CCLME.ORG - DIVISION 1. HOUSING AND COMMUNITY DEVELOPMENT

(continued)
(b) Except as otherwise provided in this subsection (b), all program income and recaptured funds shall be remitted directly to the Department for deposit into the Department's local account.
(1) If requested by the State Recipient, the Department shall allow program income and recaptured funds to be deposited into the State Recipient's local account, subject to the requirements of 24 CFR Sections 92.502(c)(3) and 92.503(a)(1).
(2) If requested by a CHDO, the Department shall allow recaptured funds and proceeds from the investment of HOME funds to be retained by a CHDO that meets the requirements of subsection (c) of this section.
(3) Where HOME funds are invested in housing to assist acquisition by a first-time homebuyer who sells the home unit or repays the loan prior to the end of the required affordability period, the HOME funds repaid to the CHDO or State Recipient shall be recaptured, exceptions may be requested to use resale for limited equity forms of ownership like cooperatives and community land trust.
(4) State Recipients and CHDOs that retain program income, proceeds from the investment of HOME funds, and recaptured funds shall submit quarterly reports and an annual report documenting all local account activity. Failure to submit the required reports shall result in a negative performance rating in future applications from funding. Continued failure to comply with all federal and state requirements for use of these funds shall result in a termination of the agreement for the State Recipient or CHDO to retain such funds.
(c) The Department may permit a CHDO to retain collections if it demonstrates to the satisfaction of the Department all of the following:
(1) adherence to program requirements and deadlines identified in Sections 8216 and 8217 in the last four preceding State HOME contracts including CHDO certification and application requirements identified in Sections 8204 and 8204.1 and federal overlays;
(2) successful completion of at least six housing projects with a total of at least 100 units;
(3) no unresolved monitoring findings on completed HOME projects; and
(4) service to the community, as defined by Section 8204.1(e), of at least ten years;
(d) A CHDO that meets the requirements of subsection (c) shall be subject to the requirements of 24 CFR Section 92.502(c)(3), but shall only use proceeds from the investment of HOME funds for eligible activities pursuant to 24 CFR Sections 92.205 and 92.206. A CHDO that has been permitted to retain proceeds in one HOME standard agreement shall be permitted to retain proceeds in all future contracts. If at any time a CHDO fails to demonstrate compliance with the requirements of subsection (c), the Department may require the CHDO to remit all future collections to the Department.
(e) When a CHDO applies for a rental housing development and the Department has approved the CHDO to retain proceeds in accordance with Section 8206 .1(b)(2), the rental housing development shall:
(1) be underwritten by the Department in compliance with Section 8212.2;
(2) comply with 24 CFR part 92 which includes project requirements specified in 24 CFR Sections 92.250, 92.251, 92.252, and 92.253; and
(3) be inspected by the Department pursuant to 24 CFR Section 92.504(d)(1).
(f) In the event of a breach or violation of Section 8206.1(e)(1) and (2) by the CHDO and the breach or violation is not cured to the satisfaction of the Department, the Department may declare a default and may seek all available legal remedies including the following:
(1) Collect all rents and income in connection with the operation of the development;
(2) Take possession of the development in accordance with Section 8206.1(e)(1) and (2);
(3) Apply to any court, State or federal, for specific performance of this Agreement or for the appointment of a receiver to take over and operate the development;
(4) Accelerate all amounts, including outstanding principal and interest due. Declare a default and initiate a foreclosure in accordance with the provisions of the HOME Deed of Trust and State law regarding foreclosures.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.254, 92.300, 92.502(c)(3), 92.503 and 92.503(a)(1); and Sections 50896 and 50896.1, Health and Safety Code.

s 8207. Amount of HOME Assistance.
(a) The amount of HOME funds invested in a project:
(1) shall not exceed the per unit dollar limits established by HUD under 24 CFR Section 92.250; and
(2) is limited to the amount necessary, when considered with other financing and assistance, to accomplish the following:

(A) enable the project as proposed to be developed and to operate in compliance with all HOME requirements;
(B) for first-time homebuyer projects and programs, allow homebuyers to purchase homes utilizing loans from primary lenders. (Notice: First-time homebuyers shall be required to obtain financing from primary lenders in addition to HOME financing.) Loans from primary lenders shall comply with the following requirements:
(i) the loan must have a 30 year term, except for US Department of Agriculture Rural Housing Service 502 loans, which may have terms of 33 or 38 years;
(ii) the loan must be fully amortizing and have a fixed interest rate that does not exceed the current market rate, as established by an index identified in the NOFA. No temporary interest rate buy-downs are permitted;
(b) A recipient of a conditional reservation for a rental project shall be required to submit an updated sources and uses and an operating budget within 15 days of obtaining permanent financing commitments and at least 45 days prior to the date of anticipated construction or acquisition loan closing. The Department shall conduct a feasibility analysis and subsidy layering analysis. If the project is determined to be feasible, a final funding amount will be set based upon the subsidy layering analysis.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.205(c) and 92.250; and Sections 50896 and 50896.1, Health and Safety Code.

s 8208. Affordability Requirements.
(a) In order to qualify under these regulations for funding as an affordable rental housing project, the project shall meet the periods of affordability specified in the following table, and shall comply with the other requirements of 24 CFR Sections 92.252, 92,255 and 92.258.

Minimum Period
Amount of HOME of Affordability

Assistance Activity Assisted in Years
Less than 15,000 Rehabilitation of existing 10 years
per unit rental housing
$15,000 to $40,000 Rehabilitation of existing 15 years
rental housing
More than $40,000 Rehabilitation of existing 20 years
rental housing
Any dollar amount Acquisition and 55 years
Rehabilitation, Acquisition
and or New construction of
rental housing

(b) Homeownership units assisted with HOME funds shall meet the requirements of 24 CFR sections 92.254, 92.255 and 92.258. Except for owner-occupied units being rehabilitated with HOME funds, all assistance shall be made available only to first-time homebuyers.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.252, 92.254, 92.255, 92.257, 92.258, 201.10, 203.18, 234.27, 813.102 and 888.111; Section 6932, Government Code; and Sections 50896 and 50896.1, Health and Safety Code.

s 8209. Tenant-Based Rental Assistance.
Unless otherwise requested by the state recipient, eligibility for HOME-funded tenant-based rental assistance and security deposit assistance shall be restricted to families who maintain residence within the boundaries of the jurisdiction where the assistance is provided. The state recipient shall comply with the provisions of 24 CFR sections 92.209. In all cases, assistance shall be restricted to the boundaries of the state and shall continue to be the responsibility of the state recipient.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR part 882 and 882.209(a)(7); 42 USC 12742; and Sections 50896 and 50896.1, Health and Safety Code.

s 8210. Application Process.
(a) Within a funding cycle, the Department shall issue one or more NOFAs.
(b) Eligible applicants, defined as those that comply with the provisions in Section 8204, may submit only one application in response to a NOFA.
(c) Applications from CHDOs shall propose only activities that are eligible to qualify as CHDO setaside activities pursuant to 24 CFR Section 92.300(a).
(d) The NOFA shall specify, among other things, the maximum amount of funds available to a State Recipient or CHDO under the NOFA, the time frame for submittal of applications, the application requirements pursuant to Section 8211, the allocation of rating points pursuant to Section 8212, the matching contribution requirements pursuant to Section 8206, the value of voluntary labor as determined by HUD pursuant to 24 CFR Section 92.220(a)(8), any prohibitions on uses of funds, the availability of administrative funds, and the general terms and conditions of funding allocations.
(e) The Department shall only consider applications that are complete, as defined by Section 8211(b), and contain all the information required by Section 8211(c).
(f) If funds are disencumbered pursuant to Section 8218, made available due to an unexecuted standard agreement or made available by HUD pursuant to 24 CFR Section 92.451, the Department may make such funds available to (1) the next highest-ranked unfunded or partially-funded application from the most recent award of funds if the applicant can demonstrate that a proposed activity can be successfully implemented and executed, or (2) through the next published NOFA pursuant to subsection (a).
(g) In order to comply with any set-aside established by HUD or the Department, or special allocation made by HUD, the Department may do one or more of the following:
(1) issue a special NOFA;
(2) specify in each NOFA the reservation of a portion of the funds; and
(3) specify in each NOFA any waivers to requirements granted by HUD in connection with the funds.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Section 92.451; and Sections 50896, 50896.1 and 50896.3, Health and Safety Code.

s 8211. Application Requirements/Form.
(a) Application shall be made on a form made available by the Department that requests the information required by these regulations.
(b) An application shall be deemed complete when the Department is able to determine from the information provided whether the application is eligible for rating pursuant to the requirements of Section 8212(a).
(c) All applications shall be required to contain the following:

(1) identification of the applicant;
(2) information on the proposed activity(ies);
(3) information adequate to determine whether the applicant is eligible, in accordance with Sections 8204 and 8204.1;
(4) information adequate to determine whether the activity is eligible, in accordance with Sections 8205 and 8210(c);
(5) information indicating whether the applicant or any member of its program team or project team has any unresolved audit findings or has been suspended or debarred from participation in any federal or State housing or community development program;
(6) information on any pending litigation affecting the applicant's ability to carry out the activity;
(7) identification of any administrative subcontractor;

(8) a certification that the applicant will comply with State and federal requirements;
(9) a resolution by the governing board of the applicant authorizing the application and the execution of all required documents;
(10) information adequate to determine the experience of the applicant with other federal, State or local housing or community development programs;
(11) identification of all members of the program team or project team;
(12) information on sources and amounts of matching contributions, in accordance with Section 8206, and sources and amounts of leverage, as defined in Section 8201.
(d) In addition to the information required by subsection (c), applications proposing programs shall be required to contain the following:
(1) information on which member of the program team is responsible for accomplishing key administrative tasks;

(2) information on the projected administrative budget and sources of funds to pay for the costs of administering the program;
(3) information adequate to determine the experience of the applicant in administering a program to assist the same type of activity proposed in the application;
(4) a description of how the applicant proposes to use HOME funds;
(5) a copy of the guidelines to be used by the applicant for administering the program in compliance with State and federal requirements;
(6) information adequate to determine the feasibility of the program;
(e) In addition to the information required by subsection (c), applications proposing projects shall be required to contain the following:
(1) a description of the roles, financial structure and all legal relationships of the applicant, developer, owner(s), managing general partner, administrative subcontractor and all other partners in the construction project;

(2) information adequate to determine the experience of the applicant, developer, owner and managing general partner in developing the same type of subsidized project as proposed by the application;
(3) information adequate to determine the readiness of the project to proceed;
(4) information adequate to determine the feasibility of the proposed project, including information adequate to determine the financial feasibility of the project in accordance with Section 8212(d)(3) and the Uniform Multifamily Regulations (commencing with Section 8300); and
(5) if applicant is a CHDO, the procedures to ensure the CHDO's effective project control of activities assisted with HOME funds pursuant to 24 CFR Section 92.300(a)(1).

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.1, 92.201, 92.205, 92.209, 92.214(a), 92.252, 92.254, 92.300(a)(1) and 92.500; Section 65588, Government Code; and Sections 50896, 50896.1 and 50896.3, Health and Safety Code.

s 8212. Application Selection and Evaluation.
(a) Applications shall not be considered for funding unless the application is received within the time frames specified in the NOFA and demonstrates that all of the following conditions exist:
(1) the applicant is eligible pursuant to Section 8204 and 8204.1;
(2) the applicant proposes at least one eligible activity and the proposed uses for the HOME funds are eligible pursuant to Sections 8205 and 8210(c);

(3) the application is complete pursuant to Section 8211;
(4) the total amount of funds requested for both administration and activity-specific costs does not exceed the funding allocation limit which is stated in the NOFA and any allowed increase to this limit pursuant to Section 8217;
(5) if applicant is a CHDO, includes procedures ensuring the CHDO's effective project control of activities assisted with HOME funds pursuant to 24 CFR Section 92.300(a)(1); and
(6) for applications proposing projects involving acquisition of rental housing, acquisition and rehabilitation of rental housing, rehabilitation of rental housing, construction of rental housing, or construction of housing for first-time homebuyers, the application demonstrates:
(A) that the project is financially feasible;
(B) site control is obtained pursuant to Section 8303;
(C) that there are no pending lawsuits that will prevent implementation of the project, as proposed;
(7) for applications proposing rental activities, the application contains documentation demonstrating that the project either complies with or is exempt from Article 34 of the California Constitution.
(b) Each application considered for funding shall first be rated using the criteria contained in this subsection and either the criteria in subsection (c) for program applications or the criteria listed in subsection (d) for project applications. Maximum possible rating points are listed after each criterion. Applications proposing programs and applications proposing projects shall be rated and ranked separately. All applications shall be rated on the following:
(1) If the applicant is a city or county, the city or county's adopted housing element is in substantive compliance on the date applications are due to the Department as published in the NOFA. Newly formed cities that are not required to have an adopted housing element in compliance with general plan law shall receive full points in this category. If the applicant is a CHDO, the CHDO shall receive full points in this category. (50 points)
(2) Whether the application proposes activities within a jurisdiction whose formula allocation is being reallocated by the Department. (50 points)
(3) Whether the application proposes activities in a rural area. (50 points)
(4) Whether the application addresses one or more state objectives, as identified in the Consolidated Plan or the Annual Plan of the Consolidated Plan required by HUD. (50 points)
(c) Applications proposing programs shall be evaluated on these additional criteria:
(1) Capability to operate a HOME program, as demonstrated by the following: (up to 250 points).
(A) Performance of the applicant in meeting federal and State HOME requirements specified in this Section in previous State HOME contracts (up to 150 points). For this criterion only, all applicants initially will be credited with 150 points. Applications will then have points deducted for performance problems under previous State HOME contracts.
(i) Applicants who have in the last three contracts, from prior years as defined in the NOFA, not submitted required quarterly, annual, or project completion reports on time will lose up to 50 points; and
(ii) applicants who have not complied with monitoring and contractual requirements identified by the Department in the last 5 years as defined in the NOFA will lose up to 100 points.
(B) Prior experience of the applicant, as measured by implementation of HOME, and/or other local, State or federal affordable housing or community development programs during the most recent seven year period (up to 100 points):
(2) Community need based on one or more of the following factors: poverty level and overpayment for housing by low-income households by tenure (i.e., owner or renter), vacancy rates for housing in the jurisdiction by tenure, age of housing stock by tenure in the jurisdiction, numbers and percentages of substandard housing units, overcrowding of housing by tenure in the jurisdiction, and percentages of households that are below poverty level and who are overcrowded and living in substandard housing by tenure, as reflected in U.S. Census data; the numbers of low-income housing units at risk of conversion to market rate and those that actually have converted to market rate; and the ratio between the median home sales price and the median household income in the jurisdiction. The NOFA will identify the community need factors that apply to each activity and required source and who will be required to provide the source documentation. (up to 450 points)
(3) Feasibility of the program being applied for, as demonstrated by the degree to which the applicant's program guidelines reflect federal and State requirements, and the following: (up to 100 points)
(A) for first-time homebuyer programs, the number of units which have sold in the city or county over the preceding 12 month period at a price which is affordable, given the proposed HOME assistance, to lower income families;
(B) for rehabilitation of owner-occupied housing and rental housing programs, the number of overcrowded households by tenure and the age of the housing stock by tenure in the city or county, as reflected in U.S. Census data;
(C) for tenant-based rental assistance programs, the overpayment by lower-income renter households as reflected in U.S. Census data.
(d) Applications proposing projects will be evaluated on these additional criteria:
(1) Capability to develop a HOME-assisted project, as demonstrated by the following: (up to 450 points)
(A) Performance of the applicant in meeting federal and State HOME requirements specified in this section in previous State HOME contracts; (up to 200 points). For this criterion only, all applicants initially will be credited with 200 points. Applications will then have points deducted for performance problems under previous State HOME contracts.
(i) applicants who have in the last 3 contracts, from prior years defined in the NOFA, missed deadlines for projects specified in Section 8217 will lose up to 200 points; or not submitted required quarterly, annual, or project completion reports on time will lose up to 50 points; and
(ii) applicants who have not complied with monitoring requirements identified by the Department in the last five years will lose up to 100 points.
(B) Prior experience of the applicant, as measured by the implementation of HOME, and/or other local, State or federal affordable housing or community development projects during the most recent seven year period; (up to 50 points)
(C) Prior experience during the most recent five year period of the applicant, developer, owner, and managing general partner in developing the same type of subsidized project, in a manner consistent with the applicable funding source, as is proposed in the application. (up to 200 points)
(2) Community need based on one or more of the following factors: poverty level and overpayment for housing by low-income households and by tenure (i.e., owner or renter), vacancy rates for housing in the jurisdiction by tenure, age of housing stock by tenure in the jurisdiction, numbers and percentages of substandard housing units, overcrowding of housing by tenure in the jurisdiction, and percentages of households that are below poverty level and who are overcrowded and living in substandard housing by tenure, as reflected in U.S. Census data; the numbers of low-income housing units at risk of conversion to market rate and those that actually have converted to market rate; and the ratio between the median home sales price and the median household income in the jurisdiction. The NOFA will identify the community need factors that apply to each activity and required source and who will be required to provide the source documentation. (up to 450 points)

(3) Feasibility of the project, as demonstrated by compliance with the Uniform Multifamily Regulations (commencing with Section 8300). Projects will also earn points based on having the greatest percent of assisted units. Point values for each factor will be identified in the NOFA. (up to 200 points)
(4) Readiness of the project, as demonstrated by the project development plan, status of local governmental approvals, design progress and financing commitments. Point values for each factor will be identified in the NOFA. (up to 300 points)
(5) Applications must receive at least 930 points in subsections (b) and (d) in order to be eligible for funding.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR part 91, and 24 CFR Sections 92.1, 92.50, 92.102, 92.204, 92.205, 92.206, 92.218, 92.250, 92.451 and 92.453; and Sections 50896, 50896.1 and 50896.3, Health and Safety Code.

s 8212.1. Allocation by Type of Activity and Rural Location.
(a) HOME funds will be divided into two separate allocations, one for projects and one for programs, with the percentage of each allocation based on the actual application demand expressed as dollar amount requested in response to the initial NOFA of a funding cycle. However, under the initial NOFA, in no event shall either allocation decline below 40 percent of the total funds available.
(b) If either minimum allocation is not fully subscribed for applications submitted under the initial NOFA, the remaining funds may be: (i) transferred to the other allocation; (ii) made available under a subsequent NOFA; or (iii) a combination of both (i) and (ii). Funds made available under a subsequent NOFA may be made available on a first come-first served basis for a maximum of nine months from the application deadline under the initial NOFA.
(c) In making its determination of how to allocate remaining funds pursuant to subsection (b), the Department shall, at a minimum, consider: (i) the amount of funds remaining; (ii) any remaining demands under a fully subscribed allocation; (iii) the potential future demand for program funds based on expenditure information on file with the Department; and (iv) the anticipated timing and amount of the initial NOFA for the next funding cycle.
(d) Projects will compete against projects, and programs will compete against programs.
(e) At least 50 percent of HOME funds awarded will be reserved for applicants qualifying for rural points, as stated in 8212(b)(3). However, if an insufficient number of applications that qualify for rural points are eligible for funding pursuant to 8212(c) and 8212(d)(5), the remaining rural funding reservation will be used to fund any non-rural applications that are eligible for funding.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Section 92.150; and Sections 50896, 50896.1 and 50896.3, Health and Safety Code.

s 8212.2. Uniform Multifamily Underwriting and Program Rules.
(a) The following sections of title 25, Division 1, Chapter 7, Subchapter 19 are hereby incorporated by reference into this subchapter and shall apply to rental housing developments. State Recipients may request a deviation from these rules on a case by case basis. Such a request will be evaluated to determine its impact on project feasibility. The Department at its sole discretion may or may not approve such a request.
(1) Section 8303. Site Control Requirements;

(2) Section 8304. Unit Standards;
(3) Section 8305. Tenant Selection;
(4) Section 8306. Tenant Recertification and Unit Mix Maintenance;
(5) Section 8307. Rental Agreement and Grievance Procedure;
(6) Section 8308. Operating Reserves.
(7) Section 8309. Replacement Reserves.
(8) Section 8310. Underwriting Standards;
(9) Section 8311. Limits on Development Costs;
(10) Section 8312. Developer Fee;
(11) Section 8313. Reserved.

(12) Section 8314. Use of Operating Cash Flow.
(13) Section 8315. Subordination Policy
(14) Section 8316. Leasehold Security
(b) For purposes of this section 7239 the definitions found in Section 8301 shall apply.
(c) In the event of a conflict or a perceived conflict between the provisions of this section and the other sections in this subchapter, the provisions of this section shall be construed to further the purposes of this subchapter.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: Sections 50896, 50896.1 and 50896.3, Health and Safety Code; 42 U.S.C. Section 5304(b); and 24 CFR Sections 92.252, 92.253, 92.303, 92.350, 92.351 and 92.504(c).

s 8213. Conditional Reservation of Funds.
(a) The Department will rate, rank and issue conditional reservations of funds for applications based on its review of all of the eligible activities for which funds are requested in the application. Rating scores for each of the factors set forth in Section 8212(b), (c) and (d) will be totaled by the Department. Those project applications which receive the minimum required number of points, as specified in 8212(d), and all eligible program applications will receive conditional reservations in the order in which they are ranked with the higher point score funded first. Those applications which are to be funded wholly from any set-aside, because all proposed activities are eligible to qualify as set-aside activities, shall be funded first based on their score. Once the set-aside has been achieved, all remaining applications will be funded based on their score relative to all other remaining applications.
(b) In the case of a tied score, the application demonstrating the highest poverty level shall receive the higher ranking.
(c) In the event there are insufficient funds to fund an applicant's whole program, the applicant may be offered the amount of funds available, provided it is sufficient to complete a portion of the application which, if evaluated separately, would have been awarded funds.
(d) Applications shall be funded subject to the availability of funds.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Section 92.150; and Sections 50896, 50896.1 and 50896.3, Health and Safety Code.

s 8214. Legal Documents.
(a) Standard Agreement
(1) The written document required by 24 CFR Section 92.504 shall be a contract known as a standard agreement. The Department shall enter into a standard agreement with each State Recipient and CHDO once the State Recipient and CHDO have demonstrated compliance with the requirements in their award letter.

(2) This standard agreement shall reserve monies from the HOME fund in an amount approved for funding by the Department pursuant to Section 8213.
(3) The standard agreement shall require compliance with those provisions of 24 CFR part 92 which are applicable to State Recipients and CHDOs and with this subchapter.
(4) The standard agreement shall include all the items specified in 24 CFR Section 92.504 and the following provisions:
(A) the granting and cancellation of HOME funds to the State Recipient or CHDO;
(B) State Recipient and CHDO responsibilities for local HOME program operation, including time frames and milestones as set forth in the application;
(C) reporting requirements, including performance reports, pursuant to Section 8216 and the recordkeeping requirements as necessary to ensure compliance with 24 CFR Sections 92.508 and 92.509;
(D) requirements related to ensuring that the HOME assistance to the project is not more than is necessary to provide affordable housing;

(E) project set-up and fund disbursement requirements, including provision of evidence that projects are ready to be set up and provisions for receipt, use, and accounting of HOME funds pursuant to Sections 8215 and 8217;
(F) provisions for securing loans and grants pursuant to subdivision (b);
(G) the actions to be taken to mitigate environmental effects in accordance with the requirements set forth in 24 CFR Section 92.352;
(H) requirements that the State Recipient or CHDO shall not discriminate or permit discrimination on the basis of race, color, religion, ancestry, sex, age, national origin, marital status, and mental or physical handicap, in accordance with state law and shall comply with the federal requirements as set forth in 24 CFR Sections 92.350 and 92.351;
(I) requirements that prior to the issuance of a state designation number which is necessary to access the federal disbursement and information system, the State Recipient or CHDO shall comply with the requirements of 24 CFR Sections 92.500 and 92.502;

(J) remedies available to the Department in the event of a violation, breach, or default of the standard agreement, including repayment of all costs of enforcement;
(K) requirements that the State Recipient or CHDO permit the Department, HUD or their designated agents and employees the right to inspect the project or projects and all books, records, and documents maintained by the State Recipient or CHDO in connection with the local HOME program;
(L) requirements that the State Recipient or CHDO submit audits pursuant to 24 CFR Section 92.506;
(M) any other terms and conditions as required by local, state, or federal law, which are necessary to ensure compliance with the requirements of the Act.
(b) Security and Regulatory Documents
(1) Except when the State Recipient will be retaining funds in a local account, all loans shall be evidenced by a promissory note payable to the Department in the principal amount of the loan and stating terms consistent with the requirements of HOME. The promissory note shall be secured by a deed of trust naming the Department as beneficiary, or by other security acceptable to the Department. Such security shall be executed prior to the disbursement of funds.
(2) If the State Recipient will be retaining funds in a local account, all loans shall be evidenced by a promissory note payable to the State Recipient in the principal amount of the loan. The promissory note shall be secured by a deed of trust naming the State Recipient as the beneficiary. All loans made to State Recipients by the Department for use on projects which the State Recipient owns shall be evidenced by a promissory note payable to the Department in accordance with subsection (b)(1).
(3) The Department or State Recipient shall ensure that restrictions are recorded or imposed against the project to ensure affordability requirements pursuant to Section 8208.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR part 92; 24 CFR Sections 92.303, 92.350, 92.352, 92.500, 92.502, 92.504, 92.508 and 92.509; and Sections 35800, 50896 and 50896.1, Health and Safety Code.

s 8215. Project Set-Up and Disbursement of Funds.
(a) Upon notification from the State Recipient or CHDO that it is ready to set up each project in the federal disbursement and information system:
(1) The State Recipient or CHDO shall submit to the Department the project set-up report required by 24 CFR Section 92.502(b) prior to the first disbursement request.
(2) The Department shall verify that the project is in compliance with the applicable conditions contained in the standard agreement.
(3) Upon verification of subsections (a)(1) and (a)(2), the Department shall set up the project with HUD in the federal disbursement and information system.
(b) HOME funds shall be drawn down by electronic fund transfer from the HOME fund for a project that has been set up pursuant to subsection (a).
(1) The Department shall make telephonic requests for disbursement directly to the federal disbursement and information system after receipt of a certification of the payment request. The original certification shall remain in the permanent project file.
(2) The Department shall withhold disbursements in the event the State Recipient or CHDO fails to comply with the terms of the standard agreement, these regulations and/or the requirements of 24 CFR part 92.
(c) Funds drawn from the HOME fund shall be expended for eligible costs within 15 days.
(1) Interest earned on HOME funds drawn from the federal disbursement and information system and remaining in the local account no more than 15 days shall be retained in the local account and used for eligible HOME costs.
(2) Unused funds, including interest earned on funds beyond the 15 days, shall be returned to the Department to be returned to the federal disbursement and information system.
(d) All HOME funds in the local account shall be disbursed in accordance with 24 CFR Section 92.502(c)(3).
(e) Within 60 days of receipt of the final drawdown request for a project, the State Recipient or CHDO shall provide to the Department the project completion report required by 24 CFR Section 92.502(e). If the State Recipient or CHDO does not comply with this requirement within the 60-day time period, the Department shall suspend further project set-ups or disbursements for the State Recipient or CHDO until a project completion report is received and accepted by the federal disbursement and information system.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Section 92.502; and Sections 50896 and 50896.1, Health and Safety Code.

s 8216. Reporting and Recordkeeping.
(a) Reporting Requirements
(1) Upon execution of the standard agreement and, at a minimum, no later than 30 days after the end of each calendar quarter until the final project completion report is accepted in the federal disbursement and information system, State Recipients and CHDOs shall submit to the Department a performance report which shall include the following information:

(A) activities undertaken to implement the local program and to meet milestones contained in the standard agreement;
(B) anticipated activities in the next quarter to implement the local program and to meet milestones contained in the standard agreement;
(C) problems in implementing the program or complaints received during the reporting period and actions taken to resolve such problems and complaints;
(D) financial information related to expenditures of HOME funds and activity in the local account.
(E) any additional information which may be requested by the Department to ensure compliance with federal requirements.
(2) State Recipients, CHDOs, or other borrowers shall submit to the Department an annual performance report. The annual performance report shall cover the period from July 1 to June 30 and shall be submitted on July 1 of each year and not later than July 31 of each year pursuant to Section 8214(a)(4)(C). The report shall include information and documentation which is necessary to meet record keeping and reporting requirements pursuant to 24 CFR Section 92.508(b).
(b) Fiscal and Programmatic Requirements
(1) State Recipients and CHDOs shall maintain records as described in 24 CFR Sections 92.508(a)(2), (a)(3), (a)(5), and (a)(6). These records shall be retained for the periods of time specified in 24 CFR Section 92.508(c). State Recipients and CHDOs shall make all program records available to the Department for inspection and review and shall provide all program records to the Department upon request.
(2) At any time during the operation of the local HOME program, the Department may perform or cause to be performed a financial audit pursuant to 24 CFR Section 92.506 of any and all phases of program operations. At the Department's request, the State Recipient or CHDO or other borrower shall provide, at its own expense, a financial audit prepared by a certified public accountant.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.504, 92.506, 92.508; and Sections 50896 and 50896.1, Health and Safety Code.

s 8217. Project Deadlines.
(a) For purposes of this section, the following terms have the following meanings:
(1) "Contract" means the standard agreement required by section 8214. The contract shall designate each activity listed therein as either a "project" or a "program".
(2) "Contractor" means a CHDO or State Recipient that has executed a contract with the Department.
(3) "Expenditure" means the Department has received a valid disbursement request for the funds.
(4) "Performance points" means those points made available pursuant to Section 8212(d)(1)(A).
(5) "Project" means an activity for which, at the time of application, there is an identified site and an identified borrower. No substitution of sites shall be permitted after the submission of an application to the Department.
(6) "Program" means an activity for which, at the time of application, there is no identified site or no identified borrower.
(b) Project Deadlines
(1) All projects shall meet the following deadlines:
(A) the State Recipient or CHDO shall obtain all necessary permanent project financing, including the permanent financing for the required period of affordability within 12 months of the date of the award letter;
(B) all projects shall be set up in the federal disbursement and information system no later than 17 months after the date of the award letter;
(C) all construction loan closings shall occur no later than 20 months after the date of the award letter, with the exception of self-help projects, for which construction loan closings must occur no later than 23 months after the date of the award letter. Construction loan closing is defined as the recordation of all construction financing loan documents, including, as applicable, the HOME deed of trust and HOME regulatory agreement;
(D) all projects shall be completed within 36 months of the date of the award letter, as evidenced by the filing of a Notice of Completion; and
(E) all expenditures shall be made within 40 months of the date of the award letter.
(2) If a project fails to meet one or more of these timeframes outlined in (1) above, the next application for a project submitted by the contractor in response to a NOFA having an application deadline after the missed project deadline/s shall receive a performance penalty pursuant to section 8212(d)(1)(A).
(3) If a project fails to meet three (3) of the timeframes outlined in (1) above the contractor shall be:
(A) ineligible to apply for a project in any NOFA having an application deadline following the third missed deadline until the project is completed, occupancy is obtained and all expenditures are made and all necessary HOME funds are drawn; and
(B) the next application for a project submitted by the contractor shall receive a performance penalty.
(c) An exception to the project requirements of this section may be requested and provided at the Department's sole discretion when it is determined that violation was clearly outside of the control of the Contractor. This provision does not apply to Subsection 8217(b)(3)(A).

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.454(a)(2) and 92.500(d); and Sections 50896 and 50896.1, Health and Safety Code.

s 8217.1. Identification and Set-Up Deadlines for Contracts Numbered Prior to 1999.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.454(a)(2) and 92.500(d); and Sections 50896 and 50896.1, Health and Safety Code.

s 8218. Cancellation and Termination.
(a) Funding allocations to state recipients and CHDOs shall be canceled or reduced and standard agreements shall be terminated or amended by the department under any one of the following conditions:
(1) State recipients or CHDOs are not in compliance with the requirements of HOME or the standard agreement;
(2) implementation of the local HOME program is not in compliance with the time frames and goals stated in the state recipient's or CHDO's application and standard agreement;
(3) special conditions for funding as stated in the standard agreement have not been fulfilled; or
(4) the department has been notified by HUD of a reduction in or elimination of the department's allocation of HOME funds.
(b) At least fourteen days prior to the effective date of the termination or amendment of a standard agreement, the department shall provide written notice to state recipients and CHDOs of its intent to cancel or amend the funding allocation.
(c) Upon notification by the department that the funding allocation is canceled or reduced and the standard agreement is terminated or amended, the state recipient or CHDO shall:
(1) complete all work affected by the cancellation or reduction that is in progress; and

(2) terminate any other activities that were to be paid for with HOME funds.
(d) After all required repayments have been returned to C/MI, any funds remaining in the state recipient's local account shall be made available in accordance with section 8210(g) of this subchapter.

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR Sections 92.504(c)(1)(x) and 92.504(c)(3)(vii); and Sections 50896 and 50896.1, Health and Safety Code.

s 8219. State Recipient Administration of CHDO Local Programs.

Note: Authority cited: Section 50406, Health and Safety Code. Reference: 24 CFR Sections 92.201 and 92.502.

s 8220. [Reserved.]

s 8250. Purpose and Scope.
(a) As part of the Thompson-Maddy-Ducheny-Ashburn Welfare-to-Work Act of 1997, (Ch. 270, stats. of 1997, codified at Education Code sections 8277.5 and 8277.6), the Legislature established the Child Care and Development Facilities Loan Guaranty Fund (hereafter, the "Loan Guaranty Fund") and the Child Care and Development Facilities Direct Loan Fund (hereafter, the "Direct Loan Fund") (combined, the "Funds"), and mandated that the Department of Housing and Community Development (the "department") administer the Funds, and establish regulations for implementing and managing the Funds.
(b) The purpose of this subchapter is to implement, interpret, and make specific the legislative provisions establishing and governing the Loan Guaranty Fund and the Direct Loan Fund as set forth in Education Code Part 6, Chapter 2, Article 12, sections 8277.5 and 8277.6 (the "statutes"). These regulations shall be referred to as the "Child Care Facilities Financing Program," or "CCFFP."
(c) This subchapter makes child care facility assistance available through three programs: (1) a program, to be administered by the department or a department contractor, to guaranty loans; (2) a direct loan program which may be administered directly by the department or through a department contractor; and (3) a microenterprise assistance program whereby the department will make assistance available to local microenterprises to assist eligible family child care homes serving more than six (6) children.

Note: Authority cited: Section 8277.6(g), Education Code. Reference: Chapter 270, Stats. of 1997, Section 1; and Sections 8277.5 and 8277.6, Education Code.

s 8251. Definitions.
Unless otherwise indicated by the context, the following definitions shall apply to this subchapter.
(a) "Amortized" or "amortized loan" means a loan which shall be repaid in regular payments of principal and interest sufficient to pay off the loan at maturity.
(b) "Applicant" means an entity applying for a guaranty, a direct loan, or microenterprise assistance.
(c) "Application" means the information provided by a borrower applying for a guaranty, a direct loan, or microenterprise assistance.
(d) "Borrower" means an applicant who has received a guaranty, a direct loan, or microenterprise assistance, but does not include an "intermediary."
(e) "Child care and development facility" means any residence or building or part thereof in which child care and development services are provided.
(f) "Child care and development services" means those services designed to meet a wide variety of needs of children and their families, while their parents or guardians are working, in training, seeking employment, incapacitated, or in need of respite. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements.
(g) "Collateral" means real or personal property pledged by a borrower, guarantor or intermediary as security for repayment of a direct loan, microenterprise, guarantied loan or intermediary loan.
(h) "Collection guaranty" means a guaranty of a specified percentage of net loan principal and up to 120 days of interest at the same percentage. "Net loan principal" means the amount of loan principal remaining outstanding after the lender has fully complied with the collection procedures described in sections 8261 and 8262 of this subchapter.
(i) "Community Care Licensing Division" means the same as "licensing agency" which means the State Department of Social Services, or its contractor.
(j) "Contractor" means a public or private entity under contract to the department or the department's contractor for the purpose of administering loan guaranties, direct loans or microenterprise.
(k) "Creditworthy" means that with the loan, the borrower will have the ability to, for the reasonably foreseeable future, remain a going concern, and repay the loan on the agreed to terms.
( l ) "Default" means: (1) either a delinquency, or a nonmonetary breach of the lender's loan documents, or (2) that the borrower is in bankruptcy.
(m) "Delinquency" means the failure of the borrower to make any payment when due, pursuant to the terms of the promissory note.
(n) "Demand" means a request for payment of all outstanding loan principal and interest, and other fees due, on a guarantied loan, direct loan, or microenterprise assistance.
(o) "Demand letter" means a letter containing a demand for payment delivered pursuant to section 8261 of this subchapter.
(p) "Department" means the California Department of Housing and Community Development.
(q) "Direct loan" means a loan made to an applicant by the department or its contractor in a principal amount of not less than $25,000.
(r) "Direct Loan Fund" means the Child Care and Development Facilities Direct Loan Fund established by subdivision (b) of Education Code section 8277.5.
(s) "Direct loan program" refers, collectively, to those provisions of the statutes and this subchapter relating to the making of loans using funds from the Direct Loan Fund.
(t) "Environmental survey" means an assessment to be completed by the applicant, or other individuals familiar with the project, which will give the lender an indication of the possible risks from anyhazardous substance that may be encountered relative to the project. "Hazardous substance," for the purpose of this subchapter shall have the same meaning as set forth in paragraph (2) of subdivision (e) of section 2929.5 of the Civil Code. (continued)