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. This chapter describes the specific eligible uses, restrictions, and procedures used to administer financing adjustment factor funds in the State. The objectives of the Administration in its use of Financing Adjustment Factor Funds are to: 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: Promote the development or rehabilitation of rental housing for households of very low income; Promote homeownership opportunities for households of very low income; or Facilitate nonprofit ownership of group housing for persons of very low income with special need; 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 Provide grants to local governments, local development corporations, local development agencies, municipalities, and nonprofit organizations for certain eligible activities. In this chapter, the following terms have the meanings indicated. Terms Defined. “Administration” means the Community Development Administration. “Community development project” has the meaning stated in Housing and Community Development Article, §4-217, Annotated Code of Maryland. “Community Legacy Program” means the program authorized by Housing and Community Development Article, Title 6, Subtitle 2, Annotated Code of Maryland. “Decent, safe, and sanitary housing” means housing that meets the standards determined under 24 CFR §5.703. “Distressed area” has the meaning stated in Housing and Community Development Article, §4-221(e), Annotated Code of Maryland. “Energy conservation project” has the meaning stated in Housing and Community Development Article, §4-218, Annotated Code of Maryland. “FAF funds” means funds: 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 Granted to the State under the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, P.L. 100-628, as amended. “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. “Home improvement project” has the meaning stated in Housing and Community Development Article, §4-219, Annotated Code of Maryland. “Household” means one or more persons occupying a housing unit. “Local development agency” has the meaning stated in Housing and Community Development Article, §4-201(l), Annotated Code of Maryland. “Local development corporation” has the meaning stated in Housing and Community Development Article, §4-201(m), Annotated Code of Maryland. “HUD” means the United States Department of Housing and Urban Development. “Multifamily programs” means the: Elderly Rental Housing Program authorized under Housing and Community Development Article, §4-402, Annotated Code of Maryland; 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; 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; Multifamily Rehabilitation Program of the Maryland Housing Rehabilitation Program authorized under Housing and Community Development Article, §4-906, Annotated Code of Maryland; Nonprofit Rehabilitation Program authorized under Housing and Community Development Article, §4-929, Annotated Code of Maryland; Partnership Rental Housing Program authorized under Housing and Community Development Article, Title 4, Subtitle 12, Annotated Code of Maryland; Rental Housing Production Program authorized under Housing and Community Development Article, §4-1502, Annotated Code of Maryland; and 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. “Maryland HOME Program” means the program authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. “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. “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. “Public purpose project” has the meaning stated in Housing and Community Development Article, §4-221(d), Annotated Code of Maryland. “Secretary” means the Secretary of Housing and Community Development. “Single Family Programs” means the: Accessory, Shared, and Sheltered Housing Program authorized under Housing and Community Development Article, §4-926, Annotated Code of Maryland; Federal Lead Hazard Reduction Program authorized under Housing and Community Development Article, §§4-211(a)(8) and (9), Annotated Code of Maryland; Group Home Financing Program authorized under Housing and Community Development Article, §4-602, Annotated Code of Maryland; Home and Energy Loan Program (one-to-four units) authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; Indoor Plumbing Program authorized under Housing and Community Development Article, §4-927, Annotated Code of Maryland; 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; Maryland Home Financing Programs, authorized by Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland; The Maryland Mortgage Program, authorized by Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; Regular Rehabilitation Program of the Maryland Housing Rehabilitation Program authorized under Housing and Community Development Article, §4-906, Annotated Code of Maryland; Settlement Expense Loan Program authorized by Housing and Community Development Article, Title 4, Subtitle 3, Annotated Code of Maryland; and Special Housing Opportunities Program authorized under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. “Solar energy project” has the meaning stated in Housing and Community Development Article, §4-201(s), Annotated Code of Maryland. “Special housing facility” has the meaning stated in Housing and Community Development Article, §4-201(t), Annotated Code of Maryland. “Sponsor” means an applicant that develops a project and receives a loan or grant of FAF funds. “Very low-income households” means very low-income families as provided in 42 U.S.C. §1437a. The Administration may use FAF funds to finance the following: Rental housing; Homeownership; Housing for persons with special housing needs; or Accessory, shared, or sheltered housing facilities. The housing financed with FAF funds shall be rented, occupied, or sold to very low-income households in accordance with this chapter. 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. FAF funds may be used for the following: Activities identified in 24 CFR §811.110, as amended; Interest rate subsidies; Direct rental subsidies; Grants or loans for housing very low-income households, including housing in mixed income or mixed use projects; Interest subsidies, grants, or loans to enable very low-income households to acquire ownership of single family housing units; and 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. 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. FAF funds may be used toward the development costs of mixed-income or mixed-use projects, if the costs: Would be properly includable in an FHA-insured mortgage loan insured under the National Housing Act, 12 U.S.C. §1715l(d)(4); and 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). 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. Occupancy Requirements and Income Restrictions. For residential rental projects, all of the residential rental units financed with FAF funds shall be rented only to very low-income households. For homeownership projects, the recipients of FAF Funds shall be very low-income households. 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. Term of Income Restrictions. All residential rental projects subsidized with FAF Funds shall be income-restricted for a minimum of 10 years. 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. 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. Repayment. Repayment shall be made as provided in the loan documents. Interest and principal repayment may be deferred at the discretion of the Department, in accordance with the terms and provisions of the loan documents. 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. 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. 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: Identifies a specific single family program, multifamily program, or Maryland HOME program, or identifies the community legacy program for which the project qualifies; Agrees to comply with the regulations of the specific identified program; and Agrees to comply with this chapter. 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. The sponsor receiving FAF funds shall agree to comply with any program guidelines, manuals, or policies established for the specific identified program. The Secretary may waive or vary particular provisions of this chapter if: The waiver is consistent with the Act; Any necessary approvals from HUD are obtained; and The Secretary determines that: An emergency exists; or The application of a regulation in a specific case would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §§2-102, 2-211, and 4-211(a)(8) and (9), Annotated Code of Maryland Effective date: March 15, 2004 (31:5 Md. R. 447)