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)