[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR1003.511]

[Page 797-798]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 
               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
PART 1003_COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND 
ALASKA NATIVE VILLAGES--Table of Contents
 
                     Subpart F_Grant Administration
 
Sec. 1003.511  Use of escrow accounts for rehabilitation of privately 
owned residential property.

    (a) Limitations. A grantee may withdraw funds from its line of 
credit for immediate deposit into an escrow account for use in funding 
loans and grants for the rehabilitation of privately owned residential 
property under Sec. 1003.202(a)(1). The following additional 
limitations apply to the use of escrow accounts for residential 
rehabilitation loans and grants closed after September 7, 1990:
    (1) The use of escrow accounts under this section is limited to 
loans and grants for the rehabilitation of primarily residential 
properties containing no more than four dwelling units (and accessory 
neighborhood-scale non-residential space within the same structure, if 
any, e.g., a store front below a dwelling unit).
    (2) An escrow account shall not be used unless the contract between 
the property owner and the contractor selected to do the rehabilitation 
work specifically provides that payment to the contractor shall be made 
through an escrow account maintained by the grantee, by a subrecipient 
as defined in Sec. 1003.4, by a public agency designated under Sec. 
1003.500(a), or by an agent under a procurement contact governed by the 
requirements of 24 CFR 85.36. No deposit to the escrow account shall be 
made until after the contract has been executed between the property 
owner and the rehabilitation contractor.
    (3) All funds withdrawn under this section shall be deposited into 
one interest earning account with a financial institution. Separate bank 
accounts shall not be established for individual loans and grants.
    (4) The amount of funds deposited into an escrow account shall be 
limited to the amount expected to be disbursed within 10 working days 
from the date of deposit. If the escrow account, for whatever reason, at 
any time contains funds exceeding 10 days cash needs, the grantee 
immediately shall transfer the excess funds to its program account. In 
the program account, the excess funds shall be treated as funds 
erroneously drawn in accordance with the requirements of U.S. Treasury 
Financial Manual, paragraph 6-2075.30.
    (5) Funds deposited into an escrow account shall be used only to pay 
the actual costs of rehabilitation incurred by the owner under the 
contract with a private contractor. Other eligible costs related to the 
rehabilitation loan or grant, e.g., the grantee's administrative costs 
under Sec. 1003.206 or rehabilitation services costs under Sec. 
1003.202(b)(9), are not permissible uses of escrowed funds. Such other 
eligible rehabilitation costs shall be paid under normal ICDBG payment 
procedures (e.g., from withdrawals of grant funds under the grantee's 
line of credit with the Treasury).
    (b) Interest. Interest earned on escrow accounts established in 
accordance

[[Page 798]]

with this section, less any service charges for the account, shall be 
remitted to HUD at least quarterly but not more frequently than monthly. 
Interest earned on escrow accounts is not required to be remitted to HUD 
to the extent the interest is attributable to the investment of program 
income.
    (c) Remedies for noncompliance. If HUD determines that a grantee has 
failed to use an escrow account in accordance with this section, HUD 
may, in addition to imposing any other sanctions provided for under this 
part, require the grantee to discontinue the use of escrow accounts, in 
whole or in part.