Chapter 04. Maryland Heritage Areas Loan Program
Regulation .01 General.LinkCopy Citation
A.
This chapter sets forth the policies, procedures, and authorizations for administering the Maryland Heritage Areas Loan Program, established within the Maryland Heritage Area Authority, which provides loans from the Maryland Heritage Areas Authority Financing Fund.
B.
The objective of the Loan Program is to provide a source of funding, including loans to local jurisdictions or other appropriate entities, to undertake projects that will assist and encourage preservation, tourism, and other economic development within certified heritage areas.
Regulation .02 Definitions.LinkCopy Citation
A.
In this chapter, the following terms have the meanings indicated.
B.
Terms Defined.
(1)
“Act” means Financial Institutions Article, §§13-1101—13-1124, Annotated Code of Maryland.
(2)
“Authority” means the Maryland Heritage Areas Authority established by the Act.
(3)
“Borrower” means the recipient of a loan.
(4)
“Business entity” means a corporation, limited liability company, association, partnership, joint venture, or other legally organized entity.
(5)
“Capital project” means a project to acquire, develop, preserve, rehabilitate, or restore either real property or tangible personal property that has a useful life of at least 15 years.
(6)
“Certified heritage area” means a recognized heritage area that has been designated a certified heritage area in accordance with the Act and COMAR 14.29.02.
(7)
“Fund” means the Maryland Heritage Areas Authority Financing Fund established by the Act.
(8)
“Heritage area” means a contiguous or noncontiguous developed geographic area of public and private uses that:
(a)
Can range in size from as small as a portion of a county or municipal corporation to as large as a regional area;
(b)
Has a coherent and cohesive special character;
(c)
Is distinguished by a concentration of natural, recreational, cultural, and historic resources of Statewide significance that have played a vital role in the historic life and development of the area and contribute to the public through interpretive, educational, and recreational uses; and
(d)
May include traditional parks and historic places or property.
(9)
“Heritage area management entity” means a nonprofit organization or agency of either State or local government that is or will be responsible for coordinating development of a management plan for a recognized heritage area or is responsible for implementing the management plan for a certified heritage area.
(10)
“Local jurisdiction” means any of the 23 counties of the State, the City of Baltimore, any municipal corporation in the State that is subject to the provisions of Article XI-E of the Maryland Constitution, or any of their duly authorized agencies or instrumentalities.
(11)
“Loan” means a loan made from the Fund.
(12)
“Loan documents” means the promissory note, loan agreement, security instruments and other documents between a borrower and the Authority which evidence the terms and conditions of a loan.
(13)
“Loan Program” means the Maryland Heritage Areas Loan Program of the Authority established by this chapter as authorized under the Act.
(14)
“Management plan” means a document prepared and approved in accordance with the Act and COMAR 14.29.02, that includes a comprehensive strategy expressed in words, maps, illustrations, or other media for planning, implementing, and achieving the goals and objectives for the heritage area.
(15)
“Nonprofit organization” means a corporation, foundation, governmental entity, or other legal entity, no part of the net earnings of which inure to the benefit of a private shareholder or individual holding an interest in the entity.
(16)
“Trust” means the Maryland Historical Trust established under State Finance and Procurement Article, §5A-310, Annotated Code of Maryland.
Regulation .03 Eligible Borrowers and Eligible Activities.LinkCopy Citation
A.
An entity is eligible to receive a loan under the Program if the entity:
(1)
Is a:
(a)
Local jurisdiction;
(b)
Nonprofit organization or a business entity that:
(i)
Is in good standing and qualified to do business in Maryland; and
(ii)
Has the legal capacity and all necessary legal authority to be obligated by the loan; or
(c)
An individual who has the legal capacity and all necessary legal authority to be obligated by the loan; and
(2)
Is authorized to apply for the loan by the heritage area management entity for the certified heritage area that will benefit from the loan.
B.
The Authority may provide a loan to an entity eligible under §A of this regulation if the loan is for purposes of funding:
(1)
An activity that will:
(a)
Be undertaken within a certified heritage area; and
(b)
Further or complete an activity identified in the management plan for the certified heritage area; and
(2)
Is:
(a)
A capital project;
(b)
The purchase of capital equipment, furnishings, or inventory; or
(c)
Working capital to be used in conjunction with a capital project.
C.
For an activity that involves improvement to leasehold property, the remaining term of the lease at the time the loan is made must not be less than the term of the loan.
Regulation .04 Loan Application Procedures.LinkCopy Citation
A.
An entity eligible to receive a loan under Regulation .03A of this chapter may apply to the Authority for a loan to fund an activity eligible under Regulation .03B of this chapter.
B.
For reasons or circumstances determined appropriate or necessary by the Authority, the Authority may at its discretion:
(1)
Establish deadlines for acceptance of loan applications;
(2)
Refuse to accept loan applications; and
(3)
For a loan application accepted by the Authority:
(a)
Hold the Authority’s consideration of the application in abeyance; or
(b)
Decide not to consider the loan application.
C.
Application. A loan application shall:
(1)
Be made on forms prescribed by the Authority;
(2)
Establish that the applicant is an eligible borrower as provided in Regulation .03A of this chapter evidenced by copies of its organizational documents, including as applicable its articles of incorporation and bylaws, its articles of organization and operating agreement, its certificate of limited partnership and limited partnership agreement, or its partnership or joint venture agreement, and evidence of being in good standing and qualified to do business in the State;
(3)
Describe in detail the proposed activity;
(4)
Identify the estimated or actual cost of the proposed activity evidenced by contractor bids, proposals, or other good faith estimates;
(5)
Identify in a proposed budget all proposed sources and uses of funding for the activity;
(6)
Establish the applicant’s capability and readiness to initiate and undertake the activity and to complete the activity within an established time frame;
(7)
Identify the property that will benefit from or be assisted by the loan;
(8)
Identify the ownership of the property and any lessees of the property;
(9)
Include information sufficient for the Authority to evaluate:
(a)
The activity’s consistency with the goals of the management plan;
(b)
The historical or cultural significance of the property;
(c)
The current and proposed conditions and uses of the property;
(d)
The extent to which the activity will impact use of the property;
(e)
The applicant’s ability to repay the loan, including identification of sources of revenue that will be used to repay the loan;
(f)
If the activity involves a leasehold property, that the activity is authorized under the lease and the remaining lease term is equal to the proposed term of the loan; and
(g)
If the activity involves acquisition of property, that the applicant has the authority to purchase the property under a valid purchase option agreement, purchase and sale agreement, or other evidence satisfactory to the Authority; and
(10)
Include other information as may be required by the Authority.
D.
Application Fee. The Authority may require a loan applicant to pay an application fee to cover some portion of the cost of processing the application and the loan.
E.
Loan Application Review and Processing.
(1)
After receipt of an application for a loan that the Authority has accepted and will consider for potential funding, staff of the Authority:
(a)
Will conduct an initial assessment for the completeness of the information required under §C of this regulation;
(b)
May conduct an inspection of the property for any assessment purpose related to the review and processing of the application; and
(c)
Shall notify the applicant in writing of any missing information required under §C of this regulation or of other requirements that the applicant must satisfy in order for the application to be complete.
(2)
The Authority shall not consider for approval a loan application for which the applicant has not satisfied all requirements.
F.
Withdrawal of Application.
(1)
An applicant may withdraw an application for a loan at any time before closing of the loan by sending written notice to the Authority.
(2)
An applicant who withdraws an application shall be responsible for all costs, other than the Authority’s internal processing costs, incurred by the Authority to process the application, including, but not limited to, costs to obtain credit reports or appraisals.
Regulation .05 Loan Application Evaluation and Approval.LinkCopy Citation
A.
The Authority shall review and evaluate a completed loan application accepted under Regulation .04 of this chapter in accordance with selection criteria established by the Authority, which criteria may include:
(1)
The viability of the activity for which the loan is sought;
(2)
The applicant’s readiness to commence the activity and complete it within an established time frame;
(3)
The level of urgency of the applicant’s need for a loan to complete the activity;
(4)
The activity’s consistency with the goals of the management plan;
(5)
The extent to which the activity will have a positive impact on the certified heritage area;
(6)
The extent to which the activity, once completed, might serve as a model for other projects within certified heritage areas;
(7)
The applicant’s administrative capability, including the applicant’s capacity to manage the activity;
(8)
The applicant’s ability to repay the loan;
(9)
The availability of private or non-State funds for the activity; and
(10)
Such additional criteria as the Authority considers appropriate.
B.
Following review and evaluation under §A of this regulation, the Authority shall:
(1)
Either approve, approve with modification, or disapprove the loan;
(2)
If approved, determine a level of funding for the loan, which may be in an amount less than the amount applied for by the applicant; and
(3)
Notify the applicant in writing of the action taken by the Authority on the application.
C.
For a loan approved under §B of this regulation, the Authority may issue to the applicant a commitment letter for the loan that sets forth:
(1)
The amount of the loan;
(2)
Terms and conditions under which the loan will be made, which shall at a minimum include the terms and conditions set forth in Regulation .06 of this chapter; and
(3)
A time limit within which execution of loan documents shall occur before the Authority will withdraw its commitment, which time limit the Authority may extend at its sole discretion.
D.
A decision of the Authority to approve or disapprove a loan is not a contested case within the meaning of State Government Article, Title 10, Subtitle 2, Annotated Code of Maryland.
E.
Loan closing shall be scheduled at a time and place acceptable to the applicant, Authority staff, and the Office of the Attorney General.
Regulation .06 Loan Terms and Conditions.LinkCopy Citation
A.
General Requirements. A loan shall, as necessary and required by the Authority, include terms and conditions consistent with this section.
(1)
Maximum Loan Amount. A loan may be in an amount not to exceed an 80 percent loan to value ratio based on the appraised value of the property assisted by the loan, or other property offered as collateral for the loan, less any preexisting indebtedness secured by a lien on the assisted property or the collateral property.
(2)
Interest Rate. The rate of interest charged by the Authority against the loan:
(a)
Shall be, as established from time to time by the Authority, consistent with applicable federal regulations governing State borrowing; and
(b)
May be either lower or higher than rates charged for other loans made by the Authority.
(3)
Insurance. The borrower shall cause the property assisted by the loan or securing the loan to be insured against loss or damage by fire and other hazards, casualties, and contingencies as may be required from time to time by the Authority in amounts satisfactory to the Authority, as described in §B of this regulation.
(4)
Term. The loan shall have a term established by the Authority that is based upon the use and amount of the loan.
(5)
Repayment.
(a)
Except as otherwise provided in §A(5)(b) of this regulation, a single monthly payment shall be charged, which shall be applied first to late charges, then the Authority’s enforcement and collection expenses, if applicable, then to interest, and then to principal, in that order.
(b)
At the discretion of the Authority, repayments of either principal or interest, or of both principal and interest, may be deferred, subject to the following additional requirements:
(i)
The loan term may provide for deferred payments of either principal or interest, or of both principal and interest.
(ii)
The deferred terms shall provide for repayment of deferred amounts at the loan maturity date, any earlier date established by the Authority, or upon any sale or other transfer of the property securing the loan.
(c)
The Authority may charge interest on deferred interest payments.
(6)
Late Charge. Late charges may be imposed by the Authority, as permitted by law.
(7)
Security. The loan shall be secured, at the discretion of the Authority, by collateral acceptable to the Authority, which may include:
(a)
Cash escrow;
(b)
A letter of credit;
(c)
A pledge of depository accounts;
(d)
A pledge of accounts receivable;
(e)
An assignment of income;
(f)
A security interest in machinery and equipment;
(g)
A mortgage or deed of trust on the real property assisted by the loan;
(h)
A mortgage or deed of trust on other real property satisfactory to the Authority;
(i)
Guarantees of repayment from guarantors acceptable to the Authority; or
(j)
Any other form of security or collateral acceptable to the Authority.
(8)
Plans and Specifications. The plans and specifications for a capital project funded by a loan shall be subject to prior review and approval by Authority staff and shall conform to applicable acquisition, construction, rehabilitation, and restoration requirements established or applied by the Authority.
(9)
Disbursement. Disbursement of loan funds shall be made as the activity progresses based upon requests for disbursement submitted by the borrower in a form satisfactory to the Authority.
(10)
Modification of Loan. In order to facilitate the successful completion or operation of an activity funded by a loan, the Authority may modify:
(a)
The rate of interest on the loan;
(b)
The time or amount of payment of principal or interest, or both principal and interest;
(c)
The maturity date of the loan; or
(d)
Any other term of a loan.
(11)
Loan Default. In the event of default under the loan documents, the Authority may:
(a)
Modify the rate of interest;
(b)
Modify the time or amount of payment of principal, interest, or both principal and interest;
(c)
Modify the maturity date of the loan;
(d)
Modify the loan in any other manner that promotes repayment of the loan and achieves the purposes of the Loan Program; and
(e)
Exercise all remedies provided by law and at equity, or available pursuant to the loan documents, including acceleration of payment of the entire principal and interest due on the loan, foreclosure, receivership, attachment, and repossession of property and collateral securing the loan.
(12)
If the Authority obtains title to property by taking action under §A(11)(e) of this regulation, the Authority shall obtain approval from the Board of Public Works prior to further conveyance of title to the property.
(13)
Prepayment Penalty. The Authority may not charge a prepayment penalty.
(14)
Historic Property. If an activity funded by a loan will impact property that is listed or eligible for listing on the Maryland Register of Historic Properties, the loan agreement shall provide that:
(a)
The plans and specifications for the project must be reviewed and approved by the Trust prior to the borrower undertaking any work on the property;
(b)
All aspects of the project must conform to historic preservation standards established or applied by the Trust, including, but not limited to, the Secretary of the Interior’s Standards for Treatment of Historic Properties;
(c)
The borrower must permit staff from the Trust to inspect ongoing construction to ensure that the borrower is undertaking the project in conformance with the applicable historic preservations standards and requirements; and
(d)
If required by the Trust, the borrower shall:
(i)
Convey or cause to be conveyed to the Trust for recording in the applicable land records a deed of easement, in form, substance, and duration satisfactory to the Director of the Trust, for preservation of the historic real property and the improvements and the settings thereon affected by the project; or
(ii)
Enter into a preservation agreement with the Trust, or cause an agreement with the Trust, that obligates preservation and maintenance of the historic property affected by the project, in form, substance, and duration satisfactory to the Director.
(15)
Other Requirements. The Authority may establish other terms and conditions in the loan documents as considered reasonable and necessary by the Authority.
B.
Real Property Requirements. The following requirements apply when a loan is secured by real property.
(1)
Mortgage or Deed of Trust.
(a)
A mortgage or deed of trust on real property securing the loan shall be recorded in the land records of the local jurisdiction in which the real property is situated.
(b)
The mortgage or deed of trust may be subordinate to other recorded mortgage liens, at the Authority’s discretion, provided that the Authority and the other mortgagee or mortgagees give any required consents and the loan to value ratio of the property being subordinated complies with the requirements of §B(4)(b) of this regulation.
(2)
Property, Liability, and Other Insurance.
(a)
The borrower shall provide evidence that the borrower, the property owner if borrower is not the property owner, and contractors, have obtained and will continue to maintain the following insurance coverages, as applicable:
(i)
Owner’s commercial general liability;
(ii)
Owner’s property or hazard on the property securing the loan, in an amount not less than the loan plus all other debt secured by a lien on the property;
(iii)
Builder’s risk during construction only;
(iv)
Contractor’s general liability; and
(v)
Flood insurance, if required by the Authority.
(b)
All insurance required under this section shall:
(i)
Be written by a company registered with the Maryland Insurance Administration, or a company approved by the Authority in the event the property securing the loan or insurance company are located out-of-State;
(ii)
Be in force at or before the time of loan closing;
(iii)
Not be terminable without prior notification to the Authority; and
(iv)
Contain such other terms and coverage satisfactory to the Authority.
(c)
Owner’s commercial general liability insurance shall:
(i)
Name the Authority as an additional insured; and
(ii)
Remain in force until full repayment of the loan.
(d)
Contractor’s general liability insurance shall:
(i)
Name the Authority as an additional insured; and
(ii)
Remain in place through completion of the project, or such later date as the Authority may require.
(e)
Owner’s property or hazard insurance and builder’s risk insurance shall:
(i)
Name the Authority as an additional insured, loss payee, and mortgagee; and
(ii)
Remain in force until full repayment of the loan.
(3)
Title Insurance.
(a)
For loans in amounts of $15,000 or greater, the Authority may require the borrower to provide a standard American Land Title Association Loan Policy — 2006, as amended, which policy shall:
(i)
Be issued by a title insurance company acceptable to the Authority;
(ii)
Be issued in an amount not less than the maximum principal amount of the loan;
(iii)
Insure the Authority as additional insured, mortgagee, and loss payee;
(iv)
Evidence that fee simple interest in the real property securing the loan is, as of the date of closing, vested in the borrower;
(v)
Contain only exceptions and encumbrances approved by the Authority; and
(vi)
Not include exceptions for survey matters, general or blanket exceptions, materialman’s liens or for taxes or assessments that are due and payable as of the date of closing.
(b)
For loans in amounts up to $15,000, the Authority may require the borrower to provide an attorney’s certificate of title or other evidence of title acceptable to the Authority, which;
(i)
Establishes that fee simple interest in the real property securing the loan is, as of the date of closing, vested in the borrower;
(ii)
May contain only exceptions and encumbrances approved by the Authority; and
(iii)
May not include exceptions for survey matters, general or blanket exceptions or materialman’s liens or for taxes or assessments that are due and payable as of the date of closing.
(4)
Appraisals. The Authority may require:
(a)
An appraisal of the real property assisted by the loan that establishes the property’s value after completion of the project; or
(b)
An appraisal of other real property that secures the loan that established that the property has sufficient value, taking into account all senior debt secured by a lien on the property, to secure the loan at an 80 percent loan to value ratio.
Regulation .07 Loan Administration.LinkCopy Citation
A.
Books and Records.
(1)
A borrower shall maintain the books, accounts, and records related to a loan or the activity funded by a loan that the Authority from time to time may require, and shall cause the borrower’s contractors and subcontractors to do the same.
(2)
A borrower shall file with the Authority financial and other reports as the Authority may from time to time require.
(3)
Books, accounts, and records required to be maintained under this section shall be:
(a)
Open for inspection by representatives of the Authority or the State during reasonable working hours before, during, or after repayment of the loan; and
(b)
Maintained and made available for inspection for up to 3 years after either the date of the borrower’s repayment of the loan or the termination of the contractual relationship between the Authority and the borrower, whichever is later.
(4)
A borrower shall, upon request of the Authority or the State, make the borrower’s administrative offices and personnel, whether full-time, part-time, consultants, or volunteers, available to discuss or address matters concerning administration of the loan or of the activity funded by a loan.
B.
Inspections. The Authority may conduct periodic inspections during the undertaking of an activity funded by a loan to assure that the activity is progressing in accordance with all terms and conditions of the loan documents or other requirements of the Authority.
C.
Reports. A borrower shall submit a final report, and interim reports as may be required by the Authority, that document progress and evaluate effectiveness of the activity funded by a loan.
D.
Nondiscrimination.
(1)
A borrower may not discriminate on the basis of age (except with respect to residents in elderly projects), race, color, religion, national origin, sex, sexual orientation, marital status, or physical or mental handicap in any aspect of the project financed under the Program, or in any aspect of employment by any borrower, or contractor for any project financed under the Program.
(2)
A borrower shall comply with all applicable federal, State, and local laws and Authority policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices including:
(a)
Titles VI and VII of the Civil Rights Act of 1964, as amended;
(b)
Title VIII of the Civil Rights Act of 1968, as amended;
(c)
The Governor’s Code of Fair Practices, as amended; and
(d)
The Authority's Minority Business Enterprise Program, as amended, if the borrower does not have a minority business participation program which is acceptable to the Authority.
Regulation .08 Loan Program Administration.LinkCopy Citation
A.
Except for waivers under Regulation .09 of this chapter, any action or decision required or permitted to be taken or made by the Authority under this chapter may be taken or made by the Authority’s designee.
B.
The Authority may terminate a loan or refuse to make additional disbursements of a loan if the Authority finds that the borrower is not in compliance with a requirement of the Loan Program or any term of the loan documents.
C.
The Authority may adopt written policies or guidelines related to administration of the Loan Program and shall post any such adopted policies or guidelines on the Trust’s website.
D.
The Authority may enter into agreements for loan servicing or other services useful to the operation of the Loan Program on terms acceptable to the Authority.
Regulation .09 Waiver.LinkCopy Citation
The Authority may waive or vary a provision of this chapter if the waiver or variance is consistent with the Act and, as determined by the Authority, application of the provision in a specific instance or case, or in an emergency situation, would be inequitable or contrary to the purposes of the Act.
Regulation .10 False Statements.LinkCopy Citation
A person who knowingly makes or causes to be made a false statement submitted or made to the Authority in connection with an application for a loan or affecting an existing loan is subject to any penalties authorized by law.
Chapter annotations
Authority: Financial Institutions Article, §§13-1107(6) and (12), 13-1113 and 13-1114, Annotated Code of Maryland
History: Effective date: October 13, 2003 (30:20 Md. R. 1448)
History: Regulation .04 amended effective April 24, 2017 (44:8 Md. R. 406)
History: Regulations .01—.13 repealed and new Regulations .01—.10 adopted effective November 4, 2019 (46:22 Md. R. 978)