Code of Maryland Regulations
Title 14 - INDEPENDENT AGENCIES
Subtitle 29 - MARYLAND HERITAGE AREAS AUTHORITY
Chapter 14.29.04 - Maryland Heritage Areas Loan Program
Section 14.29.04.06 - Loan Terms and Conditions

Universal Citation: MD Code Reg 14.29.04.06

Current through Register Vol. 51, No. 19, September 20, 2024

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(ll)(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, inform, 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, inform, 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.

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