Sec. 05.13.06.08. Terms and Conditions of Financial Assistance

A. The financial assistance from the Program shall be on such terms as the Department considers necessary to make the project financially feasible.

B. Financial assistance in the form of a loan from the Program may be secured, at the discretion of the Department, by a security instrument described in §C of this regulation, which may be subordinate to other security interests.

C. The security shall be acceptable to the Department and may be:

(1) A mortgage or deed of trust lien;

(2) A cash escrow;

(3) A letter of credit;

(4) A pledge of depository accounts;

(5) A pledge of accounts receivable;

(6) An assignment of income;

(7) A security interest in machinery and equipment; or

(8) Any other form of security or collateral acceptable to the Department.

D. The principal and interest of a loan made or guaranteed under the Program shall:

(1) Be repayable out of revenues specified by an approved applicant;

(2) Bear interest at a rate determined to be necessary and reasonable for the project which may be as low as zero percent; and

(3) Be repayable in accordance with a schedule determined by the Department and may be on a deferred payment schedule.

E. In order to facilitate the successful completion or operation of a project, the Department may modify:

(1) The rate of interest;

(2) The time or amount of payment; or

(3) Any other term of a loan.

F. Default. In the event of default, the Department shall have the right to modify the rate of interest, the time or amount of payment, or any other term of financial assistance in order to ensure repayment and achieve the purposes of the Program.

G. Property, Liability, and Other Insurance.

(1) At or before closing of the financial assistance, and at such other times as required by the Department, the applicant shall provide evidence that the applicant, contractor, and other parties have obtained and maintained the following insurance:

(a) Owner’s liability;

(b) Owner’s property or hazard or contractor’s builder’s risk;

(c) Contractor’s liability;

(d) Business income;

(e) Architect’s errors and omissions; and

(f) Engineer’s errors and omissions.

(2) All insurance required under §G(1) of this regulation shall meet the following requirements:

(a) Be written by a company registered with the Maryland Insurance Administration, or a company approved by the Department in the event the property and company are located out of State;

(b) Be in force at the time of closing;

(c) Not be terminable without prior notification to the Department; and

(d) Contain such other terms and coverage satisfactory to the Department.

(3) In addition to the requirements of §G(2) of this regulation, owner’s liability and business income insurance shall:

(a) Name the Department as an additional insured; and

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

(4) In addition to the requirements of §G(2) of this regulation, contractor’s liability insurance shall:

(a) Name the Department as an additional insured; and

(b) Remain in place through final closing or such later date as the Department requires.

(5) In addition to the requirements of §G(2) of this regulation, owner’s property or hazard insurance and builder’s risk insurance shall:

(a) Name the Department as an additional insured, loss payee, and mortgagee; and

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