These regulations set forth the policies, procedures, and authorizations for making preferred interest rate loans to households of limited income. The Preferred Interest Rate Loan Program is designed to provide: Financing for eligible homebuyers to purchase, or purchase and rehabilitate, a home; Refinancing to eligible homeowners who, because of certain exceptional adverse personal or economic circumstances, can no longer make the full mortgage payments on their homes and would otherwise have to forfeit title to their homes; and Short-term loans to nonprofit organizations and local governments for the acquisition and construction, acquisition and rehabilitation together with demolition or lot consolidation, or acquisition and rehabilitation, of residential units affordable for purchase by households of limited income. Programs Operating Under the Maryland Home Financing Program. The Program is one of four loan programs operated under the Maryland Home Financing Program as authorized by Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland. Other loan programs operating under the Maryland Home Financing Program include programs for making: Emergency mortgage assistance loans to certain households of limited income, who because of involuntary loss of income due to unemployment or other extraordinary hardship are unable to make current mortgage payments on their homes and are likely to forfeit title to their homes, as described in COMAR 05.03.03, as amended from time to time; Short-term construction loans to developers for the construction of or rehabilitation of residential units affordable to certain households of limited income; and Reverse equity mortgage loans to elderly households of limited income for housing-related expenses and personal expenses which enable the owner to continue to occupy the owner's home, as described in COMAR 05.03.05. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland, as amended. Adjusted Annual Income. “Adjusted annual income” means 100 percent of the projected annual gross income, based on income from all members of the household 18 years old or older, who intend to reside in the eligible residence as their primary residence, except for a full-time high school or undergraduate student who is not a borrower. “Adjusted annual income” includes social security, retirement income, pensions, wages, overtime, bonuses, commissions, investment and interest income, rental income, disability or unemployment insurance, alimony and support payments, and all other income from any source, less: Abnormal expenses of a long-term unusual nature such as extraordinary unreimburseable medical, rehabilitation, or special education expenses; Unusual or temporary one-time income items, such as judgments or gifts, as determined by the Program; and Other income items as may be permitted by the Program. “Applicable codes and standards” means construction, health, safety, fire, occupancy, planning, zoning, and other codes and standards applicable in the State and the political subdivision where the property is located, and similar standards as may be established by the Program. “Borrower” means an applicant who receives a loan through the Program. Closing Costs. “Closing costs” means costs incurred in connection with purchasing or purchasing and rehabilitating an eligible residence, as approved by the Program. “Closing costs” includes: Credit report fee; Appraisal fee; Home inspection fee; Survey fee; Title examination fee; Title insurance fee; Application fee; Required escrow payments; Attorney's fee; Document preparation fee; Recording fee; and State and local transfer tax and recordation tax. If the loan refinances existing mortgage debt, closing costs may include, in the discretion of the Program, costs such as payments owed at the time of the loan closing for: Property taxes; Hazard insurance premiums; or Ground rent. “DDF” means the Division of Development Finance, a division of the Department. “Department” means the Department of Housing and Community Development, a principal department of the State. “Eligible residence” means residential property that meets the requirements of Regulation .04. “Household” means the individual or individuals who occupy or intend to occupy: The eligible residence, in the case of a one unit residence; or One of the units in the eligible residence, in the case of a two to four unit residence. “Household of limited income” means a household for which the adjusted annual income does not exceed the upper income limit or limits established by the Secretary in accordance with Housing and Community Development Article, §4-806(a)(2), Annotated Code of Maryland. “Loan” means a loan made by the Department to a borrower through the Program, and secured by a lien on an eligible residence. “Lot consolidation” means acquisition of real property adjacent to and in connection with a residence financed by the Program for purposes of including the real property as part of the residence. “Manufactured home” means a structure designed to be used as a dwelling, which: Is a multisectional structure which has a single HUD certification, and was fabricated on or after June 15, 1976, in an off-site manufacturing facility for installation or assembly at the building site; When installed on the site, meets a minimum floor area, depth, and length as required by the Program, in its sole discretion; Is installed permanently on an engineered foundation in conformance with the National Building Code published by the Building Officials and Code Administration International, Inc. which is incorporated by reference under COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc. which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by: The United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended; or The Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland; Complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. “Mortgage” means a mortgage or deed of trust. “Nonprofit organization” means a corporation, foundation, or other legal entity, no part of the net earnings of which inures to the benefit of any private shareholder or individual holding an interest in that entity. Program. “Program” means the Preferred Interest Rate Loan Program. “Program” may include staff administering the Program. “Purchase” means the acquisition of a: Lot improved by a residential structure; or Newly constructed residential structure on a lot already owned by the borrower. “Rehabilitation costs” means the costs for repairs and other rehabilitation work for an eligible residence as described in Regulations .06B and .07B of this chapter. “Secretary” means the Secretary of the Department of Housing and Community Development. “Work write-up” means a description of the structural, mechanical, electrical, and other work items needed for the rehabilitation of an eligible residence. An eligible residence: Is comprised of one to four residential units; Is real property owned by the borrower in fee simple or under a freely transferable, perpetually renewable, ground lease which permits the lessee to transfer the leasehold interest without the consent of the lessor; Is located in the State; May be a detached home, modular home, townhouse, condominium, or a manufactured home as defined under Regulation .03B(13) of this chapter; May not be a residence which is treated as personal property for the purpose of establishing a security interest, such as a cooperative unit or a manufactured home not meeting the requirements for a manufactured home under Regulation .03B(13) of this chapter Meets all applicable codes and standards, except that if the loan includes proceeds for rehabilitation work, then the Program shall be satisfied that all applicable codes and standards will be met when the rehabilitation work is complete; and If new construction, is located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. Other Liens. At the time of the loan closing, the eligible residence: May not be encumbered by a tax lien or judgment lien; May be encumbered by a superior lien under circumstances approved by the Program in its sole discretion to promote housing affordability; and May be encumbered by a lien subordinate to the lien securing the Program loan, under circumstances which promote housing affordability as determined by the Program in its sole discretion. Except as provided in Regulation .07 of this chapter, an eligible residence comprised of one residential unit shall be occupied by the borrower as the borrower's primary residence. If the eligible residence is comprised of two to four residential units, each unit not occupied by the borrower shall be occupied by a household of limited income. Home Inspection. The Program may require a borrower to obtain a home inspection before closing. A home inspection under this section shall meet standards set by the Program and be conducted by a home inspector acceptable to the Program. In order to be eligible for a loan to finance the purchase, or the purchase and rehabilitation, of an eligible residence comprised of one residential unit, a borrower: Shall be all those persons who will hold title to the eligible residence; Shall be 18 years old or older, unless married to a joint borrower who is 18 years old or older; Shall be a member or members of a household of limited income; Shall intend to reside in the eligible residence; If the borrower owns a personal residence at the time of application and is purchasing another residence, shall: Have the existing residence under contract of sale at the time of the loan application and shall sell the residence before or simultaneous with the borrower's purchase of the property financed by the Program loan; and Provide evidence satisfactory to the Program that the borrower has a compelling need to purchase a new residence, because of a change in: Circumstances of employment such as a new place of work, or Personal circumstances such as a divorce or an increase in the size of the household; May not own or hold any interest in any other real property except cemetery plots, recreational vehicle lots, a 5 percent or less interest in a time share unit (2.6 weeks), real property used in a trade or business, or a lot adjacent to the purchased property that is consolidated with the purchased property securing the Program loan; Shall satisfy the Program that the borrower does not have assets or resources, which are set forth in §C of this regulation, that could enable the borrower to qualify for conventional or other Departmental mortgage financing; Shall have the legal capacity to incur the obligations of the loan; and Shall agree to comply with the requirements established by the Program and with the terms of the loan. In order for a borrower to be eligible for a loan to finance the purchase, or the purchase and rehabilitation, of an eligible residence comprised of two to four residential units, a borrower: Shall be all those persons who will hold title to the eligible residence; Shall be 18 years old or older, unless married to a joint borrower who is 18 years old or older; Shall intend to reside in one unit of the eligible residence; If the borrower owns a personal residence at the time of application and is purchasing another residence, shall: Have the existing residence under contract of sale at the time of the loan application and shall sell the residence before or simultaneous with the borrower's purchase of the property financed by the Program loan; and Provide evidence satisfactory to the Program that the borrower has a compelling need to purchase a new residence, because of a change in: Circumstances of employment such as a new place of work, or Personal circumstances such as a divorce or an increase in the size of the household; May not own or hold any interest in any other real property except cemetery plots, recreational vehicle lots, a 5 percent or less interest in a time share unit (2.6 weeks), real property used in a trade or business, or a lot adjacent to the purchased property that is consolidated with the purchased property securing the Program loan; Shall satisfy the Program that the borrower does not have assets or resources, which are set forth in §C of this regulation, that could enable the borrower to qualify for conventional or other Departmental mortgage financing; Shall have the legal capacity to incur the obligations of the loan; Shall lease all units other than the borrower's unit only to households of limited income; Shall agree to require each lease to include a lease addendum, in a form specified by the Program, which at a minimum: Requires a tenant to be a household of limited income; and Requires a tenant to provide income tax returns or other evidence satisfactory to the Program of the tenant's household income, at the time the lease is made; and Shall agree to comply with the requirements established by the Program and with terms of the loan. The assets in §A(7) and §B of this regulation: May include: Individual or joint savings accounts; Individual or joint checking accounts; Individual or joint certificates of deposit; Individual or joint money market or mutual fund accounts; Other individual or joint bank accounts; Proceeds derived or to be derived from the sale of real property or a mobile home or other personal property prior to loan closing; In trust for accounts; Any stocks or bonds; Funds from gift letters; Amounts used or borrowed from a life insurance policy, individual retirement account, or 401(k) account minus any penalty; Items paid outside of closing, such as appraisal, credit report fee, home inspection fee, and deposit on property; or Other asset items as determined by the Program policy; May not include: Cash surrender value of a life insurance policy, value of individual retirement accounts or 401(k) accounts, or value of other similar accounts as may be determined by the Program; or Proceeds from any Program approved secondary financing or grant. In order to be eligible for a loan that refinances existing mortgage debt, a borrower: Shall satisfy the requirements in §§A and C, or §§B and C of this regulation; Shall be likely, in the estimation of the Department, to have to forfeit title to the eligible residence; Shall be unable to keep current the existing mortgage loan or loans on the eligible residence due to any of the following exceptional adverse personal or economic circumstances: Involuntary unemployment of a borrower, Onset of a borrower's disability or handicap, Divorce or separation, provided that the separated spouse or former spouse no longer holds title to the property, Death of a spouse or other co-borrower, Incarceration of a spouse or other co-borrower, Business reversal leading to sustained material loss of income, or Other similar circumstances of unforeseeable hardship as determined by the Program; Is not expected, in the judgment of the Program, to recover from the adverse personal or economic circumstances which caused the applicant to be unable to keep mortgage payments current, but can afford to repay a Program loan that refinances existing mortgage debt; Can be better assisted, in the judgment of the Program, by a loan to refinance existing mortgage debt rather than by the short-term mortgage assistance available through the Emergency Mortgage Assistance Program, as described in COMAR 05.03.03; Shall hold title to the eligible residence free and clear of all other liens, except for a subordinate mortgage lien which satisfies the criteria of Regulation .04B(3); and Shall reside and intend to continue to reside in the eligible residence at the time of the loan closing. The proceeds of a loan made to purchase an eligible residence may be used to pay for: The purchase price of the eligible residence; and Closing costs. The proceeds of a loan made under Regulation .05A and B of this chapter to purchase and rehabilitate an eligible residence may be used to pay for: The purchase price of the eligible residence; Closing costs; plus Any of the following rehabilitation costs, which shall total $5,000 or more to be eligible for a loan under this regulation: The reasonable cost of correcting major structural defects, The reasonable cost of repairing or replacing plumbing, HVAC, or electrical systems, The reasonable cost of correcting any violations of local planning, zoning, or building codes, or other applicable laws, The reasonable costs of eliminating health and safety hazards including correcting or removing defective paint surfaces and lead-based paint problems; and The reasonable cost of demolition, construction, or lot consolidation as may be approved by the Program; and Any of the following costs: The reasonable cost of inspections performed in accordance with Regulation .08D of this chapter; and Other reasonable rehabilitation costs as may be approved by the Program, such as the cost of developer fees, cosmetic repairs, energy conservation improvements, accessibility modifications, or major appliances. The proceeds of a loan made to refinance an eligible residence may be used to pay for: The payoff and release of the existing mortgage loan or loans, including: The remaining principal balance of the existing mortgage loan or loans, and Unpaid interest due on an existing mortgage loan or loans at the time the Program loan closes; The cost of buying out the equity interest of a co-owner; Any of the following fees, taxes, premiums, or costs which are unpaid and overdue at the time the Program loan closes, up to a limit of 20 percent of the amount of the loan: Late fees, Real property taxes, Insurance premiums, Fees or costs, such as condominium or homeowners association fees, as approved by the Program, or Reasonable costs previously expended by a mortgage lienholder in connection with initiating foreclosure proceedings, if approved by the Program; Closing costs that are associated with the refinancing; Program fees such as application fees and loan review fees; Fees for financial counseling received in accordance with Regulation.14D of this chapter; In extraordinary individual cases, as determined in the discretion of the Director of DDF, the payoff and release of liens other than mortgage liens. For short-term loans to finance the acquisition and construction, or acquisition and rehabilitation together with demolition or lot consolidation, or acquisition and rehabilitation, of residential units, an applicant shall: Be a nonprofit organization or a local government; Demonstrate to the satisfaction of the Program that it has successfully completed an acquisition and rehabilitation project or a similar project within the last 2 years; Agree to sell the residential unit to a household of limited income under a purchase or a lease purchase contract acceptable to the Program; Have a commitment from the Department for permanent financing under the Program for the sale of the residence acquired and constructed or rehabilitated with the loan; and Provide costs for acquisition, construction, rehabilitation, demolition, or lot consolidation, marketing data, and such other information as may be required by the Program; The proceeds of short-term loans to local governments and nonprofits to finance the acquisition and construction, acquisition and rehabilitation together with demolition or lot consolidation, or acquisition and rehabilitation, of residential units may be used for: The purchase price of the eligible residence; Closing costs; Any of the following reasonable rehabilitation and construction costs which shall total at least $5,000; Correcting major structural defects; Repairing or replacing plumbing, HVAC, or electrical systems; Correcting any violations of local planning, zoning, or building codes, or other applicable laws; Eliminating health and safety hazards including correcting or removing defective paint surfaces and lead-based paint problems; and Cost of demolition, construction, or lot consolidation as may be approved by the Program; and Any of the following costs: The reasonable cost of inspections performed in accordance with Regulation .08D of this chapter; and Other reasonable rehabilitation costs as may be approved by the Program, such as the cost of developer fees, cosmetic repairs, energy conservation improvements, accessibility modifications, or major appliances. Loans made under this regulation may not exceed the lesser of: The sum of: The sales price of the eligible residence; plus The rehabilitation costs permitted under §B of this regulation; plus Closing costs; minus Any contribution required by the Program; minus The amount of any prior permitted mortgage lien; or The sum of: The appraiser's estimate of the value of the property after the rehabilitation is completed; plus Closing costs; minus The applicant's contribution described in Regulation .11C of this chapter; minus Any prior permitted mortgage lien. Standards for Rehabilitation Work. The rehabilitated property shall satisfy: State and local planning, zoning, and building codes and other applicable laws; and Standards established by the Program. Rehabilitation Work Write-Up. The work write-up describing the rehabilitation work to be done shall: Be prepared by the Department or an entity, such as a government agency, a nonprofit or for-profit corporation, or a licensed contractor, acceptable to the Program; Be approved by the Program; and Include only eligible rehabilitation costs as described in Regulation .06B or .07B of this chapter, as applicable. All rehabilitation work shall be performed by State-licensed contractors in accordance with the work write-up. The contractor or contractors performing the work shall submit to the Program both a draw schedule and a plan for implementing the work write-up. The Program, in its discretion, may revise the draw schedule in §B(3), above. Monitoring Generally. In monitoring loans and disbursements, the Program, in its sole discretion, shall determine the frequency and level of oversight by the Program during rehabilitation, taking into consideration: The capability of the borrower or the developer under Regulation .07 of this chapter; The demonstrated experience and reliability of the contractor; The amount of the loan; The availability of local technical assistance; and Other factors considered relevant. Inspections of Rehabilitation Work. For rehabilitation work under Regulation .05 of this chapter: The Program staff or those persons or entities, which may include the borrower, authorized by the Program, shall conduct inspections to: Determine the necessary scope of work, when required; and Verify whether the contractor performing the work is entitled to a draw payment. Inspection reports shall be made on a standard form prescribed by the Program. The Department may charge borrowers a fee for inspections of the rehabilitation work. For rehabilitation work under Regulation .07 of this chapter: The Program may require that periodic inspections or a final home inspection be conducted to: Determine the necessary scope of work, if required; and Verify whether the contractor performing the work is entitled to a draw payment or that all work has been completed; Inspection reports shall be made on a standard form prescribed by the Program; Inspections shall meet standards set by the Program and be conducted by the Program or an inspector acceptable to the Program; and The Department may charge borrowers a fee for inspections of the rehabilitation work. Completion of Work Required. Except as provided in §B of this regulation, payments shall be made only for work completed. Payments may not be made for material delivered to the site but not incorporated into the project. Advances. For loans under Regulation .05 of this chapter, there may be an advance or down payment in an amount which does not exceed 10 percent of the rehabilitation costs, if required by the contract for the rehabilitation. For loans under Regulation .07 of this chapter, the Program may advance to a nonprofit organization or local government 10—90 percent of the acquisition and rehabilitation costs. The percentage of costs advanced shall be in the sole discretion of the Department, taking into account experience managing construction or rehabilitation projects and disbursing funds. Progress Payments. Progress payments may not be made until the borrower has delivered satisfactory evidence, such as receipts or bills, of the amount of the payment requested. Progress payments may not be made without an inspection to verify completion of the work, except at the discretion of the Program. At a minimum, however, the Program or its approved agents shall verify completion of the work before disbursing the final payment, as described in §G of this regulation. If a request for payment is refused, the Program shall notify the borrower. The determination of the Program as to percentage of work completed is final. The Program shall give the borrower written notice of its determination of the percentage of work completed. Joint Payee Checks. Payments of draws shall be made by a joint payee check issued to the borrower and contractor unless an alternative payment method is approved by the Program Director. Effect of Arrearage. Loan funds may not be disbursed if there is any arrearage of interest payments or escrows required by the loan documents. Retainage. For all projects for which the borrower is responsible for project inspections, the Program shall retain loan proceeds equal to not more than 10 percent of the contract proposal costs until final payment. For any other project, the Program, at its discretion, may elect to retain loan proceeds equal to not more than 10 percent of the contract proposal costs until final payment, taking into consideration: The type of project; The contractor's experience; and Other factors the Program considers relevant. The retainage shall be released at final payment upon verification that all contracted rehabilitation items are complete and acceptable to the Department. In addition to standard retainage, if the Program receives written notice that subcontractors, materialmen, or suppliers have not been paid for work done or material supplied to and for the project, and all loan funds have not yet been disbursed, the Program shall retain an amount equal to the lesser of all funds not yet disbursed and the amount sufficient to satisfy the claims until satisfactory evidence of satisfaction and release by the subcontractors, materialmen, or suppliers is presented. The contractor shall promptly pay or bond any liens established. Final Payment. Final payment shall be made as follows: The borrower shall submit to the Program a certificate of completion, executed by the borrower and contractor, certifying that all work: Has been completed in accordance with the contract documents; Was performed in a workmanlike manner; and Was in accordance with all applicable planning, zoning, and building codes, and other applicable laws. Upon final inspection and receipt and approval of the certificate of completion, final payment shall be processed. If, in the opinion of the Program, the contractor has satisfied the contract and the borrower has refused to request or release the final payment, then the Program may follow the procedure described below: The Program may require the borrower to explain in writing within 10 days why the Program should not make direct payment to the contractor; If the borrower responds within the 10-day period and requests a meeting, the Program Director shall hold a meeting at which the borrower shall present objections to requesting or releasing the final payment; and The Program, in its discretion, may then approve direct payment to the contractor or the borrower. Closeout Procedures. After final payment is made, the Department shall reconcile all receipts and disbursements and prepare a close-out statement. Secretarial Determination of Maximum Loan Amounts. The Secretary shall determine limits on loan amounts from time to time. In making the determinations in §A(1) of this regulation, the Secretary may consider factors including the following: Regional costs of housing; Costs of housing affordable to households of limited income; and Exceptional circumstances in individual cases. Purchase Loans. A loan made to finance the purchase of an eligible residence may not exceed the sum of: 100 percent of the sales price of the eligible residence, up to the appraised value of the property, plus Closing costs, minus The borrower's minimum cash contribution described in Regulation .11C of this chapter; minus Any prior permitted mortgage lien. Purchase and Rehabilitation Loans. A loan made under Regulation .05A and B of this chapter to finance the purchase and rehabilitation of an eligible residence may not exceed the lesser of: The sum of: The sales price of the eligible residence; plus The rehabilitation costs permitted under Regulation .06B of this chapter; plus Closing costs; minus The borrower's contribution described in Regulation .11C of this chapter; minus Any prior permitted mortgage lien; or The sum of: The appraiser's estimate of the value of the property after the rehabilitation is completed; plus Closing costs; minus The borrower's contribution described in Regulation .11C of this chapter; minus Any prior permitted mortgage lien. Subordinate Program Loans. The sum of a subordinate Program loan made under Regulation .04B of this chapter, plus the amount of the superior mortgage loan, may not exceed the sum of the appraised value plus closing costs, minus the borrower's contribution required under Regulation .11C of this chapter. Refinancing Loans. A loan made to refinance existing mortgage loans may not exceed the lesser of: The total refinancing costs permitted in accordance with Regulation .06C of this chapter; or The appraised value of the eligible residence, plus applicable closing costs. Interest Rates. The initial preferred interest rate for a loan shall be: Not higher than the prevailing private market rate as determined by the Program; and A rate, which may be as low as 0 percent, set by the Program in relation to the borrower's financial capacity as determined by the Program. The initial preferred interest rate may be adjustable in accordance with Regulation .13 of this chapter. For purchase and rehabilitation loans, during the rehabilitation period, the Program may in the discretion of the Program charge interest at a rate lower than the initial interest rate. Loan Term. On the stated date for the borrower to begin repayment of the loan, the maximum loan term may not exceed the lesser of: 40 years; or If an appraisal is required for the loan, the estimated remaining economic life of the property. Borrower's Contribution. The Program may require the borrower to make a minimum contribution to the transaction, as determined by the Department. The minimum contribution requirement described in §C(1) of this regulation applies only to purchase loans, not to refinancing loans. Security for Loans. A loan shall be secured by a mortgage on the property in the form required by the Department, which shall be recorded in the land records of the county in which the property is located. A loan shall be secured by a first mortgage unless it is permitted to be secured by a second mortgage under Regulations .04B and .07C of this chapter. The mortgage securing the Program loan may not be subordinate to any other liens, including but not limited to mortgage liens other than mortgage liens permitted under Regulations .04B and .07C of this chapter, tax liens, or judgment liens. Late Charges. A late charge, as permitted by law, may be imposed. Prepayment Penalty. A prepayment penalty may not be charged. Change of Ownership. The loan shall become due and payable upon the sale or transfer of the real property securing the loan unless the transfer is: To a spouse, divorced spouse, or a child who resides at the mortgaged property; Any other transfer which lenders are required by federal law to permit; or To an assuming transferee who would otherwise be eligible for a Program loan. For a loan made under Regulation .07 of this chapter: The loan shall be due and payable upon the sale or transfer of the real property securing the loan, under partial release provisions set by the Program if applicable; and The real property securing the loan shall be sold to a household of limited income. Loan Payments During Rehabilitation. During the rehabilitation period for the loan, which is to be determined by the Program, the borrower may be charged interest only. Hazard Insurance. The borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount equal to the lesser of the: Replacement value of the improvements, as determined by the appraisal required under this chapter; or Sum of the loan, plus any superior mortgage lien permitted by the Program. Flood Insurance. If the property is located in an area designated by either the Director of the Federal Emergency Management Agency or the Secretary of the Department of Housing and Urban Development as having special flood hazards, and for which flood insurance is available, the eligible residence shall be covered by a flood insurance policy in an amount equal to the lesser of the: Maximum amount of insurance available; or Amount of the loan. Terms and Conditions. An insurance policy shall meet the minimum requirements in §C(2), below, plus any additional requirements which may be set by the Department. An insurance policy shall: Be written by a company: Acceptable to the Department, and Which is reputable and financially sound, as determined by the Department; Be in force upon the closing of the loan; Contain a standard mortgagee endorsement attached to or printed in the policy naming the Department as mortgagee; Provide for notification to the Department before termination; and Contain terms and coverage satisfactory to the Department. Applicability. This regulation applies to loans made to owners of one-to-four unit properties. Adjustable Interest Rates. The initial preferred interest rate on the loan may be adjustable. Loans subject to adjustment shall be made in accordance with the following provisions: The interest rate adjustment shall be based on increases or decreases in the borrower's household income; The manner of calculating interest rate adjustments and the frequency of the adjustments shall be fully disclosed to the borrower at the time the loan is made; and An interest rate adjustment shall take place only after written notice to the borrower. Except for the reasons set forth in §C(4) of this regulation or Regulation .11A(3) of this chapter, the interest rate may not be adjusted: Below the initial preferred interest rate described in Regulation .11A of this chapter; or Above a rate determined by the Program to be the market interest rate at the time the loan is made. The Program may establish an alternative interest rate for a borrower that is permitted to assume the loan under Regulation .11G of this chapter, but fails to provide the Program with evidence that the borrower meets the income limits in effect at the time the borrower acquires the property or an interest in the property. Adjustable Rate Loans; Review of Income and Adjustment of Rate. The provisions of this section apply only to adjustable rate loans made under §B of this regulation. A borrower's household income may be reviewed periodically as required or permitted under the loan documents, upon request of the borrower, or for a new owner permitted to assume the loan as described in §B(4) of this regulation. For the purposes of reviewing household income, the Program may require the borrower to submit, in a timely manner, copies of income tax returns and other pertinent information for all members of the borrower's household. If, upon review, the Program determines that the financial circumstances of the borrower have changed and the borrower is: Eligible for a decrease in the interest rate, then the: Program may decrease the interest rate to a lower rate which the Program has determined the borrower can afford, based on the decrease in the borrower's income, and Decreased interest rate may not drop below the initial preferred interest rate described in Regulation .11A of this chapter, except that in extraordinary individual cases as determined by the Program, the interest rate may be decreased to a lower rate necessitated by the financial circumstances of the borrower; No longer eligible for the preferred interest rate stated in the borrower's loan documents, then the Program may: Increase the preferred interest rate to a higher rate which the Program has determined the borrower can afford, based on the increase in the borrower's income, except that the increased interest rate may not exceed the lower of the maximum rate, if any, set forth in the loan documents, or the current prevailing rate for private mortgages, as determined by the Program, or Call the loan and declare it due and payable after the first 5 years of the loan if the loan documents so permit. The Program may increase the preferred rate to the maximum rate set forth in the loan documents, regardless of the prevailing rate for private mortgages, if: Upon the request of the Program, the borrower fails to provide a current Maryland or federal tax return or other evidence of financial circumstances satisfactory to the Program; or The borrower does not execute all of the legal documents required by the Program necessary to increase the preferred interest rate. If, after receiving notice of an adjustment to the loan's interest rate, the borrower believes the interest rate adjustment is unwarranted, then the borrower may request the Program to reconsider the adjustment. Within 30 days of the date of the notice in §C(5) of this regulation, the borrower requesting reconsideration of an adjustment to the loan's interest rate: Shall submit to the Program a written statement of reasons why the borrower believes the loan is eligible for a lower interest rate, which statement may be accompanied by any supporting documentation; and May request a personal interview in connection with the request to reconsider the interest rate adjustment. The Director of DDF shall designate a review committee composed of at least three employees of the Department, none of whom participate in original decisions about interest rate adjustments. The review committee shall make a recommendation to the Director of DDF for a request to reconsider an interest rate adjustment, following the procedure described below: The review committee shall review all requests by borrowers to reconsider an interest rate adjustment; The review committee shall conduct all personal interviews requested by borrowers, except that only two members of the review committee need to be present at each interview; If a borrower does not request an interview or fails to appear for an interview, then the review committee shall make its recommendation about the interest rate adjustment based on any written statements and documentation submitted by the borrower, in addition to any other relevant information available; If a personal interview takes place, then the review committee's recommendation about the interest rate adjustment shall take into account information provided in the interview. The Director of DDF may: Make the final decision about requests to reconsider interest rate adjustments; or Delegate the authority to make the final decisions to the Director or Deputy Director of Homeownership Programs, as long as the designee is not a member of the review committee. Applications. To apply for a loan, an applicant shall: Submit a completed application in the form that the Department requires; Supply a copy of the latest income tax return, if appropriate, for each member of the household, or other available verification of any existing household income; and Submit any other information or documentation reasonably requested by the Program in order to establish eligibility and qualifications for a loan. Application or Other Program Fees. The Program may require application fees and loan review fees. Loan Closings. The Program shall establish procedures for closing loans either by the Department directly or by authorized agent. Loan closings shall be scheduled at a time and place acceptable to the Program and the borrower and conducted in a manner acceptable to the Department and the Office of the Attorney General. Title Insurance. The borrower shall provide at closing a standard American Land Title Association Loan Policy that is acceptable to the Program, insuring the Department for an amount equal to the borrower's loan. The title policy shall evidence that title to the home is vested in the borrower, or borrowers as the case may be, and contain only those exceptions and encumbrances acceptable to the Program. Charges and Fees. The borrower is responsible for paying closing costs. Payment may be made directly by the borrower or may be financed by the Program loan in accordance with Regulation .06 of this chapter. Appraisals. The Program may require an appraisal of the value of an eligible residence submitted by an appraiser, and in a form and manner acceptable to the Program. The appraisal may be required to estimate the remaining economic life of the property. If the loan is for purchase and rehabilitation of the eligible residence, the Program may require the appraisal to state the: Value of the property before rehabilitation work is done; and Estimated value of the property after rehabilitation work is completed. Home Buyer Counseling. Each individual borrower receiving a loan may be required to participate in a homebuyer counseling program acceptable to the Department. Borrowers required to participate in a homebuyer counseling program may be required to pay a fee for the program, which fee may be included in the loan amount in accordance with Regulation .06C(5) of this chapter. For eligible developers of eligible homes, the Department may enter into forward commitments to reserve, for a fixed period of time, a fixed amount of Program funds. The Program funds reserved in the forward commitment shall be used to finance Program loans for eligible borrowers purchasing eligible homes constructed or rehabilitated by the developer. Eligible developers are: Nonprofit or for-profit organizations; Local governments; or Local government agencies. To be eligible for a commitment, homes to be financed with the funds reserved shall: Be priced to be affordable to eligible borrowers; and In the determination of the Department, avoid creating or aggravating a concentration of low income households that would adversely affect surrounding communities. If homes to be included in this forward commitment are new construction, or will change the type of use or increase the intensity of the existing use of the property included in the commitment, the homes are eligible for a forward commitment only if the: Department has complied with COMAR 05.01.06.06; and Secretary has issued the written determination required under COMAR 05.01.06.07. To be eligible for a commitment, newly constructed homes to be included in a forward commitment shall be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. A developer seeking a forward commitment shall submit sufficient information and documentation to determine the extent, if any, to which the homes to be financed by the loans will change the type of use or increase the intensity of the existing use of the property included in the forward commitment. The Department, in its discretion, may set aside Program funds for initiatives and special programs, whereby funds may be made available under special terms set by the Administration. Forward Commitments. The Department may enter into forward commitments with sponsors to reserve, for a fixed period of time, a fixed amount of Program funds for initiatives or special programs. The sponsor may be a nonprofit organization or a local government. The Department may: Assign a mortgage for value; Release a mortgage; Foreclose a mortgage; Acquire property securing a loan in default; Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; or Obtain and seek enforcement of a deficiency judgment. In the event of default, as provided in the loan documents, or in the event of a prospective default, the Department, in its sole discretion, may: Modify the rate of interest; Modify the time or amount of payment; Modify the term of the loan; Modify the loan in any other way in order to promote repayment of the loan and achieve the purpose of the Program; Accelerate the loan and foreclose on the mortgage, or accept a deed instead of foreclosure; Accept a deed in lieu of foreclosure whereby the Department accepts a voluntary conveyance of the property securing the loan in exchange for cancellation of debt; Permit a short sale whereby the borrower sells the property and pays less than the full amount of the mortgage debt, if the Department determines that loan loss will be minimized as a result; or Take any other action permitted under the Act. Loan Documentation. Loans shall be made using standard forms prescribed by the Program. Program Fund Allocations. The Secretary may reserve all or any portion of the Program funds at any time for any purpose. The Secretary also may restrict the use of all or a portion of the unreserved Program funds so that funds are made available: For a particular purpose consistent with Program goals; For limited times or geographic areas; To meet certain economic or other emergencies; or To one of the other loan programs operated under the Maryland Home Financing Program described in Regulation .02B of this chapter, or to the Settlement Expense Loan Program described in COMAR 05.03.04. To the extent that Program funds are not reserved or restricted under §B(1) or (2) of this regulation, or encumbered under a forward commitment made under Regulation .15 or .16 of this chapter, the Program may make funds available to eligible loan applicants on a first-come, first-served basis. However, the Program is not obligated to make loans generally available or to make a specific loan. Delegation of Authority. An action or decision required or permitted to be taken or made by the Department under the Act or these regulations, except for actions when the Secretary is designated, may be delegated by the Secretary. Operational Manuals. The Department may establish from time to time operational handbooks or manuals governing matters relating to the program, including descriptive statements of program procedures which do not affect directly the rights of, or the procedures available to, the public. Loan Servicing and Origination. The Department may enter into servicing agreements with mortgage loan servicers acceptable to the Department. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Act. Reconsideration. An applicant or developer dissatisfied with any decision of the Program may request reconsideration by writing to the Director of the Program. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Agreements with Political Subdivisions. The Program may enter into agreements with political subdivisions to perform loan application intake services if the political subdivision meets the minimum criteria established by the Department. A borrower who knowingly makes or causes to be made any material statement or material misstatement of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-816, Annotated Code of Maryland. Housing and Community Development Article, §§4-803—4-806; State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of MarylandExecutive Orders 01.01.1992.27C and 01.01.1998.04 Effective date: April, 1973 Regulations .01—.20 amended effective September 1, 1974 (1:2 Md. R. 112) Regulations .01—.20 amended effective July 23, 1975 (2:16 Md. R. 1138) Regulation .03F amended effective April 13, 1977 (4:8 Md. R. 632) Regulation .03H adopted effective April 13, 1977 (4:8 Md. R. 632) Regulation .04D amended effective April 13, 1977 (4:8 Md. R. 632) Chapter recodified from COMAR 05.01.04 to COMAR 05.03.01 Regulations .01, .03, .04, .07—.11, and .13—.15 amended and new Regulation .17 adopted as an emergency provision effective January 25, 1989 (16:3 Md. R. 334); emergency status expired July 25, 1989; adopted permanently effective August 7, 1989 (16:15 Md. R. 1650) Regulation .05 amended effective January 8, 1990 (16:26 Md. R. 2786) Chapter, Maryland Home Financing Program, repealed effective July 22, 1991 (18:14 Md. R. 1609) Regulations .01—.17 under a new chapter, Preferred Interest Rate Loan Program, adopted effective July 22, 1991 (18:14 Md. R. 1609) Regulation .03B amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .04 amended effective February 1, 1993 (20:2 Md. R. 110); January 21, 2002 (29:1 Md. R. 20) Regulation .05 amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .06C amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .10A and G amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .12 amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .14 amended effective January 2, 1994 (20:25 Md. R. 1941); January 21, 2001 (29:1 Md. R. 20) Chapter revised effective August 5, 2002 (29:15 Md. R. 1141) Regulation .04A amended effective October 13, 2003 (30:20 Md. R. 1447) Regulation .15E amended effective October 13, 2003 (30:20 Md. R. 1447) These regulations govern the use of proceeds from the issuance of the Community Development Administration's mortgage revenue bonds or from other sources of financing. Proceeds of the bonds and other financing are used to provide mortgages at interest rates below rates prevailing in the unassisted private mortgage market. The Administration may purchase mortgage loans from lenders, make certain direct mortgage loans for eligible residences, or make forward commitments to make or to purchase permanent mortgage loans for eligible residences to be constructed or rehabilitated by developers. Terms appearing in the Act have the meanings defined there and, in addition, the meanings used in this chapter. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency within the Division of Development Finance of the Department of Housing and Community Development. “Applicant” means an individual applying for a mortgage loan. “Authorized officer”, for purposes of executing the Program documents, means any of the following: The Director and any Deputy Director of the Administration; The Director of Single Family Housing Programs; The Deputy Director of Single Family Housing Programs; and The Assistant Director of Single Family Housing Programs. “Bond” means a bond, note, or other obligation of the Administration, the proceeds of which finance mortgage loans. “Bond certificate” means: A certificate, resolution, trust indenture, or other instrument authorizing the issuance and sale of bonds; or Any agreement governing any other source of financing. “Borrower” means the obligee on a mortgage loan from the Program. “Closing costs” means costs incurred in connection with purchasing or refinancing an eligible residence, including costs such as the: Credit report fee; Appraisal fee; Home inspection fee; Survey fee; Title examination fee; Loan origination fee; Title insurance fee; Application fee; Attorney's fee; Documentation and preparation fee; Recording fee; State and local transfer tax; and Recordation taxes. “Code” means the Internal Revenue Code of 1986, as amended, 26 U.S.C., or the Internal Revenue Code of 1954, as amended, as applicable, and any related income tax regulations. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. “Developer” means an individual or entity that owns, acquires, constructs, or rehabilitates a project of eligible residences, the purchases of which are to be financed by mortgage loans. “Eligible residence” means residential real property which meets the requirements of Regulation .05 of this chapter. “Household” means the individual or individuals who occupy or intend to occupy: The eligible residence, in the case of a one unit residence; or One of the units in the eligible residence, in the case of a two to four unit residence. Income. “Income” means, for purposes of determining whether an applicant's household is qualified as an eligible household, 100 percent of the anticipated annual gross income based on current rate of income from all members of the applicant's household, except as identified in Regulation .04D of this chapter, who intend to reside in an eligible residence as their principal residence. “Income” includes wages, overtime, bonuses, commissions, investment and interest income, unemployment insurance, alimony, child support, pensions, and all other income from any source, as required under the Code, less certain income of minors, unusual or temporary income items, and other items as may be permitted under the Code. “Loan documents” means documents evidencing or securing a mortgage loan or relating to the application for a mortgage loan, including the note, deed of trust, mortgage, and affidavits submitted in connection with the origination of the mortgage loan, and other documents as may be required by the Administration consistent with prevailing prudent lending practices, or to comply with federal and State law. “Manufactured home” means a structure designed to be used as a dwelling, which: Is a multisectional structure which has one HUD certification for each section shipped, and was fabricated on or after June 15, 1976, in an off-site manufacturing facility for installation or assembly at the building site; When installed on the site, meets a minimum floor area, minimum depth, and minimum length as required by the Administration, in its sole discretion; Is installed permanently on an engineered foundation in conformance with the International Residential Code, which is incorporated by reference under COMAR 05.02.07, or the standards set by the American National Standards Institute, Inc., which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by: The United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or The Department of Housing and Community Development as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland; Complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. “Master servicer” means a master servicer selected by the Administration in accordance with section .13F. “MBS” means mortgage-backed securities. “MHF” means the Maryland Housing Fund, an agency within the Division of Credit Assurance of the Department of Housing and Community Development. “Mortgage” means a written instrument including a deed of trust, evidencing or creating a lien against real property for the purpose of providing collateral to secure the repayment of a loan. “Mortgage insurer” means a mortgage pool insurer or provider of primary mortgage insurance, and includes private and governmental mortgage insurers or guarantors. “Mortgage lender” means: Any approved bank, trust company, savings institution, savings and loan association, national bank association, mortgage banker, licensed mortgage lender, insurance company, or other financial institution that: Maintains an office in the State, Engages in making or originating residential mortgage loans, Closes loans in its corporate name; Is authorized to transact business in the State; and Meets other applicable Program criteria; With the prior approval of the Program, two related entities that: Each meets the requirements of §B(22)(a)(i), (ii), (iv), and (v) of this regulation; Originate and close loans and assign to the Administration in a manner approved by the Administration in its sole discretion; and Agree to execute additional documents and meet additional requirements as the Administration determines in its sole discretion; or The Maryland Home Financing Program. “Mortgage loan” means a loan made under the Program and secured by a mortgage. “Prepaid expenses” means costs due at the time of closing which are required by the lender to be paid in connection with closing a mortgage loan such as property taxes, ground rent, hazard insurance, condominium or homeowners association fees, if applicable, and any mortgage insurance premiums. “Program” means the Administration's program for using the proceeds of the Administration's revenue bonds or other sources to: Finance mortgage loans secured by eligible residences: Purchased from lenders, or Made directly by the Administration in accordance with Regulation .14 of this chapter; and Make forward commitments to developers to make or purchase mortgage loans for acquisition of existing, newly constructed, or substantially rehabilitated eligible residences. “Program documents” mean those documents evidencing or securing the obligations of mortgage lenders, loan servicers, or developers to the Administration under the Program. “Project” means an undertaking by a developer relating to existing, newly constructed, or substantially rehabilitated eligible residences, such that the undertaking qualifies as a “community development project” as defined in the Act. “Secretary” means the Secretary of Housing and Community Development. “Settlement costs” means closing costs and prepaid expenses. “Targeted area” means a: Geographically defined area of chronic economic distress as designated by the State and approved by the United States Department of the Treasury and the United States Department of Housing and Urban Development; or Qualified census tract whose population according to the most recent decennial census meets certain income limits set forth under the Code. To be eligible for a mortgage loan to be financed through the Program, a borrower is required to provide affidavits and other verification of compliance with ownership, occupancy, and financial requirements. Ownership and Occupancy Requirements. Principal Residence. Individuals taking title to an eligible residence are required to execute an affidavit stating that they intend to occupy the property as their principal residence within a reasonable time after closing of the loan. Prior Ownership Disqualification; Exceptions to Disqualification. Each individual taking title to an eligible residence: May not have had an ownership interest in their principal residence at any time during the 3 years preceding the date of the closing of the mortgage loan; or Is an honorably discharged veteran, as evidenced by proper documentation, exercising their one-time exemption to the first time homebuyer requirement under the Code. The restriction in §B(2) of this regulation does not apply if the eligible residence being financed: Is located in a targeted area; Meets the following requirements: Is at least 20 years old, Has rehabilitation expenses in excess of 25 percent of the purchase price, and The external and internal walls and internal structural framework are retained to the extent required for a qualified rehabilitation loan under §143(k) of the Code; Is financed with taxable mortgage revenue bonds, as determined by the Administration; or Is financed from other sources available to the Program, as determined by the Program. Ownership of Other Real Estate. The borrower may not own any other real property at the time the mortgage loan closes except: A cemetery plot; A recreational vehicle lot; A 1/20th (2.6 weeks) or less interest time-sharing unit; A lot on which the residential housing unit to be financed with proceeds of the mortgage loan is to be built; or An existing principal residence of a borrower if it is subject to a contract of sale at the time of application and is conveyed before the mortgage loan is closed if the mortgage is financed with: Tax-exempt mortgage revenue bonds and the residence is located in a targeted area under the Code; or Taxable mortgage revenue bonds or another source of financing available to the Program. Minimum Age. Each single applicant and at least one married applicant taking title to the residence shall be 18 years old or older. Form of Ownership. Individuals shall take title to the property in the form required by the Administration. Purchase Contract Inspection Contingency. The Administration may require that a home inspection be conducted before closing by a home inspector acceptable to the purchaser and lender. The inspection may be required by the purchaser as a contingency to the purchase contract. The purchaser shall obtain the inspection report although the cost to the purchaser may be reimbursed by the seller. Financial Requirements. Borrower's Household Income. The total anticipated annual household income of all individuals, except those individuals identified in §D(1)(b) of this regulation, who intend to occupy an eligible residence which will secure a mortgage loan financed by the Administration may not, at the time the mortgage loan is closed, exceed the lesser of the: Maximum annual income limits as determined under federal law for the area in which the residence is located; or Maximum income limits as determined by the Secretary from time to time. Total anticipated annual household income does not include the income of full-time high school or undergraduate students who are dependent children, unless that individual is a mortgagor or guarantor. Responsibility for Repayment. All of the individuals who take title to an eligible residence are required to execute the deed of trust subjecting their interest in the residence to the lien of the deed of trust. Ability to Repay. The borrower shall meet the mortgage insurer's underwriting criteria regarding creditworthiness and ability to repay the mortgage loan. Minimum Payment to Close. Payment made at closing by or on behalf of the borrower shall be the difference between the: Total expense of acquiring the residence including settlement costs and any down payment; and Principal amount of the mortgage loan as permitted under Regulation .06 of this chapter. Maximum Assets. Purchase Loans. Borrowers with liquid assets equal to 20 percent or more of the sales contract price may not be eligible for a mortgage loan under the Program if those assets, in the estimation of the Administration, would enable the borrower to obtain financing in the current unassisted private lending market. Refinance Loans. Borrowers with liquid assets and equity in their residence may not be eligible for a mortgage loan under the Program if those assets, in the estimation of the Administration, would enable the borrower to obtain financing in the current unassisted private lending market. Minimum Cash Contribution by Borrower. The borrower is required to contribute an amount acceptable to the mortgage insurer. The Administration may purchase mortgage loans secured by eligible residences comprised of one to four residential units as described in this regulation. Loans Secured by Two to Four Unit Residences. The Administration may purchase a loan secured by a two to four unit residence only for special projects, initiatives, or programs approved by the Administration, in its sole discretion. In addition, a loan may be eligible for purchase only if: One of the units shall be occupied by the owner of the units; and The units shall have been first occupied at least 5 years before the mortgage is executed, unless the residence is a two-unit residence located in a targeted area and the borrower meets the federal income requirements set forth in §143(k)(7) of the Code. Maximum Regional Purchase Price Limits. The cost to acquire an eligible residence, including all amounts paid by or on behalf of the borrower, excluding usual and reasonable settlement costs, may not exceed the lesser of: The maximum purchase price limit determined in accordance with federal law for each federally designated region of the State; or The appraised value of a residence. Limit on Appraised Value. The appraised value of a residence may not exceed 125 percent of the maximum purchase price limit determined in accordance with federal law for each federally designated region of the State. Other Requirements. The eligible residence shall meet all applicable building, health, zoning, and other legal requirements at the time of purchase, or upon completion of rehabilitation that meets the requirements for a qualified rehabilitation loan under Regulation .04B(2) of this chapter. If the residence is newly constructed, then the eligible residence shall be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. Section E(2) of this regulation does not apply to loans financed solely with the proceeds of revenue bonds issued under a transfer by a county to the Administration of the Maryland State ceiling under Financial Institutions Article, Title 13, Subtitle 8, Annotated Code of Maryland. Eligible Units. Types of eligible units include detached units, modular units, town homes, condominiums, manufactured homes under the meaning stated in Regulation .03B(16) of this chapter, and other types of units acceptable to the Administration. Ineligible Units. The following types of housing units are not eligible: Stock ownership in cooperative housing projects, except as provided otherwise in Regulation .17B(3) of this chapter; and Manufactured homes that do not meet the definition under Regulation .03B(16) of this chapter. Ineligible Business Use. A portion of the residence may not be used in a trade or business except with the prior consent of the Administration. The Code permits certain limited exceptions to the prohibition against business use. Therefore, if a borrower expects to use any portion of the residence in a trade or business, the Administration requires certification from the borrower regarding the nature and extent of any proposed business use in order to assure compliance with applicable federal law governing this use. Maximum Mortgage Loan Calculation. The original principal amount of a mortgage loan to be made or purchased by the Administration, less any permitted cost set forth in §A(2) of this regulation, may not exceed the lowest of: The maximum purchase price determined from time to time in accordance with federal law for the region of the State in which the residence is located; A maximum mortgage loan amount determined under any applicable bond certificate; or A maximum mortgage loan amount determined by the Secretary from time to time. Costs that may be subtracted from the original principal amount for the purposes of §A(1) of this regulation are: A financed mortgage insurance premium or guarantee fee; For a loan insured by FHA, additional costs permitted by FHA to be included in the insured loan amount; and Any other costs permitted by the Administration in its discretion, if allowed under the applicable bond documents. In making the determination in §A(1)(c) of this regulation, the Secretary may consider: Moderating disparities in federal regional cost limits published from time to time; Jurisdictional requests in connection with particular bond issues; and Whether to modify the maximum mortgage loan amount for loans financed from sources other than tax-exempt bonds. Interest Rate. The interest rate or rates on mortgage loans shall be set from time to time by the Administration taking into account: The interest payable by the Administration on its bonds; Administrative expenses of the Program; Possible losses due to mortgage loan defaults; Maximum earnings on bond proceeds financing the loans as permitted under §§103 and 141—150 of the Code, as applicable; Minimum earnings on bond proceeds as required under Housing and Community Development Article, §4-248, Annotated Code of Maryland, and any applicable bond certificate; The income levels of the households being served; and Other matters the Administration considers relevant or appropriate. Maturity Date. The maturity dates for mortgage loans shall be determined by taking into account the maturity dates of the Administration's bonds. In most cases a mortgage loan will have a term not to exceed 30 to 40 years. However, the term of a mortgage loan may not exceed the remaining economic life of the eligible residence. Lien Priority. The mortgage shall be either: A first mortgage lien on the eligible residence, subject only to permitted liens and encumbrances, which may include reservations, easements, and other imperfections of title acceptable to the mortgage insurer and the Administration; or A subordinate lien as permitted by the Administration, in its sole discretion. Title Insurance. Each mortgage shall be the subject of a title insurance policy acceptable to the Administration in an amount not less than the original principal amount of the mortgage loan, insuring that the mortgage is a first mortgage lien or, if applicable under §C of this regulation, a subordinate lien as permitted by the Administration. Subordinate Liens. At the time a Program loan is made or purchased, a borrower may not place any subordinate liens on the property securing the mortgage loan without the prior consent of the Administration. Mortgage Insurance. Mortgage loans shall be the subject of such primary and pool mortgage insurance or other credit enhancement as required by any applicable bond certificate or as the Administration requires in its sole discretion. With the approval of the pool insurer, if any, the Administration may permit termination of primary mortgage insurance provided by MHF or a private mortgage insurer: If the borrower is not delinquent and if the unpaid principal amount of the mortgage loan is 78 percent or less of the original principal amount or as otherwise permitted by the Administration; or As otherwise required by State or federal law. Property Insurance. Fire and extended hazard insurance coverage shall meet the following requirements: Policies shall be written by insurance companies authorized to transact business in the State; Policies shall be in force at the time of the mortgage loan closing; The Administration shall be named as the mortgagee in a standard mortgagee clause or endorsement attached to or printed in the policy; The insurance shall be in an amount at least equal to the lesser of: The original principal balance of the mortgage loan, or 100 percent of the replacement value of the improvements located on the property; The insurance shall be payable in an amount equal to any partial or total loss not exceeding the full amount of insurance to prevent the borrower from being a coinsurer; The terms and coverage of all insurance policies shall be satisfactory to the Administration. Loan Documents. The Administration may prescribe the form and the substance of the loan documents. The loan documents may provide for: A single monthly payment, due on the first day of the month, to be applied to interest, principal, and expenses, in the order determined by the Administration, which may be preceded by a period of monthly payments calculated in the amount of interest and expenses only, to be applied to interest, principal, and expenses in the order determined by the Administration; The monthly payment of expenses equal to 1/12 of annual real estate taxes, any ground rent, property insurance premiums, mortgage insurance premiums, condominium or homeowners association fees, unless otherwise directed by the Administration, and any other item required by the Administration; A late charge; Each loan to be due on transfer and not be assumable without the written consent of the Administration, which may be granted only if the transfer is not in violation of the Code; The Administration to increase the rate of interest as an alternative to acceleration of the indebtedness in the event of certain nonmonetary defaults related to covenants by the mortgagor required by provisions of the Code, to facilitate transfer of the loan out of the Program; Prepayment premiums if otherwise permitted by State law for private mortgages; A prohibition on subordinate liens without the consent of the Administration; and Other provisions necessary to protect the interests of the Administration, to further its purposes, and to ensure compliance by the Administration with the Act, any applicable provisions of the Code, and the applicable bond certificate. Loans for Acquisition and Rehabilitation. The Administration, in its discretion, may make or purchase loans that finance a combination of acquisition and rehabilitation costs, if the loans meet the requirements of the Code, the Act, applicable bond documents, and any other applicable requirements. Tax-Exempt Bond Refinancing. In order to comply with the Code, mortgage loans financed with tax-exempt mortgage revenue bonds may not be used to refinance an existing mortgage or a land installment contract except: In limited circumstances involving construction of a home on a lot owned by the borrower, or to refinance temporary bridge financing, or in connection with a qualified rehabilitation loan, in any case as may be approved by the Administration; or For refinance loans permitted by the Code, if any, and the applicable bond documents, to the extent offered by the Administration. Financing from Taxable Bonds or Other Sources. Mortgage loans financed with taxable mortgage revenue bonds or other sources may be used to refinance an existing mortgage. A refinancing loan may be used to pay for: The payoff and release of existing mortgages and all liens; and Closing costs, settlement costs, real property taxes, homeowners and mortgage insurance premiums, homeowner association fees, and other closing expenses as determined by the Program. A refinancing loan may not be used to provide money directly to the borrower or pay debts that are not secured by the residence. The Program may set terms and conditions for refinancing loans, including: A requirement that the borrower's current first mortgage have an interest rate subject to change or a balloon payment; or A maximum or minimum on the loan-to-value ratio, including all existing debt secured by the residence. The Program may set interest rates for loans financed by taxable bonds or other sources that are higher than rates for tax-exempt mortgage loans. If a defaulted mortgage loan is owned directly by the Administration, the mortgage loan may be foreclosed, restructured, forborne, or otherwise treated, as described in §§B—G of this regulation. Foreclosure. Mortgage loans which are in default may be: Foreclosed by the Administration or its agent in the manner provided by law for foreclosures of private mortgages; or Assigned by the Administration to the mortgage insurer. The Administration may take title in its name to any property foreclosed by it. The Administration may convey title to the property to bona fide purchasers. This conveyance is not subject to the provisions of the State Finance and Procurement Article, Annotated Code of Maryland. Deed in Lieu. Instead of foreclosing or assigning a loan under §B(1) of this regulation, the Administration may accept voluntary conveyance of the property securing the loan in exchange for cancellation of the debt. Loan Restructuring. The Administration may permit plans of repayment of mortgage loans which do not require a direct monthly reduction of principal, a fixed rate of interest, level payments, or amortization of principal over the term of the mortgage loan, provided that the plan does not impair payment of the bonds or other obligations of the Administration with respect to the bonds, and subject to the requirements of the mortgage insurer, the Code, and the applicable bond certificates. Forbearance. The Administration may forebear on collection of payment due on mortgage loans, provided this forbearance is not materially adverse to the Administration's bond holders and does not impair the mortgage insurance. Short Sale. The Administration may permit a borrower to sell the property and pay less than the full amount of the mortgage debt if the Administration, in its sole discretion, determines that loan loss will be minimized by this action. In General. The Administration may take any other action permitted under the Act. The ability to take action as described in this regulation may be governed by agreements with mortgage insurers and the regulations governing MHF. Nonmonetary Transfers. The Administration may approve nonmonetary transfers of interest in property that is security for a mortgage loan made under the Program if the requirements of the Code and the applicable mortgage insurers can be satisfied. The transferee shall be required to execute appropriate affidavits, modification documents to the note and deed of trust, recapture tax notice, and other documents in the form provided by the Administration. The Administration reserves the right to disapprove transfers under circumstances where it appears that there was deception or sham on the part of the borrower in connection with the original mortgage loan in an attempt to avoid ineligibility under the requirements of Regulation .04 of this chapter. Assumptions for Consideration. The Administration will permit an assumption of one of its mortgage loans only if the assumption meets the: Eligibility requirements for new mortgage loans contained in Regulations .04 and .05 of this chapter; and Requirements of the applicable mortgage insurers. Compliance with the Code. Transfers or assumptions of interests in property in accordance with §A or B of this regulation are subject to modification from time to time to comply with requirements of the Code. A mortgage lender may apply to be approved to participate as an eligible lender under the Program to originate mortgage loans for purchase by the Administration. An eligible mortgage lender shall certify at the time of application for approval, and shall update the certifications as required by the Administration, that the lender is: In compliance with all applicable State and federal laws and regulations governing the business of the mortgage lender and the making of residential mortgage loans for residential housing; and Except as provided in §F of this regulation, approved by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). The Administration may approve eligible mortgage lenders that: Meet the Administration's standards in §B of this regulation; In the estimation of the Administration, are reputable and financially sound; Provide all required documentation, information, and counsel opinions acceptable to the Administration as set forth in §D of this regulation; Execute all program documents for participating mortgage lenders in the form prescribed by the Administration; and Meet additional requirements of the Administration established from time to time. A mortgage lender shall provide the Administration with: A counsel's opinion in form and substance satisfactory to the Administration; and Any financial data, documents, or other information that the Administration requires. A mortgage lender approved by the Administration shall: Enter into a mortgage purchase agreement with the Administration, as amended from time to time, stating the general terms and conditions on which the Administration will purchase mortgage loans from the mortgage lender; At the request of the Administration, provide supplemental opinions, documents, and information in order to remain approved by the Administration for participation in the Program; and Meet any additional requirements of the Administration. A mortgage lender that is not an FNMA or FHLMC approved seller of mortgage loans may be approved to sell mortgage loans to the Administration if the: Lender qualifies to participate under all other Program requirements; Lender meets any minimum origination requirements of the Administration; and Lender meets any additional requirements of the Administration. Conditions Related to Particular Bond Issues. Conditional Obligation to Purchase. From time to time the Administration issues tax-exempt or taxable mortgage revenue bonds to finance mortgage loan purchases. Any obligations of the Administration to purchase any mortgage loans financed from the proceeds of its bonds are subject to: The successful sale and delivery by the Administration of bonds on terms and in an amount satisfactory to the Administration; and Execution by the lender and the Administration of the participation agreement or other program document applicable to a particular bond issue, or issues, or as otherwise required by the Administration. Participation Agreement. The participation agreement or other program documents or directives set the specific terms and conditions of the mortgage loans to be made by the lender and purchased by the Administration. The participation agreement or other program documents or directives shall state the applicable interest rates that may be charged on the mortgage loans, and the maximum purchase prices of residences to be financed by mortgage loans which the Administration will purchase from the mortgage lender. The maximum return to a mortgage lender may be established by the Administration in the form of points, fees, and charges, including amounts which may be retained out of mortgage payments by the mortgage lender for servicing a mortgage loan. The participation agreement or other program documents or directives may contain requirements for: Allocations of proceeds to be reserved for purchase of mortgage loans for particular local jurisdictions for specified periods of time; Additional requirements for or restrictions upon the terms and conditions of mortgage loans, the eligibility of borrowers, and the number, type, location, and use of eligible residences; Electronic and other reporting, reconciliation, loan reservation, and other processes; and Other terms and conditions that the Administration considers necessary or desirable. Other program documents and directives referred to in §A(2) of this regulation may include notices to lenders through electronic means and the Department's internet site. Purchase Procedure. Loan Review. Loans are subject to review by the Administration before purchase. Purchase Schedules. The Administration may establish a standard purchase schedule, and also an expedited purchase schedule, as an incentive to encourage efficient submission of loans in proper order for purchase. Repurchase. The mortgage purchase agreement may require that a mortgage lender repurchase any loan that the Administration determines was not in compliance with conditions for purchase of mortgage loans by the Administration, was delinquent in making the first payment, or has been inadequately serviced by the mortgage lender. In General. For new loans originated by mortgage lenders and purchased by the Administration, the Administration may: Require loans to be serviced by a master servicer or servicers selected by the Administration, or serviced by the Administration; or Permit mortgage lenders, or a related entity acceptable to the Administration in its discretion, to be approved to service the mortgage loans the lender originates on terms set by the Administration. If the Administration has permitted mortgage lenders to service certain mortgage loans as described in §A(1)(b) of this regulation, the Administration may permit the servicer to retain from mortgage loan receipts a monthly servicing fee determined by the Administration from time to time. Upon notice to the servicers, the Administration may require that loans held by the servicers be transferred to the master servicer or servicers selected by the Administration or transferred to the Administration. The provisions of §A(1)—(3) of this regulation are subject to the requirements of issuers of investment certificates secured by the mortgage loans, where applicable. Servicing shall be performed in accordance with a mortgage agency agreement and servicing manual prepared by the Administration. To be approved initially by the Administration to service mortgage loans, a lender is required to: Enter into a mortgage agency agreement with the Administration, as amended from time to time, stating the general terms and conditions for servicing of mortgage loans for the Administration by the mortgage loan servicer; Be an FNMA approved mortgage loan servicer; In the estimation of the Administration, be reputable and financially sound; Submit all certifications, affidavits, financial information, and other information as required by the mortgage agency agreement; Agree to the establishment of separate insured trust or custodial accounts for the benefit of the Administration and its borrowers; Be subject to service of legal process in the State; Demonstrate delinquency rates that do not exceed rates acceptable to the Administration; Be a participating originating lender in the Program; and Not currently be suspended or debarred under COMAR 05.01.05. To remain approved by the Administration to service mortgage loans, a loan servicer is required to meet all the requirements of §C of this regulation, with the following exceptions and additional requirements: Update all certifications, affidavits, financial information, and other information as required by the mortgage agency agreement; Verify establishment of separate insured trust or custodial accounts for the benefit of the Administration and its borrowers; Be subject to service of legal process in the State; Maintain delinquency rates that do not exceed rates acceptable to the Administration, or institute a plan, as approved by the Administration, for reducing the delinquency rates for the Administration portfolio of loans to a level acceptable to the Administration; Maintain a servicing portfolio for the Administration that has at least the minimum number of loans determined by the Administration from time to time; and Satisfactorily perform its duties under its contractual obligations to the Administration. Transfer of Servicing. A servicing portfolio of Administration mortgage loans may not be transferred by the loan servicer without the prior written approval of the Administration. Transfer to a related entity requires prior written approval by the Administration in its discretion. Merger with or acquisition of the servicer also requires the prior written approval of the Administration in order to continue servicing. If a servicer fails to meet the requirement of §D of this regulation, or if the servicer wishes to transfer its mortgage loan portfolio voluntarily, the Administration may: Require the servicer to transfer Administration loans to one or more master servicers designated by the Administration or to the Administration; or Permit a servicer to transfer loans to another approved servicer within a period of time set by the Administration, after which the loans shall be transferred to one or more master servicers designated by the Administration or to the Administration. Other Servicing. The Administration may select one or more master loan servicers or subservicers from time to time on terms within its discretion to service all or a portion of the loans the Administration purchases or the loans that secure the MBS purchased by the Administration. The Administration may service all or a portion of the loans the Administration purchases or the loans that secure the MBS purchased by the Administration. Division of Credit Assurance. The Division of Credit Assurance of the Department shall carry out loan asset management for the Administration. The Administration may make a direct mortgage loan to a household with income at the limits established in Regulation .04D(1) of this chapter: For an eligible residence located in an eligible project as described in Regulations .15—.19 of this chapter; For a household that has a disabled member who will reside in the dwelling; For an emergency housing need as determined by the Secretary; For settlement and down payment costs; or That is made in conjunction with a loan funded with State appropriated funds if the State loan comprises at least 20 percent of the total amount loaned to the borrower. Processing of a direct mortgage loan may be initiated by submission of a standard form of application prescribed by the Administration accompanied by: A nonrefundable application fee in an amount determined by the Administration from time to time to be used to offset the cost of processing and appraisal and credit report fees; and Any documents, affidavits, or information that the Administration requires. The Administration may prescribe procedures for evaluating applicants for direct mortgage loans. The Administration may prescribe procedures and requirements for closing mortgage loans, including the following: Only title insurance companies authorized to do business in the State, attorneys acting on behalf of these title insurance companies, or attorneys authorized by the Administration and the Office of the Attorney General may close mortgage loans; Reasonable and customary amounts for the following items may be collected from the borrower: Recording fees and recording and transfer taxes or other charges incident to recordation; Credit report and appraisal, which are normally covered by the application fee; Required survey charges; Title examination and title insurance; and Other charges or fees authorized by the Administration, including points or origination fees; The mortgagor shall pay at closing a sum that, together with monthly expense payments, will pay all ground rents, taxes, assessments, insurance premiums, and condominium or homeowners association fees when due and payable; All taxes and assessments against the property that are due and payable shall be paid at or before closing; Before closing, the title insurance company shall issue its preliminary binder in favor of the Administration as mortgagee, with a title insurance policy being issued at closing in accordance with the binder. With the approval of the Secretary, the Administration may provide forward commitments to developers for the financing of mortgage loans to families of limited income meeting the requirements of Housing and Community Development Article, §4-218, Annotated Code of Maryland, for the purchase of existing, newly constructed, or rehabilitated homes in community development projects. The Administration may finance these mortgages by making mortgage loans directly to eligible mortgagors, as described in Regulation .14 of this chapter, or by purchasing mortgage loans from an approved lender selected by the developer or the borrower, as described in Regulations .11—.13 of this chapter. If a project is approved, the Administration may issue a commitment letter to the eligible developer setting forth: The total principal amount of loans for eligible residences that the Administration will make or purchase within a project; Project conditions and requirements; Loan terms and conditions; and Any other restrictions applicable to the mortgage loans, such as the: Eligibility of mortgagors, and Number, type, location, and use of eligible residences in a project. Before issuance of the commitment letter, the developer shall have delivered to the Administration: Evidence, satisfactory to the Administration, of construction or rehabilitation financing for the project, if applicable; Evidence, satisfactory to the Administration, of ownership by the developer or rights to ownership of the land and buildings that are to be financed by the mortgage loans, except in cases of converting tenants to homeowners or similar projects approved by the Administration; and A certified copy of an approving ordinance or resolution, duly adopted by the legislative body of the municipality or county in which the project is located or the Board of Estimates in Baltimore City, approved by the county executive of the chartered county or the mayor of a municipality, if not a member of the city council, with the ordinance or resolution being in any form as long as it contains the following information: The identity of the developer, The location and nature of the project, Acknowledgment of the financing to be provided by the Administration, and Approval of the project. The developer shall agree in writing to purchase from the Administration any mortgage loan if any information or statement contained in any submission to the Administration by the developer is untrue or inaccurate in any material respect, including any information or statement that jeopardizes the tax-exempt status of interest on applicable bonds of the Administration or compliance of the loan with applicable State or federal law. The developer shall comply with the terms and conditions of a commitment letter or any other program document entered into between the developer and the Administration. The Administration, in its sole discretion, shall determine whether an eligible residence is eligible to be financed in a project under the program, taking into account such factors as the purchase price, the appraised value, the cost of other housing in the area, the square footage, whether it is subject to a homeowner's warranty or equivalent warranty acceptable to the Administration, and other appropriate factors. The commitment to the developer and any extensions of the commitment shall expire unless the eligible residences under construction or to be constructed are completed and sold, and the loans settled and purchased, within the time limits specified by the Administration. The time limit for a commitment may not exceed the time permissible under the applicable bond certificate. To be eligible for a forward commitment, a developer: Shall demonstrate experience, acceptable to the Administration, in the development of eligible residences and satisfactory prior experience, if any, in the Program or other programs of the Administration; In the estimation of the Administration, shall be reputable and have the ability to satisfy its obligations under the program documents and these regulations; Shall be qualified to do business in Maryland; Shall hold all licenses or permits from the State, its agencies, and any local governmental unit having jurisdiction necessary to own, construct or rehabilitate, and operate a project, and, if no independent broker or brokers are retained, necessary to sell eligible residences in a project; and May not be suspended or debarred under COMAR 05.02.02, or be on the disapproved contractors' list maintained by the Department, the United States Department of Housing and Urban Development, the Maryland Department of General Services, or any other federal or state agency or instrumentality. Developments of eligible residences or portions of the developments may be approved as eligible projects. The Administration may limit the number of eligible residences it will finance in any development of which the project is a part. If a development consists of more than one section, this limitation may be applicable to each section separately, as well as to the development as a whole. Project Units. A project may be a scattered site project of units that are not located on contiguous properties. A project shall consist of at least two units. In the sole discretion of the Administration, cooperative units may be project units if the: Project consists of all of the cooperative units in the building or buildings owned by the cooperative housing corporation; Cooperative is in compliance with Corporations and Associations Code, Title 5, Subtitle 6B, Annotated Code of Maryland; Cooperative project is determined by the Secretary to be a community development project under the Act; Loans have such terms, and are secured, as required by the Administration and the mortgage insurer; and Administration, in its sole discretion, determines that the loans are permitted to be financed under the applicable bond documents. Projects involving rehabilitation are eligible for a commitment if: The proposed rehabilitation will correct all code violations and bring the property to a standard acceptable to the Department; The structures to be rehabilitated are unoccupied at the time of commitment, except in cases of: Occupancy by tenants who are to become homeowners, or Adoption of a relocation plan acceptable to the Department; and Except in cases of tenant conversion to homeownership, the buildings to be rehabilitated are owned or to be owned by the developer. If a project involves new construction or will change the type of use or increase the intensity of the existing use of the property, the project is eligible for a forward commitment only if the: Department has complied with COMAR 05.01.06.06; and Secretary has issued the written determination required under COMAR 05.01.06.07. Regulations .03—.10 of this chapter apply to mortgage loans to finance acquisition of eligible residences located in eligible projects whether the mortgage loans are made directly by the Administration or purchased by the Administration from participating lenders. If the project consists of newly constructed homes, then the project shall be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. Section F of this regulation does not apply to loans financed solely with the proceeds of revenue bonds issued under a transfer by a county to the Administration of the Maryland State ceiling under Financial Institutions Article, Title 13, Subtitle 8, Annotated Code of Maryland. Approval of a project shall be initiated by submission of an application on forms prescribed by the Administration. Preliminary Application. Developers may submit the following items for preliminary eligibility review by the Administration: Completed application form; Location map; Construction and sales schedule; Cost breakdown for the project; Marketing plan; and Sufficient information and documentation to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the land and buildings to be financed by the mortgage loans. Final Applications. Final applications shall contain any information, documents, or items that the Administration requires in accordance with this section. In addition to items listed in §A of this regulation, the Administration may require an application to include the following: Appraisals satisfactory to the Administration; Certification of equal employment opportunity; Warranty certification; Subdivision and site plans; Plans and specifications for each model type to be built by the developers; Form of sales contract; Condominium or homeowners association documents, as applicable; Local government resolution of approval; Historical Trust clearance; A nonrefundable application fee in an amount as may be established by the Administration; and Other information and documentation as may be required by the Administration. The developer shall submit and satisfy all requirements of the application process set forth in this regulation. Factors which the Administration may consider in approving a project include, but are not limited to: Cost, unit size, type of building, quality of construction, energy efficiency, and location of the project; Geographic distribution of all projects for which mortgage loans have been or may be made available; Regional demand; The number and amount of mortgage loans requested; The incomes of the households to be served; The Administration's prior experience with the developer; and Other criteria that the Administration considers appropriate in furtherance of the public purpose of the Program. The Administration, in its discretion, may set aside Program funds for initiatives and special programs, whereby funds may be made available under special terms set by the Administration. The Administration, in its discretion, may operate a program whereby Program loans are collateral for mortgage-backed securities, or other securities, certificates, or agreements, under the terms and conditions which the Administration and the issuer of the securities, or certificates, or other party to the agreements, may require. Subordinate Mortgage Loans. The Administration, in its discretion, may operate a program in which a borrower receiving a first mortgage loan through the Program also may receive a second and subordinate mortgage loan through the Program under terms set by the Administration. The purpose of such a program is to provide a governmental benefit to qualifying borrowers by providing additional financing when doing so will enhance the borrowers' opportunities for affordable housing. The borrower may be charged a higher rate of interest on the first mortgage loan than the rate charged on first mortgage loans to borrowers who do not receive the secondary mortgage loan. The Program may make loans that do not bear interest and are forgivable as to principal under terms set by the Administration. Settlement Expense Grants. The Administration may make funds available for grants to Program borrowers to assist with settlement expenses upon terms set by the Administration. The loan to the borrower receiving a grant under §D(1) of this regulation may be at a higher interest rate than loans available without the grant. The Administration may require that the borrower execute Administration documentation to receive the grant. The purpose of such a program is to provide a governmental benefit to qualifying borrowers by providing down payment and settlement costs when doing so will enhance the borrowers' opportunities for affordable housing. A mortgage lender, servicer, master servicer, developer, or mortgage insurer may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in any aspect of the Program, or in any aspect of employment by any mortgage lender, servicer, master servicer, developer or mortgage insurer in connection with any property financed or assisted under the Program. A mortgage lender, servicer, master servicer, developer, or mortgage insurer shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination, equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Titles VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department's Minority Business Enterprise Program, as amended; The Americans with Disabilities Act of 1990, as amended; State Government Article, Title 20, Annotated Code of Maryland, as amended; and Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Administration and other parties. Timing of Issuance. The Administration may obtain funds to make or purchase mortgage loans from any source authorized by law, particularly by issuing bonds or notes payable from revenues from the mortgage loans. The timing of any bond or note sale and the acceptability of the interest rate to be paid by the Administration are solely within the discretion of the Secretary. Restricted Bond Purchase. A mortgage lender, servicer, developer, or mortgage insurer, including any related person as defined in §144 of the Code, may not, under any arrangement, formal or informal or direct or indirect, purchase bonds or other obligations of the Administration in an amount related to the aggregate principal amount of the mortgage loans to be sold to the Administration by the mortgage lender, subject to a commitment to a developer, or to be insured by the mortgage insurer. Guidelines. The Administration may establish from time to time detailed Program guidelines containing underwriting standards, loan processing requirements, and other requirements or matters relating to the financing and servicing of mortgage loans or to the Program. Copies of these guidelines shall be available for examination at the offices of the applicable mortgage lenders, servicers, and developers and at the Administration's principal office. The Administration, upon request, shall make copies available to the public without charge. Fees. The Administration may charge any commitment fees, application fees, nonusage fees, or other fees, charges, or penalties to applicants, mortgage lenders, servicers, developers, or other individuals or entities that participate in the Program. The Administration may restrict the fees and charges that mortgage lenders, servicers, developers, or other Program participants obtain from mortgagors or applicants. Delegation. In addition to authorized officers identified in Regulation .03B(4) of this chapter, the Secretary may delegate to any other official or employee of the Department or Administration the authority to execute or approve any program documents or loan documents. Designation of Proceeds. The Secretary may from time to time designate use of any portion of the proceeds available under the program for any purpose of the program consistent with the Act and the applicable bond certificates. Waiver. The Secretary may waive or vary particular provisions of these regulations if in the written determination of the Secretary the waiver or variance is: Not inconsistent with the Act and is not contrary to the provisions of any applicable bond certificate and application of the regulations in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act; or Necessary to comply with the regulations of the Code or any federal agency. Reconsideration. An applicant, developer, mortgage lender, or servicer dissatisfied with any decision of the Administration may request reconsideration by writing to the Director of the Program. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Books and Records. Mortgage lenders, servicers, and developers shall maintain complete books, accounts, and records regarding all transactions under the Program. These shall be maintained and available for inspection by the Administration or other representatives of the State until at least 3 years after the termination of all contractual relationships with the Administration. The Administration may make any examination that it considers necessary to monitor compliance with the program documents or other documents, the Act, any applicable provisions of the Code, the applicable bond certificate, and these regulations. Requirements of the Code. The requirements of the Code, which shall be determined by the Administration in its sole discretion, shall take precedence over the requirements of this chapter in the event of any conflict or omission. Housing and Community Development Article, §§4-237—4-240; State Finance and Procurement Article, §§5-7B-01—5-7B-10; Annotated Code of MarylandExecutive Orders 01.01.1992.27C and 01.01.1998.04 Effective date: Regulations .01—.27 adopted as an emergency provision effective April 23, 1980 (7:10 Md. R. 949); adopted permanently effective September 5, 1980 (7:18 Md. R. 1737) Regulation .01 amended and Regulations .28—.55 adopted as an emergency provision effective December 3, 1981 (8:26 Md. R. 2097); emergency status extended at 9:10 Md. R. 1017; adopted permanently effective May 24, 1982 (9:10 Md. R. 1018) Regulations .01, .29, .39, .43 amended and new Regulations .56 and .57 adopted as an emergency provision effective September 17, 1982 (9:21 Md. R. 2102) (Emergency provisions are temporary and not printed in COMAR) Regulations .01, .39C, and .43 amended, and new Regulations .56 and .57 adopted effective March 14, 1983 (10:5 Md. R. 463) Chapter repealed effective July 30, 1984 (11:15 Md. R. 1329) Regulations .01—.27 adopted effective July 30, 1984 (11:15 Md. R. 1329) Chapter recodified from COMAR 05.01.12 to COMAR 05.03.02 Regulation .02T amended effective January 8, 1990 (16:26 Md. R. 2786) Regulation .10 amended effective January 8, 1990 (16:26 Md. R. 2786) Regulations .01—.27 repealed and new Regulations .01—.21 adopted effective September 30, 1991 (18:19 Md. R. 2098) Regulation .03B amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2024); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .04 amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2024); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .17 amended effective January 2, 1994 (20:25 Md. R. 1941) Regulation .18B amended effective January 2, 1994 (20:25 Md. R. 1941) Chapter revised effective July 27, 1998 (25:15 Md. R. 1190) Regulation .01 amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .02 amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .03 amended effective October 14, 2002 (29:20 Md. R. 1586) Regulation .03B amended effective March 31, 2003 (30:6 Md. R. 418); January 2, 2006 (32:26 Md. R. 1995); October 9, 2006 (33:20 Md. R. 1614); April 29, 2013 (40:8 Md. R. 723) Regulation .04B amended effective October 9, 2006 (33:20 Md. R. 1614); April 29, 2013 (40:8 Md. R. 723) Regulation .04D amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .05E amended effective January 21, 2002 (29:1 Md. R. 20); October 13, 2003 (30:20 Md. R. 1447) Regulation .06 amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .07A amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .07B amended effective October 24, 2005 (32:21 Md. R. 1706) Regulation .07F amended effective October 9, 2006 (33:20 Md. R. 1614); April 29, 2013 (40:8 Md. R. 723) Regulation .07H amended effective October 24, 2005 (32:21 Md. R. 1706) Regulation .08 amended effective October 9, 2006 (33:20 Md. R. 1614); April 29, 2013 (40:8 Md. R. 723) Regulation .09A amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .10A amended effective March 31, 2003 (30:6 Md. R. 418) Regulation .11C, E amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .11F amended effective January 2, 2006 (32:26 Md. R. 1995) Regulation .12 amended effective October 14, 2002 (29:20 Md. R. 1586); April 29, 2013 (40:8 Md. R. 723) Regulation .13 amended effective October 14, 2002 (29:20 Md. R. 1586); January 6, 2003 (29:26 Md. R. 2027) Regulation .13F amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .14A amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .17F adopted effective January 21, 2002 (29:1 Md. R. 20) Regulation .17F repealed and new Regulation .17F and G adopted effective October 13, 2003 (30:20 Md. R. 1447) Regulation .19B, C, and D amended effective April 29, 2013 (40:8 Md. R. 723) Regulation .19C adopted effective October 13, 2003 (30:12 Md. R. 1447) Regulation .19C amended effective May 23, 2005 (32:10 Md. R. 924) Regulation .19D adopted effective May 23, 2005 (32:10 Md. R. 924) Regulation .20 amended effective March 16, 2015 (42:5 Md. R. 485) These regulations prescribe the policies, procedures, and authorizations for making emergency assistance mortgage loans to households of limited income. The Program is designed to provide short-term financing for eligible homeowners who, because of an involuntary loss of income due to unemployment or other extraordinary hardship, are unable to make current mortgage payments on their homes and are likely to have to forfeit the title to their home. The Program is one of four loan programs operated under the Maryland Home Financing Program as authorized by the Act. Other loan programs operating under the Maryland Home Financing Program include programs for making: Preferred interest adjustable rate loans to certain households of limited income, for the purchase, purchase and rehabilitation, or refinancing of a primary residence as described in COMAR 05.03.01; Short-term construction loans to developers for the construction of, or rehabilitation of, residential units affordable to certain households of limited income; and Reverse equity mortgage loans to elderly households of limited income for housing-related expenses and personal expenses which enable the owner to continue to occupy the owner's home, as described in COMAR 05.03.05. The following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland, as amended. “Adjusted annual income” means 100 percent of the projected annual gross income, based on the income from all members of the household 18 years old or older, including social security, retirement income, pensions, wages, overtime, bonuses, commissions, investment and interest income, rental income, disability or unemployment insurance, alimony and support payments, and all other income from any source, less: Abnormal expenses of a long-term unusual nature such as extraordinary unreimburseable medical, rehabilitation, or special education expenses; and Unusual or temporary one-time income items, such as judgments or gifts, as determined by the Program. “Borrower” means an applicant who receives a loan through the Program. “Closing costs” mean: Fees or premiums for property and judgment reports, title examination, or other similar expenses; Fees for preparation of a deed, settlement statement, or other documents; Payments owed at the time of the loan closing for property taxes, hazard insurance premiums, or ground rent; Fees for notarizing deeds or other documents; Appraisal and survey fees; Recordation taxes and fees; Fees or premiums for mortgage insurance; Loan application fees; Fees for credit reports; Reasonable legal fees; Payoff of prior liens or mortgages; and Other closing costs as approved by the Department. “Controlled dangerous substance” means a controlled dangerous substance as that term is defined in Criminal Law Article,§5-101, Annotated Code of Maryland, as amended. “Department” means the Maryland Department of Housing and Community Development, a principal department of the State. “Household” means the individual or individuals who occupy the eligible residence securing the loan. “Household of limited income” means a household for which the adjusted annual income does not exceed the upper income limit established by the Secretary in accordance with Housing and Community Development Article, §§4-806 and 4-807, Annotated Code of Maryland. “Loan” means a loan made by the Department to a borrower through the Program, and secured by a lien on the eligible residence as defined in Regulation .04. “Mortgage” means a mortgage or deed of trust. “Program” means the Emergency Mortgage Assistance Program. “Secretary” means the Secretary of the Department. An eligible residence: Shall be the primary residence of the borrower; Shall be a single family dwelling unit located in the State, including a townhouse or condominium; Shall be real property owned by the borrower in fee simple or under a freely transferable, perpetually renewable, ground lease which permits the lessee to transfer the leasehold interest without the consent of the lessor; May not be a cooperative or mobile home, which is treated as personalty for the purposes of establishing a security interest. A manufactured housing unit may be an eligible residence if it: Is intended for residential use by a single household; Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1987), which is incorporated by reference under COMAR 05.02.02,and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. An eligible residence may not be encumbered by: More than two other mortgage liens which collectively may secure a remaining mortgage debt of not more than 95 percent of the current value of the eligible residence, as determined by the Program; A mortgage lien that secures a line of credit loan; or Other liens, including a tax lien. At the time of application, an eligible borrower: Shall be likely to have to forfeit title to an eligible residence defined in Regulation .04 if the borrower does not receive a loan through the Program; Shall be unable to keep payments on the borrower's home mortgage loan or loans current due to loss of income caused by one or more of the following unforeseeable adverse personal or economic circumstances: Involuntary unemployment of a borrower, Onset of a borrower's disability or handicap, Divorce from a co-borrower, Death of a spouse or other co-borrower, Incarceration of a spouse or other co-borrower, Business reversal leading to sustained material loss of income, or Other circumstances of unforeseeable hardship as determined by the Program; May not have an unforeseeable hardship which is caused by: Current or former distribution of controlled dangerous substances by the borrower; Current use or possession of controlled dangerous substances by the borrower; or Former use or possession of a controlled dangerous substance by a borrower who is not a recovering addict which means someone: Who has successfully completed a supervised drug rehabilitation program and is no longer engaged in the illegal use of drugs, or has otherwise been rehabilitated successfully and is no longer engaging in illegal drug use; or Is participating in a supervised rehabilitation program and is no longer engaging in illegal drug use. Reasonably may be expected by the Program to resume regular mortgage loan payments within 24 months after the Program loan closes. The borrower's household shall be a household of limited income. An eligible borrower also shall meet the following requirements: Shall own and occupy an eligible residence as defined in Regulation .04 at the time of the loan application, and intend to continue to do so at the time of the loan closing; May not own or hold any interest in any other real property except cemetery plots, or real property used in a trade or business; Shall satisfy the following criteria in the estimation of the Program: Does not have the financial resources to obtain private conventional mortgage financing, Is not eligible for mortgage assistance under other Departmental loan programs or federal government programs, and Is not eligible for assistance available when the delinquent mortgage is insured by the Federal Housing Administration (FHA) under Title II of the National Housing Act; Shall meet the underwriting standards of the Program, which shall include but not be limited to: Good credit history before loss of income from adverse personal or economic circumstances, Stable employment history, Past history of responsible financial management, evidenced in part by the level of debt at the time of application for the loan; Shall have the legal capacity to incur the obligations of the loan; and Shall agree to comply with the requirements established by the Program and with the terms of the loan. A loan applicant shall be eligible for a refinancing loan under the Department's preferred interest rate loan program if: The loan applicant is otherwise eligible for a loan under the program; In the judgment of the Director of the Program, the loan applicant cannot be expected to recover from the adverse personal or economic circumstances which caused the applicant to be unable to keep mortgage payments current; The loan applicant meets the underwriting criteria of the preferred interest rate loan program, including but not limited to the income limits, house value limits, and affordability standards; and In the judgment of the Program, a loan to refinance existing mortgage debt is preferable for assisting the loan applicant. The proceeds of a loan made through the Program may be used to: Make up to 36 payments of principal and interest on the superior mortgage loan or loans as follows: Up to 12 of the payments may be payments which are overdue and unpaid at the time the loan made through the Program closes, Not more than 24 of the payments may be payments which become due after the loan through the Program closes, and Not more than a total of 36 of the payments of principal and interest may be made from the proceeds of the loan, whether the payments are as described in § A(1)(a) or (b), above, or a combination of them; Pay any of the following fees, taxes, premiums, or costs which are unpaid and overdue at the time the loan closes, or which become due during the first 24 months after the loan closes if the total does not exceed 20 percent of the total loan amount: Late fees, Real property taxes, Insurance premiums, or Fees or costs such as homeowners' association dues, which the Program determines are necessary to bring or keep the superior mortgage loan or loans current; Pay for any of the following costs associated with the Program loan: Closing costs as defined in Regulation .03B(4), above, Application fees, and Fees for financial counseling as described in Regulation .12, below. Loan proceeds shall be disbursed by the Program directly to the mortgagees or such other parties as may be owed payments or fees. Loan proceeds may not be disbursed directly to the borrower. Loan Amount. The loan amount may not exceed the lesser of: An amount which, when added to the outstanding balance of the superior mortgage lien or liens, does not exceed 100 percent of the value of the eligible residence as determined by the Program, except that in an extraordinary case, approved by written determination of the Director of the Program, the amount may be increased to an amount up to 110 percent of the value of the eligible residence; The maximum amount for which the borrower is eligible under Regulation .06A; The amount the borrower reasonably can be expected to be able to afford to repay, in the estimation of the Program; or The maximum loan amount for the Program, as determined by the Secretary from time to time. Interest Rates. The Secretary, by written determination, shall set an interest rate or rates for Program loans, from time to time, taking into account rates available in the conventional housing market and the household income and assets of the borrowers to be served by the Program. Loan Term. On the stated date for the borrower to begin repayment of the loan, the maximum loan term shall be either 20 years, or, if an appraisal is required, the appraised estimated remaining economic life of the property, whichever is less. Security for Loans. A loan shall be secured by a mortgage on the property in the form required by the Department which shall be recorded in the land records of the county in which the property is located. The mortgage securing the Program loan may be subordinate to one or two other mortgage liens if the requirements of Regulation .04C(3) are fulfilled. Late Charges. A late charge, as permitted by law, may be imposed. Prepayment Penalty. A prepayment penalty may not be charged. Insurance. Hazard Insurance. The borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount not less than the sum of the loan and any other indebtedness secured by the eligible residence, up to the value of the improvements located on the property. Flood Insurance. If the improvements are located in a 100-year plain, as designated by the United States Department of Housing and Urban Development, then the eligible residence shall be covered by a flood plain insurance policy in an amount equal to the lesser of the maximum amount of insurance available, or the sum of the loan and any other indebtedness secured by the residence. Terms and Conditions. Each insurance policy shall meet the following minimum requirements plus any additional requirements which may be set by the Department: Be written by companies acceptable to the Department; Be written by companies which are reputable and financially sound, as determined by the Department; Be in force upon the closing of the loan; Contain a standard mortgagee endorsement attached to or printed in the policy naming the Department as mortgagee; Name the Department as loss payee and additional insured; Provide for notification to the Department before termination; and Contain terms and coverage satisfactory to the Department. Change of Ownership. The loan shall become due and payable upon the sale or transfer of the real property securing the loan unless the transfer is to a spouse, divorced spouse, or child who resides at the mortgaged property, or the transfer is otherwise in accordance with federal law. Appraisal. The Program may require an appraisal of the eligible residence submitted by an appraiser, and in a form and manner acceptable to the Program. The appraisal may be required to estimate the remaining economic life of the property. Disbursement of Loan Proceeds. For a period of up to 6 months from the date of the loan closing, the Program may disburse loan proceeds to the mortgagees or other parties as may be owed payments or fees based on the information provided in the borrower's application. After the initial 6-month period, the borrower may make additional requests for disbursement of loan proceeds to the mortgagees or other parties as may be owed payments or fees. Each request shall satisfy the following requirements: The request shall be for a period of not more than 6 months; The period of time for which loan disbursements are requested shall end not later than 24 months after the loan closing; The amount of the request may not cause the loan to exceed the maximum loan amount stated in the borrower's loan documents; The request shall be made on the form provided by the Program, and shall be submitted to the Program within the time period required by the Program; The request form shall be accompanied by updated information requested by the Program about the financial circumstances of the borrower's household. The information provided shall satisfy the Program that the borrower continues to be eligible for assistance under the Program. Loan proceeds may not be disbursed by the Program on behalf of the borrower once 24 months have passed since the date of the loan closing. The Program, in its discretion, may reevaluate the borrower's financial circumstances at any time during the time that loan proceeds are being disbursed. If the borrower fails to provide information reasonably requested by the Program, or if the Program determines that the borrower is no longer eligible for assistance, then the Program may discontinue any further loan disbursements. Repayment Terms. The Program shall establish a repayment plan for the borrower which shall be set forth in the loan documents at the time the loan closes. The repayment plan shall require the borrower to begin repayment of the loan 24 months after the loan closes. Payments of principal and interest shall be deferred until the date established for repayment to begin. To apply for a loan, an applicant shall; Submit a completed application in such form as the Department may require; Supply a copy of the latest State income tax return, if appropriate, for each member of the household, or other available verification of any existing household income; and Submit any other information or documentation reasonably requested by the Program in order to establish eligibility and qualifications for a loan. Application Fee. The Program may require an application fee for processing the loan application. The Program shall establish procedures for closing the loans either by the Department directly or by an authorized agent. Loan closings shall be scheduled at a time and place acceptable to the Program and the borrower, and conducted in a manner acceptable to the Department and the Office of the Attorney General. Title. The Program shall require a title binder or property and judgment report, which shall be updated for the closing. The binder or report shall be in a form, and prepared by a company, acceptable to the Program, and the contents of the binder or report shall be acceptable to the Program. The Program may require additional evidence that title to the eligible residence is vested in the borrower and is subject only to exceptions and encumbrances acceptable to the Program. Charges and Fees. The borrower is responsible for paying closing costs. Payment may be made directly by the borrower or may be financed by the Program loan in accordance with Regulation .06A(3), above. In the event of default, as provided in the legal documents, or in the event of a prospective default, the Department may: Modify the rate of interest; Defer payment of principal, interest, or both, or forgive interest; Modify the term of the loan; Modify the loan in any other way in order to promote repayment of the loan and achieve the purpose of the Program; or Accelerate the loan and foreclose on the mortgage or accept a deed in lieu of foreclosure. The mortgage securing the program loan may be released if the Department, in its sole discretion, determines that it is in the best financial interests of the Department to do so. Each borrower shall participate in a financial counseling program acceptable to the Department unless, in the written determination of the Program, a financial counseling program is not available for the borrower or the Program otherwise determines that financial counseling is not necessary. In order to be acceptable to the Department, a financial counseling program shall: Require financial counseling before the loan is approved and after the loan closes, to the extent determined necessary by the Program; Provide credit counseling, including counseling about budget planning; Provide mortgage delinquency counseling, including a plan to address alternatives to a program loan such as: A repayment plan with the mortgagee or mortgagees, A forbearance agreement, A refinancing of the existing mortgage debt, Assistance from federal and private programs, and Sale by the owner directly to a third party instead of foreclosure. Forms and Documentation. The application and the loan documents shall be made upon standard forms prescribed by the Program. Program Fund Allocations. It is the intent of the Department that Program funds be distributed Statewide to eligible applicants and borrowers. Program funds shall be made available to eligible loan applicants on a first-come first-served basis. The Secretary may reserve a portion of the Program funds to be used for emergency circumstances. Delegation of Authority. Any action or decision required or permitted to be taken or made by the Department under the Act or these regulations, except for actions when the Secretary is designated, may be delegated by the Secretary. Operational Manuals. The Department may establish from time to time operational handbooks or manuals governing matters relating to the Program, including descriptive statements of Program procedures which do not affect directly the rights of, or the procedures available to, the public. Loan Servicing. The Department may enter into: Servicing agreements with mortgage loan servicers acceptable to the Department; Agreements with financial counseling agencies described in Regulation .12. Power of the Department. The Department may do any of the following: Assign a mortgage for value; Release a mortgage; Foreclose a mortgage; Acquire property securing a loan in default; Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; or Obtain and seek enforcement of a deficiency judgment. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Act. A borrower who knowingly makes or causes to be made any material statement or material misstatement of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-816, Annotated Code of Maryland. Housing and Community Development Article, §4-806(a)(4), Annotated Code of Maryland Effective date: October 8, 1984 (11:20 Md. R. 1741) Chapter recodified from COMAR 05.01.16 to COMAR 05.03.03 Chapter (Homeowners' Emergency Assistance Program) repealed effective April 30, 1990 (17:8 Md. R. 975) Regulations .01—.15 (Emergency Mortgage Assistance Program) adopted effective April 30, 1990 (17:8 Md. R. 975) Regulation .05A amended effective January 2, 1993 (19:26 Md. R. 2283) This chapter prescribes the policies, procedures, and authorizations for making mortgage loans to pay for settlement expenses for purchasing a home. The objective of the Downpayment and Settlement Expense Loan Program is to provide financing for settlement expenses for eligible home buyers who lack the resources to purchase a home. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 3, Annotated Code of Maryland, as amended. “Administration” means the Community Development Administration, an agency within the Division of Development Finance of the Department. “Borrower” means an applicant who receives a loan through the Program. “Department” means the Department of Housing and Community Development, a principal department of the State. “Home buyer of eligible income” means a borrower whose household income does not exceed the upper income limits established from time to time by the Secretary in accordance with Housing and Community Development Article, §4-304, Annotated Code of Maryland. “Home buyer of low income” means a borrower whose household income does not exceed the income limits established from time to time by the Secretary in accordance with Housing and Community Development Article, §4-304, Annotated Code of Maryland, which income limits will be less than those established for the home buyer of eligible income. “Household” means an individual or individuals who occupy or intend to occupy: The eligible residence, in the case of a one unit residence; or One of the units in the eligible residence, in the case of a two to four unit residence. “Household income” means 100 percent of the projected annual gross income based on current rate of income from all members of the borrower's household, 18 years old or older, including wages, overtime, bonuses, commissions, investment and interest income, unemployment insurance, alimony, child support, pensions, and all other income from any source, less: Abnormal expenses of a long-term unusual nature, such as extraordinary medical, rehabilitation, or special education expenses, as determined by the Program; and Unusual or temporary income items, as determined by the Program. “Loan” means a loan made by the Department to a borrower from the Downpayment and Settlement Expense Loan Program fund. “Manufactured home” means a structure that: Is intended for residential use by a single household; Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1987), which is incorporated by reference under COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc., which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. “MHF” means the Maryland Housing Fund, a Division of the Department. “Mortgage lender” means the Administration, the Department, or a bank, trust company, savings institution, savings and loan association, national bank association, mortgage banker, or other financial institution that maintains an office in the State and engages in making or originating residential mortgage loans, and that is licensed or otherwise authorized to make residential mortgage loans in the State pursuant to applicable State and federal law. “Program” means the Downpayment and Settlement Expense Loan Program. “Secretary” means the Secretary of Housing and Community Development. An eligible borrower: Shall be one or more members of a household who are purchasing, and shall hold title to, an eligible residence in Maryland; Shall be 18 years old or older, unless married to a joint borrower who is 18 years old or older; Shall be a home buyer of eligible income; Shall intend the borrower's primary residence to be the eligible residence for which settlement expenses are financed by the Program; May not have assets or resources, such as savings accounts, checking accounts, certificates of deposit, money market accounts, or other bank accounts, or proceeds from the sale of real property or a mobile home or other personal property, but not including individual retirement accounts or other similar accounts as approved by the Program, which could enable the borrower to pay for the settlement expenses and the minimum down payment required by the first mortgage lender, without assistance from the Program; Shall have legal capacity to incur the obligations of the loan; Shall agree to comply with the requirements established by the Program and with the terms of the loan. If the borrower's first mortgage is made or purchased by the Administration, then after the closing of the Program loan, the borrower may be required by the Administration to participate in a homeownership education program acceptable to the Administration and operated by an agency acceptable to the Administration. An eligible residence shall: Be a newly constructed or existing dwelling of not more than four residential units, one of which shall be occupied by the borrower; Be located in the State; Be real property that will be purchased by the borrower in fee simple or under a ground lease which permits the lessee to transfer the leasehold interest without the consent of the lessor; Have an acquisition cost that does not exceed the acquisition cost limits as may be established by the Secretary from time to time; and If new construction, be located within a priority funding area identified under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. An eligible residence may be a detached dwelling, a townhouse, a manufactured home, or a condominium, but not a cooperative unit. The first mortgage loan for the eligible residence shall be: Made by a mortgage lender as defined in Regulation .03 of this chapter; Purchased by the Administration if it is made by a mortgage lender other than the Administration; and Insured or guaranteed by an insurer or guarantor acceptable to the Program. A loan may be used to pay up to 100 percent of the following types of settlement expenses: Fees or premiums for title examination, title insurance, or similar expenses; Fees for preparation of a deed, settlement statement, or other documents; Payments owed at the time of settlement for property taxes or hazard insurance coverage; Escrows for future payments of taxes and hazard insurance; Fees for notarizing deeds and other documents; Appraisal fees; Fees for credit reports; Transfer and recordation taxes and fees; Fees or premiums for mortgage insurance; Loan discount points and origination fees; Down payments; Up to 30 days' worth of prepaid interest; Home inspection fee; and Other settlement expenses as may be approved by the Program before the loan closing. Loan Amount. The Program shall determine limits on loan amounts from time to time. In making the determination under §A(1) of this regulation, the Program may consider factors including the following: Regional costs of affordable housing; The amount and payment terms of other financing available to borrowers; and Exceptional circumstances in individual cases or projects. Equity Capital. The Program may require the borrower to contribute as equity capital a minimum amount of cash to the transaction, in an amount determined as a percent of the first mortgage loan amount. Loan Terms. Interest Rate. The Program shall establish, from time to time, for loans under the Program, either a single interest rate or a range of interest rates based on household income. The interest rate may be as low as zero percent. Term. The loan term may not exceed the term of the first mortgage. Payments. General. Monthly payments shall be applied to expenses, when applicable, interest, and principal, in that order. Deferred Loans. Payments of principal or interest, or both principal and interest, may be deferred until the earlier of: The sale or other transfer of the property; The maturity date or prepayment of the first mortgage loan; or A default under the Program loan. Late Charge. Late charges, as permitted by law, may be imposed. Prepayment Penalty. A prepayment penalty may not be charged. Security for Loans. Loans shall be secured by a mortgage or deed of trust, in the form required by the Department, which shall be recorded in the land records of the county in which the property is located. The mortgage or deed of trust may be subordinate to not more than two other recorded mortgage liens. Insurance. Hazard Insurance. The borrower shall maintain fire and extended coverage insurance at the borrower's expense in an amount not less than the sum of the loan and any other indebtedness secured by the eligible residence, up to the value of the improvements. The hazard insurance policy shall: Be written by companies authorized to do business in Maryland; Be in force at the time of loan closing; Name the Department as a loss payee as its interest may appear in a standard mortgagee endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Department. Flood Insurance. If the building is in a 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the: Eligible residence shall be covered by a flood plain insurance policy in an amount equal to the sum of the loan and any other indebtedness secured by the residence, naming the Department as beneficiary; and Flood plain policy may not be terminated without prior notification to the Department. Change of Ownership. The loan shall become due and payable upon the sale or transfer of the real property securing the loan unless the: Department has consented in writing to the assumption of the loan by a purchaser who meets the requirements of an eligible borrower under Regulation .04 of this chapter, and such other terms as are satisfactory to the Program; or Transfer is to a spouse, divorced spouse, or child who resides at the mortgaged property, or the transfer is otherwise in accordance with federal law. Tenant Income. The Secretary shall determine maximum household income levels for tenants occupying units in the eligible residence. The Program may set a maximum fee that mortgage lenders can charge borrowers to process the application for a loan. The fee may be financed as part of the loan. At loan closing, the borrower may be charged not more than customary and usual amounts for settlement costs. In determining the settlement expenses which may be financed by a loan under the Program, the Program may set a maximum amount for legal fees, title searches, appraisals, and other services as the Program deems necessary. The Department may charge application fees to loan applicants or mortgage lenders. The Program shall establish procedures to operate the Program. The Program may: Provide for a process by which mortgage lenders are certified to originate, sell, and service the loans; Enter into servicing agreements with mortgage lenders or other mortgage loan servicers acceptable to the Department; Prescribe the documentation required to establish an applicant's eligibility; Prescribe the form of legal documents to be used in closing the loans; Enter into agreements with local governments and nonprofit organizations to assist in the operation and funding of the Program. The Program expects to give preference for the use of loan funds in the following ways: The Program may reserve a portion of loan funds for use in connection with other Departmental programs or particular housing developments, as approved by the Secretary, where the properties being purchased are one or two unit residences; The Program intends to give preference to applicants purchasing one and two unit residences; The Program shall give priority to homebuyers of low income by reserving at least 50 percent of the funds available for Program loans in each fiscal year for making loans to homebuyers of low income. Any reserve funds not applied for after 8 months of the fiscal year shall become available to all eligible borrowers. The Program shall establish procedures for the closing of loans either by the Department directly or by authorized agent. The Department may use Program funds for initiatives or special programs that promote affordable housing under the terms and conditions set by the Program. In the event of default, as provided in the legal documents, the Department may: Modify the rate of interest; Defer payment of principal, interest, or both; Modify the term of the loan; Modify the loan in any other way in order to promote repayment of the loan and achieve the purposes of the Program; or Foreclose the loan or accept a deed instead of foreclosure. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. An action or decision required or permitted to be taken or made by the Department pursuant to the Act or these regulations, except for waiver under Regulation .11, may be taken by the Director of the Division of Housing Finance of the Department, or the Director's designees. The Department may establish from time to time operational handbooks or manuals governing matters relating to the Program including descriptive statements of program procedures which do not directly affect the rights of, or the procedures available to, the public. A borrower who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-309, Annotated Code of Maryland. The provisions of these regulations are severable. A judgment by any court of competent jurisdiction finding or declaring that any provisions of these regulations or the application of any provision to any person or circumstance is invalid does not affect the validity of the remaining provisions of the regulations or any other application of these regulations, and the remaining regulations shall have full force and effect as if a judgment had not been entered. Housing and Community Development Article, Title 4, Subtitle 3, Annotated Code of Maryland Effective date: Regulations .01—.14 adopted as an emergency provision effective December 13, 1988 (15:27 Md. R. 3114); emergency status extended at 16:12 Md. R. 1331; emergency status expired October 31, 1989 Regulations .01—.14 adopted effective December 11, 1989 (16:24 Md. R. 2616) Regulation .03B amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .04 amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .05 amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .06 amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2024); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .07 amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .07B amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2024); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .09 amended effective February 1, 1993 (20:2 Md. R. 110) Chapter revised effective October 16, 2000 (27:20 Md. R.1838) Regulation .05A amended effective October 13, 2003 (30:20 Md. R. 1447) Regulation .07A amended effective December 1, 2008 (35:24 Md. R. 2075) Regulation .09E adopted effective December 1, 2008 (35:24 Md. R. 2075) These regulations prescribe the policies, procedures, and authorizations for making home equity mortgage loans, with principal and interest repayment deferred, to elderly homeowners of limited income. The objective of the Program is to provide an eligible borrower with a line of credit, secured by the borrower's home, which is based on the equity in the home and the age of the borrower. The loan proceeds are to be used for housing-related expenses and other personal expenses which enable the borrowers to continue to occupy their homes. In general, payment of principal or interest is not required until the borrower dies or moves out of the home, or until the home is sold, except that the Program has the right to foreclose in the event of a default. In general, the Program will look to the equity in the home for repayment of principal and interest. There are restrictions on the line of credit, including a limit on the amount the borrower can draw each year on the line of credit, and the Program's right to refuse to make disbursements to a defaulting borrower. In addition, because Program funding is appropriated annually by the legislature, there is no assurance that an approved line of credit can be drawn on by a borrower in any year, or that the borrower will ever be able to draw on the entire amount of the borrower's maximum line of credit. The following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland, as amended. “Borrower” means an applicant who receives a loan through the Program. “Closing costs” may include: Fees or premiums for title examination, title insurance, or similar expenses; Fees for preparation of a deed, settlement statement, or other documents; Payments owed at the time of the loan closing for property taxes, hazard insurance premiums, or ground rent; Fees for notarizing deeds and other documents; Appraisal and survey fees; Recordation taxes and fees; Fees or premiums for mortgage insurance; Loan application fees; Reasonable legal fees; Payoff of prior liens or mortgages; and Other closing costs as approved by the Program. “Department” means the Maryland Department of Housing and Community Development, a principal department of the State. “Equity payment” means a loan disbursement made by the Department to a borrower. “Home”: Means the real property which secures the loan and otherwise fulfills the requirements of Regulation .05; Includes the residential dwelling unit, the lot upon which the residential dwelling unit sits, and the accompanying rights to occupy or use other real property in connection with ownership of the home. “Household” means the individual or individuals who occupy the home. “Household income” means 100 percent of the projected annual gross income, based on income for the year preceding the loan application, from all members of the borrower's household 18 years old or older, including social security, retirement income, pensions, wages, overtime, bonuses, commissions, investment and interest income, rental income, imputed income from non-income producing assets other than the borrower's home when the total value exceeds $20,000, disability or unemployment insurance, alimony and support payments, and all other income from any sources, less: Unreimbursable medical expenses, and health or long term care expenses that enable the borrower to remain in the home, including but not limited to: Adult day care, Attendant care, Durable medical equipment, Health, supplemental medicare, or other long term care insurance premiums, Home health care, Hospice care, Housekeeping assistance, Nursing home expenses for a temporary stay for a borrower, Prescription drugs; and Unusual or temporary income items as approved by the Program. “Joint borrower” means a borrower who receives a loan along with one or more other borrowers, all of whom together own the home. “Loan” means a loan made by the Department to a borrower through the Program and secured by the home. “Manufactured home” means a structure that: Is intended for residential use by a single household; Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1990), which is incorporated by reference under COMAR 05.02.01, or the standards set by the American Standards Institute, Inc., which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the mortgage. “Program” means the Reverse Equity Mortgage Program. “Secretary” means the Secretary of the Department. Each individual borrower and each joint borrower, shall meet the following requirements: Be at least 65 years old; Have a total household income which does not exceed the limits established by the Department from time to time; Have the legal capacity, or the necessary legal authority in the case of someone acting on behalf of the borrower, to incur the obligations of the loan; and Agree to comply with the terms of the loan and the requirements established by the Program. For at least 1 year before applying for the loan, the individual borrower or at least one joint borrower shall have continuously owned and occupied the home, except that the individual or joint borrower who has continuously owned the home but has been unable to occupy the home for health or safety reasons shall reasonably expect to reoccupy the home within 2 months after the loan closing. The home shall meet the following requirements: Be the primary residence of the individual borrower, or at least one of the joint borrowers; and Be real property owned by the individual borrower, or all of the joint borrowers, in fee simple or under a freely transferable, perpetually renewable, ground rent lease which permits the lessee to transfer the leasehold interest without the consent of the lessor. The home shall be a residential dwelling unit located in Maryland. It may be a condominium acceptable to the Program, but not a cooperative unit. Manufactured homes may be eligible, subject to review by the Program of each particular application for a loan. Joint borrowers shall own the home as tenants by the entireties or as joint tenants with a right of survivorship. The mortgage or deed of trust: May be subordinate to one other mortgage lien which: Shall secure a remaining mortgage debt of not more than 25 percent of the equity in the home, equity being determined in accordance with Regulation .07B, and May not secure a line of credit loan; May not be subordinate to any other liens including a tax lien. The proceeds of the loan may be used to pay the following costs and expenses: Necessary home repair, home maintenance, adaptation, or modification; Ongoing housing expenses, including: Payoff of the existing mortgage or mortgages, Property tax payments, Utility costs, Homeowner's insurance premiums including all types required under Regulation .07K, Ground rent, and Other housing expenses approved by the Program; Health and long term care expenses that enable the borrower to remain at home, including but not limited to: Adult day care, Attendant care, Durable medical equipment, Health, supplemental Medicare or other long term care insurance premiums, Home health care, Hospice care, Housekeeping assistance, Nursing home expenses for a temporary stay for a borrower, Prescription drugs; and Other expenses, as approved by the Program, related to the borrower's maintaining independence in the home. Proceeds of the loan may be used to pay closing costs. The Program may set a maximum amount that will be financed by the loan for legal fees, title searches, appraisals, and other services. The borrower shall certify at closing that all equity payments requested and received shall be used solely for the eligible uses as described in this regulation. The Program may also request certification concerning the use of the loan proceeds when the borrower requests equity payments and during the annual recertification process. Each loan shall be made subject to the requirements of this regulation. 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. Line of Credit. Scale of Equity Percentages. 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. The scale of equity percentages determined in accordance with §C(1)(a) of this regulation is set forth in the table below: The scale of equity percentages may be adjusted from time to time by determination of the Secretary to: Respond to changes in property values; Take into account Program experience in making loans and receiving repayments of loans; and Take into account other factors relevant to the Program and considered appropriate by the Secretary to periodic adjustment of the scale. Borrower's Maximum Line of Credit. A borrower's maximum line of credit shall be calculated by multiplying the equity in the home by the appropriate equity percentage. 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. 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. 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. 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. 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. Annual Maximum of Equity Payments. 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. 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. The annual maximum of equity payments shall be subject to: The availability of Program funds; and A borrower's maximum line of credit. Emergency Equity Payments. 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: Is in imminent danger of losing title to the home or of having to vacate the home for medical or safety reasons; Has no other source of funds to alleviate the problem; and Whose problem can be alleviated by additional Program funds. 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. Interest Rate. The Program shall establish, from time to time, the interest rate for the loans. Maturity of the Loan. The loan shall become due and payable at the earliest occurrence of: The death of an individual borrower, or in the case of joint borrowers, after the death of the last surviving borrower; 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; 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 Any of the events of default which are enumerated in the deed of trust or other loan documents executed by the borrower. Payments. 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. 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: The sale price of the home, if applicable, less a reasonable real estate agent or broker commission not exceeding 7 percent; The current assessed value of the home; or An appraisal to be submitted in a form and manner and by an appraiser acceptable to the Program. 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: In the case of borrower's fraud or misrepresentation; In the case of borrower's willful neglect or abuse of the home; or Under other conditions determined by the Program and set forth in the loan documents. 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. 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: 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 May not secure a line of credit loan. Insurance. 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: Be written by companies authorized to transact business in Maryland; Be in force at the time of loan closing; Name the Department as loss payee as its interest may appear in the standard mortgagee endorsement attached to or printed in the policy; and Contain terms and coverage satisfactory to the Program. 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: 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 Flood plain insurance policy may not be terminated without prior notification to the Department. Disbursements. The Program shall establish procedures for requesting equity payments, and shall establish limits for: Minimum and maximum dollar amounts for the initial and any succeeding equity payment requests during any fiscal year; and The maximum frequency of requests per year. Equity payments will be made to the borrower only upon borrower's request, which shall be in accordance with Program procedures. 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. 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. 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: The borrower fails to meet the standards for occupancy or use of the loan proceeds; 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; There is an unpermitted lien or encumbrance on the home; or The borrower fails to respond to the recertification request within a reasonable time. Taxes, Insurance, and Other Assessments. 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: Make these payments directly as described in §L(3), above; Refuse to make further disbursements requested by the borrower; or Foreclose on the home. 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. 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. The Department shall establish the maximum dollar amount of equity payments authorized for disbursement to each borrower for each fiscal year. Because Program funding is appropriated annually by the legislature, there is no assurance that an approved line of credit can be drawn on by the borrower in any year, or that the borrower will ever be able to draw on the entire amount of the borrower's maximum line of credit. Time and Place. The loan closing shall be scheduled at a time and place acceptable to the borrower and the Program and conducted in a manner acceptable to the Program. Title Insurance. The borrower shall provide at closing a standard American Land Title Association Loan Policy that is acceptable to the Program, insuring the Department for an amount equal to the borrower's maximum line of credit. The title policy shall evidence that title to the home is vested in the borrower, or the joint borrowers as the case may be, and contain only those exceptions and encumbrances acceptable to the Program. Charges and Fees. The borrower is responsible for paying closing costs. Payment may be made directly by the borrower or may be financed by the loan as described in Regulation .06B. Forms and Documentation. The application and the loan documents shall be made upon standard forms prescribed by the Program. Application Fee. The Program may require an application fee for processing the loan. Program Fund Allocations. It is the intent of the Department that Program funds be distributed Statewide to eligible applicants and borrowers. At the discretion of the Department, the Program may: Make Program funds available on a first come, first served basis; Give priority to a loan applicant or borrower whom the Program, in its discretion, determines: Is in imminent danger of losing title to the home or having to vacate the home for medical or safety reasons, Has no alternative source of funds to alleviate the problem, and Whose problem can be alleviated by a Program loan; Give priority, among eligible loan applicants, to those with less income or fewer assets, or both; or Use Program funds in a combination of §C(1)—(3), above. Procedures. The Department shall establish procedures for operating the Program which may include: Internal operating procedures for making loans directly; or Procedures for directing financial institutions to make loans on behalf of the Department. Delegation of Authority. An action or decision required or permitted to be taken or made by the Department pursuant to the Act or these regulations, except for actions where the Secretary is designated, may be taken by the Director of the Division of Housing Finance of the Department, or the Director's designee. A borrower who knowingly makes or causes to be made any material misstatement or material omission of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, in any statement or report in or regarding an application for a loan, a borrower recertification, or an equity payment request, or affecting an equity payment already made, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-816, Annotated Code of Maryland. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. The provisions of these regulations are severable. A judgment by any court of competent jurisdiction finding or declaring that any provisions of these regulations or the application of any provision to any person or circumstance is invalid does not affect the validity of the remaining provisions of the regulations or any other application of these regulations, and the remaining regulations shall have full force and effect as if no judgment had been entered. Housing and Community Development Article, §§4-804, 4-806, and 4-807, Annotated Code of Maryland Effective date: Regulations .01—.11 adopted as an emergency provision effective May 16, 1989 (16:11 Md. R. 1212); emergency status expired November 15, 1989 Regulations .01—.13 adopted effective December 11, 1989 (16:24 Md. R. 2616) Regulation .03B amended effective February 1, 1993 (20:2 Md. R. 110) Regulation .07C and D amended effective February 1, 1993 (20:2 Md. R. 110) These regulations prescribe the policies, procedures, and authorizations to make or purchase loans financed through the Special Purpose Investment Fund (SPIF) of the Community Development Administration. The Special Purpose Investment Fund was created and established by the Single Family Program General Bond Certificate to provide for investments by the Administration using funds that are not proceeds of bonds of the Administration. The Mortgage Yield Account was created as the initial account within the Fund to provide for the financing of mortgage loans to bear interest at rates that achieve yields required for attribution to other investments made under the General Bond Certificate. Other accounts may be established within the Fund in accordance with the General Bond Certificate and the Act. These regulations apply to mortgage loans financed through the Mortgage Yield Account of the Fund. The loans: Are not subject to the Internal Revenue Code; Are mortgage investments under the General Bond Certificate as described in Regulation .03B(13) of this chapter or mortgage loans that otherwise meet the requirements of the General Bond Certificate; Are pledged to the bond holders under the General Bond Certificate; May be ineligible for financing with proceeds of the Administration's mortgage revenue bonds or through other mortgage programs of the Department; Enable borrowers to acquire, rehabilitate, and refinance owner-occupied residential housing of one to four units; and May be made for acquisition of residential housing of one to four units in a project in accordance with forward commitments to developers for permanent take-out financing under the SPIF program. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development, Title 4, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency within the Division of Housing Finance of the Department. “Applicable codes and standards” means construction, health, safety, fire, occupancy, and other codes and standards in force in the political subdivision in which an eligible residence is located and which are applicable to that unit or to the construction of that unit. “Bonds” means mortgage revenue bonds of the Administration issued under the General Bond Certificate. “Closing costs” means: Financing costs such as points, if applicable, and fees for application, credit report, appraisal, survey, title examination, loan origination, and title insurance; and Title fees such as the attorney's fee, documentation and preparation fee, recording fee, State and local transfer tax, and documentary stamps. “Department” means the Department of Housing and Community Development. “Developer” means an individual or entity that owns, acquires, constructs, or rehabilitates a project of eligible residences, the purchases of which are to be financed by mortgage investments. “Families of limited income” means individuals or households meeting income limits established for this Program by written determination of the Secretary from time to time. “Fund” means the Special Purpose Investment Fund authorized by the General Bond Certificate and held by the Trustee under the Certificate for the benefit of the bondholders. “General Bond Certificate” means the Community Development Administration, Single Family Program General Bond Certificate, dated May 1, 1980, as amended and supplemented from time to time. “Loan” means an eligible loan financed by the Administration under the Program. “Manufactured home” means a housing unit that: Is intended for residential use by a single household; Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1987), which is incorporated by reference under COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc. which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the loan. “Mortgage investment”, for purposes of the Program, means mortgage loans to families of limited incomes, either made directly by the Administration or purchased from mortgage lenders, for the financing of eligible properties of one to four dwelling units. “Mortgage Yield Account” means the account established within the Special Purpose Investment Fund for making mortgage investments and other investments in accordance with the General Bond Certificate. “Prepaid expenses” means costs due at the time of closing which are required to be paid in connection with closing a mortgage loan such as property taxes, ground rent, hazard insurance, condominium or homeowners association fees if applicable, and any mortgage insurance premiums. “Program” means the Administration's program to make or purchase mortgage investments with funds available in the Mortgage Yield Account of the Special Purpose Investment Fund. “Project” means a community development project within the meaning of the Act, that contains eligible existing, newly constructed, or rehabilitated one to four family residential housing units that include at least one owner-occupied unit. “Reservation of funds” means a commitment to a borrower, lender, or developer for a loan to be financed by the Fund. “Secretary” means the Secretary of Housing and Community Development. “Settlement costs” means closing costs and prepaid expenses. “Single family residence” means a residential housing unit intended for occupancy by one to four families meeting criteria specified for the Program. “Special Purpose Investment Fund” means the Fund created and established by §5.16(a) of the General Bond Certificate, and may include: A Mortgage Yield Account; An additional investment account; and Other accounts as may be created and established in accordance with the General Bond Certificate. The Administration may use funds available under the Program for any of the purposes set forth in this regulation. Preferred Uses. In the event of limited funds, the uses described in §§B(2)—(5) of this regulation may be given preference over the standard uses described in §C of this regulation. Designated Area Loans. Loans may be made for acquisition financing to borrowers purchasing residences in an area or neighborhood where the Secretary has determined home ownership should be encouraged through availability of Program loans. Accessory and Shared Housing. Acquisition financing may be provided for: Accessory housing that includes up to three dwelling units with complete, independent sleeping, cooking, and living facilities which are within, or attached to, or on the same parcel as, and subordinate to, but under the same ownership as a single family, owner-occupied dwelling, if a majority of all the units comprising the property are occupied by families of limited income; and Shared housing that provides sleeping facilities for up to four additional families and common, shared, or independent sanitary facilities and common or shared living, dining, and kitchen facilities, if a majority of the families occupying the property are of limited income. Refinancing of Existing Mortgages. Program loans may be made to refinance mortgages in order to assist eligible homeowners in critical circumstances, or to achieve the mortgage yield requirements of the Program. Prior Homeownership. Loans may be made to certain persons ineligible under the Administration's tax-exempt, bond-financed lending program because of prior home ownership, but who otherwise meet the requirements of that program. Standard Uses. Loans may be made under the program to borrowers who meet Program requirements but are ineligible to receive loans under the more restrictive income and purchase price and other limits of the Administration's tax-exempt bond-financed lending Program. Second Mortgage Loans. Loans may be made under the Program for second mortgage loans if the borrower is receiving a first mortgage loan financed by the Administration. Other uses, as determined from time to time by the Secretary, may be made. An eligible borrower shall: Be one or more members of a household that owns or is purchasing, and shall hold title to, an eligible residence as set forth in Regulation .06 of this chapter; Be 18 years old or older, unless married to a joint borrower who is 18 years old or older; Meet income eligibility requirements as may be determined from time to time by the Secretary both for eligible borrowers and for tenants of multi-unit residences financed under the Program in accordance with Housing and Community Development Article, §4-218, Annotated Code of Maryland; Reside or intend to reside after purchase in an eligible property; Have legal capacity to incur the obligations of the loan; and Agree to comply with the loan terms and requirements established by the Administration. Requirements. An eligible property shall: Contain one to four residential units, one of which is intended to be occupied by the borrower as the borrower's primary residence; Be real property owned by the borrower in fee simple or under a freely transferable, perpetually renewable, ground lease which permits the lessee to transfer the leasehold interest without the consent of the lessor; Have a purchase price that does not exceed the maximum program loan amount as described in Regulation .08 of this chapter, except in cases of additional financing provided by governmental or nonprofit organizations or other sources acceptable to the Administration; At the time of the loan closing, be unencumbered by any other lien except as may be acceptable to the Administration; Reasonably be expected to have an economic life equal to or greater than the term of the loan; and Meet all applicable codes and standards and other legal requirements at the time the mortgage investment is made or upon completion of rehabilitation. Requirements—Forward Commitments. An eligible property shall meet the requirements of §A of this regulation. If a project involves new construction or will change the type of use or increase the intensity of the existing use of the property, a property shall be eligible for forward commitments of permanent take-out financing to developers only if: The Department has complied with COMAR 05.01.06.06; and The Secretary has issued the written determination required under COMAR 05.01.06.07. Types of Units. An eligible property may be a: Modular home if it has the State seal of approval; Condominium unit approved by the mortgage insurer; or Manufactured home meeting the definition of Regulation .03B(11) of this chapter. An eligible property may not be a: Unit in a cooperative housing project; or Mobile home that does not meet the definition of manufactured home under Regulation .03B(11) of this chapter. Subject to the limitations of Regulation .08B of this chapter, the proceeds of a loan made under the Program may be used for payment of: Purchase price of the eligible residence; Down payment and settlement costs; Rehabilitation costs described in Regulation .07B of this chapter; or Costs associated with eligible refinancings, as described in §D of this regulation. Eligible rehabilitation costs include: The reasonable cost of correcting major structural defects; The reasonable cost of repairing or replacing plumbing, HVAC, or electrical systems; The reasonable cost of correcting any violations of local planning, zoning, or building codes, or other applicable laws; The reasonable cost of inspections; and Other reasonable rehabilitation costs that are approved by the Program, including the cost of cosmetic repairs, energy conservation improvements, accessibility modifications, or major appliances. The Administration, in its discretion, may make a loan under the Program to refinance an eligible residence, taking into consideration factors including the following: Critical financial or personal circumstances that require restructuring of prior home mortgage loans; Yield requirements of the Program; Promotion of community development which may be enhanced by refinancing to enable rehabilitation or sale for purposes of homeownership; or Borrower's ineligibility to continue home financing under other programs of the Administration due to an increase in a borrower's income. Uses for proceeds of an eligible refinancing loan under the Program include: The payoff and release of the existing mortgage loan or loans, including: The remaining principal balance of the existing mortgage loan or loans, and Accrued and unpaid interest due on an existing mortgage loan or loans at the time the loan closes; Eligible rehabilitation costs, if applicable; and Any of the following fees, taxes, premiums, or costs which are unpaid and due or overdue at the time the loan closes, up to a limit of 20 percent of the amount of the loan: Late fees, Real property taxes, Insurance premiums, Fees or costs, such as condominium or homeowners association fees as approved by the Administration, Reasonable costs previously expended by a mortgage lien holder in connection with initiating foreclosure, if approved by the Administration, or Application fees and loan review fees. Limits. The maximum loan amounts under the program shall be within limits set from time to time by the Secretary. For a residence containing one dwelling unit the limit, as of April 1, 1991, is 150 percent of the maximum loan amount for a newly constructed single dwelling unit under the Maryland Mortgage Program (MMP) of the Administration. For a property containing two dwelling units the limit, as of April 1, 1991, is 175 percent of the MMP limit for a newly constructed single dwelling unit. For a property containing three units or four units, limits will be determined by the Secretary on a case by case basis, taking into account: The public purpose being served; Regional costs for this housing; and Other factors deemed appropriate by the Secretary. Maximum loan amounts may be adjusted periodically by determination of the Secretary to: Reflect the annual rate of inflation; Reflect the number of dwelling units in the property; Reflect differing area property values; Respond to changes in average sales prices; Support State agency economic or community development initiatives; or Encourage innovative programs of the Administration. Except for any financed mortgage insurance premium, and subject to the maximum loan amount under §A of this regulation: A first mortgage loan made to finance the purchase of an eligible property may not exceed the lesser of the: Appraised value; or Purchase price of the residence; A second mortgage loan made to finance the purchase of an eligible property, when added to the amount of the first mortgage loan, may not exceed: The lesser of the: Appraised value; or Purchase price of the residence; plus The amount of any down payment and closing costs covered by the second mortgage loan, so long as the Administration determines that the loan meets the requirements of the General Bond Certificate; A loan made to finance the purchase and rehabilitation of an eligible residence may not exceed the lesser of: The total of: 100 percent of the purchase price, plus Estimated costs for rehabilitation of the eligible residence; or The after-rehabilitation appraised value; A loan made to refinance an existing mortgage loan may not exceed the lesser of: The total refinancing costs permitted in accordance with Regulation .07C of this chapter; or The appraised value of the eligible residence, after rehabilitation, if applicable. Each loan financed by the Fund shall comply with the conditions of this regulation. Security. Each loan shall be secured by a mortgage or deed of trust that shall be: In a lien position required by the Administration; and Executed and recorded in accordance with the requirements of existing law. Each deed of trust shall be the subject of a title insurance policy in an amount at least equal to the outstanding principal amount of the loan, insuring that the deed of trust constitutes a first lien, subject only to liens for taxes and assessments and permitted liens and encumbrances on the real property with respect to which the loan is secured. Mortgage Insurance or Guarantee. Primary Mortgage Insurance. Each first mortgage loan shall be the subject of primary mortgage insurance issued by a private or public mortgage insurer acceptable to the Administration. Except as provided in §C(1)(c) or (e) or C(2) of this regulation, each loan shall be subject to primary mortgage insurance either in the amount of: 100 percent of the unpaid principal amount of the mortgage loan, if issued by the Federal Housing Administration (FHA) or the Veterans Administration (VA); or 25 percent of the mortgage loan amount if issued by a private or governmental insurer acceptable to the Administration. A first mortgage loan need not be subject to primary mortgage insurance if the original principal amount of the mortgage loan is not in excess of 75 percent of the lesser of the: Appraised value; or Purchase price of the residence, excluding settlement costs. The Administration may permit termination of primary mortgage insurance if the unpaid principal amount of the mortgage loan is 75 percent or less of the original principal amount. A second mortgage loan may be required to be subject to primary mortgage insurance at the sole discretion of the Administration. Except for second mortgage loans, loans made under the Program are required to be subject to mortgage pool insurance from an insurer acceptable to the Administration, unless the loan is subject to primary mortgage issuance or guaranty under §C(1)(b)(i) of this regulation. Interest Rate. Loans financed from moneys in the Mortgage Yield Account may be subject to payment of points and shall bear interest at rates established from time to time by certificates of the Administration in order to achieve yields required for attribution to other investments made under the General Bond Certificate. Other loans financed under the Special Purpose Investment Fund may be made at rates of interest up to prevailing market rates of interest. Escrow. Each loan shall require escrow payments on the part of the mortgagor with respect to all taxes, assessments, water rates, ground rents, sewer rates, condominium or homeowners association fees, insurance premiums, including mortgage insurance premiums, and other charges, to the extent actually charged or assessed, and any prior liens at any time assessed or levied against the premises or any part of it, unless otherwise approved by the Administration. Property Insurance. Fire and extended hazard insurance coverage shall meet the following requirements: Policies shall be written by insurance companies authorized to transact business in the State; Policies shall be in force at the time of the mortgage loan closing; The Administration shall be named as the mortgagee in a standard mortgagee clause or endorsement attached to or printed in the policy; The insurance shall be in an amount at least equal to the lesser of: The original principal balance of the mortgage loan, or 100 percent of the replacement value of the improvements located on the property; The insurance shall be payable in an amount equal to any partial or total loss not exceeding the full amount of insurance to prevent the borrower from being a co-insurer; The terms and coverage of all insurance policies shall be satisfactory to the Administration. Forms and Documentation. The application and the loan shall be made upon form documents prescribed by the Administration. If application is being made for a forward commitment of permanent take-out financing by a developer, sufficient information and documentation shall be provided to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property. Delegation of Authority. An action or decision required or permitted to be taken or made by the Department under the Act or these regulations, except for actions when the Secretary is designated, may be delegated by the Secretary. Allocation of Funds. The Secretary from time to time may designate use of any portion of the moneys available under the Fund for a particular purpose consistent with the Act and the General Bond Certificate. Operational Manuals. The Administration may establish, from time to time, operational handbooks or manuals governing matters relating to the Fund including descriptive statements of procedures which do not affect directly the rights of, or the procedures available to, the public. Loan Servicing. The Administration may enter into servicing agreements with loan servicers acceptable to the Administration for the servicing of loans made under this chapter. Power of the Administration. With respect to loans made under this chapter, the Administration may do any of the following: Assign a mortgage or deed of trust for value; Release a mortgage or deed of trust; Foreclose a mortgage or deed of trust; Acquire property securing a loan in default; Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; Obtain and seek enforcement of a deficiency judgment; Forbear; or Restructure the loan. A borrower who knowingly makes or causes to be made any false material statement or material misstatement of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Administration's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-225, Annotated Code of Maryland. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs or of the General Bond Certificate in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Act. Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: January 20, 1992 (19:1 Md. R. 23) Regulation .02B amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .04D, E amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1941) Regulation .07A amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .08C amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .09 amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .10A amended effective January 2, 1994 (20:25 Md. R. 1941) This chapter is adopted under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, to implement a program of community development projects in the State to be known as the Live Near Your Work (LNYW) Program. The LNYW Program is a cooperative effort between the State, local jurisdictions, and employers to provide financial assistance to eligible employees in purchasing homes near their place of employment. This chapter describes the policies, procedures, and authorizations for the operation of the LNYW Program. The objectives of the Program are to: Stimulate homeownership in designated neighborhoods; Promote public/private partnerships to strengthen communities; Support State transportation policy by promoting shorter commuting times; and Support employer compliance with the federal Clean Air Act Amendments of 1990. In this chapter, the following terms have the meanings indicated. Terms Defined. Closing Costs. “Closing costs” means costs incurred in connection with purchasing an eligible residence. “Closing costs” include: Credit report fee; Appraisal fee; Home inspection fee; Survey fee; Title examination; Loan origination fee; Title insurance fee; Homeownership counseling fee; Application fee; Attorneys' fees; Document preparation fee; Recording fees; State and local transfer tax; and State recordation tax. “Department” means the Department of Housing and Community Development, a principal department of the State. “Designated neighborhood”' has the meaning stated in Housing and Community Development Article, §§6-301(b) and 6-306(b), Annotated Code of Maryland. “Eligible employee” means an individual who: Is employed by an employer approved pursuant to Regulation .05 of this chapter; Is 18 years old or older; Has a contract to purchase an eligible residence located in the employer's applicable LNYW area; Shall hold title to an eligible residence; Shall make a cash contribution of at least $1,000 toward the cost of the downpayment or closing costs in connection with purchasing an eligible residence; and Meets any additional eligibility requirements imposed by the local jurisdiction or the participating employer and approved by the Department. “Eligible residence” means a dwelling unit that is: The primary residence of an eligible employee; Located in the LNYW area of the eligible employee's employer; and A single unit property, including a townhouse or condominium, or is a two to four unit property and the eligible employee occupies one of the units. “Family of limited income” means a household meeting income limits established for this Program by written determination of the Secretary. “Household” means the individual or individuals who occupy or intend to occupy the: Eligible residence, in the case of a single unit property; or Unit in the eligible residence occupied by the eligible employee, in the case of a two to four unit property. “Household income” means 100 percent of the projected annual gross income, based on current rate of income, from all members of the household 18 years old or older including Social Security income, retirement income, pensions, wages, overtime, bonuses, commissions, investment and interest income, rental income, disability or unemployment insurance, alimony and support payments, and all other income from any sources, less: Abnormal expenses of a long-term, unusual nature such as extraordinary unreimbursable medical, rehabilitation, or special education expenses; Unusual or temporary one-time income items, such as judgments or gifts, as determined by the Department; Income of a full-time high school or undergraduate college student, unless that individual is to hold title to an eligible residence; and Other income items as may be excluded by the Department. “LNYW area” means an area that: Is the same as or is a part of the area or areas that lie within the LNYW boundary for the local jurisdiction; Is designated by an employer that desires to participate in the Program as the area where eligible employees may purchase a home; Has a relationship to the employer's location that supports the objectives of the Program; Is approved by the local jurisdiction; and Is approved by the Department. “LNYW boundary” means an area or areas within a local jurisdiction that: Coincides with or lies within one or more designated neighborhoods located within the local jurisdiction; Is approved as the local jurisdiction's LNYW boundary by a resolution of the governing body of the local jurisdiction; and Is approved by the Department. “LNYW grant” means the funds granted by the local jurisdiction to the eligible employee under the terms of this chapter, with combined funds from the Department, the local jurisdiction, and the employer. “LNYW project” means the Program operated by the local jurisdiction within the LNYW boundary for the local jurisdiction. “Local development agency” has the meaning stated in Housing and Community Development Article, §4-201(l), Annotated Code of Maryland. “Local development corporation” has the meaning stated in Housing and Community Development Article, §4-201(m), Annotated Code of Maryland. “Local jurisdiction” means either a municipal corporation subject to the provisions of the State Constitution, Article XI-E, or any one of the 23 counties of the State or Baltimore City. “Nonprofit organization” has the meaning stated in Housing and Community Development Article, §1-101(g), Annotated Code of Maryland. “Program” means the Live Near Your Work Program. “Program grant” means the funds granted by the Department to a local jurisdiction to be used for the Department's contribution to LNYW grants. “Secretary” means the Secretary of Housing and Community Development. Application Process. The Department may set periodic deadlines for applications from local jurisdictions. The local jurisdiction shall submit an application to the Department in the form and containing the information and documentation required by the Department. Awarding Program Grants to Local Jurisdictions. The Assistant Secretary for Neighborhood Revitalization and the Assistant Secretary who is the Director of the Community Development Administration shall: Review all applications from local jurisdictions; and Recommend to the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland, for review and recommendation to the Secretary, the amount of all Program grants to local jurisdictions based on the: Capacity of the local jurisdiction to operate a LNYW project, and Financial commitment of the local jurisdiction and the employers. The Secretary shall by written determination approve, disapprove, or modify the terms of all Program grants after receipt of the recommendation of the Housing Finance Review Committee. If the Secretary approves a Program grant, the written determination from the Secretary shall also: Approve the LNYW project as a community development project as defined in Housing and Community Development Article, §4-217, Annotated Code of Maryland; and Approve the LNYW boundary. The Department may set deadlines and conditions for using the Program grant. Each local jurisdiction approved for a Program grant under §B of this regulation shall enter into a grant agreement with the Department which provides: That the local jurisdiction shall: Provide a minimum of $1,000 for each LNYW grant and demonstrate to the satisfaction of the Department that funds have been committed for that purpose, Ensure that at least 51 percent of the eligible employees who receive LNYW grants from the local jurisdiction's LNYW project are families of limited income, Agree to cooperate with the Department in conducting evaluations and analyses of the Program, and Develop a marketing plan to promote the Program that is satisfactory to the Department; and Other terms and conditions required by the Department. Conditions on LNYW Grants. The contribution from the local jurisdiction may be in the form of a grant or a conditional grant. A conditional grant is subject to the following minimum terms and conditions: Repayment of the grant may be required upon any terms and conditions approved by the Department; No interest is due on the unpaid portion of the grant; The term of the grant may not exceed 3 years; and A pro rata portion of the grant shall be released in each year of the term, so that at the end of the term the grantee is not required to repay the grant if all terms and conditions are met. The local jurisdiction may impose additional eligibility requirements for LNYW grants, including a minimum period of residency in the home purchased or homeownership counseling, if the additional restrictions: Do not violate any applicable law; Have been approved by the Department; and Are imposed on all LNYW grants from the local jurisdiction. The local jurisdiction may not impose income limits that are higher than the requirements under this chapter for families of limited income. Authorizing Another Entity. A local jurisdiction may authorize another entity to operate the LNYW project in that jurisdiction if the: Entity is a nonprofit organization, local development corporation, or local development agency; Local jurisdiction authorizes the entity to operate the Program in a resolution of its local governing body; Entity is approved by the Department to operate the LNYW project; and Local jurisdiction and the entity enter into a written agreement, which is approved by the Department, for the operation of the LNYW project. If a local jurisdiction authorizes another entity to operate the LNYW project in that jurisdiction, the entity shall: Execute the grant agreement with the Department or, if the local jurisdiction has already executed a grant agreement with the Department, execute an amendment to the grant agreement agreeing to assume the local jurisdiction's rights and responsibilities under the grant agreement; and Take all actions described in this chapter for the local jurisdiction except for actions to designate an LNYW boundary. If a local jurisdiction authorizes another entity to operate the LNYW project in that jurisdiction, either the local jurisdiction or the entity may provide the matching funds required of the local jurisdiction. To be eligible to participate in the LNYW project operated by the local jurisdiction, an employer shall: Complete any application required by the local jurisdiction or the Department; Except as provided in §F(2) of this regulation, provide a minimum contribution of $1,000 for each LNYW grant made to one of its employees; In coordination with the local jurisdiction, designate an LNYW area that coincides with or is within the LNYW boundary for the local jurisdiction, in the form required by the Department; Coordinate participation in the Program with the local jurisdiction; and Submit all other materials to and comply with any restrictions imposed by the local jurisdiction or the Department. The contribution from the employer may be in the form of a grant or a conditional grant as described in Regulation .04D of this chapter. Employers may set eligibility requirements that are reasonably related to the employer-employee relationship for their employees to receive an LNYW grant if the eligibility requirements: Do not violate any applicable law; Are approved by the local jurisdiction; Are approved by the Department; and Are imposed on all eligible employees. An employer may offer additional benefits to its employees in connection with the purchase of an eligible residence. If an employer has more than one location, there shall be an LNYW area for each location, each of which shall comply with all requirements of this chapter for designation and approval of an LNYW area. The LNYW areas for an employer under this section may overlap. In addition to any other requirements of this chapter, an employee and a residence shall only be eligible if the residence is located in the LNYW area of the employer for the location where the employee works. Employer Groups. Two or more employers located in the same local jurisdiction may join together to combine resources from which LNYW grants may be made if: The group of employers agrees to contribute at least $1,000 to each LNYW grant made by the group of employers; LNYW grants are made by the group of employers only to employees of employers in the group; The group of employers submits to the local jurisdiction an application, an LNYW area map, and any other materials requested by the local jurisdiction or the Department, consistent with §A of this regulation; and The application and LNYW area are approved by the local jurisdiction and the Department. Each employer in a group of employers approved under this regulation shall make a contribution of at least the minimum amount established by the group of employers, which may be less than $1,000 for each LNYW grant. A group of employers approved under this regulation may impose eligibility requirements consistent with §C of this regulation and may offer additional benefits consistent with §D of this regulation in connection with any LNYW grants made by the group of employers. The contribution from a group of employers pursuant to this regulation may be in the form of a grant or a conditional grant as described in Regulation .04D of this chapter. An eligible employee shall: Comply with the Program requirements and terms for receiving an LNYW grant; and Respond to periodic surveys for Program evaluation purposes including a survey to be completed at settlement. Only one person per household may receive an LNYW grant. Program grants from the Department to the local jurisdiction shall be used solely to fund $1,000 of an LNYW grant to an eligible employee. Program grants from the Department to the local jurisdiction may not be used to: Fund an LNYW grant if the eligible employee, the employer, and the local jurisdiction do not make the minimum contribution set forth in this chapter; or Fund any expenses of operating the LNYW project. An LNYW grant may only be used for the downpayment and closing costs incurred in connection with purchasing an eligible residence. An LNYW grant may not be used to pay costs incurred in connection with a transfer of property where the grantor remains a title holder. At the closing on an eligible residence, the local jurisdiction shall provide funds for the local jurisdiction's contribution and the Department's contribution to the LNYW grant. Before agreeing to fund an LNYW grant to an employee, the local jurisdiction shall confirm: That the property to be purchased is an eligible residence; The eligibility of the employer and the employee; The employee's household income; That the employee has already made or at closing shall make a contribution of at least $1,000 towards the purchase of the home; That the employer has made a contribution of at least $1,000 towards the LNYW grant; and That at least 51 percent of all of the LNYW grant recipients for the local jurisdiction's LNYW project are families of limited income. The local jurisdiction may, at its own risk, fund LNYW grants which do not comply with §B(6) of this regulation. However, the Department shall only reimburse the local jurisdiction for the Department's contribution to an LNYW grant if, at the time the request for reimbursement is submitted to the Department, at least 51 percent of the LNYW grant recipients for the local jurisdiction's LNYW project are families of limited income. After the closing, the local jurisdiction shall submit to the Department a request for reimbursement of the Department's contribution to the LNYW grant in the form required by the Department. The Department may require evidence of the closing and the fulfillment of all Departmental requirements before reimbursing the local jurisdiction for funds advanced for the Department's share of the LNYW grant. If any of the requirements of this chapter have not been met, the Department may deny a request for reimbursement. Reporting Requirements. The local jurisdiction shall make a report to the Department at times required by the Department. The report shall be in the form and contain information required by the Department. Overcommitment. If a local jurisdiction receives an application and financial commitment from an employer which would cause the total amount of financial commitments from all employers to exceed the total amount of the Program grant to the local jurisdiction, the local jurisdiction may not accept the new employer in the local jurisdiction's LNYW project, unless the local jurisdiction first informs all participating employers that: The local jurisdiction intends to accept a new commitment from an employer which will cause the total financial commitments of employers to exceed the total amount of the Program grant; Funds may be unavailable to fund all applications for LNYW grants; and Any new applications for LNYW grants shall be funded on a first-come, first-served basis. Right to Reallocate. At any time after 6 months from the date of any grant agreement with a local jurisdiction, the Department may elect to reallocate any unused Program grant funds, originally allocated to a local jurisdiction, to another local jurisdiction. The Department may establish operational handbooks or manuals governing matters relating to the Program including descriptive statements of Program procedures and policies. The Secretary may delegate to the Assistant Secretary for Neighborhood Revitalization, the Assistant Secretary who is the Director of the Community Development Administration, or any other official or employee of the Department, the authority to execute Program documents. The Secretary may waive or vary particular provisions of this chapter to the extent that waiver is not inconsistent with Housing and Community Development Article, Annotated Code of Maryland, if, in the determination of the Secretary, the application of a regulation in a particular case or in an emergency situation would be inequitable or contrary to the purposes of Housing and Community Development Article, Annotated Code of Maryland, or the purpose authorized for the Program. Reconsideration. A local jurisdiction, employer, or person dissatisfied with any decision of the Department may request reconsideration by writing to the Assistant Secretary for Neighborhood Revitalization and the Assistant Secretary who is the Director of the Community Development Administration. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01. Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland Effective date: June 29, 1998 (25:13 Md. R. 992) These regulations prescribe the policies, procedures, and authorizations for making construction loans and providing credit enhancement for the construction of net-zero homes and low-energy homes. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 20, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development. Closing Costs. “Closing costs” means the costs incurred in connection with obtaining a loan from the Department under the Program. “Closing costs” includes: Credit report fees; Appraisal fees; Survey fees; Loan origination and application fees; Title examination and insurance fees; Property taxes and ground rent; Hazard insurance and mortgage insurance premiums; Attorney's fees; Document preparation fees; Recording fees; and Transfer and recordation taxes. “Credit enhancement” means any form of insurance, guarantee, or agreement that increases the credit strength of a loan and reduces the risk of lending to a borrower. “Department” means the Department of Housing and Community Development, a principal department of the State of Maryland. Development Costs. “Development costs” means the costs incurred in carrying out all works and undertakings which the Department deems reasonable and necessary for the acquisition and construction of a project. “Development costs” includes the costs for: Acquisition of land and any buildings on it; Closing costs; Necessary studies, surveys, plans, and specifications; Architectural, engineering, or special services; Site preparation and development; Labor and materials for construction; Fees incurred in connection with financing the project; Construction period interest on the loan; Indemnity and surety bonds; Premiums on insurance; and Other costs the Department deems reasonable and necessary. “Director” means the Director of the Administration. “Home” means a single family residence or a multifamily building used by the occupants as their residence. “Low-energy home” means a home that achieves a Home Energy Rating System (HERS) Index rating of 50 or lower. “Net–zero home” means a home that is designed to produce an amount of energy in 1 year that is equal to the amount of energy that the home uses in 1 year. “Program” means the Energy-Efficient Homes Construction Loan Program. “Program Manager” means the Manager of the Program as assigned by the Department. “Project” means any undertaking or project, or portion thereof, including land, buildings, and improvements, that constitutes a low-energy home or net-zero home upon completion. “Secretary” means the Secretary of Housing and Community Development. To qualify as an eligible borrower under the program, an applicant shall: If a nonprofit organization, corporation, or partnership, be in good standing and qualified to do business in Maryland; Have the legal capacity and all necessary authorization to incur the obligations of the loan; Own the project or have a valid sales contract to purchase the project; Demonstrate credit worthiness and repayment ability acceptable to the Department; and Demonstrate the ability to complete the project. Eligible projects shall be: A low-energy or net-zero home upon completion; Properly zoned for residential use; Rehabilitated or constructed in accordance with the applicable federal, State, and local building, zoning, environmental, health, and housing codes and standards, which includes the latest version of the building codes adopted by the Department; and Sold or rented to an individual that will use the property as their residence. Proceeds of the loan may be used for the: Acquisition of a project; Construction and development costs of a project; and Closing and settlement costs associated with the financing and acquisition of the project. The Department shall establish interest rates for each loan based on the underwriting of each project. The maximum interest rate on a loan shall be a rate which does not impair the financial viability of the project or the capability of the borrower to construct a low-energy home or net-zero home. The Department may establish lower interest rates for projects that achieve greater energy savings. The maximum loan, when added to any superior debts, may not exceed the greater of the: Amount of permanent financing approved for the project; or 100 percent of the market value of the eligible building and property after construction as determined by the Department. Repayment. Terms for repayment of principal and interest shall be established based on the underwriting for each project and in a manner which does not impair the financial viability of the project or the capability of the borrower to construct a project. A program loan shall be evidenced by a promissory note and secured by a mortgage or deed of trust to be recorded in the land records of the county in which the project is located. Loan funds shall be disbursed in accordance with a draw schedule approved by the Department, which may include releasing funds upon successful inspections. The borrower shall agree not to sell, cease to own, assign, transfer, or dispose of all or any part of the project or the borrower's interest in it, during the loan term, without the prior written consent of the Department. Insurance. The borrower shall maintain property, fire, and extended coverage insurance on the buildings comprising a project both during and after construction, which shall name the Department as a loss payee, additional insured, and mortgagee, as applicable. If the project is located on real property which is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. For all secured loans the borrower shall provide a standard American Land Title Association (ALTA) Loan policy or other form of title policy approved by the Department. Taxes and assessments against the property which are due and payable shall be paid at or before closing. The Department may require the borrower to obtain any of the following types of insurance, issued by a company that is approved by the State Insurance Commissioner, depending on the size of the project and risks to the Department: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; and Engineer's errors and omissions. In addition to the requirements of §A of this regulation, owner's liability insurance shall: Name the Department as an additional insured; and Remain in force for the duration of the loan. In addition to a promissory note and deed of trust, the Department may require the borrower to execute or provide any of the following documents: A loan agreement; An agreement and declaration of covenants and restrictions; A disbursement agreement; A guaranty of completion or loan payments; A completion assurance agreement; An assignment of the construction contract; An opinion of borrower's counsel; An opinion of contractor's counsel; A contractor's letter and certification; An assurance of compliance with civil rights requirements; A fair practices certification; and Such other documents as the Department may find it desirable or necessary to require. The Department, at its sole discretion, may require additional security or collateral from the borrower to assure completion of the construction of the project or repayment of the loan. The collateral may be in the form of one or more of the following: A cash escrow; A letter of credit in an amount and form and from a financial institution acceptable to the Department; Depository accounts pledged to the Department; Performance and payment bonds from a surety acceptable to the Department; A completion assurance agreement executed by the borrower and backed by some form of monetary collateral; A guaranty of completion or loan payments, or both, executed by a third party who is financially able and willing to back the guarantee by some collateral acceptable to the Department; A pledge of the developer's fee; or Other collateral acceptable to the Department. The Department may accept applications on a first-come, first-served basis or through competitive rounds to be announced by the program periodically. A loan application shall be made upon standard forms prescribed by the Department. Each application shall be fully completed and properly executed and be accompanied by the following items: A copy of the articles of incorporation, bylaws, and most recent financial statements of an applicant for a nonprofit organization, corporation, or partnership; A copy of: The deed to the property; A contract or option agreement to purchase the property; or An agreement of understanding or letter of intent to purchase the property; A preliminary description, plans, and specifications of the low-energy or net-zero home to be constructed; A description of the applicant’s experience and current activity which demonstrates the applicant’s capacity to construct a project; and Identification of how the land is presently zoned. Feasibility Notification. Upon receipt of all documentation necessary to determine the feasibility of a project and the primary loan structure and terms, the Department shall issue a written notification letter to the applicant. The feasibility notification letter shall outline anticipated loan terms and shall specify any additional documentation which shall be provided or other conditions which shall be met in order for the Department to recommend a loan for commitment, including: Plans and specifications or a detailed scope of work for the construction of the project and proposed energy usage by the home; A copy of the contract for the work; Evidence of zoning compliance; A copy of a commitment or letter of intent to provide permanent financing which, at a minimum, shall state the amount, rate, and terms of the permanent financing; and A schedule of the proposed sales price or rent of the home. Approval. Upon satisfaction of all the requirements and conditions of the feasibility notification letter, the Department shall undertake an analysis of each application as to the final recommended loan amount, structure, and terms. Loans shall be submitted to the Housing Finance Review Committee in accordance with COMAR 05.01.07, as applicable, and to the Secretary for approval. Commitment Letter. Upon the approval a loan, the Director or Program Manager is authorized to issue a commitment letter setting forth the amount of the loan, the interest rate on the loan, and the other terms and conditions under which it will be made. Rejection of Applications. The Department shall issue a written notice of the determination of ineligibility if it determines that a project or applicant is not eligible for a loan. Reconsideration. Applicants may request reconsideration of a rejection in accordance with the procedures contained in the program guidelines. The Department may provide credit enhancement on a loan made by a lender for a project that meets the requirements of Regulation .04 of this chapter. A project financed by a loan that is credit-enhanced by the Department shall: Be a net-zero home or a low-energy home upon completion; Have clear and merchantable title acceptable to the Department; Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes; Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance; Have an appraised value that is satisfactory to the Department; Be secured by a lien against the mortgaged property; and Meet any other standards of the Department. A borrower shall establish to the satisfaction of the Department the capacity to meet the financial obligations of the loan and complete the project. Application. A lender shall submit an application, in the form prescribed by the Department, which shall contain a complete credit package and any other documentation required by the Department. Applications will be reviewed on a loan-by-loan basis by the Department. The Department will consider the following factors when deciding whether it will approve an application for credit enhancement: Amount of loss coverage being requested; The terms of the loan; Financial capability and credit rating of the borrower; Condition and value of property securing loan; Capability of borrower to successfully construct and sell a project; and Any other factors related to the Department’s risk in providing credit enhancement. Scope of Credit Enhancement. The Department may offer the following types of credit enhancement: Mortgage insurance; Guarantee; Risk sharing agreement; or Any other form of credit enhancement. Credit enhancement is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk. Expenses incurred for property repair resulting from casualty loss, including losses due to negligence, flood, fire, termites, vandalism, and defective construction, are not eligible for credit enhancement coverage. Expenses incurred by the lender in the preservation and normal maintenance of a defaulted project may be covered in accordance with the terms and conditions of the credit enhancement agreement with the Department. Premiums for credit enhancement shall be determined by the Department from time to time for various programs and types of coverage. Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include the: Amount of loss coverage being requested; Terms of the loan; Financial capability and credit rating of the borrower; Condition and value of property securing the loan; Capability of borrower to successfully construct and sell a project; and Any other factors related to the Department’s risk in providing credit enhancement. The lender shall follow the procedures contained in the credit enhancement agreement with the Department upon default of a loan. The right of the Department to pursue a borrower for deficiency or loss exists in every case to the extent allowed by law and may be enforced at the discretion of the Department. The Department may refuse payment of a claim on the basis of fraud, misrepresentation, or material error or omission with respect to any claim. The Department may participate with a lender to collectively lend money for the construction of net-zero and low-energy homes by: Making loans on a project, including subordinate loans; Pooling loan funds; Entering into loan participation agreements; and Purchasing a loan or an interest in a loan. A lender shall submit an application, in the form prescribed by the Department, which shall contain a complete project description, credit package, and any other documentation required by the Department. The Department’s review and approval of an application shall follow the procedures in Regulation .08 of this chapter. The Department shall enter into an agreement with a lender with whom it has agreed to collectively lend money to a borrower on a project. Each agreement to collectively lend on a project shall specify: Timing of loan repayments; Rate of return for the lender and the Department; Risk of loss attributed to the lender and Department in the event of default; and Any other terms the lender and Department require. Each project shall pass an inspection and verification test that the home was constructed to the standards to achieve the level of energy usage approved by the Department. The Department may require a third party to inspect and verify that the home was constructed to achieve the required energy rating. It is the goal of the Department to increase program participation by minority business enterprises certified under State Finance and Procurement Article, Title 14, Subtitle 3, Annotated Code of Maryland. To increase participation by minority business enterprises, the Department shall: Directly market the program to minority business enterprises; and Require an applicant to submit a minority business plan. An applicant, borrower, or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, repair, or maintenance of any property financed or assisted under the program. An applicant, borrower or contractor shall comply with all applicable federal, State, and local laws and Departmental policies and programs regarding discrimination, equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including: Title VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order; State Government Article, Title 20, Annotated Code of Maryland, as amended; and The Americans with Disabilities Act of 1990, as amended. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties. Program Handbook. The Department may establish from time to time program guidelines or manuals containing internal underwriting standards and loan processing requirements. Fees. The Department may charge an applicant, borrower, or lender customary loan application and loan fees. The Department shall ensure that program guidelines, fee information, and application forms are publicly available on its website and at its offices. Delegation. The Secretary may delegate to the Director of the Administration or to any other official or employee of the Department or Administration the authority to execute or approve any program loans, documents, or contract documents. Waiver. The Secretary may waive or vary particular provisions of these regulations in writing to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs in connection with providing financing to the project necessitates waiver or variance of a regulation; or In the determination of the Secretary, the application of a regulation in a specific case or in any emergency situation would be inequitable or contrary to the purposes of the Act. Housing and Community Development Article, §4-2003(a)(5), Annotated Code of Maryland Effective date: July 31, 2017 (44:15 Md. R. 759)