To any person, agency, or organization without the prior written consent of the Department; or For use other than as a shelter, transitional, or other housing facility for homeless households; The sponsor ceases to operate all or a portion of the project as a shelter, transitional, or other housing facility for homeless households; or The sponsor encumbers or permits any other lien against the project or the property without the prior written consent of the Department. Amount of Repayment. If the conditions in either §B(1) or (2) of this regulation exist, the Department shall recover from the sponsor: The amount of capital assistance provided to the project divided by the total development costs of the project, multiplied by the fair market value of the project at the time the condition for repayment occurs; and All costs and reasonable attorney fees incurred by the Department in recovery proceedings. Notice of Repayment. Before the payment of any capital assistance, the sponsor shall record notice, in the form acceptable to the Department, in the land records of the jurisdiction in which the project is located, of the Department's right to repayment. The sponsor shall provide evidence of the recordation to the Department. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §A of this regulation shall meet the following requirements: Be written by a company registered with 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 §A 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 §A of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §A of this regulation, owner's property or hazard insurance shall: Name the Department as an additional insured, loss payee, and mortgagee; and Remain in force for the duration of the loan. For local governments, the Department shall: Evaluate any self-insurance program to determine if adequate coverage and terms acceptable to the Department can be provided; and Accept coverage under the self-insurance program subject to the determination. General Rule. Except as provided in §B of this regulation, total capital assistance to a project may not exceed 50 percent of the total development costs of the shelter, transitional, or other housing facility for homeless households. Exceptional Rule. Capital assistance may be in an amount equal to 75 percent of the total development costs of the project if: The sponsor demonstrates to the satisfaction of the Department that all available sources of funds have been sought and insufficient funds are available to the project; The sponsor agrees in writing to serve households who upon initial occupancy in the shelter, transitional, or other housing facility for homeless households have annual incomes that do not exceed 30 percent of the area median income as determined by the Department of Housing and Urban Development and adjusted for household size; and The Department determines that the project cannot support repayment of loans offered by the Department or other public lenders. Calculation of Amount. The amount of capital assistance for a project shall be determined based on an analysis of the financial feasibility of the project and the availability of resources to repay other sources of funds. Within the limitations established in §§A and B of this regulation, the capital assistance may not exceed total project costs, less the sum of other resources provided by the applicant and less the amount of any loan the Department determines the project can support without impacting the financial feasibility of the project or the capability of the sponsor to provide the services proposed in the application. The Department shall provide the sponsor with copies of standard form capital assistance documents. The capital assistance documents may include the following: A conditional financing agreement with conditions for repayment; A notice of the Department's right to repayment which shall be filed in the land records of the jurisdiction in which the project is located; A regulatory agreement, which is an agreement covering the administrative and occupancy requirements of the capital assistance; A disbursement agreement, which is an agreement setting forth the terms and conditions for the disbursement of capital assistance funds over the course of construction or rehabilitation of the project; Contractor's letter and certification, which is an agreement provided to the Department by the project's general contractor in which the general contractor agrees not to amend the construction or rehabilitation contract without the Department's consent and, in the event of default by the sponsor, to cooperate with the Department in the completion of the project; Assurance of compliance with equal employment, civil rights, fair housing, and drug-free workplace requirements, which is an agreement committing the sponsor to comply with State and federal provisions governing employment and housing in force in the State; and Other documents as may be required by the Department. Applications for capital assistance shall be made upon standard forms required by the Department. Each application shall include the following information or items: A site map that identifies the location of the property; Evidence that the sponsor owns the site or has control of the site, such as a deed, contract of sale for the site, site option agreement, or other instrument satisfactory to the Department; A general description of the site and project and the plan of action for construction, reconstruction, rehabilitation, general improvements, or purchase of capital equipment and furnishings; Evidence of the sources and availability of all financing which is not provided by the Program and which is necessary to complete a project; A management plan including: A description of the proposed services to be provided to residents of the shelter, transitional, or other housing facility for homeless households; Descriptions of the service provider and management agent, if different from the sponsor; A set of proposed administrative and maintenance procedures; and A copy of the proposed lease or leases; A description of the households expected to be served, including projected income levels and proposed rents; Evidence of compliance with any applicable zoning; Preliminary plans and specifications or a proposed scope of work, an estimate of development costs, and an estimate of any additional expenses necessary to complete the project; A proposed operating budget for the project; Other information the Department requires which may be set forth in the application package or requested in writing by the Department. Local Governments. For each project for which an application is received under this chapter, the Department shall provide written notice and reasonable opportunity to comment on the project to the chief executive officer or the equivalent officer and the head or president of the legislative body of the political subdivision in which the proposed project is located. If a proposed project is in a municipal corporation, the notice required under §A(1) of this regulation shall be sent to the chief executive officer and the head or president of the legislative body of the municipal corporation, not the surrounding county. The notice provided under §A(1) of this regulation shall contain the following information about the proposed project: Date of application; Name and description of project; Address of project; Sponsor of the project and sponsor’s contact information; Amount of funding requested; Amount, type, and provider of other sources of funding; Total number of units; and Such other information as the Department deems relevant. Notification Letter to Sponsor. Upon receipt and analysis of all documentation necessary to assess the feasibility of a project, the Program shall issue a written notification letter to the sponsor that details conditions that shall be met in order for the Program to recommend approval of capital assistance, including: Final plans, specifications or scope of work, and firm costs for the acquisition, construction, rehabilitation, and capital equipment and furnishings; A minority business participation plan that complies with the Department's Minority Business Enterprise Program; Evidence of the commitment of any other necessary financing; and Other documentation required by the Department and included in the notification letter. An expedited analysis of whether to recommend approval of capital assistance may be conducted and recommendation of approval or disapproval made under §C of this regulation without the intermediate step of a notification letter, if all necessary documentation is provided with the initial application. Approval. Upon satisfaction of all terms and conditions of the notification letter, the Program shall undertake an analysis of each application to determine the final recommended amount of capital assistance and any recommended special terms and conditions for the project. Except in the case of an emergency when urgent action is required, all capital assistance in amounts greater than the minimum amount set forth in COMAR 05.01.07 shall be submitted to the Housing Finance Review Committee for review and recommendation to the Secretary for modification, approval, or disapproval of the capital assistance and the terms under which it shall be provided. Upon receipt of a recommendation of the Housing Finance Review Committee, the Secretary shall approve or disapprove the capital assistance and the terms under which the capital assistance shall be provided. In an emergency when urgent action is required, the Secretary, or the Secretary's designee, may approve the capital assistance without the recommendation of the Housing Finance Review Committee. For capital assistance in amounts at or below the minimum amount set forth in COMAR 05.01.07, the Department's Director of the Division of Development Finance may approve the capital assistance without the recommendation of the Housing Finance Review Committee. Commitment Letter. Upon approval of the capital assistance under §C of this regulation, the Department’s Director of the Division of Development Finance or the Division’s Director of Multifamily Housing is authorized to issue a commitment letter setting forth the amount of the capital assistance and the terms and conditions under which the capital assistance shall be made. Expiration of Commitment. The Department shall specify in the commitment letter a time within which the execution of the commitment letter and the capital assistance documents shall occur, which time limits may be extended in the Department's sole discretion. If execution of the commitment and capital assistance documents does not occur within the time limits specified by the Department, the commitment shall expire, and upon written notification to the sponsor, the Department may withdraw the moneys encumbered for the project and use them for any other project authorized by the regulations. Rejection of Applications. If the Department determines not to recommend approval of a project for capital assistance, the Program shall issue a written notice of rejection. Reconsideration. Sponsors may request reconsideration of a rejection by submitting a written request to the Director of the Division of Development Finance, to be received within 30 days following the date of the Program's rejection notice. The request for reconsideration shall address each reason for the rejection and provide documentation supporting reasons for reconsideration of the issues. The Director shall respond in writing to the sponsor's request for reconsideration within 30 days of receipt of the request for reconsideration. Sponsors may request reconsideration of the written response of the Director by submitting a written request for reconsideration to the Secretary to be received within 30 days of the date of the written response of the Director. This request shall be referred to the Housing Finance Review Committee for review and recommendation to the Secretary, who shall take final action regarding the request. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02. Priority. It is the intent of the Department that Program funds be made available throughout the State. Funds generally shall be available on a first-come, first-served basis based upon the readiness of projects to initiate acquisition, construction, rehabilitation, or purchase of capital equipment and furnishings, and provided that the Department has the right, in its sole discretion, to deny funding to any project. If a project application is submitted but funding is not then available under the Program, the Program in its discretion may continue to process the application until such time as funding is available, and then may authorize the capital assistance without the necessity of a new application. Funding Availability. The Department may from time to time publicize the availability of moneys to provide capital assistance. The Department may at any time consider applications for capital assistance or may establish beginning and ending dates for the receipt of applications. Funds shall be maintained in the State Treasurer's account and may be withdrawn by the Department upon the request of the Director of Multifamily Housing or the Director's designee to reimburse or pay for development costs. Sponsors shall requisition funds on forms required by the Department in accordance with the terms of the capital assistance documents for approved development costs. Guidelines. The Program may establish from time to time detailed Program guidelines containing underwriting standards, processing requirements, and other requirements or matters relating to providing capital assistance. Delegation. The Secretary may delegate to the Director of the Department's Division of Development Finance, or to any other official or employee of the Department or Program, the authority to execute or approve any capital assistance documents or other documents governing capital assistance, except waivers under Regulation .18 of this chapter. A sponsor or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, sexual orientation, or physical or mental disability, 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 leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project financed or assisted under the Program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, reconstruction, and rehabilitation of any project financed or assisted under the Program. Each sponsor 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; State Government Article, Title 20, Annotated Code of Maryland, as amended; The Americans with Disabilities Act of 1990, as amended; The Department’s Minority Business Enterprise Program, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing the requirements in this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Sponsors, developers, contractors, and subcontractors shall maintain such books, accounts, and records and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the contractor and the sponsor. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is consistent with the legal authorizations for the Program, if: In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Program; and The Secretary's determination is approved for form and legal sufficiency by the Office of the Attorney General. Housing and Community Development Article, §2-102(a)(7), Annotated Code of Maryland;Ch. 396, Acts of 2011; Ch. 444, Acts of 2012; Ch. 424, Acts of 2013; and Ch. 463, Acts of 2014 Effective date: November 7, 1994 (21:22 Md. R. 1873) Regulations .01—.07 and .09—.16 amended effective October 5, 1998 (25:20 Md. R. 1527) Chapter revised effective September 7, 2009 (36:18 Md. R. 1380) Regulation .03B amended effective June 22, 2015 (42:12 Md. R. 761) Regulation .04C amended effective June 22, 2015 (42:12 Md. R. 761) Regulation .08 amended effective April 19, 2010 (37:8 Md. R. 614) Regulation .11B amended effective June 22, 2015 (42:12 Md. R. 761) Regulation .12 amended effective June 22, 2015 (42:12 Md. R. 761) Regulation .13A amended effective June 22, 2015 (42:12 Md. R. 761) Regulation .16 amended effective March 16, 2015 (42:5 Md. R. 485) This chapter prescribes the policies, procedures, and authorizations for administering the Maryland Appalachian Housing Program and the Maryland Appalachian Housing Fund. Under the provisions of Housing and Community Development Article, Title 11, Annotated Code of Maryland, the Department has been given the authority to administer the Program. The Department has assigned administration of the Program to the Community Development Administration, an agency with the Division of Development Finance, a division of the Department. The objectives of the program are to provide assistance to Maryland Appalachian counties in the following areas: The stimulation of production of housing for low and moderate income families; and The preservation of existing housing for low and moderate income families. The terms appearing in the Act and the Code shall have the meanings defined there and, in addition, the meanings used in this chapter. Terms Defined. “Act” means the Appalachian Regional Development Act of 1965, 40 U.S.C. App. §§101—405, as amended, and the regulations, rules, resolutions, policies, and procedures promulgated under it. “ARC” or the “Commission” means the Appalachian Regional Commission established under §101 of the Act. “Code” means Housing and Community Development Article, Title 11, Annotated Code of Maryland, as amended. “Demonstration assistance” means financial assistance which shall be used for activities set forth in Regulation .05D of this chapter. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. “Director” means the Director of the Community Development Administration. “Financial assistance” means a grant under the Program including a grant with conditional repayment conditions. “Financial assistance documents” means the documents by and between the sponsor and the Department which set forth the terms of financial assistance under the Program. “Fund” or “MAHF” means the Maryland Appalachian Housing Fund established under the Code. “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, as amended. “Legal entity” means a corporation, cooperative, association, general partnership, limited partnership, joint venture, organization, or business which is organized legally to conduct a project. “Limited dividend organization” means any legal entity which receives a limited rate of return on a project, as approved by the Program staff. “Local jurisdiction” means the Maryland Appalachian counties, or instrumentalities of them, and all municipalities located in the Maryland Appalachian counties. “Low and moderate income families” means an individual or household whose combined income does not exceed the income limits established by the public agency which contributes to or oversees a project receiving financial assistance for planning or site development, except for financial assistance for demonstration projects whose income limits are established by the Secretary. “Maryland Appalachian counties” means Allegany, Garrett, and Washington counties in Maryland. “Maryland ARC representative” means the Governor, or the individual and an alternate appointed by the Secretary, with approval of the Governor, to the ARC. “Municipality” means a municipal corporation subject to the provision of the State Constitution, Article XI-E. “Nonprofit organization” means a: Legal entity, no part of the earnings of which inures to the benefit of any private shareholder or individual holding an interest in that entity; or Limited partnership if: Each of the general partners qualifies as a nonprofit organization or the limited partnership is a wholly owned subsidiary of a nonprofit organization, The limited partnership is formed for the purpose of undertaking a project that is eligible in whole or in part for a federal program or incentives, including low-income housing tax credits, and An organization that meets the criteria set forth in §B(18)(a) is managing the project or will be the recipient of net cash flow or the residual sale proceeds upon the sale of the project. “Planning assistance” means financial assistance which shall be used for the activities set forth in Regulation .05B of this chapter. “Program” means the Maryland Appalachian Housing Program operated by the Department. “Program income” means interest earned on investment of Program funds. “Project” means a housing project for which financial assistance for a planning, site development, or demonstration project has been made and which benefits low and moderate income families under the Program. “Public agency” means any State, federal, or local public agency or program which contributes or oversees a project. “Public housing authority” means a housing authority created under Article 44A, Annotated Code of Maryland, as amended. “Secretary” means the Secretary of Housing and Community Development. “Site development assistance” means financial assistance which shall be used for the activities set forth in Regulation .05C of this chapter. “Sponsors” means eligible applicants who receive financial assistance under the Program. “State” means the State of Maryland. Grants, including grants with conditional repayment provisions, are the eligible form of financial assistance under the Program, unless the Department is otherwise directed by the ARC. The Department may provide the following types of financial assistance from the Fund to an eligible sponsor: Planning; Site development; and Demonstration. Planning Assistance. Planning assistance may be used to pay for predevelopment costs associated with a project including: Reasonable fees for architectural, engineering, consultant, or legal services; Organizational expenses; Socioeconomic market studies; Appraisals; Surveys; Reasonable costs associated with obtaining construction or permanent financing; and Other fees and costs acceptable to the Department and permitted under the Act and the Code. Planning assistance may be used to fund an option for the purchase of land which will be part of a project, but may not be used for the acquisition of land which will be a part of a project. Site development assistance may be used to pay for on-site development and off-site development costs associated with a project, including: Excavation; Sewer and water services; Demolition, clearing, and grubbing; Sidewalks, curbs, and gutters; Paving; Landscaping; Seeding and sediment control; Installation of wells; Installation of septic and other waste disposal systems; Recreation facilities; and Other costs acceptable to the Department and permitted under the Act and the Code. Demonstration assistance may be used to pay direct costs associated with a project which responds to housing needs of low and moderate income families in Maryland Appalachian counties, and which demonstrates a new or innovative method of constructing or financing housing for low and moderate income families, or projects which demonstrate alternative living arrangements for low and moderate income families. These direct costs include: The activities described in §§B and C of this regulation; The acquisition of equipment which will be part of a project; The acquisition of land and any buildings located on the land; Cost of labor and materials for new construction or rehabilitation or installation of improvements as set forth in the approved plans and specifications for a project; Indemnity and security bonds; Premiums on hazard, liability, title, and mortgage insurance; Necessary fees, licenses, and permits related to construction, project review, and approval; Payment and performance bonds; and Other costs acceptable to the Department and permitted under the Act and the Code. Grants with conditional repayment provisions may be used to provide planning, site development, or demonstration assistance in accordance with the provisions set forth in Regulation .08B of this chapter. Program income from the Fund may be used to pay the expenses of the Program, as approved by the ARC. The Fund may not be used to pay for costs associated with the following activities unless otherwise permitted by the Act: Activities associated with libraries, cultural centers, or adult or child day-use facilities; Construction of schools, hospitals, or government office buildings; and Construction of community centers or social service facilities. The following entities are eligible to apply for financial assistance under the Program: Nonprofit organizations; Limited dividend organizations; Local jurisdictions eligible or potentially eligible to sponsor projects; and Public housing authorities. Applicants for financial assistance shall meet the following minimum requirements to be eligible to apply for financial assistance under the Program: Applicants shall be in good standing and qualified to do business in Maryland; and Applicants shall have the legal capacity and all necessary legal authority to incur the obligations of any financial assistance provided under the Program. In order to be eligible for financial assistance under the Program, a project shall demonstrate that it: Is located in a Maryland Appalachian county; Will provide housing for low and moderate income families; Is eligible for financial assistance from a public agency if the project involves planning or site development assistance; and Will be in compliance upon completion with all applicable zoning requirements and standards as well as the applicable building code of the local jurisdiction in which it is located. Amount of Financial Assistance. The maximum amount of financial assistance under the Program shall be as follows: Planning assistance may not exceed 50 percent of the total predevelopment costs of a project or such other percentage as may be specified by ARC; Site development assistance may not exceed the following amounts of such other amounts as may be specified by ARC: 10 percent of the total project costs for new construction, or 10 percent of the reasonable costs after rehabilitation value of a rehabilitation project; Demonstration assistance may not exceed 50 percent of the total cost of a project or such other percentage as may be specified by ARC; The total amount of federal financial assistance involved in a project may not exceed 80 percent of the total costs of a project. Conditional Repayment Provisions. The Department may require the repayment of any financial assistance if the: Sponsor anticipates being reimbursed for eligible costs paid out of financial assistance from the Program; and Reimbursement of the sponsor will occur within 2 years of the date of the grant agreement between the sponsor and the Department. The Department may require a sponsor to maintain the following insurance: Multi-peril insurance which provides fire and extended coverage insurance on a project both during and after construction or rehabilitation. The insurance coverage shall include such endorsements as the Department may require including: Collapse; Explosion; Loss of rents; and Vandalism. Liability Insurance. Comprehensive general liability insurance shall be maintained with such endorsements as the Department may require, both during and after construction or rehabilitation of a project. Flood Insurance. If the project is located on real property which is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. Before closing of a loan for a project, permits shall be secured from the Maryland Department of Natural Resources and the Maryland Appalachian county in which the project is located. Contractor's Insurance. If a project involves construction or rehabilitation of a building or improvements of any kind, the general contractor shall provide insurance coverage for comprehensive public liability, property damage, and workers' compensation in form and amounts required by the Department. Other Insurance. The sponsor shall provide at closing of the financial assistance such other insurance as the Department may require including builder's risk, boiler insurance, comprehensive automobile liability, and broad form workers' compensation. Terms and Conditions. Each insurance policy shall meet the following minimum requirements plus any additional requirements which may be set by the Department: Be written by companies acceptable to the Department; Be written by companies which are reputable and financially sound, as determined by the Department; Be in force to the extent applicable upon the closing of the financial assistance; Contain to the extent applicable a standard mortgagee endorsement attached to or printed in the policy naming the Department as mortgagee; Name to the extent required by the Department, the Department as loss payee and additional insured; Provide for notification to the Department before termination; and Contain terms and coverage satisfactory to the Department. An application for financial assistance shall be submitted to the Department and shall be made upon standard forms prescribed by the Department. Each application shall contain sufficient information and documentation to determine: Whether the project is located in a Maryland Appalachian county; The extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property; Whether the project will benefit low and moderate income families; The rate of return, if any, the sponsor anticipates receiving on a project; In the case of an application for a planning or site development assistance, whether the project is eligible for financial assistance from a public agency; The availability or lack of conventional financing for the project; and Such other information as the Program may request. Approval of Applications. Upon submission of all required information, the Program shall undertake an analysis of each application and make a recommendation as to the amount of financial assistance and any special terms and conditions for a project. Approval of Application. If the Secretary approves an application for financial assistance, the Secretary shall execute a determination that the financial assistance is authorized by the Act and the Code. The determination shall include authorization for the issuance of a grant agreement between the Department and the sponsor for the financial assistance only if the financial assistance is approved by ARC on the same terms and conditions approved by the Secretary. The determination also shall constitute authorization for issuance of a grant agreement between the sponsor and the Department, obligating the Department to provide the financial assistance after the financial assistance is approved by ARC on the same terms and conditions approved by the Secretary. Upon issuance of a determination by the Secretary approving the financial assistance, the application for financial assistance shall be submitted to the Maryland ARC representative for approval. If the Maryland ARC representative approves the application, the Maryland ARC representative shall submit the application to the ARC for approval. If the application is approved by the ARC on the same terms and conditions set forth in the Secretary's determination, the Department shall issue a grant agreement between the sponsor and the Department for the financial assistance. Rejection of Application. The Program shall inform an applicant in writing of rejection of an application for financial assistance, and an applicant shall have the right to appeal any rejection of an application by the Program under the procedures set forth in §E of this regulation. When an application is rejected by the ARC: If the ARC requires additional terms and conditions for a proposed project, the Director shall inform the applicant, in writing, of these additional terms and conditions. The applicant shall notify the Director, in writing, of its acceptance or rejection of the new or additional terms and conditions required by the ARC. If the ARC rejects an applicant's application for financial assistance for a project, the Department may not have the authority to provide the financial assistance requested by the applicant. The Program shall inform the applicant of rejection by the ARC of its proposed project. The appeal procedures set forth in §E of this regulation may not be available to an applicant whose application is rejected by the ARC. The Program, the Maryland ARC representative, and the ARC may take the following factors into consideration in considering the award of financial assistance: With respect to a planning assistance, whether the costs incurred are reimbursable out of permanent financing for the project; The area in a Maryland Appalachian county in which the project will be located; The extent to which the project will benefit low or moderate income families; The availability or unavailability of funds for preconstruction expenses and gap financing through conventional commercial lenders; The extent of local government participation in the project; and Other factors which the Program determines are desirable in fostering development in the Maryland Appalachian counties. The Department shall provide the sponsor with a grant agreement that is consistent with the terms and requirements under which the financial assistance was approved, and the provisions set forth in these regulations and in the Act and the Code. The grant agreement shall specify the reports necessary to monitor compliance by the sponsor with the terms and conditions of the Act, the Code, and these regulations. Appeal. An applicant may appeal rejection by the Program of an application for financial assistance in the following manner: Submission to the Secretary within 15 working days of the date of the notice of rejection from the Program, a written appeal which contains the following information: Reasons for disagreement with rejection, Additional information and supporting documents, and Explanation as to why the documentation was not furnished in the original application; The Secretary shall respond in writing to the applicant's request within 30 days of receipt of the written appeal of the applicant. An applicant may not have any right to appeal to the Department a rejection of any application by the ARC. Sponsors, contractors, and subcontractors shall maintain such books, accounts, and records and shall file with the Department such financial and other reports as the Department may from time to time require. The books, accounts, and records in §A of this regulation, as well as the administrative personnel, whether full-time or part-time, shall be available to the inspection of representatives of the ARC, the Department, or other agencies of the State during reasonable working hours. 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 relationship between the contractor and the sponsor. The Department may charge a sponsor an application and administrative fee to cover the costs to the Department involved in processing the financial assistance. A sponsor may withdraw an application at any time before an award of financial assistance by written notice to the Department. The sponsor may be required to bear any costs incurred by the Department for items other than Departmental processing including a nonusage fee. The Department may retain the application and administrative fees paid before the date of withdrawal of an application. A sponsor 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 leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project financed or assisted under the Program, or in any aspect of employment by any sponsor or contractor in the construction, repair, or maintenance of any property financed or assisted under the Program. A sponsor 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; State Government Article, Title 20, Annotated Code of Maryland, as amended; The Americans with Disabilities Act of 1990, 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. As a condition of receipt of financial assistance from the Program, the Department may require the sponsor to: Adopt and administer a program to promote a drug and alcohol free workplace; Make a good faith effort to ensure that any project it owns, manages, or otherwise retains an interest in shall be free from the illegal use, possession, or distribution of drugs or alcohol by residents or beneficiaries of the project; and Agree to participate in the Families Insisting on Safe Tenancies Program sponsored by the State. The Secretary may waive or vary provisions of these regulations to the extent that the waiver or variance is consistent with the Act and the Code and if, in the written determination of the Secretary, the application of the regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act or the Code, or contrary to federal law or regulation. Housing and Community Development Article, §2-102(a)(7), Title 11, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: April 30, 1990 (17:8 Md. R. 976) Regulation .03B amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .04 amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .05 amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .07 amended effective January 2, 1994 (20:25 Md. R. 1944); April 5, 1999 (26:7 Md. R. 539) Regulation .08 amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .09 amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .09A amended effective January 2, 1994 (20:25 Md. R. 1944) Regulation .11A amended effective January 2, 1993 (19:26 Md. R. 2283) Chapter recodified from COMAR 05.07.07 to COMAR 05.05.10 effective September 6, 1999 (26:18 Md. R. 1373) Regulation .01B amended effective September 6, 1999 (26:18 Md. R. 1373) Regulation .03B amended effective September 6, 1999 (26:18 Md. R. 1373) Regulation .12 amended effective March 16, 2015 (42:5 Md. R. 485)