Md. Code Regs. 05.03.05.07 - Loan Terms and Requirements
A. Each loan shall be made subject to the
requirements of this regulation.
B.
Equity in the Home. The equity in the home shall be determined by subtracting
any existing indebtedness on the home from the value of the home. At the time
of application, the value of the home may be established by using the current
assessed value of the home, or, at the request and expense of the borrower and
with Program approval, by using an appraisal submitted in a form and manner and
by an appraiser acceptable to the Program.
C. Line of Credit.
(1) Scale of Equity Percentages.
(a) The Secretary shall determine, from time
to time, a scale of equity percentages representing the percentage of equity in
the home which may be used to calculate the borrower 's maximum line of credit.
The scale of equity percentages shall vary inversely in relation to the age of
the borrower .
(b) The scale of
equity percentages determined in accordance with §C(1)(a) of this
regulation is set forth in the table below:
Age of the
(c) The scale of equity
percentages may be adjusted from time to time by determination of the Secretary
to:
(i) Respond to changes in property
values;
(ii) Take into account
Program experience in making loans and receiving repayments of loans;
and
(iii) Take into account other
factors relevant to the Program and considered appropriate by the Secretary to
periodic adjustment of the scale.
(2) Borrower 's Maximum Line of Credit.
(a) A borrower 's maximum line of credit shall
be calculated by multiplying the equity in the home by the appropriate equity
percentage.
(b) In the case of
joint borrowers, the youngest borrower 's age as of the date of the loan
application shall be used to determine the appropriate equity
percentage.
(c) The total amount of
equity payments disbursed to the borrower , less any repayment of principal, may
not exceed the borrower 's maximum line of credit.
(3) Program Maximum Line of Credit. The
maximum line of credit available under the Program is $50,000. A borrower 's
maximum line of credit may not exceed this Program maximum line of
credit.
(4) Borrower 's Minimum Line
of Credit. The Program may reject an application for a loan if the requested
line of credit is less than $5,000.
(5) Increasing the Borrower 's Maximum Line of
Credit. The borrower may request an increase in the borrower 's maximum line of
credit if the borrower has drawn at least 90 percent of the existing line of
credit and if the equity in the home has increased by at least $10,000. The new
maximum line of credit shall be calculated in the manner set forth in
§C(1), above, taking into account the current age of the individual
borrower or youngest joint borrower . In order to determine the increase in
equity, the Program may require from the borrower , at the Program's sole
option, either evidence of the current tax assessment or an appraisal submitted
in a form and manner and by an appraiser acceptable to the Program. The
borrower shall pay the cost of the appraisal, a title and lien search, the
costs associated with recording additional loan documents evidencing the
increase in the line of credit, and increased insurance premiums. These costs
may be financed by the loan upon approval from the Program.
D. Annual Maximum of Equity
Payments.
(1) The Secretary shall determine
from time to time the total amount of equity payments which can be disbursed to
a borrower during the fiscal year, considering factors such as the availability
of Program funds, the demand for new Program loans, and the demand for funds
for other homeownership programs.
(2) The annual maximum of equity payments
shall be $5,000, subject to revision by determination of the Secretary from
time to time in accordance with the factors set forth in §D(1) of this
regulation.
(3) The annual maximum
of equity payments shall be subject to:
(a)
The availability of Program funds; and
(b) A borrower 's maximum line of
credit.
E.
Emergency Equity Payments.
(1) The Program may
increase the annual maximum of equity payments by not more than $5,000, subject
to the borrower 's maximum line of credit, in the case of a borrower whom the
Program determines in its sole discretion:
(a)
Is in imminent danger of losing title to the home or of having to vacate the
home for medical or safety reasons;
(b) Has no other source of funds to alleviate
the problem; and
(c) Whose problem
can be alleviated by additional Program funds.
(2) The borrower shall comply with the
Program's terms and conditions, including payment of the cost of a title and
lien search, the cost of recording additional loan documents, and increased
insurance premiums. These costs may be financed by the loan upon approval from
the Program.
F. Interest
Rate. The Program shall establish, from time to time, the interest rate for the
loans.
G. Maturity of the Loan . The
loan shall become due and payable at the earliest occurrence of:
(1) The death of an individual borrower , or
in the case of joint borrowers, after the death of the last surviving
borrower ;
(2) Failure by an
individual borrower or all of the joint borrowers to occupy the home as the
principal residence during any continuous period exceeding 1 year, unless the
borrower has received the prior written approval of the Program;
(3) Transfer of title to the home, including
a transfer of any interest in the home, except that the borrower may lease a
room or a portion of the home if the borrower continues to reside in the home
and obtains the prior written approval of the Program; or
(4) Any of the events of default which are
enumerated in the deed of trust or other loan documents executed by the
borrower .
H. Payments.
(1) Payment on the loan is not required of a
borrower until the loan matures as described in §G, above. Full or partial
payment of principal or interest, or both, may be made at any time without
penalty.
(2) All accrued principal
and interest shall be paid at maturity to the extent of equity in the home at
that time. At the sole option of the Program , the equity in the home at that
time may be established by using:
(a) The sale
price of the home, if applicable, less a reasonable real estate agent or broker
commission not exceeding 7 percent;
(b) The current assessed value of the home;
or
(c) An appraisal to be submitted
in a form and manner and by an appraiser acceptable to the Program .
(3) The borrower may not be
personally liable for the loan, and in order to satisfy the debt, the
Department shall look only to the equity in the home and may not seek payment
from the borrower 's personal assets or estate, other than from the home,
except:
(a) In the case of borrower 's fraud or
misrepresentation;
(b) In the case
of borrower 's willful neglect or abuse of the home; or
(c) Under other conditions determined by the
Program and set forth in the loan documents.
I. Outstanding Indebtedness. At least once a
year, the borrower shall receive a statement of the outstanding indebtedness on
the loan. The outstanding indebtedness shall be the total of equity payments
disbursed to the borrower plus the simple interest accrued on the sums
disbursed, less any repayments of principal or interest. Accrued interest and
repayments of principal or interest shall be indicated on the
statement.
J. Security for Loans.
Each loan shall be secured by a mortgage or deed of trust, in the form required
by the Program, and recorded in the land records of the county in which the
home is located. Subordinate liens may not be placed on the home without the
prior written consent of the Program. The mortgage or deed of trust securing
the loan may be subordinate to not more than one other recorded mortgage lien
which:
(1) Shall secure a remaining mortgage
debt of not more than 25 percent of the equity in the home, equity being
determined in accordance with §B of this regulation; and
(2) May not secure a line of credit
loan .
K. Insurance.
(1) Hazard Insurance. The borrower shall
maintain fire and extended coverage insurance at the owner's expense in an
amount not less than the replacement value of the home. The hazard insurance
policy shall:
(a) Be written by companies
authorized to transact business in Maryland;
(b) Be in force at the time of loan
closing;
(c) Name the Department as
loss payee as its interest may appear in the standard mortgagee endorsement
attached to or printed in the policy; and
(d) Contain terms and coverage satisfactory
to the Program .
(2)
Flood Insurance. If the home is in the 100-year flood plain, as designated by
the United States Department of Housing and Urban Development, the:
(a) Home shall be covered by a flood plain
insurance policy naming the Department as a beneficiary, in an amount equal to
the borrower 's maximum line of credit, up to the federal limit, plus any other
indebtedness secured by the home; and
(b) Flood plain insurance policy may not be
terminated without prior notification to the Department .
L. Disbursements.
(1) The Program shall establish procedures
for requesting equity payments, and shall establish limits for:
(a) Minimum and maximum dollar amounts for
the initial and any succeeding equity payment requests during any fiscal year;
and
(b) The maximum frequency of
requests per year.
(2)
Equity payments will be made to the borrower only upon borrower 's request,
which shall be in accordance with Program procedures.
(3) The borrower is responsible for making
payments for real estate taxes, insurance, ground rent, and any other fees or
payments relating to the home. The borrower may use loan disbursements to make
these payments. If any of these payments become delinquent, the Program, in its
sole discretion and without any obligation to do so, may make immediate and
direct payment of these expenses and increase the outstanding loan balance by
the amount of the payment. In making this payment, the Program may override the
borrower 's maximum line of credit, the Program maximum line of credit, or the
maximum in equity payments available to the borrower for that fiscal year. Any
direct payment by the Program may not be construed as a waiver of the
borrower 's obligation, and the borrower 's loan still may be declared in
default.
(4) The borrower may not
be entitled to disbursements of equity payments if there are any uncured
defaults under the deed of trust or any other loan documents.
M. Change of Ownership or
Occupancy of the Home or of Borrower Eligibility. The Program shall establish
policies and procedures to monitor the continued ownership and occupancy of the
home and eligibility of the borrower for the loan, including an annual borrower
recertification procedure. The Program may at its option terminate the right to
any future borrowing against the line of credit or may accelerate the loan if:
(1) The borrower fails to meet the standards
for occupancy or use of the loan proceeds;
(2) An interest in the home has been
transferred, except that the borrower may lease a room or portion of the home
if the borrower continues to reside in the home and obtains the prior written
approval of the Program;
(3) There
is an unpermitted lien or encumbrance on the home; or
(4) The borrower fails to respond to the
recertification request within a reasonable time.
N. Taxes, Insurance, and Other Assessments.
(1) Real estate taxes, ground rent, water and
sewer fees, condominium or homeownership fees, insurance coverage required
under §K, and other assessments shall be paid when due by the borrower . If
the borrower fails to make the payments or to provide the Program with evidence
of payment, the Program may at its option take one or more of the following
actions:
(a) Make these payments directly as
described in §L(3), above;
(b)
Refuse to make further disbursements requested by the borrower ; or
(c) Foreclose on the home.
(2) Escrow Account. If there is no
prior mortgage requiring the payment of expenses to a mortgagee, the Program
may establish an escrow account for the borrower at the loan closing and may
require the borrower to make monthly expense payments consisting of 1/12 of
annual real estate taxes, ground rent, property insurance premiums and, when
appropriate, other items for which payments are required by the Program.
Instead of an escrow account, the Program may require evidence of payment of
the taxes, insurance, and assessments described in §N(1), above.
O. Maintaining the Home. The
borrower shall maintain the home in good repair, and the Program shall have the
right to inspect the home. If the Program determines that repairs are
necessary, the Program shall have the right but not the obligation to cause the
repairs to be made and to charge the cost of the repairs against the borrower 's
line of credit as an equity payment. In this event, the Program may override
the borrower 's maximum line of credit, the Program maximum line of credit, or
the maximum of equity payments available to the borrower for that fiscal year.
These actions by the Program may not be construed as a waiver of borrower 's
obligation to maintain the home, and the borrower 's loan may still be declared
in default.
Notes
Regulations .07 adopted effective December 11, 1989 (16:24 Md. R. 2616)
Regulation .07C and D amended effective February 1, 1993 (20:2 Md. R. 110)
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No prior version found.