Md. Code Regs. 34.04.02.08

Current through Register Vol. 51, No. 17, August 23, 2024

Section 34.04.02.08 - Terms and Requirements for Loans and Transfers

A. General Requirements for Loans. Loans shall meet the following requirements:

(1) Maximum Loan Amount. The Trust shall establish a maximum loan amount for any proposed project proportionate to the value of the historic property to be assisted less any preexisting indebtedness secured by the historic property.

(2) Interest Rate.

(a) From time to time, the Trust shall establish interest rates in accordance with State Finance and Procurement Article, § 5A-327(i)(1)(iv), Annotated Code of Maryland.

(b) Interest rates may be preferred in relation to rates for other loans made at the time if:

(i) The borrower is a nonprofit organization or a local jurisdiction; or

(ii) Upon conclusion of any scheduled restoration or rehabilitation of the historic property, it will be occupied in whole or in part by individuals or families of limited income as determined by the Secretary of Housing and Community Development under Housing and Community Development Article, § 4-212, Annotated Code of Maryland.

(3) Insurance. The borrower shall cause the assisted historic property 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 Trust in amounts satisfactory to the Trust, as described in §C of this regulation.

(4) Term. Except as otherwise provided in Regulation .05A(5)(a) of this chapter regarding loans for preparation costs, the term of each loan may not exceed 20 years.

(5) Loan Repayment.

(a) Except as otherwise provided in §A(5)(b) of this regulation, a single monthly payment shall be charged which shall be applied to expenses, when applicable, interest, and principal in that order.

(b) At the discretion of the Trust, interest and principal repayments may be deferred in accordance with the terms and provisions of the loan documents.

(6) Late Charge. The Trust may impose late charges, as permitted by law.

(7) Security.

(a) Loans from the Trust may be secured, at the discretion of the Trust, by collateral acceptable to the Trust; and

(b) Collateral acceptable to the Trust may include:

(i) A cash escrow;

(ii) A letter of credit;

(iii) A pledge of depository accounts;

(iv) A pledge of accounts receivable;

(v) An assignment of income;

(vi) A security interest in machinery and equipment;

(vii) A mortgage or deed of trust on the historic real property assisted by the loan;

(viii) A mortgage or deed of trust on other real property satisfactory to the Trust; or

(ix) Guarantees of repayment from guarantors acceptable to the Trust.

(8) Preservation Agreement. The borrower, and the owner of the assisted historic property if the owner is not the borrower, shall enter into an agreement with the Trust to preserve and maintain the historic property in such manner and for such duration as is acceptable to the Trust.

(9) Plans and Specifications.

(a) The plans and specifications for borrower's rehabilitation and restoration projects under Regulation .05A(2) and (3) of this chapter or for a preparation cost project under Regulation .05A(5) of this chapter shall be subject to review and approval by the Trust.

(b) All work carried out on projects shall comply with:

(i) The Secretary of the Interior's Standards for the Treatment of Historic Properties ( 36 CFR Part 68 ); and

(ii) Standards for acquisition, rehabilitation, and restoration established by the Trust as well as any other applicable standards and requirements established by the Trust.

(10) Disbursement. Disbursement of loan funds will be made as the project progresses based upon requests for disbursement submitted by the borrower in a form satisfactory to the Trust.

(11) Modification of Loan. In order to facilitate the successful completion or operation of a project, the Trust may modify:

(a) The rate of interest;

(b) The time or amount of payment; or

(c) Any other term of a loan.

(12) Acceleration of Loan. In accordance with the terms of the loan documents, the Trust may accelerate the payment of the entire principal and interest due if the:

(a) Borrower defaults on the loan;

(b) Encumbrance of the deed of easement referred to in §C(5) of this regulation is extinguished by the foreclosure of a prior lien or otherwise; or

(c) Deed of easement referred to in §C(5) of this regulation or the preservation agreement referred to in §A(8) of this regulation is determined not to be legally enforceable by the Trust for any reason.

(13) Change of Ownership. The borrower may not sell, cease to own, assign, transfer, or dispose of all or any portion of the historic property during the term of the loan without the prior written consent of the Trust.

(14) Prepayment Penalty. The Trust may not charge a prepayment penalty.

(15) Other Requirements. The Trust may establish other terms and conditions in the loan documents as considered reasonable and necessary by the Trust.

B. Deferred Loan Requirements. In addition to the conditions and requirements of §A of this regulation, deferred loans shall meet the following additional requirements:

(1) The loan term may provide for deferred payments of either principal or interest or of both principal and interest.

(2) The deferred terms shall provide for repayment of deferred amounts at the maturity date or any earlier date established by the Trust, or upon any sale or other transfer of the real property securing a loan, or any sale or other transfer of an interest in such real property. The Trust may, but need not, charge interest on deferred interest payments.

C. Real Property Requirements for Loans. In addition to the conditions and requirements of §§A and B of this regulation, when real property secures or is assisted by the loan, the loan shall meet the following requirements:

(1) Mortgage or Deed of Trust.

(a) A mortgage or deed of trust on real property securing a loan shall be recorded in the land records of the political subdivision in which the real property is situated.

(b)The mortgage or deed of trust may be subordinate to other recorded mortgage liens, provided that the Trust and the other mortgagee or mortgagees give any required consents.

(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 continues to maintain the following insurance, as required by the Trust:

(i) Owner's liability;

(ii) Contractor's liability; and

(iii) Owner's property or hazard, or builder's risk.

(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 Trust in the event the property and 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 Trust; and

(iv) Contain such other terms and coverage satisfactory to the Trust.

(c) Owner's liability insurance shall:

(i) Name the Trust as an additional insured; and

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

(d) Contractor's liability insurance shall:

(i) Name the Trust as an additional insured; and

(ii) Remain in place through completion of construction the project or such later date as the Trust may require.

(e) Owner's property or hazard insurance and builder's risk insurance shall:

(i) Name the Trust as an additional insured, loss payee, and mortgagee; and

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

(3) Title Insurance.

(a) The Trust may require the borrower to provide a standard American Land Title Association Loan Policy - 2021, as amended, which shall

(i) Be issued by a title insurance company acceptable to the Trust;

(ii)Be issued in an amount equal to the maximum principal amount of the loan;

(iii) Insure the Trust as additional insured and mortgagee;

(iv) Evidence that title to the real property on which the improvements are located is, as of the date of closing, vested in the borrower;

(v) Contain only exceptions and encumbrances approved by the Trust; 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) In its discretion the Trust may require the borrower to provide an attorney's certificate of title or other evidence of title acceptable to the Trust, which:

(i) Establishes that title to the real property on which the improvements are located is as of the date of closing, vested in the borrower;

(ii) May contain only exceptions and encumbrances approved by the Trust; 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 Trust, in its discretion, may require:

(a) An appraisal of the assisted historic real property that secures a loan, showing the property's value after completion of any scheduled restoration or rehabilitation; or

(b) An appraisal of other real property that secures a loan, showing the property has sufficient value, taking into account all senior liens, to secure the lien at an 80 percent loan to value ratio.

(5) Deed of Easement.

(a) If the real property assisted by the loan is historic property, the borrower and the owner of the real property, if the owner is not the borrower, shall convey to the Trust a deed of easement containing preservation covenants applicable to the real property, in form, substance, and duration satisfactory to the Trust, which shall:

(i) Be recorded in the land records of the political subdivision in which the real property is situated;

(ii) Satisfy the preservation agreement requirement of §A(8) of this regulation.

(b) The preservation agreement or deed of easement requirements set forth in §§A(8) and C(5)(a) of this regulation may be modified or waived by the Secretary if the Secretary determines that such an agreement or easement is impracticable under the circumstances.

(c) The requirement in §C(5)(a) of this regulation that a deed of easement be conveyed by a property owner if the owner is not the borrower may be modified or waived by the Director, as necessary, if the subject property is long-term leasehold property.

D. General Requirements for Transfers. Transfers shall meet the following requirements:

(1) A transferee receiving a transfer from the Trust to make one or more subloans, in consultation with the Director, shall adopt appropriate guidelines to carry out the purposes enumerated in Regulation .05C(d) and (e) of this chapter.

(2) A transferee shall make the following information about subloans available on its website:

(a) The guidelines established under §D(1) of this regulation;

(b) The availability of funds; and

(c) Information on projects receiving financial assistance from a transfer.

(3) Use of Transfers for Administrative Costs and Programmatic Expenses.

(a) A transfer may be used to pay:

(i) Eligible administrative costs; and

(ii) Eligible programmatic expenses.

(b) The administrative costs and programmatic expenses of transferee's staff who perform both administrative and programmatic functions shall be allocated between the two different expense types and evidenced by accurate time reports.

(c) Administrative costs and programmatic expenses may not be paid with any portion of a transfer that consists of State general obligation bond funds.

(d) Administrative costs and programmatic expenses may be paid with any portion of a transfer that consists of special funds if:

(i) The administrative costs and programmatic expenses are related to the restoration or rehabilitation of historic properties owned by the transferee for resale or lease, or are necessary to carry out the transfer of funds; and

(ii) The total administrative costs and programmatic expenses do not exceed 10 percent of the portion of a transfer that consists of special funds.

(4) Insurance.

(a) A transferee shall cause historic property that it acquires, restores, or rehabilitates for resale or lease with transfer funds to be insured against loss or damage by fire and other hazards, casualties, and contingencies through a policy that complies with the requirements set out in §C(2) (b) of this regulation.

(b) A transferee whose project involves the operation of a preservation loan fund program may be required to carry director and officer liability or employee dishonesty insurance policies, satisfactory to the Trust, which cover all individuals responsible for the security and control of the transfer.

(5) Deed of Easement. The transferee, as a condition of the sale or lease of historic property that it has acquired, restored, or rehabilitated with proceeds of a transfer, shall require the purchaser or lessee to:

(a) Enter into a preservation agreement with the transferee, or another entity approved by the Trust, to preserve and maintain the historic property in such manner and for such duration as is acceptable to the Trust; or

(b) Convey to the transferee, or another entity approved by the Trust, a deed of easement containing preservation covenants applicable to the real property, in form, substance, and duration satisfactory to the Trust, which shall be recorded in the land records of the political subdivision in which the real property is located.

(6) Plans and Specifications.

(a) The plans and specifications for projects involving a transferee's rehabilitation and restoration of its own property for resale or lease funded under Regulation .05C(1)(b) of this chapter, including preparation costs, shall be subject to review and approval by the Trust.

(b) All work carried out on projects involving a transferee's rehabilitation and restoration of its own property for resale or lease shall:

(i) Comply with the Secretary of the Interior's Standards for the Treatment of Historic Properties (36 CFR Part 68); and

(ii) Conform to standards for acquisition, rehabilitation, and restoration established by the Trust as well as any other applicable standards and requirements established by the Trust.

(7) Maximum Transfer Amount. The Trust shall establish a maximum transfer amount for any proposed project, including a maximum transfer amount proportionate to the value of any historic property to be assisted by a transfer, less any preexisting indebtedness secured by the historic property.

(8) Disbursement. Disbursement of a transfer will be made as a one-time disbursement based upon a request for disbursement submitted by the transferee in a form satisfactory to the Trust.

(9) Appraisals. For transfers to acquire, restore, or rehabilitate historic property, the Trust, in its discretion, may require an appraisal of the assisted historic real property, showing the property's value after completion of any scheduled restoration or rehabilitation.

(10) Other Requirements. The Trust may establish other terms and conditions of the transfer, including disbursement requirements and default and remedy provisions, as considered reasonable and necessary by the Trust.

Md. Code Regs. 34.04.02.08

Regulation .08 amended effective 43:20 Md. R. 1111, eff. 10/10/2016; amended effective 46:6 Md. R. 347, eff. 3/25/2019; amended effective 51:16 Md. R. 744, eff. 8/19/2024.