Current through Register Vol. 50, No. 25, December 15, 2023
A. Monitoring.
(1) The local administrator shall monitor
loans and disbursement of loan funds during rehabilitation to assist borrowers
and to assure that loan funds are properly used.
(2) Based on Program guidelines, the local
administrator shall determine the frequency and level of inspections during
rehabilitation taking into consideration:
(a)
The capability of the borrower;
(b)
The demonstrated experience and reliability of the contractor;
(c) The amount of the loan;
(d) The availability of local technical
assistance; and
(e) Other factors
considered relevant by the Department.
(3) The local administrator may charge
borrowers a fee for inspections during rehabilitation, as approved by the
Department.
B. Payments
Generally.
(1) Loan funds shall be disbursed
in full at the closing of the loan to an account held on behalf of the borrower
by either the political subdivision that is the local administrator for the
loan or the subcontractor. The loan funds shall be held in an account
established under §C of this regulation.
(2) The local administrator or the
subcontractor shall disburse the loan proceeds in accordance with the
requirements of §B(3)-(5) of this regulation.
(3) Loan funds may not be disbursed if
payments of interest or escrows required by the loan documents are in
arrears.
(4) Payments of draws
shall be by joint payee check issued to the borrower and contractor unless an
alternative payment method is approved by the Program Director.
(5) Except as provided in §D of this
regulation, payments shall be made only for work completed. Payments may not be
made for material delivered to the site but not installed in the
project.
C. Loan
Accounts.
(1) Loan funds shall be held in a
non-interest-bearing account established by the local administrator or the
subcontractor and approved by the Department. The account may be:
(a) An account with a depository institution
that is separate from the other operating accounts of the local administrator
or subcontractor;
(b) An account
with a depository institution that is not separate from the other operating
accounts of the local administrator or subcontractor using a separate
reconciled general ledger account for all Program funds;
(c) An escrow account or attorney's trust
account held and managed by an escrow agent if the escrow agent meets the
following minimum criteria to the satisfaction of the Department:
(i) Any employee of the escrow agent with
access to the account shall be covered by a fidelity bond, or insured with
employee dishonesty liability insurance, in an amount not less than
$100,000;
(ii) The escrow agent
shall provide the local administrator or the subcontractor, if any, and the
Department with any statements required under §C(2) of this regulation;
and
(iii) Any other requirements
established by the Department; or
(d) Another type of account approved by the
Department.
(2) The
Department may require the local administrator or the subcontractor to provide
periodic statements to the Department of all loan funds in an account. If the
statements do not correspond with the Department's records of loan funds in the
account, the local administrator or the subcontractor shall work with the
Department to reconcile the differences.
(3) The Department may revoke, at any time,
its approval of any loan account established under this regulation.
D. Advance Payments. Advances or
down payments may be made to contractors to purchase materials delivered on
site or valid purchase requisitions not to exceed 20 percent of the contract
costs.
E. Progress Payments.
(1) Progress payments may not be made until
the borrower has delivered satisfactory evidence, such as receipts or bills, of
the amount of the payment requested.
(2) Progress payments may not be made without
an inspection to verify completion of the work, except at the discretion of the
Department or the local administrator, when the entire cost of the project is
$60,000 or less. At a minimum, however, the local administrator shall verify
completion of the work before disbursing the final payment, as described in
§F of this regulation.
(3) If
a borrower's request for payment is refused, the local administrator shall
notify the borrower. The determination of the local administrator as to
percentage of work completed is final.
F. Final Payment. Final payment shall be made
as follows:
(1) A borrower shall submit to the
local administrator a certificate of completion, executed by the borrower and
contractor, certifying that all work has been completed in accordance with the
contract documents.
(2) Upon final
inspection and receipt and approval of the certificate of completion, final
payment shall be processed.
(3) If,
in the opinion of the local administrator, the contractor has satisfied the
contract and the borrower refuses to request or release the final payment, then
the local administrator may follow the following procedure:
(a) The local administrator may require the
borrower to explain in writing within 10 days why the local administrator
should not make direct payment to the contractor;
(b) If the borrower responds within the
10-day period and requests a meeting, the local administrator shall hold a
meeting at which the borrower shall present the borrower's objections to
requesting or releasing the final payment;
(c) The local administrator, in its
discretion, may then either approve or disapprove direct payment to the
contractor or the borrower.
(4) If the local administrator receives
written notice that subcontractors, materialmen, or suppliers have not been
paid for work done or material supplied to and for the project, and all loan
funds have not yet been disbursed, the local administrator shall retain an
amount equal to the lesser of all funds not yet disbursed and the amount
sufficient to satisfy the claims until satisfactory evidence of satisfaction
and release by the subcontractors, materialmen, or suppliers is presented. The
contractor shall promptly pay or bond any liens established.
G. Retainage.
(1) The local administrator shall retain
until final payment 10 percent of the contract proposal costs for all projects
for which the borrower is responsible for project inspections.
(2) The local administrator, at its
discretion, may elect to retain until final payment 10 percent of the contract
proposal costs for any other project, taking into consideration:
(a) The type of project;
(b) The contractor's experience;
and
(c) Other factors the Program
considers relevant.
(3)
The retainage shall be released at final payment upon verification that all
contracted rehabilitation items are complete and acceptable to the
Department.
H. Closeout
Procedures. After final payment is made, the local administrator or the
subcontractor shall reconcile all receipts and disbursements and prepare a
close-out statement. A copy of the close-out statement shall be forwarded to
the Program and the servicer.
Regulation .15B amended
effective February 11, 1985 (12:3 Md. R. 243)
Regulations .15
adopted effective July 22, 1991 (18:14 Md. R. 1609)
Regulations .15
amended effective November 9, 1992 (19:22 Md. R. 1986)
Regulation
.15 amended effective February 22, 1999 (26:4 Md. R. 272)
Regulation .15E amended effective September 29, 2003 (30:19 Md. R.
1329); amended effective
43:13
Md. R. 712, eff. 7/4/2016