(b) If the corporation or the department determines that the project or the recipient is not in compliance with Federal or State laws or the terms of the applicable PFA, and, following written notice to the recipient, the project or recipient is not brought into compliance, the corporation may, on its own initiative or at the direction of the department:

1. (1) withdraw the interest rate subsidy, recoup any other benefit provided to the recipient, or reduce any future interest rate subsidy or such other benefit, or reduce any future interest rate subsidy or such other benefit for future DWSRF assistance;
2. (2) refuse to approve DWSRF disbursement requests; and
3. (3) refuse execution of subsequent PFAs until the project or recipient is brought into compliance.