Sec. 05.04.03.06. Loan Terms, Limits, and Requirements

All loans shall be made for the terms, and conform to the requirements, set forth below:

A. Interest Rate. The Department shall from time to time and, in accordance with the Act, establish the interest rate to be paid on all loans at a preferred rate.

B. Term. The Department shall establish the term of all loans which:

(1) May include a construction period of generally not more than 4 months; and

(2) May not exceed 10 years from completion of construction.

C. Loan Amount Restrictions. Restrictions on loan amounts are as follows:

(1) The minimum approvable loan amount shall be not less than $2,000;

(2) Except as otherwise provided in these regulations, the maximum amount of loans for improvements to any one migratory labor camp may not exceed $75,000;

(3) The preceding loan amount restrictions may be varied if, in the sole determination of the Department, the improvements required pursuant to the plan cannot reasonably be financed with the loan amount restrictions;

(4) If the plan is a multi-phased plan with respect to improvements to the migratory labor camp, and the owner applies to the Program for more than one loan, the preceding loan amount restrictions shall be applied separately to each loan; and

(5) Notwithstanding any other provision of these regulations, the total maximum amount of loans to any one borrower, or for improvements to any one migratory labor camp, may not exceed $200,000.

D. Loan-to-Value Ratio. Notwithstanding the provisions of §C of this regulation, a loan may not exceed an amount which, when added to any outstanding debts secured by or relating to the eligible migratory labor camp property, would equal 67 percent of the appraised value of the property after the proposed improvements are completed. If the total amount of outstanding debt relating to the property exceeds 67 percent of the appraised value, the borrower may pledge other assets of the borrower to satisfy the loan-to-value ratio. If other assets are pledged to secure the loan, any outstanding debts secured by or relating to the pledged assets shall be considered in determining the loan-to-value ratio.

E. Monthly Payment. The borrower shall repay the loan by single monthly payments which shall be applied to expenses, when applicable, interest, and principal, in that order.

F. Late Charge. Late charges, as permitted by law, will be charged.

G. Security for Loans. All loans shall be evidenced by a promissory note and any other documents that the Department may require. All loans shall be secured by a first lien, or in the discretion of the Department a second lien, mortgage, or deed of trust in a form required by the Department, which shall be recorded in the land records of the political subdivision in which the migratory labor camp property is located. Pursuant to §D of this regulation, the Department may require the borrower to provide additional security through an indemnity mortgage or a lien covering other assets of the borrower. If the borrower is a business entity, the principals of the business entity shall guarantee repayment of the loan and the performance of the borrower's obligations under the loan documents.

H. Disbursement. The Department shall disburse loan funds in accordance with a draw schedule approved before or at the loan closing. The draw schedule shall be based upon completion of specified items or a percentage of work. Payment shall be requested by the borrower and approved by the Assistant Director or his designee based on completed work.

I. Change of Ownership or Use.

(1) The borrower may not sell, cease to own, assign, transfer, dispose of, lease, refinance, or encumber all or any portion of the migratory labor camp property, or the borrower's interest in the property, during the loan term, without the prior written consent of the Department.

(2) The borrower may not cease to use all or any portion of the migratory labor camp property for purposes other than housing facilities for migratory workers during the loan term, or, if the loan is prepaid in full before its maturity, within 5 years of the date of prepayment without the prior written consent of the Department.

J. Prepayment. Borrowers may prepay a loan, in whole or in part, without penalty, at any time during the term of the loan.

K. Assumption. Loans may not be assumed without the prior written consent of the Department. However, an assumption may not be approved unless the proposed borrower qualifies as an eligible applicant in accordance with Regulation .04 of this chapter.

L. Insurance.

(1) The borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount not less than the sum of the loan and any prior debts secured by the migratory labor camp property.

(2) The insurance policy or policies shall:

(a) Be written by companies authorized to transact business in the State;

(b) Be written by companies which are reputable and financially sound, as determined by the Department;

(c) Be in force at the time of the loan closing;

(d) Name the Department as mortgagee in a standard mortgagee clause attached to or printed in the policy; and

(e) Contain terms and coverage satisfactory to the Department.

M. Flood Insurance. If the migratory labor camp is located in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, it shall be covered by a flood plain insurance policy in an amount equal to the loan, naming the Department as beneficiary. The policy may not be terminated without prior notification to the Department. Before initiation of construction of the improvements, the borrower shall secure all necessary flood plain permits from the Maryland Department of Natural Resources and the political subdivision in which the migratory labor camp is located.

N. Title Insurance. The borrower shall provide a title insurance policy in standard ALTA form, or any other form approved by the Department naming the Department as an insured mortgagee, and containing only standard exceptions and encumbrances approved in writing by the Department.

O. Appraisals.

(1) Before the approval of a loan, the borrower shall submit an appraisal of the migratory labor camp property which, at the discretion of the Department, shall be prepared by either of the following:

(a) A certified MAI, SREA, or SRA appraiser; or

(b) A person, financial institution, or entity acceptable to the Department with prior experience in appraising real property.

(2) The appraisal shall indicate the property's value before and after the proposed improvements and shall be in a form and conducted in a manner acceptable to the Department.

(3) If machinery, equipment, or other personal property is also proposed to secure the loan, the borrower shall submit an appraisal of the machinery, equipment, or other property performed by a licensed auctioneer or other person generally engaged in the business of valuating equipment and whose experience and qualifications are acceptable to the Department.

P. Escrow Account. If there is no prior mortgage on the migratory labor camp property requiring the payment of expenses to the mortgagee, the Program mortgage or deed of trust shall require the borrower to make monthly expense payments to the Program in escrow consisting of 1/12 of annual real estate taxes, property insurance premiums, and when appropriate, other items for which payments are required by the Department. Interest on the escrowed expense funds shall be credited to the escrow account at the rates and terms set forth in the documents evidencing and securing the loan.

Q. Eligible Costs.

(1) The proceeds of a loan may be used to finance the following eligible costs:

(a) Construction of necessary improvements;

(b) Architectural, planning, technical, or design fees.

(2) All closing costs, together with the cost of appraisals, and any other costs incidental to loan approval shall be paid by the borrower.

R. Compliance with Laws. The borrower shall agree to comply with all applicable State and federal laws, orders, ordinances, and regulations, including, by way of example, the laws, orders, ordinances, and regulations relating to equal opportunity.

S. Default.

(1) A loan is in default when:

(a) Any payment required by the loan documents is 90 days delinquent;

(b) There is a default in any other term or condition of any loan document; or

(c) As set forth in § T of this regulation, a representation made by the borrower in the application or any document submitted to the Program in connection with the loan is determined to have been untrue.

(2) Remedies for default shall include all remedies provided for in the loan documents, in the Act, or by law.

(3) In the event of any default by the borrower, the Department may, after notice to the borrower, increase the interest rate of the loan to the prevailing private mortgage rate.

T. Any borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's actions, shall be subject to the criminal penalties set forth in the Act in addition to immediate acceleration of the loan.