The following terms, wherever used or referred to in this article, shall have the following meanings, unless a different meaning is clearly indicated by the context: (a) Home: Both "one-family dwelling" and "mobile home," as those terms are defined in section 59-1. (b) Homeowner: A person who owns and lives in his or her own home. (c) Replacement: Removal of any existing substandard home and substitution therefor, by construction or purchase and placement on the property, of a home that will comply with all applicable state and county statutes, codes and ordinances.

The county council is hereby empowered and authorized by resolution to establish and thereafter to maintain a special fund to be known as the "homeowners’ replacement loan fund" for the purpose of making direct loans to homeowners of low income, whose present homes cannot be rehabilitated to conform with applicable county code requirements, to finance new homes, including prefabricated and mobile homes and to finance the purchase of land upon which a home is situated; provided, that such loans are not available on reasonable terms and conditions from other sources. The county executive shall adopt under method (2) of section 2A-15 of this Code, from time to time such regulations as he or she shall deem appropriate for the making of such loans and the administration of the fund, including the right to contract with private organizations for the administration of such fund; provided, that the loans available under this fund shall be limited to those individuals whose income and net worth preclude home financing through normal banking or other financial channels. In determining the availability to the property owner of adequate commercial financing, the following shall be taken into consideration: (a) The present condition and value of the property. (b) Real estate owned by the borrower that would be a source of funds either by sale or a commercial loan. (c) Total net income of the borrower and members of his or her family. No loan shall be made to any owner-occupied home where the resources of (a) and (b) above are adequate for obtaining financing of the home from other sources.

To be eligible for assistance under the homeowners' replacement loan fund, properties shall comply with the following eligibility requirements: (a) Properties or homes shall be single-family, owner-occupied homes which are found to be in violation of one or more of the provisions of the state and county statutes, codes and ordinances relating to the use, maintenance, facilities and occupancy of existing property. (b) Properties or homes shall be situated in locations where they will not be in conflict with the following types of governmental projects: 1. Federally assisted urban renewal and concentrated code enforcement projects. 2. Projects for the construction or development of public schools, parks, streets, highways, utilities and other public works. This requirement is not to preclude loans on properties located within urban renewal and code enforcement projects which are not federally assisted. (c) Properties or homes shall be in locations where safe, sanitary and adequate water supply and sewage disposal are available or will be provided as a result of application of the loan proceeds. (d) Properties or homes must not be feasibly capable of being brought into compliance with the applicable county codes and ordinances by use of the rehabilitation loan fund for the county or any other type of rehabilitation loan made available by any other governmental agency because the expense required to achieve rehabilitation would be excessive in relation to the resulting benefit to the property.

The purpose of replacement homes (conventional construction, modular or mobile) is to eliminate existing conditions of deterioration or obsolescence and to prevent their recurrence. (a) Home replacement to be carried out under this program shall be only that necessary to bring the property into full compliance with all applicable state and county statutes, codes and ordinances. Replacement shall be limited to facilities reasonably necessary to accommodate the present occupancy and usage. (b) The purpose of replacement is to eliminate existing conditions of deterioration or obsolescence and to prevent their recurrence. All construction shall be carried out in a workmanlike manner and be of such quality as to be durable and long lasting and in compliance with applicable state and county statutes, codes and ordinances.

The loan proceeds available under this program shall be limited to those cases where the property owners' income and net worth precludes home replacement financing through normal banking or other financial channels. Where loans are made available from the homeowners' replacement loan fund, they shall be subject to the following requirements and limitations: (a) Loans may be made to owner-occupants whose verified income does not exceed the section 8 lower income limits for the Washington Metropolitan Area as established from time to time by the U.S. Department of Housing and Urban Development. The county executive may make exception to those limits if a finding is made that an otherwise good risk is unable to obtain a conventional loan. (b) Loans shall carry an interest rate of from one (1) to six (6) percent per annum. Repayment provisions shall be based upon the financial circumstances of the individual property owner. In determining the initial rate of interest the property owner shall not be expected to allocate, based on a loan term of forty-five (45) years, more than thirty-five (35) percent of his family gross income to the monthly costs of shelter (principal, interest, taxes, insurance, maintenance and utilities). (c) Terms of the loan shall be based upon the owner's financial circumstances at the time of the loan commitment. If the initial rate of interest is three (3) percent or less, the interest rate must be increased to a higher rate upon a determination that thirty-five (35) percent of the property owner's family gross income is sufficient to pay the monthly costs of shelter (principal, interest, taxes, insurance, maintenance and utilities) at such higher rate. The initial interest rate may be decreased upon a determination that the property owner will pay more than thirty-five (35) percent of family gross income for the monthly costs of shelter (principal, interest, taxes, insurance, maintenance and utilities) and undue financial hardship would occur if the interest rate remained as previously established. (d) Security for loans made pursuant to this fund shall be of such a nature as will best protect the interests of the county at minimum costs and shall be determined on an individual basis pursuant to regulations to be established by the county executive. (e) Existing mortgagees or lien holders whose mortgages or liens are secured by the existing improvements must consent to the removal of the existing improvements. Such mortgagees or lien holders shall have the option to make a reconstruction loan to the applicant if the parties so desire. (f) The interest rate shall be increased to the market rate if the property is sold except that if the property is purchased by the Montgomery County housing opportunities commission, the interest rate shall be three (3) percent. If the property is purchased by a person who meets the eligibility requirements of subsection (a) of section 56-5, the interest rate shall be determined by subsection (b) of section 56-5.

The homeowners' replacement loan fund is administered by the Director of Housing and Community Affairs, under regulations adopted by the County Executive under method (2).