# COMAR Title 05 — Department of Housing and Community Development ## Subtitle 12 — Federal Housing Programs ### Chapter 01 — Maryland HOME Program **Authority:** Housing and Community Development Article, §§2-111(b) and 4-211(a)(8) and (10); State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of MarylandExecutive Order 01.01.1998.04 **Administrative History:** Effective date: January 2, 1993 (19:26 Md. R. 2285) **Administrative History:** Chapter revised effective December 5, 1994 (21:24 Md. R. 1987) **Administrative History:** Regulation .03B amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .04D amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .05B amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .05C amended effective April 5, 1999 (26:7 Md. R. 540) **Administrative History:** Regulation .06C amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .07 amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .09A amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .09C, D amended effective September 6, 1999 (26:18 Md. R. 1374) **Administrative History:** Regulation .10B amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .11A amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .11B amended effective July 1, 1996 (23:13 Md. R. 940) **Administrative History:** Regulation .12 amended effective March 24, 1997 (24:6 Md. R. 483) **Administrative History:** Regulation .15B, C amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .16B amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .17 amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .18C amended effective September 25, 1995 (22:19 Md. R. 1471) **Administrative History:** Regulation .20C amended as an emergency provision effective August 24, 1995 (22:19 Md. R. 1459); emergency status extended at 23:7 Md. R. 548; amended permanently effective August 26, 1996 (23:17 Md. R. 1247) **Administrative History:** Chapter revised effective June 26, 2000 (27:12 Md. R. 1137) **Administrative History:** Regulation .05B amended effective January 21, 2002 (29:1 Md. R. 22) **Administrative History:** Chapter revised effective March 13, 2006 (33:5 Md. R. 519) **Administrative History:** Regulation .02B amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .03 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .04 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .05D amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .06B, C amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .07 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .09 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .10 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .11A amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .14 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .15 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .16 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .18B, C amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .19C amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .20 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .21 amended effective December 22, 2014 (41:25 Md. R. 1476) **Administrative History:** Regulation .22D amended effective December 22, 2014 (41:25 Md. R. 1476) #### Regulation .01 General. *COMAR 05.12.01.01* These regulations describe the policies and procedures the Department will use in the administration of the federal HOME Investment Partnerships Program to provide financial assistance to individuals, local governments, developers, and nonprofit organizations to promote affordable housing. These regulations describe the specific eligible uses and administrative procedures which will be used to implement and operate the HOME Program in the State. #### Regulation .02 Objectives. *COMAR 05.12.01.02* The objectives of the Maryland HOME Program are to: A. Finance affordable housing in conjunction with the housing loan programs administered by the Department by awarding funds to local governments, nonprofit sponsors and developers, and for-profit sponsors and developers to: (1) Promote the development or rehabilitation of rental housing for income eligible households, (2) Promote homeownership opportunities for income eligible households, (3) Facilitate nonprofit ownership of group housing for income eligible persons with special needs, (4) Provide rehabilitation assistance to owners of one-to-four unit properties, and (5) Provide assistance to facilitate the ability of senior citizens to remain in their housing; B. Finance programs, projects, and activities that fill a need not met by the Department’s housing programs, but that promote the development and rehabilitation of housing for homeowners, renters, and special populations; and C. Provide grants to nonprofit sponsors, developers, local governments, State agencies, and homeowners for certain eligible activities. #### Regulation .03 Definitions. *COMAR 05.12.01.03* A. The terms appearing in 24 CFR Part 92 have the meanings defined there and, in addition, the meanings used in this chapter. B. Terms Defined. (1) “Administration” means the Community Development Administration, a unit of the Division of Development Finance of the Department. (2) “Advance payment loan” means a short-term loan to a nonprofit sponsor to finance certain development costs incurred before the construction of the project, including appraisals, financing application fees, and architects', engineers' and attorneys' fees which are instrumental to the planning of a project and for which no other resources are available. (3) “Annual income” has the meaning set forth in 24 CFR §92.203. (4) “Community Housing Development Organization (CHDO)” means an entity that meets the criteria set forth in Regulation .09A of this chapter. (5) “Consolidated plan” means the planning document and funding application required to be submitted by the State annually and approved by HUD. (6) Department. (a) “Department” means the Department of Housing and Community Development, a principal department of the State. (b) “Department” includes the Administration. (7) “DHCD housing programs” means collectively the Rental Housing Program, the Single Family Programs, the Multifamily Bond Program, the Low Income Housing Tax Credit Program, and the Shelter and Transitional Facilities Grant Program, all as authorized under the Housing and Community Development Article, Annotated Code of Maryland, and this title. (8) “Director” means the Director of the Division of Development Finance of the Department. (9) “Group home” or “group home project” means a housing facility offering: (a) Common, shared, or independent living, dining, kitchen, sanitary, and sleeping facilities; (b) Supportive services or supervisory personnel to individuals with special housing needs when the individuals are not related to the group home sponsor; and (c) Except in the case of a shared bedroom, separate private space for each individual. (10) “HOME” means the federal HOME Investment Partnerships Program as implemented by the Department. (11) “HOME Investment Trust Fund” or “Trust Fund” means the monies provided by HUD for investment in HOME projects by the Department contained in the federal treasury account and any HOME funds in the Department's local account. (12) “Homeownership project” means housing owned and occupied by an income eligible household as their primary residence, including any project that would qualify for financing under any of the Single Family Programs. (13) Household. (a) “Household” means one or more individuals who occupy the same residential dwelling unit as their permanent residence. (b) “Household” includes a family as defined in 24 CFR §5.403, as amended. (14) “Housing Finance Review Committee” means the committee appointed by the Governor to review and make recommendations to the Secretary on financing requests in accordance with Housing and Community Development Article, §4-208, Annotated Code of Maryland. (15) “HUD” means the United States Department of Housing and Urban Development. (16) Income eligible household. (a) “Income eligible household” means a household whose gross annual income does not exceed the income limits for low income families or very low income families as set forth in 24 CFR §92.2. (b) “Income eligible household” does not include a student who is not eligible to receive Section 8 assistance under 24 CFR §5.612. (17) “Maryland HOME Initiatives Program Fund” means that portion of the HOME Investment Trust Fund set aside to be competitively awarded to applicants in accordance with Regulation .20B of this chapter. (18) “New construction” means the development and construction of a residential building, including any project which received its first certificate of occupancy within 1 year of receiving a commitment letter for HOME funds. (19) “Operating deficit reserve” means funds that are set aside for use in the rent-up period and are restricted to payment for debt service, operating expenses, and reserve for replacement payments. (20) “Participating jurisdiction” means a jurisdiction that: (a) HUD determines from time to time to be entitled to an allocation of HOME funds; and (b) As of October 1, 2013, consisted of Baltimore City and Anne Arundel, Baltimore, Harford, Howard, Montgomery, and Prince George’s counties. (21) “Program” means the Maryland HOME Program operated by the Department. (22) “Program Guide” means the Multifamily Rental Financing Program Guide adopted by the Department, as amended from time to time. (23) Project. (a) “Project” means a site or one or more buildings, together with the site or sites on which the building or buildings are located, that are under common ownership, management, and financing and are to be assisted with HOME funds under a commitment by the owner. (b) “Project” includes a site consisting of less than all units in a building, as calculated in accordance with Regulation .15 of this chapter. (24) Reconstruction. (a) “Reconstruction” means the replacement of existing housing on the same lot. (b) “Reconstruction” includes increasing or decreasing the number of rooms per housing unit, as long as the number of housing units is not increased or decreased. (c) “Reconstruction” includes housing that was destroyed and is rebuilt on the same lot if HOME funds are committed within 12 months of the date of destruction. (25) Rental Housing Development. (a) “Rental housing development” means a development which provides housing to income eligible households pursuant to a lease or agreement with the owner. (b) “Rental housing development” includes transitional housing and single room occupancy housing but does not include group homes. (26) “Secretary” means the Secretary of Housing and Community Development. (27) “Sanitary facilities” means a flush toilet in a separate, private room, a fixed basin with hot and cold running water, and a shower or tub with hot and cold running water, all in proper operating condition. (28) “Single Family Programs” means the: (a) Settlement Expense Loan Program authorized by Housing and Community Development Article, Title 4, Subtitle 3, Annotated Code of Maryland; (b) Maryland Home Financing Programs, authorized by Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland, which include the: (i) Reverse Equity Mortgage Program; (ii) Emergency Mortgage Assistance Program; (iii) Preferred Interest Rate Loan Program; and (iv) MHFP Construction Loan Program; (c) The Maryland Mortgage Program, authorized by Housing and Community Development Article, §§4-236—4-241, Annotated Code of Maryland; (d) Regular Rehabilitation Program of the Maryland Housing Rehabilitation Program authorized under Housing and Community Development Article, Title 4, Subtitle 9, Annotated Code of Maryland; (e) Accessory, Shared, and Sheltered Housing Program authorized under Housing and Community Development Article, §4-926, Annotated Code of Maryland; (f) Lead Hazard Reduction Grant and Loan Program authorized under Housing and Community Development Article, §4-701, Annotated Code of Maryland; (g) Indoor Plumbing Program authorized under Housing and Community Development Article, §4-927, Annotated Code of Maryland; (h) Group Home Financing Program authorized under Housing and Community Development Article, Title 4, Subtitle 6, Annotated Code of Maryland; (i) Home and Energy Loan Program (one-to-four units) authorized under Housing and Community Development Article, §§4-244—4-245, Annotated Code of Maryland; (j) Special Housing Opportunities Program authorized under Housing and Community Development Article, §§4-244—4-245, Annotated Code of Maryland; (k) Federal Lead Hazard Reduction Program authorized under Housing and Community Development Article, §4-211(a)(8) and (9), Annotated Code of Maryland; and (l) Accessible Homes for Senior Homeowners Grant Program authorized under Housing and Community Development Article, §4-931, Annotated Code of Maryland. (29) “Single room occupancy housing” means housing consisting of single room dwelling units which are the primary residence of the occupant or occupants and, if: (a) The housing is being: (i) Newly constructed, converted from nonresidential space, or reconstructed, each unit contains food preparation facilities or sanitary facilities, or both; or (ii) Acquired or rehabilitated, the building contains at least sanitary facilities for the use of occupants; and (b) The project’s designation as single room occupancy housing is not inconsistent with the building’s zoning and building code classification. (30) “Sponsor” means an eligible recipient under Regulation .06 of this chapter that has applied for funds under the program. (31) Tenant-Based Rental Assistance. (a) “Tenant-based rental assistance” means rental assistance in which the assisted tenant may move from a dwelling unit with a right to continued assistance. (b) “Tenant-based rental assistance” includes security deposits for rental of dwelling units. (32) “Transitional housing” means housing that: (a) Provides housing, together with appropriate supportive services, to people, including deinstitutionalized people with disabilities, homeless individuals with disabilities, and homeless households with children; and (b) Assists individuals and households to live independently within a certain time period. (33) “Undertaking” means an entire rental housing or homeownership development, which may be a scattered site development, being acquired, constructed, or rehabilitated by an eligible recipient and being financed as a single development, but in which development only a portion of the rental housing units or homes is assisted with HOME funds. In this case, the project being assisted with HOME funds shall have fewer rental housing units or homes than the undertaking in accordance with the formula set forth in Regulation .13 of this chapter. #### Regulation .04 Eligible Projects and Activities — Federal Criteria. *COMAR 05.12.01.04* A. All projects and activities funded with HOME funds shall meet the general eligibility criteria in 24 CFR Part 92, which is incorporated by reference. B. The housing shall be: (1) Of one of the following two types: (a) Rental housing development, or (b) Homeownership; (2) Rented, occupied, or sold to income eligible households in accordance with these regulations; and (3) Nonluxury, but with suitable amenities. C. Eligible activities are: (1) Acquisition; (2) Site improvements; (3) New construction; (4) Reconstruction; (5) Rehabilitation; (6) Relocation; (7) Conversion; (8) Demolition; (9) Tenant-based rental assistance under the provisions of the Maryland HOME Initiatives Program Fund set forth in Regulation .05C of this chapter, including assistance with security deposits and utility deposit assistance, but only if utility deposit assistance is provided with tenant-based rental assistance or security deposit payment; (10) Preconstruction costs under Regulation .09C and D of this chapter; (11) Operating expenses of community housing development organizations (CHDOs); and (12) Public housing projects, only to the extent permitted under 24 CFR §92.213. D. Ineligible activities are: (1) Except as permitted in Regulation .07I(9) of this chapter, project accounts for: (a) Reserve for replacements, (b) Project reserves for anticipated increases in operating costs, and (c) Operating subsidies; (2) Tenant-based rental assistance for the purposes served by the existing §8 program or preventing displacement from projects assisted with rental rehabilitation grants; (3) Matching requirements of any other federal program; (4) Preservation of existing federally assisted projects; and (5) Projects previously assisted by HOME funds (except for tenant-based rental assistance or assistance to first-time home buyers) during the period of affordability required under Regulation .15D of this chapter or the period specified in Regulation .17D(2) of this chapter, except within 1 year of completion if the total HOME funds in the project do not exceed the maximum allowable subsidy amount and except as permitted by 24 CFR §92.210 for troubled HOME assisted rental housing projects; (6) Housing for students; (7) Emergency shelters; (8) Halfway houses; (9) Dormitories (including farmworker dormitories); and (10) Transaction costs of privately refinanced debt. #### Regulation .05 Eligible Projects and Activities — State Criteria. *COMAR 05.12.01.05* A. General. An allocation of HOME funds can be applied for through either DHCD housing programs or the Maryland HOME Initiatives Program Fund. B. DHCD Housing Programs. To be eligible for a HOME allocation through the DHCD housing programs, a project or activity shall meet the following requirements: (1) In the case of a rental housing development project, the project shall: (a) Comply with the requirements of COMAR 05.05.01.06A, B, E, and F, provided that this chapter shall prevail in the event of a conflict between any provision of COMAR 05.05.01.06A, B, E, and F and any provision of this chapter; and (b) Provide units for occupancy in accordance with Regulation .15C of this chapter; (2) In the case of homeownership projects: (a) Be approved for a forward reservation of mortgage purchase moneys through a homeownership program; and (b) Require that upon resale of a house assisted with HOME funds, all HOME funds be repaid in accordance with Regulation .17B(6) of this chapter; (3) In the case of group home projects: (a) Be approved for a loan through the Group Home Financing Program or Special Housing Opportunities Program of the Single Family Programs; and (b) Provide group homes for occupancy by income eligible households in accordance with Regulation .15C of this chapter; (4) In the case of rehabilitation of owner-occupied housing and one-to-four unit rental housing: (a) If owner-occupied housing, be occupied by income eligible households in accordance with Regulation .17C of this chapter; and (b) If one-to-four unit rental housing, be occupied by income eligible households in accordance with Regulation .15C of this chapter. C. Maryland HOME Initiatives Program Fund. (1) To be eligible for an allocation of HOME funds from the Maryland HOME Initiatives Program Fund, a project or activity shall meet the requirements of this chapter, including the following requirements: (a) Be ineligible for funding through the DHCD housing programs; or (b) If eligible for funding through the DHCD housing programs be: (i) Partially funded from sources of funds other than the DHCD housing programs, such as conventional financial institution loans, local government funding, other State programs, Farmers Home Administration loans, or funding from federal programs which may be used in conjunction with HOME, or (ii) Eligible for one of the DHCD housing programs which the Department has elected as a matter of policy not to undertake or which does not have available funding. (2) The Department may elect to fund any application to the Maryland HOME Initiatives Program Fund from HOME funds allocated to any of the DHCD housing programs. D. Political Subdivisions; Notice and Contribution. (1) For rental housing development projects, the project shall comply with the political subdivision notice and contribution requirements in COMAR 05.05.01.07. (2) For all other HOME projects, local contributions are encouraged, although not required. #### Regulation .06 Eligible Recipients. *COMAR 05.12.01.06* A. Eligible recipients shall include: (1) The Department; (2) The Administration; (3) Other State agencies; (4) Local governments; (5) Public housing authorities; (6) Nonprofit organizations; (7) Community housing development organizations; (8) Corporations; (9) Limited dividend corporations; (10) Individuals; (11) Partnerships; and (12) Limited liability companies. B. Otherwise eligible recipients who are suspended or debarred from the Department’s or HUD’s programs may not be approved. C. If an eligible recipient engages in explicitly religious activities, including activities that involve overt religious content such as worship, religious instruction, or proselytization, then the recipient shall perform such activities and offer such services outside of programs that are supported with federal financial assistance and separately, in time or location, from the programs or services funded with HOME funds, and participation in any such explicitly religious activities shall be voluntary for the program beneficiaries of the HOME-funded programs or services. #### Regulation .07 Eligible Costs. *COMAR 05.12.01.07* HOME funds may be used to pay any costs permitted by 24 CFR Part 92. HOME funds generally may be used to pay for the following costs: A. The actual hard costs of new construction, including the costs of complying with Regulation .14 of this chapter; B. Rehabilitation hard costs to meet the property standards for rehabilitation projects in Regulation .14 of this chapter; C. The cost of refinancing existing debt secured by housing that is being rehabilitated with HOME funds: (1) For single-family (one-to-four family) owner-occupied housing, if the overall housing costs of the sponsor will be reduced and made more affordable and if the rehabilitation cost is greater than the amount of debt that is refinanced; and (2) For rental housing development projects, when lending HOME funds to rehabilitate the units if refinancing is necessary to permit or continue affordability; D. Site improvements of a type and quality in keeping with standard improvements in the area; E. Utility connections; F. Acquisition costs of improved real property; G. Cost of acquiring vacant land or the cost of demolishing improvements as permitted in 24 CFR §92.205; H. Reasonable and necessary soft costs related to the development of the project such as: (1) Architectural, engineering, and related professional fees incurred not more than 24 months before the HOME funds were committed to the project; (2) Financing and processing fees paid to lenders other than the Department; (3) Appraisal and market study fees; (4) Builders' and developers' fees; (5) Building permit; (6) Legal fees paid to lenders other than the Department; (7) Project audit fees; (8) Marketing costs including affirmative fair housing information; (9) For new construction or rehabilitation of a rental housing development project, the cost of funding an initial operating deficit reserve to meet shortfalls in project income during an initial rent-up period of up to 18 months, provided that unexpended funds are returned to the HOME Investment Trust Fund; and (10) For new construction or rehabilitation, costs for the payment of impact fees that are charged for all projects within a jurisdiction; I. Costs of relocation payments or assistance; and J. Operating expenses of CHDOs, if the Department does not: (1) Use more than 5 percent of the Department's fiscal year HOME allocation for these expenses, which 5 percent may not be included within the Department's minimum CHDO set aside of 15 percent, as set forth in Regulation .09B(1) of this chapter, and (2) Fund, in any fiscal year, more than the greater of 50 percent of, or $50,000 towards, the total operating expenses of a CHDO, including funds for organizational support, housing education, and operating expenses provided under 24 CFR §92.208. #### Regulation .08 Allocation of Funds—Generally. *COMAR 05.12.01.08* A. Initial Allocations. Upon receipt of a notification from HUD as to the availability and amount of HOME funding for administration by the State, the Department shall make recommendations on the amounts of HOME funds to be initially allocated to rental housing development projects, homeownership projects, and the Maryland HOME Initiatives Program Fund. The allocation recommendations shall be submitted to the Director for review and recommendation to the Secretary for approval, disapproval, or modification. B. Reallocations. The Director may periodically reallocate HOME funds initially allocated to rental housing development projects and homeownership projects among those types of projects. Reallocations of these HOME funds shall be based upon current demand and priorities. Generally, HOME funds may not be reallocated between the HOME funds initially allocated to rental housing development projects and homeownership projects and the HOME funds initially allocated to the Maryland HOME Initiatives Program Fund until at least 8 months following the initial allocations. C. Geographic Distribution. (1) HOME funds shall be used primarily in jurisdictions throughout the State which are not participating jurisdictions. (2) The State shall distribute HOME funds according to the needs identified in the Consolidated Plan. The State shall attempt to distribute HOME funds to nonmetropolitan areas, taking into account the population of the nonmetropolitan areas as compared to the total population of the State and objective measures of rural housing need. Therefore, the State shall use its best efforts to distribute at least 10 percent of HOME funds to nonmetropolitan areas. #### Regulation .09 Allocation of Funds — Community Housing Development Organizations. *COMAR 05.12.01.09* A. Eligible Organizations. Community housing development organizations are eligible if they meet the criteria set forth in 24 CFR §92.2. B. CHDO Set Asides. (1) Fifteen percent of the total allocation to the HOME Investment Trust Fund shall be reserved for and used by CHDOs in accordance with 24 CFR §92.300. Up to 10 percent of the funds reserved for CHDOs may be reserved for loans made under §§C and D of this regulation. (2) To the extent not reserved for loans under §§C and D of this regulation, the reserved CHDO funds shall be allocated to the DHCD housing programs. If set asides are committed at a rate slower than the rate necessary to use the set aside within the required time period, the Administration may: (a) Initiate aggressive marketing for set-aside eligible projects; (b) Give priority to set-aside eligible projects; (c) Provide expedited pipeline processing for set-aside eligible projects; or (d) Restrict remaining funds for use only to meet the set-aside requirements. C. Eligible Uses — Technical Assistance and Site Control. (1) Loans under this section shall be processed and made by the Division of Development Finance. (2) A CHDO may apply to use HOME funds for technical assistance and site control loans in the early stages of site development for an eligible project. (3) Loans under this section may be used to pay: (a) Project expenses necessary to determine project feasibility; (b) Consulting fees; (c) Costs of preliminary financial applications; (d) Legal, architectural, and engineering fees; (e) Engagement of a development team; (f) Option to acquire property; and (g) Site control and title clearance. (4) Loans under this section may not be used to pay for the general operational expenses of a CHDO. (5) Loans under this section shall be repaid from construction loan proceeds or other project income, unless the Department finds that there are impediments to project development that are reasonably beyond the control of the CHDO, in which case the Department may waive repayment, in whole or in part. D. Eligible Uses — Seed Money Loans. (1) Loans under this section shall be processed and made by the Division of Development Finance. (2) A CHDO may apply to use HOME funds to provide CHDOs with funds to pay reasonable and customary preconstruction costs of a project, including, but not limited to, the costs of: (a) Obtaining firm construction loan commitments; (b) Architectural plans and specifications; (c) Zoning approvals; (d) Engineering studies; and (e) Legal fees. (3) In order to qualify for a loan under of this section, a CHDO is required to have: (a) Control of the site evidenced by a deed, a sales contract, or an option contract to acquire the property; (b) Obtained a preliminary financial commitment; and (c) Formed a capable development team. (4) Loans under this section shall be repaid from construction loan proceeds or other project income, unless the Department finds that there are impediments to project development that are reasonably beyond the control of the CHDO, in which case the Department may waive repayment, in whole or in part. E. Special Terms and Conditions — Tenant Rights and Obligations. A CHDO which receives HOME assistance shall: (1) Adhere to a fair lease and grievance procedure approved by the Department; and (2) Develop and follow a plan of tenant participation in CHDO management decisions. #### Regulation .10 Terms and Conditions of Financial Assistance — General. *COMAR 05.12.01.10* A. Form of Financial Assistance. (1) The Department may offer HOME financial assistance in any of the following five forms: (a) Interest-bearing and non-interest-bearing loans; (b) Interest subsidies; (c) Deferred payment loans; (d) Equity investments; and (e) Grants. (2) The Department expects to offer most financial assistance in the form of grants or non-interest-bearing, deferred payment loans. B. Maximum Amount of Financial Assistance. (1) The maximum amount of financial assistance to a single project or activity generally may not exceed the lesser of: (a) $2,000,000; or (b) An amount equal to the greater of the per unit dollar limits: (i) Set under §221(d)(3)(iii) of the National Housing Act for elevator-type projects that apply to the area in which the housing is located; or (ii) Approved by HUD. (2) In the discretion of the Department, a higher amount than the amount identified in §B(1)(a) of this regulation may be approved if: (a) It does not exceed the amount in §B(1)(b) of this regulation and no other resources are available; (b) The project serves more than the required number of income eligible households; (c) The project involves the preservation of federal subsidies; (d) The project is in default on a loan from the Department and the default can be cured by using HOME funds; or (e) The higher amount will facilitate meeting set-aside requirements. C. Minimum Amount of Financial Assistance. If HOME funds are invested in a rental housing development or homeownership project, a minimum of $1,000 of HOME funds times the number of HOME assisted units in the project shall be invested. D. Term. The maximum term of financial assistance for HOME funds disbursed as loans is one of the following: (1) If the HOME funds are used for development costs of the project, the earlier of the: (a) Sale or discontinuance of use of the project to provide housing to income eligible households, or (b) 40 years from the date of acquisition, completion of construction, or rehabilitation of the project except when other sources of financing require a longer term; (2) A term not to exceed 18 months if the HOME funds are used to fund an operating deficit for a new construction or rehabilitation rental housing development project; (3) Any term approved by the Department for HOME funds awarded from the Maryland HOME Initiatives Program Fund. E. Interest Rate. (1) For homeownership projects, in order to accomplish the public purpose of serving income eligible households, the interest rate for HOME funds disbursed as loans generally is zero percent. In its discretion, the Department may require interest on HOME funds which may be repayable on a scheduled basis, or may be deferred. (2) For rental housing development projects, interest rates for each loan shall be established based on the underwriting for each project and in accordance with the Program Guide. The maximum interest rate on a loan shall be at 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 income eligible households. The interest rate may be as low as zero percent, based upon projected cash flows for the proposed project. F. Repayment. (1) Repayment shall be made in accordance with the loan documents. (2) Interest and principal repayment may be deferred at the discretion of the Department, in accordance with the terms and provisions of the loan documents. (3) In the case of repayments for terminated projects, a project shall be terminated and HOME funds disbursed as loans shall be repaid to the Department before maturity upon the earlier to occur of: (a) Sale of all or any portion of, or interest in, the project; (b) For rental housing developments, discontinuance of use of the project to provide housing to income eligible households; or (c) For rental housing developments, termination of the project or activity before completion, unless the loan was to a CHDO under Regulation .09C or D of this chapter and the Department waives repayment, in whole or in part, under that regulation. G. Security for Capital Assistance Loans. (1) Except as provided in §G(2) and (3) of this regulation, HOME funds disbursed as loans shall be secured by a recorded mortgage or deed of trust. (2) If HOME funds are loaned to a local government as part of the funds for a project sponsored by a local government and a deed of trust transferring an interest in the property is not authorized, the funds may be secured by an instrument or agreement acceptable to the Department. (3) Loans made to CHDOs under Regulation .09C and D of this chapter shall be required to be secured by a recorded mortgage, deed of trust, or declaration of covenants if the CHDO owns the site or obtains ownership of the site as a result of receipt of the loan. H. In the case of loans for rental housing development projects, the project shall comply with the loan terms indicated in COMAR 05.05.01.14—.18, provided that this chapter shall prevail in the event of a conflict between any provision of COMAR 05.05.01.14—.18 and any provision of this chapter. I. Reduction of Units. After project completion, the number of units designated as HOME-assisted may be reduced only in the following circumstances: (1) In accordance with 24 CFR §92.210 with respect to troubled HOME projects; or (2) In a project consisting of all HOME-assisted units, one unit may be subsequently converted to an on-site manager’s unit if: (a) The conversion will contribute to the stability or effectiveness of the housing; and (b) Notwithstanding the loss of one HOME-assisted unit, the costs charged to the HOME program do not exceed the actual costs of the HOME-assisted units and do not exceed the subsidy limit in §B of this regulation. #### Regulation .11 Terms and Conditions — Distribution of Sales Proceeds/Equity Sharing. *COMAR 05.12.01.11* A. As a condition to receipt of HOME funds disbursed as loans, a homeowner who receives HOME funds for house acquisition is required to enter into an agreement concerning the distribution of net proceeds upon the sale of the house as described in Regulation .17 §B(1) of this chapter. B. Recipients of HOME funds to rehabilitate owner-occupied houses and owner-occupied one-to-four unit rental projects may not be required to participate in equity sharing. C. Sponsors of group home projects which receive HOME funds may be required to enter into equity-sharing agreements as a condition to receipt of the HOME funds if, in the sole discretion of the Department, the HOME-assisted project is expected to have excess residual value. The equity-sharing agreement shall provide for payment of equity to the Department upon sale of the project or discontinuance of use of the project for income-eligible households. D. Payment under §C of this regulation shall be in an amount equal to the original HOME funds: (1) Divided by the sum of: (a) The total original costs of the project, and (b) Documented capital improvement expenditures for the benefit of the project; and (2) Multiplied by the: (a) Net sales proceeds realized upon the sale of the project, or (b) Imputed equity based on an appraisal if the project discontinues occupancy by income eligible households but is not sold. E. A sponsor of rental housing development projects which receives HOME funds may be subject to limits on return of equity as a condition to receipt of the HOME funds in accordance with COMAR 05.05.01.10. #### Regulation .12 HOME Grants. *COMAR 05.12.01.12* A. The Department may offer HOME financial assistance as grants for the following purposes: (1) Maryland HOME Initiatives Program Fund projects sponsored by nonprofit organizations, local governments, or State agencies, except that the Department reserves the right to make a conditional grant providing for repayment if there is a reasonable expectation of repayment; (2) Projects for which federal or other funding agencies do not permit loans subordinate to their funds; (3) Rehabilitation of owner-occupied housing; (4) Activities which have a high public purpose, but do not result in an appreciably higher value in the property after the improvements, including, but not limited to: (a) Lead paint abatement, (b) Modifications required by the Maryland Historical Trust, (c) Accessibility modifications, or (d) Furnace and roof replacement; or (5) Other eligible projects, activities, or costs as approved by the Department. B. A grant shall be evidenced by a grant agreement setting forth the terms and conditions of the grant, including the applicable requirements of this chapter. C. Except as provided in §D of this regulation, for HOME funds which are disbursed as grants, the HOME obligations of the recipient shall be set forth in a recorded declaration of covenants or other instrument acceptable to the Department. D. A recorded declaration of covenants is not required for a grant of HOME funds for: (1) Rehabilitation of owner-occupied single family houses or one-to-four family residences; (2) Operating expenses for CHDOs; or (3) Other purposes not related to the acquisition or rehabilitation of property. #### Regulation .13 Advance Payment Loans. *COMAR 05.12.01.13* The Department may make advance payment loans under the following conditions: A. The recipient shall be a nonprofit entity, which is not a CHDO; B. The nonprofit recipient shall demonstrate the intention and capacity to complete the project; C. Repayment of the loan is secured by a mortgage or deed of trust; D. The loan funds are for payment of early eligible costs under Regulation .07 of this chapter; E. The nonprofit recipient shall demonstrate that: (1) There are no other funding alternatives, (2) There are no other resources available to the nonprofit recipient to pay the costs, (3) The payment of the costs cannot be deferred until closing of an operating or capital assistance loan; and F. The loan is due and payable in full if the project terminates before the project's completion. G. The loan complies with all federal requirements related to environmental review pursuant to 24 CFR §92.352 and 24 CFR Part 58. #### Regulation .14 Property Standards. *COMAR 05.12.01.14* A. Applicable Standards for Projects to Which Funds Are Committed Prior to January 24, 2015. (1) All housing assisted with HOME funds shall meet the housing quality standards set forth in 24 CFR §982.401. (2) Newly constructed or rehabilitated housing shall meet the standards set forth in 24 CFR §92.251 and all applicable local codes, ordinances, rehabilitation standards, and zoning ordinances. (3) Before the transfer of a homeownership project that is to be rehabilitated after transfer, the Department or its designee shall: (a) Inspect the housing for any defects which pose a danger to health or safety; (b) Notify the prospective purchaser of any work required to cure any defects identified by the inspection; and (c) State the time frame in which the cure will be accomplished, which time frame may not exceed 6 months following the transfer. (4) In addition, a homeownership project that is to be rehabilitated after transfer shall: (a) Be free from all defects identified in the inspection required under §C of this regulation before occupancy and within 6 months of the transfer; and (b) Meet the housing quality standards set forth in §A of this regulation within 2 years of the transfer. (5) The purchase or rehabilitation of manufactured housing is eligible for HOME funds if, upon completion, the unit: (a) Is situated on a permanent foundation, except for assistance to owners of existing units who rent the lot on which their unit is placed; (b) Is connected to permanent utility hookups; (c) Is located on land which is held in fee-simple title or under a long-term ground lease with a term equal to the appropriate period of affordability; (d) Meets either the: (i) Construction standards set forth in 24 CFR 3280 if the unit was produced after June 15, 1976; or (ii) Applicable State or local codes if the unit was produced before June 15, 1976; (e) Meets all the other requirements of these regulations, including, for rental units, Regulations .15 and .16 of this chapter, and, for homeownership units, Regulation .17 of this chapter. B. Applicable Standards for Projects to Which Funds Are Committed on or After January 24, 2015. (1) New construction projects. New construction projects shall meet the requirements set forth in 24 CFR §92.251(a). (2) Rehabilitation Projects. (a) Rehabilitation projects shall meet the Department’s rehabilitation property standards, which are available either directly from the Department or on the Department’s website. (b) The construction contracts and construction documents shall describe the work to be undertaken in adequate detail so that inspections can be conducted. Written cost estimates shall be reviewed and shall be approved only if costs are determined to be reasonable. (c) An initial property inspection shall be conducted to identify any deficiencies that must be addressed. The Department or its designee shall conduct progress and final inspections to determine that work was completed in accordance with work write-ups and the Department’s rehabilitation standards. (3) Acquisition of Existing Housing. (a) Existing housing that is acquired with HOME assistance for rental housing, and that was newly constructed or rehabilitated less than 12 months before the date of commitment of HOME funds, shall meet the property standards of §B(1) or (2) of this regulation, as applicable. Compliance shall be documented based upon a review of approved building plans and certificates of occupancy, and an inspection that is conducted no earlier than 90 days before the commitment of HOME assistance. (b) All other existing housing that is acquired with HOME assistance for rental housing shall meet the rehabilitation property standards requirements of §B(2) of this regulation. Compliance shall be documented based upon an inspection that is conducted no earlier than 90 days before the commitment of HOME assistance. (c) Existing housing that is acquired for homeownership, including down-payment assistance, shall meet the Department’s homeownership property standards, which are available either directly from the Department or on the Department’s website. Compliance with these standards shall be documented based upon an inspection that is conducted no earlier than 90 days before the commitment of HOME assistance. (4) Housing occupied by tenants receiving HOME tenant-based rental assistance shall meet the standards contained in 24 CFR §982.401, or the successor requirements as established by HUD. (5) Manufactured Housing. Construction of all manufactured housing including manufactured housing that replaces an existing substandard unit under the definition of “reconstruction” shall meet the requirements set forth in 24 CFR §92.251(e). (6) Ongoing property condition standards for rental housing. All HOME-funded rental housing shall meet the Department’s ongoing property condition standards for rental housing throughout the affordability period. These standards are available either directly from the Department or on the Department’s website. #### Regulation .15 Affordable Rental Housing Requirements — Rent and Occupancy Restrictions. *COMAR 05.12.01.15* A. General. In order to quality for HOME funds, a rental housing development project shall meet the additional requirements of Regulations .15 and .16 of this chapter. B. Rent Limits. (1) The rent limits in this section apply to rent plus utilities or utility allowance, as applicable. (2) Except as provided in §B(3) of this regulation, to qualify as affordable housing and a recipient of HOME funds, project rents may not exceed the lesser of: (a) Fair market rent established by HUD for the area; (b) An amount that does not exceed 30 percent of the adjusted income of a household whose gross income equals 65 percent of median income as determined by HUD and adjusted for the number of bedrooms in the unit; or (c) An amount that does not exceed limits, if any, established by the Department. (3) Unless a unit has been allocated federal low-income housing tax credits, if the income of an existing tenant of a HOME-assisted unit exceeds 80 percent of area median income adjusted for household size, the rent charged for the HOME unit shall be adjusted to the lesser of: (a) The amount payable by the tenant under State or local law; or (b) 30 percent of the household’s adjusted monthly income, as recertified annually. C. Additional Rent Limitations for Single Room Occupancy Housing. (1) For single room occupancy housing that has both sanitary and food preparation facilities, the maximum HOME rent is based on the zero-bedroom fair market rent. The housing shall meet the requirements of §§A and B of this regulation. (2) For single room occupancy housing that has no sanitary or food preparation facilities or only one of the two, the maximum HOME rent is based on 75 percent of the zero-bedroom fair market rent. The project is not required to have low HOME rents in accordance with §B(1) or (2) of this regulation, but shall meet the occupancy requirements of §D of this regulation. D. Occupancy Requirements. (1) Multiple Unit HOME Projects. (a) A HOME project with five or more rental units, or scattered multiple HOME projects under common ownership containing five or more rental units, is required to meet the requirements of §D(1)(b)—(e) of this regulation. (b) At least 20 percent of the units in the project shall be occupied by income eligible households which qualify as very low income families as defined in 24 CFR §92.2. (c) For the units described under §D(1)(b) of this regulation, rent [may not exceed the lesser of the following: (i) The greater of 30 percent of the occupying household’s monthly adjusted income, or 30 percent of a gross family income equal to 50 percent of the median income for the area, as determined by HUD; and (ii) The rent calculated under §B of this regulation] shall meet the requirements set forth in 24 CFR §92.252(b). (d) All units in the project which do not meet the requirements of §D(1)(b) and (c) of this regulation shall be occupied by households with annual incomes that do not exceed 80 percent of area median income adjusted for household size. However, a qualified household may continue to occupy a unit in a project if the household’s income exceeds 80 percent of area median income and the rent is adjusted as set forth in §B(2) of this regulation. (2) Regardless of changes in fair market rents and in median income over time, the rent limits set forth in §§B and D(1)(c) of this regulation are not required to be lower than the HOME rent for the project in effect at the time of project commitment. (3) Small HOME Projects. A HOME project with one to four rental units shall be occupied by households with annual incomes that do not exceed 80 percent of area median income adjusted for household size. (4) HOME Projects as Part of an Undertaking. (a) If a loan is made for a project which is only a portion of the undertaking being acquired, constructed, or rehabilitated by an eligible recipient in part with HOME funds, the following formula shall be used to determine the minimum number of rental housing units which shall meet the occupancy requirements of §D(1) of this regulation: (i) The amount of HOME funds; (ii) Divided by the total cost of the undertaking; (iii) Multiplied by the total number of units or homes in the undertaking; (iv) Equals the number of units in the HOME project subject to the requirement of §D(1) of this regulation. (b) If the HOME project is contained within an undertaking, the recipient shall provide equal access to tenants of the project to any amenities and common areas within the undertaking. E. Restrictive Covenants. (1) The project shall be subjected to restrictive covenants containing the rent and occupancy restrictions, which covenants shall be set forth in a deed of trust, mortgage, deed, declaration of covenants, or other instrument acceptable to the Department. (2) The covenants shall govern the property for a minimum period of 5—20 years, in addition to an anticipated construction or rehabilitation period, as follows: (a) New construction, or acquisition of a newly constructed structure, 20 years; (b) Rehabilitation or acquisition of an existing structure, when HOME funds per unit equal: (i) Under $15,000, 5 years; (ii) $15,000—$40,000, 10 years; and (iii) Over $40,000 or rehabilitation involving refinancing, 15 years. (3) The document setting forth the restrictive covenants specified in §E(1) and (2) of this regulation shall provide that, upon foreclosure by, or a deed in lieu of foreclosure to, an after recorded deed of trust securing the lender, the restrictive covenants shall be terminated if: (a) The parties to the foreclosure, or deed in lieu of foreclosure, recognize in writing any statutory or contractual rights of the Department, other public agencies, nonprofit sponsors, or others to preserve affordable housing units; (b) The foreclosure, or deed in lieu of foreclosure, is not for the purpose of avoiding the covenants; and (c) At any time following foreclosure, or deed in lieu of foreclosure, if the owner or any entity in which the owner or the owner's family or business associates owns an interest, obtains any interest in the HOME project or property, the covenants shall be revived according to their original terms. F. HOME-assisted rental housing shall be occupied by income eligible households within 6 months following the date of project completion. G. Records and Reports. The owner of rental housing shall annually provide the Department with information on rents and occupancy of HOME-assisted units to demonstrate compliance with §§A—F of this regulation. If the rental housing project has floating HOME units, the owner shall provide the Department with information regarding unit substitution and filling vacancies so that the project remains in compliance with HOME rental occupancy requirements. #### Regulation .16 Rental Housing Requirements — Landlord Obligations. *COMAR 05.12.01.16* A. Nondiscrimination. Households having vouchers under the Section 8 Tenant-Based Assistance: Housing Choice Voucher Program (24 CFR Part 982) or other tenant-based rental assistance, including the HOME tenant-based rental assistance program, may not be excluded from units in the HOME project because of the status of the prospective tenant as a holder of such voucher or other tenant-based assistance document. B. Annual Review. (1) Tenant Income. (a) Owners shall examine the income of each tenant household annually. (b) Unless a unit has been allocated federal low-income housing tax credits, tenants who no longer qualify as income eligible households shall pay rent equal to the lesser of: (i) The amount payable by the tenant under State or local law; or (ii) 30 percent of the household's adjusted monthly income as recertified annually. (c) If noncompliance with the occupancy requirements is caused by an increase in tenant income, all vacancies shall be filled with eligible households until the noncompliance is corrected. (2) Rent Increases. (a) Maximum monthly rent shall be recalculated by the owner annually. (b) The Department shall review and approve the proposed adjustments to rent before they are implemented. C. Lease Terms. (1) Minimum Term. Leases for HOME units are for 1 year or more unless the owner and tenant mutually agree otherwise. (2) The lease shall be reviewed and approved by the Department to confirm that it does not contain an agreement by the tenant: (a) To be sued, to admit guilt, or confess judgment in favor of the owner in a legal proceeding related to the lease; (b) That the owner may take, hold, or sell personal property of household members without notice and a court decision on the rights of the parties; (c) To waive any legal liability arising from the owner's or the owner's agents' intentional or negligent acts or failure to act; (d) That the owner may initiate a lawsuit against the tenant without notice to the tenant; (e) That the owner may evict the tenant, or any household member, without obtaining a court decision on the merits, in which the tenant had the opportunity to present a defense; (f) To waive any right to trial by jury; (g) To waive any appeal rights or otherwise challenge a court decision concerning the lease; (h) To pay legal fees or costs if the tenant wins in court; and (i) To accept supportive services that are offered (other than a tenant in transitional housing). (3) Lease Termination. A lease may only be terminated or a renewal be refused upon 30 days written notice and after: (a) Serious or repeated violations of the lease terms; (b) A violation of applicable law; (c) Completion of the tenancy period for transitional housing or failure to follow any required transitional housing supportive services plan; or (d) Other good cause, which does not include an increase in the tenant’s income or refusal of the tenant to purchase the housing. D. Property Maintenance. (1) During the period of affordability, the owner of HOME-assisted rental housing shall maintain the premises in compliance with Regulation .14 §A(1) or B(6) of this chapter, as applicable. (2) The Department or its designee shall inspect the property in accordance with the requirements contained in 94 CFR §92.504. (3) The property owner shall annually certify to the Department that each building and all HOME-assisted units in the project are suitable for occupancy and are in compliance with the Department’s property standards. E. Tenant Selection. The owner of a rental housing development project assisted with HOME funds shall comply with the Department’s affirmative marketing requirements, including the adoption of written tenant selection policies and criteria that: (1) Limit the housing to income eligible households; (2) Are reasonably related to the tenant’s ability to perform the obligations of the lease; (3) Provide for selection of tenants from a written evaluation used in chronological order of application; and (4) Provide prompt written notification to any rejected applicant and the grounds for the rejection. F. Affirmative Fair Housing Marketing Plan. 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. G. Prohibited Fees. Project owners may not charge fees that are not customarily charged in rental housing, except that rental project owners may charge: (1) Reasonable application fees to prospective tenants; (2) Parking fees to tenants only if such fees are customary for rental housing projects in the neighborhood; and (3) Fees for services such as bus transportation or meals, as long as the services are voluntary and fees are charged for services provided. #### Regulation .17 Affordable Homeownership Requirements. *COMAR 05.12.01.17* A. General. In order to qualify for HOME funds, a homeownership project shall meet the requirements of §D of this regulation and either §B or C of this regulation, as applicable. B. Acquisition of a House. (1) A single family house or one-to-four family residence, the purchase of which is to be assisted with HOME funds, shall meet the criteria set forth in §§B(2)—B-1 of this regulation. (2) The purchase price of a single family home or one-to-four family residence may not exceed the lesser of: (a) The upper house prices set by the Secretary for the Maryland Mortgage Program from time to time; or (b) 95 percent of the median purchase price for the type of house in the State, as determined by HUD. (3) The estimated appraised value at acquisition or after any repairs required to meet the standards of Regulation .14 of this chapter may not exceed the limit described in §B(2) of this regulation. (4) The house is expected to be the principal residence of an income eligible household at the time of purchase. B-1. Resale of Houses. (1) The calculations as stated in §B-1(2)—(6) of this regulation shall be used to determine the amount of HOME funds due, if any, upon the sale of a house assisted with HOME funds. (2) The Department shall determine initially whether the loan of HOME funds has been forgiven because the homeowner has owned and occupied the house for a required minimum period of 5, 10, or 15 years in accordance with Regulation .17D(2) of this chapter. (3) If the Department has not forgiven the loan, then the calculations as stated in §B-1(4)—(6) of this regulation shall be used to determine the amount of HOME funds due. (4) Repay HOME Loan. (a) The HOME loan shall be repaid in full out of net proceeds from the sale of the house if the net proceeds are greater than or equal to the sum of: (i) The original principal amount of the HOME loan made to a homeowner; and (ii) The homeowner payments as defined in §B-1(7) of this regulation. (b) “Net proceeds” means the proceeds from the sale of the house less the unpaid principal balance of any superior and subordinate nongovernmental or private loans to the HOME loan. (5) Forgive HOME Loan. (a) The Department shall forgive a portion of the HOME loan if the net proceeds are less than the sum of: (i) The original principal amount of the HOME loan made to a homeowner; and (ii) The homeowner payments as defined in §B-1(7) of this regulation. (b) The portion of the HOME loan to be forgiven shall equal the original principal amount of the HOME loan made to the homeowner multiplied by the number of years the homeowner owned and occupied the house multiplied by the applicable fraction based on the following chart: (6) The amount of the HOME loan to be forgiven may not exceed the original principal amount of the HOME loan. (7) For purposes of §B-1(4) and (5) of this regulation, “homeowner payments” means, with respect to loans made with HOME funds to home buyers, the: (a) Amount of the down payment made by the homeowner on the house; (b) Amount of any payments or prepayments of principal on any loan secured by the property; and (c) Cost of all capital improvements to the house made by the homeowner. C. Rehabilitation of Existing Houses. (1) An existing house, the rehabilitation of which is to be assisted with HOME funds, shall meet the criteria of this section. (2) The value of the currently owned single family house or one-to-four family residence after rehabilitation may not exceed 95 percent of the median purchase price for the type of house in the State as determined by HUD. (3) The house shall be the principal residence of an owner whose family is an income eligible household at the time HOME funds are committed. (4) Income Eligibility. (a) In determining whether a household is an income eligible household for the purposes of this section, the Department shall use its best efforts to require that the household meets the State requirement of 55 percent of State median income as identified in Regulation .03B(16)(a) of this chapter. (b) Notwithstanding §C(4)(a) of this regulation, if, in the determination of the Program, the financial viability of a homeownership project or activity so requires, a household may meet the federal requirement of 80 percent of area median income as identified in Regulation .03B(16)(b) of this chapter. D. Loan Terms. (1) In addition to other forms of HOME assistance authorized under Regulation .10A of this chapter, repayment of HOME funds lent in connection with a homeownership project may be secured by a subordinated mortgage or deed of trust. (2) A loan of HOME funds made to assist a home buyer may be forgiven by the Department, after a minimum period of 5, 10, or 15 years, if the homeowner owns and occupies the house for: (a) 5 years if the HOME loan is under $15,000; (b) 10 years if the HOME loan is $15,000 to $40,000; and (c) 15 years if the HOME loan is over $40,000. #### Regulation .18 Tenant-Based Rental Assistance Requirements. *COMAR 05.12.01.18* A. General. In order to qualify for tenant-based rental assistance, a tenant-based rental assistance project or program shall meet the applicable requirements of this regulation. B. Tenant-Based Rental Assistance — General Conditions. (1) Tenant-based rental assistance may only be provided to income-eligible households. (2) Except as provided in §B(3) of this regulation, recipients of tenant-based rental assistance shall be selected on the basis of written tenant selection criteria, developed by the Department or its designee. (3) Relocation Exception for HOME-Assisted Units. (a) The Department or its designee may select income eligible households who currently reside in units that are designated for rehabilitation or acquisition under the HOME program without requiring that the household meet the written tenant selection criteria. (b) Households selected under §B(3)(a) of this regulation may use the tenant-based rental assistance in the rehabilitated or acquired unit or in any other qualified housing. (4) Tenant-based rental assistance shall be used within the boundaries of the State. (5) The Department or its designee shall enter into a rental assistance contract or agreement with an owner leasing a unit to an assisted household or directly with an eligible household. (6) Before entry into a rental assistance contract or agreement, the Department or its designee shall review each lease and shall disapprove a lease if the: (a) Rent is not reasonable, based on rents that are charged for comparable unassisted rental units; or (b) Lease does not comply with the requirements in Regulation .16C of this chapter. (7) Housing occupied by a household receiving HOME tenant-based rental assistance under this regulation shall meet the housing quality standards set forth in 24 CFR §982.401 or the successor requirements as established by HUD. C. Rental Assistance. (1) Rental assistance shall meet the requirements in §C(2)—(5) of this regulation. (2) The term of assistance shall begin on the 1st day of the term of the lease and may not exceed 24 months, except if renewed by the Department or its designee. (3) The term of a rental assistance contract or other agreement shall provide that if the contract or agreement is with: (a) An owner, assistance shall end upon termination of the lease; (b) A household, assistance need not end upon termination of the lease, but payments may not be made after termination of the lease until the household enters into a new lease. (4) Monthly Assistance. (a) The amount of the monthly assistance may not exceed the difference between: (i) A rent standard for the unit size established by the Department or its designee, which standard shall be based on the Section 8 Housing Choice Voucher Program (24 CFR Part 982) or on local market conditions; and (ii) 30 percent of the household's monthly adjusted income, subject to a minimum tenant contribution to rent established by the Department or its designee. (b) The Department may approve, on a unit-by-unit basis, a subsidy based on a rent standard that exceeds the applicable fair market rent by up to 10 percent for 20 percent of units assisted. (5) In any case when assistance under §8 of the United States Housing Act of 1937 becomes available, recipients of tenant-based rental assistance under this regulation shall qualify for tenant selection preferences to the same extent as when they received the HOME tenant-based rental assistance under this regulation. D. Security Deposits. Tenant-based rental assistance for security deposits shall meet the following requirements: (1) Assistance shall be in the form of loans or grants to income eligible households for security deposits for rental of dwelling units; (2) Assistance provided in the form of a loan shall be evidenced by a promissory note, which may or may not be secured; (3) HOME security deposit assistance may not exceed the equivalent of 2 months rent for the dwelling unit; (4) Only the prospective tenant may apply for HOME assistance under this regulation, although assistance may be paid directly to the tenant or to the landlord. #### Regulation .19 Application Procedures. *COMAR 05.12.01.19* A. Housing Program Applications. Applications for HOME funds for a project under one of the DHCD housing programs shall be part of the DHCD loan application and shall include the information and supporting documentation specified on the application form. B. Maryland HOME Initiatives Program Fund Applications. (1) Application for Maryland HOME Initiatives Program Funds shall be made on the application form approved by the Department. (2) The application shall include the following information and supporting documentation: (a) A detailed description of the proposed project or activity; (b) Organizational documents of the applicant unless the applicant is a local government; (c) Sufficient information and documentation to determine the extent, if any, to which the project or activity will change the type of use or increase the intensity of the existing use of the property; (d) For projects: (i) Preliminary plans and specifications including summary scope of work, preliminary drawings, and cost estimates, (ii) Proposed operating budgets, development budgets, and rents or sale prices, (iii) Evidence of zoning compliance or, if a zoning variance or exception is required, evidence that the request for variance or exception has been filed and a hearing date has been scheduled, (iv) Evidence of site control including a deed, contract of sale, lease with purchase option, or other form of site control acceptable to the Administration, (v) Evidence of compliance with local planning requirements, if applicable, and (vi) Evidence of the availability of financing including commitment, feasibility, or conditional commitment letters from lenders or grantor which establish that the lender or grantor has determined that the project is feasible and state the amount and terms and conditions of funding for the project; (e) For programs: (i) Detailed outline of policies, procedures, and eligibility requirements for the Program, and (ii) Evidence satisfactory to the Department of demand for the Program including demographic and market data, if available. C. Timing. (1) Applications for HOME through the DHCD housing programs shall be made at the times specified during the year by the applicable housing program. (2) Maryland HOME Initiatives Program Fund applications shall be made in accordance with application and competition cycles published by the Department. The Department shall notify nonprofit organizations, CHDO, developers, local governments, and other interested persons of application cycles. Notification may be by direct mailing, notices in newspapers with major Statewide circulation, or other methods selected by the Department. #### Regulation .20 Processing Procedures. *COMAR 05.12.01.20* A. Home applications through the Single Family Programs or for a homeownership project will be processed in accordance with the published processing procedures for the appropriate Single Family Program. B. Maryland HOME Initiatives Program Fund Processing. (1) Applications for the Maryland HOME Initiatives Program Fund shall be processed in accordance with the procedures of this section. (2) Threshold Requirements. Applications may not be considered for funding unless they meet the following minimum requirements: (a) The application shall be consistent with 24 CFR Part 92; (b) The application shall demonstrate that the project or activity will serve income eligible households; and (c) The project or activity shall be: (i) Ineligible for funding under the DHCD housing programs, or (ii) Eligible for a DHCD housing program which the Department has elected not to fund or undertake; (d) Projects shall be ready to proceed as evidenced by: (i) Documentation of the availability of financing, (ii) Evidence of zoning compliance and, if applicable, compliance with local planning requirements, (iii) Evidence of site control, and (iv) Completion of preliminary plans and specifications, drawings, and cost estimates; (e) Programs shall be ready to implement as evidenced by: (i) Detailed outline of policies, procedures, and eligibility requirements, and (ii) Documentation of demand for the Program; (f) The Department shall determine, based on the documentation provided with the application, if the project or program is feasible; the Department’s review will include financial, construction, and management reviews; and (g) The applicant shall demonstrate: (i) That the project or program meets all of the requirements of 24 CFR Part 92; (ii) The availability of funding for administrative costs associated with implementing and operating the project or program; and (iii) The ability to satisfy all long-term monitoring, record-keeping, and reporting requirements which are required by 24 CFR Part 92. (3) Evaluation. Applications which meet the threshold criteria shall be evaluated based upon the extent that the projects or programs: (a) Address unmet need, with extra consideration given to programs or projects which: (i) Currently are not undertaken in the State, (ii) Fill a need not met by the DHCD housing programs or other programs of the Department, or (iii) Propose new ideas that would provide insights and experience that may lead to new programs or changes to the DHCD housing programs; (b) Include nonprofit participation, with the first priority given to applications from CHDOs with CHDO-eligible activities, second priority to applications from nonprofit organizations, and third priority to coapplications with nonprofit organizations and joint ventures with nonprofit organizations depending on the role and involvement of the nonprofit organization; (c) Promote geographic distribution among eligible jurisdictions, with extra consideration given to nonentitlement jurisdictions or regions of the State underserved by HOME funds; and (d) Promote new ideas which provide insight and experience that would lead to new programs or changes in existing programs of the Department. (4) Approval to commit HOME funds from the Maryland HOME Initiatives Program Fund shall be as follows: (a) The Director or the Deputy Director of the Division of Development Finance shall approve, disapprove, or modify loans or grants in amounts less than $100,000; (b) Except in the case of an emergency when urgent action is required, all loans or grants in amounts greater than or equal to $100,000 shall be submitted to the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, for review and recommendation to the Secretary; (c) For loans or grants in amounts greater than or equal to $100,000 but less than $250,000, the recommendation of the Housing Finance Review Committee constitutes approval unless the loan or grant is specifically disapproved by the Secretary; (d) For loans or grants in amounts greater than or equal to $250,000, the Secretary shall approve, disapprove, or modify the terms of the loan or grant after receipt of the recommendation of the Housing Finance Review Committee; and (e) In an emergency when urgent action is required, the Secretary may approve loans or grants without the recommendation of the Housing Finance Review Committee. (5) Upon approval of financial assistance, the Department shall issue a commitment letter setting forth the terms and conditions of the financial assistance. The commitment letter shall specify a time limit within which the sponsor shall accept the terms and conditions of the approval by executing the approval letter. (6) The Department shall specify a time limit within which that loan shall be closed in the case of projects or funds shall be committed and expended in the case of programs, which time limit may be extended in the Department’s sole discretion. If closing does not occur within the time limit specified in the commitment or if the recipient fails to commit and expend the funds within the time limit provided in the commitment letter, the Department may use the funds committed for the loan or program for any other loan or program permitted by this chapter and 24 CFR Part 92. C. All applications for projects to use HOME funds through the rental housing program or for rental housing development projects shall be processed in accordance with the published processing procedures as stated in COMAR 05.05.01.19—.26, provided that this chapter shall prevail in the event of a conflict between any provision under COMAR 05.05.01.19—.26 and any provision of this chapter. D. Rejection. (1) If an application for HOME funds through the Single Family Programs or the Maryland HOME Initiatives Program Fund or for a homeownership project is rejected, the director of the Single Family Programs shall notify the applicant in writing of the rejection. (2) In addition to the notice to the applicant pursuant to §D(1) of this regulation, the director of the Single Family Programs shall also notify the Housing Finance Review Committee of all applications for HOME funds through the Maryland HOME Initiatives Program Fund not recommended for funding. (3) If an application for HOME funds through the rental housing program or for a rental housing development project is rejected, the project sponsor shall be notified in accordance with COMAR 05.05.01.26. E. Reconsideration. (1) Applicants rejected under §D(1) of this regulation may request reconsideration of a rejection in accordance with the procedures contained in the HOME guidelines or the Single Family Programs. (2) Applicants rejected under §D(3) of this regulation may request reconsideration of a rejection in accordance with COMAR 05.05.01.26. (3) 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. F. Loan and Grant Documents. (1) The Department shall provide the applicant with copies of standard form documents for all awards of funds for HOME projects for homeownership projects or financed through the single family programs or the Maryland HOME Initiatives Program Fund. In the case of Maryland HOME Initiatives Program Fund awards for programs, the Administration shall approve the documents to be entered into between the HOME recipient and the ultimate borrower. (2) For HOME loans made for rental housing development projects, the loan documents shall comply with COMAR 05.05.01.27. #### Regulation .21 Nondiscrimination and Drug-Free and Alcohol-Free Workplace. *COMAR 05.12.01.21* A. A sponsor or other recipient of HOME funds 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. B. Each sponsor or other recipient of HOME funds 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: (1) Titles VI and VII of the Civil Rights Act of 1964; (2) Title VIII of the Civil Rights Act of 1968, as amended; (3) State Government Article, Title 20, Annotated Code of Maryland, as amended; (4) The Americans with Disabilities Act of 1990, as amended; (5) The Department’s Minority Business Enterprise Program, as amended; (6) The Fair Housing Amendments Act of 1988, as amended; and (7) Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department regulations adopted or to be adopted to carry out the requirements of that Order and any regulations promulgated under it. C. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. #### Regulation .22 Program Administration. *COMAR 05.12.01.22* A. Except for waivers under §D of this regulation, any action or decision required or permitted to be taken or made by the Department under these regulations may be taken or made by the Director or the Director's designee. B. The Department may terminate an approval of funds or refuse to make additional disbursements under a loan agreement if the Department finds that the borrower is not complying with any of the requirements of the Program or the financing documents. C. The Department may establish from time to time operational handbooks or manuals governing matters relating to the Program including descriptive statements of Program procedures which do not directly affect the rights of the public or the procedures available to the public. D. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver or variance is not inconsistent with the provisions of 24 CFR Part 92 and the HOME Investments Partnerships Act, Title 11 of the Cranston-Gonzalez National Affordable Housing Act, as amended, 42 U.S.C. §12701 et seq., if: (1) In the written determination of the Secretary, the application of the regulations in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Program or 24 CFR Part 92 or 42 U.S.C. §12701 et seq.; or (2) Conformance with the requirements of any federal, State, or local programs in connection with the HOME Program necessitates waiver or variance of a regulation. E. The Secretary may delegate to the Director or Deputy Director of the Division of Development Finance, any Program Director, or any other official or employee of the Department the authority to execute or approve any Program documents or loan documents, including loan commitments. #### Regulation .23 False Statements. *COMAR 05.12.01.23* A person may not knowingly make or cause to be made any false statement or report in any documents required to be furnished to the Department by any agreement relating to the program. ### Chapter 02 — Financing Adjustment Factor Funds **Authority:** Housing and Community Development Article, §§2-102, 2-211, and 4-211(a)(8) and (9), Annotated Code of Maryland **Administrative History:** Effective date: March 15, 2004 (31:5 Md. R. 447) #### Regulation .01 General. *COMAR 05.12.02.01* A. This chapter describes the policies and procedures the Community Development Administration will use to administer financing adjustment factor funds granted to the State under the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, P.L. 100-628, as amended, to provide financial assistance to individuals, local governments, developers, and nonprofit organizations to provide decent, safe, and sanitary housing affordable to very low-income families or persons. B. This chapter describes the specific eligible uses, restrictions, and procedures used to administer financing adjustment factor funds in the State. #### Regulation .02 Objectives. *COMAR 05.12.02.02* The objectives of the Administration in its use of Financing Adjustment Factor Funds are to: A. Finance affordable housing in conjunction with housing loan programs administered by the Department by awarding funds to local governments, nonprofit sponsors, and developers, and for-profit sponsors and developers to: (1) Promote the development or rehabilitation of rental housing for households of very low income; (2) Promote homeownership opportunities for households of very low income; or (3) Facilitate nonprofit ownership of group housing for persons of very low income with special need; B. Finance programs, projects, and activities that fill a need not met by other DHCD housing programs, but that promote the development and rehabilitation of housing for households of very low income for homeowners, renters, and special populations; and C. Provide grants to local governments, local development corporations, local development agencies, municipalities, and nonprofit organizations for certain eligible activities. #### Regulation .03 Definitions. *COMAR 05.12.02.03* A. In this chapter, the following terms have the meanings indicated. B. Terms Defined. (1) “Administration” means the Community Development Administration. (2) “Community development project” has the meaning stated in Housing and Community Development Article, §4-217, Annotated Code of Maryland. (3) “Community Legacy Program” means the program authorized by Housing and Community Development Article, Title 6, Subtitle 2, Annotated Code of Maryland. (4) “Decent, safe, and sanitary housing” means housing that meets the standards determined under 24 CFR §5.703. (5) “Distressed area” has the meaning stated in Housing and Community Development Article, §4-221(e), Annotated Code of Maryland. (6) “Energy conservation project” has the meaning stated in Housing and Community Development Article, §4-218, Annotated Code of Maryland. (7) “FAF funds” means funds: (a) Realized from the refunding of tax-exempt bonds of the Administration secured by mortgages on projects that receive assistance from the United States of America, acting through HUD under Section 8 of the United States Housing Act of 1937, 42 U.S.C. §1437, as amended; and (b) Granted to the State under the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, P.L. 100-628, as amended. (8) “Families of limited incomes” means families or persons whose annual incomes do not exceed upper income limits established by the Secretary in accordance with COMAR 05.05.02.04B. (9) “Home improvement project” has the meaning stated in Housing and Community Development Article, §4-219, Annotated Code of Maryland. (10) “Household” means one or more persons occupying a housing unit. (11) “Local development agency” has the meaning stated in Housing and Community Development Article, §4-201(l), Annotated Code of Maryland. (12) “Local development corporation” has the meaning stated in Housing and Community Development Article, §4-201(m), Annotated Code of Maryland. (13) “HUD” means the United States Department of Housing and Urban Development. (14) “Multifamily programs” means the: (a) Elderly Rental Housing Program authorized under Housing and Community Development Article, §4-402, Annotated Code of Maryland; (b) Low Income Housing Tax Credit Program authorized under Housing and Community Development Article, §2-111 and State Finance and Procurement Article, §§5-7B-01—5-7B-10, Annotated Code of Maryland; (c) Multifamily Bond Program and Multfamily Home and Energy Loan Program authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; (d) Multifamily Rehabilitation Program of the Maryland Housing Rehabilitation Program authorized under Housing and Community Development Article, §4-906, Annotated Code of Maryland; (e) Nonprofit Rehabilitation Program authorized under Housing and Community Development Article, §4-929, Annotated Code of Maryland; (f) Partnership Rental Housing Program authorized under Housing and Community Development Article, Title 4, Subtitle 12, Annotated Code of Maryland; (g) Rental Housing Production Program authorized under Housing and Community Development Article, §4-1502, Annotated Code of Maryland; and (h) Shelter and Transitional Facilities Grant Program authorized under Ch. 73, Acts of 1993; Ch. 115, Acts of 1994; Ch. 131, Acts of 1995; Ch. 125, Acts of 1996; Ch. 600, Acts of 1997; Ch. 109 and Ch. 138, Acts of 1998; Ch. 118 and Ch. 212, Acts of 1999. (15) “Maryland HOME Program” means the program authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. (16) “Municipality” means a municipal corporation in the State subject to the provisions of Article XI-E of the Constitution of the State, the Mayor and City Council of Baltimore, or one of the 23 counties of Maryland. (17) “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. (18) “Public purpose project” has the meaning stated in Housing and Community Development Article, §4-221(d), Annotated Code of Maryland. (19) “Secretary” means the Secretary of Housing and Community Development. (20) “Single Family Programs” means the: (a) Accessory, Shared, and Sheltered Housing Program authorized under Housing and Community Development Article, §4-926, Annotated Code of Maryland; (b) Federal Lead Hazard Reduction Program authorized under Housing and Community Development Article, §§4-211(a)(8) and (9), Annotated Code of Maryland; (c) Group Home Financing Program authorized under Housing and Community Development Article, §4-602, Annotated Code of Maryland; (d) Home and Energy Loan Program (one-to-four units) authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; (e) Indoor Plumbing Program authorized under Housing and Community Development Article, §4-927, Annotated Code of Maryland; (f) Lead Hazard Reduction Grant Program and Lead Hazard Reduction Loan Program authorized under Housing and Community Development Article, Title 4, Subtitle 7, Annotated Code of Maryland; (g) Maryland Home Financing Programs, authorized by Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland; (h) The Maryland Mortgage Program, authorized by Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; (i) Regular Rehabilitation Program of the Maryland Housing Rehabilitation Program authorized under Housing and Community Development Article, §4-906, Annotated Code of Maryland; (j) Settlement Expense Loan Program authorized by Housing and Community Development Article, Title 4, Subtitle 3, Annotated Code of Maryland; and (k) Special Housing Opportunities Program authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. (21) “Solar energy project” has the meaning stated in Housing and Community Development Article, §4-201(s), Annotated Code of Maryland. (22) “Special housing facility” has the meaning stated in Housing and Community Development Article, §4-201(t), Annotated Code of Maryland. (23) “Sponsor” means an applicant that develops a project and receives a loan or grant of FAF funds. (24) “Very low-income households” means very low-income families as provided in 42 U.S.C. §1437a. #### Regulation .04 Eligible Projects. *COMAR 05.12.02.04* A. The Administration may use FAF funds to finance the following: (1) Rental housing; (2) Homeownership; (3) Housing for persons with special housing needs; or (4) Accessory, shared, or sheltered housing facilities. B. The housing financed with FAF funds shall be rented, occupied, or sold to very low-income households in accordance with this chapter. C. The projects financed with FAF funds shall be community development projects, public purpose projects, energy conservation projects, solar energy projects, home improvement projects, or special housing facilities. #### Regulation .05 Eligible Activities. *COMAR 05.12.02.05* FAF funds may be used for the following: A. Activities identified in 24 CFR §811.110, as amended; B. Interest rate subsidies; C. Direct rental subsidies; D. Grants or loans for housing very low-income households, including housing in mixed income or mixed use projects; E. Interest subsidies, grants, or loans to enable very low-income households to acquire ownership of single family housing units; and F. Funds to assist in the acquisition, construction, and rehabilitation of housing for homeless persons, very low-income households, or persons at risk of becoming homeless, and other special needs populations consisting of very low-income households. #### Regulation .06 Eligible Costs. *COMAR 05.12.02.06* A. FAF funds may be used only to pay the development costs of dwelling units to the extent they are or would be chargeable for federal income tax purposes to the project's capital account with a proper election by a taxpayer. B. FAF funds may be used toward the development costs of mixed-income or mixed-use projects, if the costs: (1) Would be properly includable in an FHA-insured mortgage loan insured under the National Housing Act, 12 U.S.C. §1715l(d)(4); and (2) Are allocable to dwelling units to be occupied by very low-income households and facilities related and subordinate to a FHA insured mortgage loan under the National Housing Act, 12 U.S.C. §1715l(d)(4). C. Any allocation shall be made under §B(2) of this regulation on a basis that reasonably reflects the actual costs of the dwelling units to be occupied by very low-income households as a percentage of the overall development costs of such mixed-income or mixed-use project. #### Regulation .07 Terms and Conditions of Financial Assistance. *COMAR 05.12.02.07* A. Occupancy Requirements and Income Restrictions. (1) For residential rental projects, all of the residential rental units financed with FAF funds shall be rented only to very low-income households. (2) For homeownership projects, the recipients of FAF Funds shall be very low-income households. (3) For homeownership projects subsidized with FAF Funds, if the Administration makes ongoing grants or subsidies from FAF Funds, the Administration shall recertify every 2 years that the recipients continue to be very low-income households and continue to occupy the unit. (4) Term of Income Restrictions. (a) All residential rental projects subsidized with FAF Funds shall be income-restricted for a minimum of 10 years. (b) All homeownership units subsidized with FAF Funds shall be owned and occupied by the recipient of the FAF funds at the time the financial assistance is received. (5) Inspection by HUD. The sponsor shall agree to permit HUD to inspect the units financed with FAF funds at reasonable times during business hours and under reasonable conditions. B. Repayment. (1) Repayment shall be made as provided in the loan documents. (2) Interest and principal repayment may be deferred at the discretion of the Department, in accordance with the terms and provisions of the loan documents. C. Lien Priority. Except for liens held in connection with public purpose projects, any lien held by the Administration on property is 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. #### Regulation .08 Use of FAF Funds by the Administration. *COMAR 05.12.02.08* A. The Administration, in its discretion, may use FAF funds in connection with a project financed under a single family program, multifamily program, community legacy program, or Maryland HOME program if the project complies with this chapter and the regulations of the single family program, multifamily program, community legacy program, or Maryland HOME program, as applicable. B. The Administration, in its discretion, may use FAF funds for the programs identified in §A of this regulation instead of funds provided under a single family program, multifamily program, community legacy program, or Maryland HOME program, if the sponsor: (1) Identifies a specific single family program, multifamily program, or Maryland HOME program, or identifies the community legacy program for which the project qualifies; (2) Agrees to comply with the regulations of the specific identified program; and (3) Agrees to comply with this chapter. C. If there is a conflict between the regulations of the specific identified program and this chapter, the more restrictive regulation applies to the project to maintain compliance with this chapter and the regulations of the specific identified program. D. The sponsor receiving FAF funds shall agree to comply with any program guidelines, manuals, or policies established for the specific identified program. #### Regulation .09 Waiver. *COMAR 05.12.02.09* The Secretary may waive or vary particular provisions of this chapter if: A. The waiver is consistent with the Act; B. Any necessary approvals from HUD are obtained; and C. The Secretary determines that: (1) An emergency exists; or (2) The application of a regulation in a specific case would be inequitable or contrary to the purposes of the Act.