Md. Code Regs. 05.04.09.16

Current through Register Vol. 51, No. 24, December 2, 2024

Section 05.04.09.16 - Loan Payments

A. Payments Generally.

(1) Loan funds may not be disbursed if there is any arrearage of interest payments or escrows required by the loan.

(2) Loan proceeds designated to finance modification or construction costs shall be held in escrow by the Department and disbursed at the discretion of the Department either upon completion of the modification or construction, or in accordance with a payment schedule approved by the Department.

(3) Payments of construction draws shall be by joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director.

(4) Except as provided in §C of this regulation, payments shall be made for work completed only. Payments may not be made for materials delivered to the site but not installed in the project.

(5) Payment of construction draws shall be requested by the borrower. Loan funds may be disbursed to the borrower upon request, except for final draws or as otherwise provided for in §F(1), (2), or (3) of this regulation.

B. Advance Payments. Advances or down payments may be made to contractors to purchase materials delivered on site or valid purchase requisitions not to exceed 10 percent of the contract costs.

C. Initial Payments. The portion of the loan used to finance the purchase of the building or land closing costs shall be disbursed at loan closing.

D. Progress Payments.

(1) Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipt 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.

(3) If a request for payment is refused, the Program shall notify the borrower. The determination of the Program as to percentage of work completed is final.

E. Final Payment.

(1) Final payment shall be made as set forth in §E(2)-(5) of this regulation.

(2) The borrower shall submit to the Program a certificate of completion, executed by the borrower and contractor, certifying that all work has been completed in accordance with the contract documents.

(3) Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed.

(4) If, in the opinion of the Department, the contractor has satisfied the contract and the borrower refuses to request or release the final payment, then the Program may follow the procedures described below:

(a) The Program may require the borrower to explain in writing, within 10 days, why the Department should not make direct payment to the contractor;

(b) If the borrower responds within the 10-day period and requests a meeting, the Program Director shall hold a meeting at which the borrower shall present the borrower's objections to requesting or releasing the final payment;

(c) The Program may then approve direct payment to either the contractor or the borrower.

(5) If the Program 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 Department 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.

F. Retainage.

(1) The Program shall retain until final payment 10 percent of the construction costs for all projects for which the borrower is responsible for project inspections.

(2) The Program, at its discretion, may elect to retain until final payment 10 percent of the construction 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.

G. Closeout Procedures.

(1) After final payment is made, the Department shall reconcile all receipts and disbursements.

(2) Funds remaining in the loan amount shall be disbursed to the borrower or applied to the principal balance of the loan, as determined by the Department.

(3) A shortage due to overpayment shall be remitted by the borrower. If reimbursement of the overpayment is not made by the borrower within 60 days of receipt of the letter, the Department shall pursue any appropriate legal remedies for collection.

Md. Code Regs. 05.04.09.16

Regulations .16 adopted effective May 25, 1992 (19:10 Md. R. 929)
Regulation .16 amended effective November 29, 1999 (26:24 Md. R. 1856)
Regulation .16F amended effective February 7, 2011 (38:3 Md. R. 151)