# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 03 — Homeownership Programs

### Chapter 03 — Emergency Mortgage Assistance Program

**Authority:** Housing and Community Development Article, §4-806(a)(4), Annotated Code of Maryland

**Administrative History:** Effective date: October 8, 1984 (11:20 Md. R. 1741)

**Administrative History:** Chapter recodified from COMAR 05.01.16 to COMAR 05.03.03

**Administrative History:** Chapter (Homeowners' Emergency Assistance Program) repealed effective

**Administrative History:** April 30, 1990 (17:8 Md. R. 975)

**Administrative History:** Regulations .01—.15 (Emergency Mortgage Assistance Program) adopted

**Administrative History:** effective April 30, 1990 (17:8 Md. R. 975)

**Administrative History:** Regulation .05A amended effective January 2, 1993 (19:26 Md. R. 2283)

#### Regulation .01 General.

*COMAR 05.03.03.01*

These regulations prescribe the policies, procedures, and authorizations for making emergency assistance mortgage loans to households of limited income.

#### Regulation .02 Scope.

*COMAR 05.03.03.02*

A. 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.

B. 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:

  (1) 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;

  (2) Short-term construction loans to developers for the construction of, or rehabilitation of, residential units affordable to certain households of limited income; and

  (3) 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.

#### Regulation .03 Definitions.

*COMAR 05.03.03.03*

A. The following terms have the meanings indicated.

B. Terms Defined.

  (1) “Act” means Housing and Community Development Article, Title 4, Subtitle 8, Annotated Code of Maryland, as amended.

  (2) “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:

    (a) Abnormal expenses of a long-term unusual nature such as extraordinary unreimburseable medical, rehabilitation, or special education expenses; and

    (b) Unusual or temporary one-time income items, such as judgments or gifts, as determined by the Program.

  (3) “Borrower” means an applicant who receives a loan through the Program.

  (4) “Closing costs” mean:

    (a) Fees or premiums for property and judgment reports, title examination, or other similar expenses;

    (b) Fees for preparation of a deed, settlement statement, or other documents;

    (c) Payments owed at the time of the loan closing for property taxes, hazard insurance premiums, or ground rent;

    (d) Fees for notarizing deeds or other documents;

    (e) Appraisal and survey fees;

    (f) Recordation taxes and fees;

    (g) Fees or premiums for mortgage insurance;

    (h) Loan application fees;

    (i) Fees for credit reports;

    (j) Reasonable legal fees;

    (k) Payoff of prior liens or mortgages; and

    (l) Other closing costs as approved by the Department.

  (5) “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.

  (6) “Department” means the Maryland Department of Housing and Community Development, a principal department of the State.

  (7) “Household” means the individual or individuals who occupy the eligible residence securing the loan.

  (8) “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.

  (9) “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.

  (10) “Mortgage” means a mortgage or deed of trust.

  (11) “Program” means the Emergency Mortgage Assistance Program.

  (12) “Secretary” means the Secretary of the Department.

#### Regulation .04 Eligible Residences.

*COMAR 05.03.03.04*

A. An eligible residence:

  (1) Shall be the primary residence of the borrower;

  (2) Shall be a single family dwelling unit located in the State, including a townhouse or condominium;

  (3) 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;

  (4) May not be a cooperative or mobile home, which is treated as personalty for the purposes of establishing a security interest.

B. A manufactured housing unit may be an eligible residence if it:

  (1) Is intended for residential use by a single household;

  (2) Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site;

  (3) Is not less than 24 feet in width and 40 feet in length;

  (4) 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;

  (5) Has brick, wood, aluminum, or cosmetically equivalent exterior siding and a pitched composition shingle or wood shake roof;

  (6) 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;

  (7) 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;

  (8) Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and

  (9) Is reasonably expected to have an economic life equal to or greater than the term of the mortgage.

C. An eligible residence may not be encumbered by:

  (1) 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;

  (2) A mortgage lien that secures a line of credit loan; or

  (3) Other liens, including a tax lien.

#### Regulation .05 Eligible Borrowers.

*COMAR 05.03.03.05*

A. At the time of application, an eligible borrower:

  (1) 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;

  (2) 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:

    (a) Involuntary unemployment of a borrower,

    (b) Onset of a borrower's disability or handicap,

    (c) Divorce from a co-borrower,

    (d) Death of a spouse or other co-borrower,

    (e) Incarceration of a spouse or other co-borrower,

    (f) Business reversal leading to sustained material loss of income, or

    (g) Other circumstances of unforeseeable hardship as determined by the Program;

  (3) May not have an unforeseeable hardship which is caused by:

    (a) Current or former distribution of controlled dangerous substances by the borrower;

    (b) Current use or possession of controlled dangerous substances by the borrower; or

    (c) Former use or possession of a controlled dangerous substance by a borrower who is not a recovering addict which means someone:

      (i) 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

      (ii) Is participating in a supervised rehabilitation program and is no longer engaging in illegal drug use.

  (4) Reasonably may be expected by the Program to resume regular mortgage loan payments within 24 months after the Program loan closes.

B. The borrower's household shall be a household of limited income.

C. An eligible borrower also shall meet the following requirements:

  (1) 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;

  (2) May not own or hold any interest in any other real property except cemetery plots, or real property used in a trade or business;

  (3) Shall satisfy the following criteria in the estimation of the Program:

    (a) Does not have the financial resources to obtain private conventional mortgage financing,

    (b) Is not eligible for mortgage assistance under other Departmental loan programs or federal government programs, and

    (c) 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;

  (4) Shall meet the underwriting standards of the Program, which shall include but not be limited to:

    (a) Good credit history before loss of income from adverse personal or economic circumstances,

    (b) Stable employment history,

    (c) Past history of responsible financial management, evidenced in part by the level of debt at the time of application for the loan;

  (5) Shall have the legal capacity to incur the obligations of the loan; and

  (6) Shall agree to comply with the requirements established by the Program and with the terms of the loan.

D. A loan applicant shall be eligible for a refinancing loan under the Department's preferred interest rate loan program if:

  (1) The loan applicant is otherwise eligible for a loan under the program;

  (2) 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;

  (3) 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

  (4) In the judgment of the Program, a loan to refinance existing mortgage debt is preferable for assisting the loan applicant.

#### Regulation .06 Eligible Uses.

*COMAR 05.03.03.06*

A. The proceeds of a loan made through the Program may be used to:

  (1) Make up to 36 payments of principal and interest on the superior mortgage loan or loans as follows:

    (a) Up to 12 of the payments may be payments which are overdue and unpaid at the time the loan made through the Program closes,

    (b) Not more than 24 of the payments may be payments which become due after the loan through the Program closes, and

    (c) 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;

  (2) 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:

    (a) Late fees,

    (b) Real property taxes,

    (c) Insurance premiums, or

    (d) 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;

  (3) Pay for any of the following costs associated with the Program loan:

    (a) Closing costs as defined in Regulation .03B(4), above,

    (b) Application fees, and

    (c) Fees for financial counseling as described in Regulation .12, below.

B. 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.

#### Regulation .07 General Loan Terms and Requirements.

*COMAR 05.03.03.07*

A. Loan Amount. The loan amount may not exceed the lesser of:

  (1) 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;

  (2) The maximum amount for which the borrower is eligible under Regulation .06A;

  (3) The amount the borrower reasonably can be expected to be able to afford to repay, in the estimation of the Program; or

  (4) The maximum loan amount for the Program, as determined by the Secretary from time to time.

B. 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.

C. 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.

D. Security for Loans.

  (1) 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.

  (2) 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.

E. Late Charges. A late charge, as permitted by law, may be imposed.

F. Prepayment Penalty. A prepayment penalty may not be charged.

G. Insurance.

  (1) 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.

  (2) 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.

  (3) Terms and Conditions. Each insurance policy shall meet the following minimum requirements plus any additional requirements which may be set by the Department:

    (a) Be written by companies acceptable to the Department;

    (b) Be written by companies which are reputable and financially sound, as determined by the Department;

    (c) Be in force upon the closing of the loan;

    (d) Contain a standard mortgagee endorsement attached to or printed in the policy naming the Department as mortgagee;

    (e) Name the Department as loss payee and additional insured;

    (f) Provide for notification to the Department before termination; and

    (g) Contain terms and coverage satisfactory to the Department.

H. 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.

I. 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.

#### Regulation .08 Loan Terms Governing Disbursement of Loan Proceeds and Repayment of the Loan.

*COMAR 05.03.03.08*

A. Disbursement of Loan Proceeds.

  (1) 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.

  (2) 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:

    (a) The request shall be for a period of not more than 6 months;

    (b) The period of time for which loan disbursements are requested shall end not later than 24 months after the loan closing;

    (c) The amount of the request may not cause the loan to exceed the maximum loan amount stated in the borrower's loan documents;

    (d) 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;

    (e) 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.

  (3) 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.

  (4) 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.

B. Repayment Terms.

  (1) 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.

  (2) Payments of principal and interest shall be deferred until the date established for repayment to begin.

#### Regulation .09 Applications.

*COMAR 05.03.03.09*

A. To apply for a loan, an applicant shall;

  (1) Submit a completed application in such form as the Department may require;

  (2) 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

  (3) Submit any other information or documentation reasonably requested by the Program in order to establish eligibility and qualifications for a loan.

B. Application Fee. The Program may require an application fee for processing the loan application.

#### Regulation .10 Loan Closings.

*COMAR 05.03.03.10*

A. The Program shall establish procedures for closing the loans either by the Department directly or by an authorized agent.

B. 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.

C. 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.

D. 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.

#### Regulation .11 Default.

*COMAR 05.03.03.11*

A. In the event of default, as provided in the legal documents, or in the event of a prospective default, the Department may:

  (1) Modify the rate of interest;

  (2) Defer payment of principal, interest, or both, or forgive interest;

  (3) Modify the term of the loan;

  (4) Modify the loan in any other way in order to promote repayment of the loan and achieve the purpose of the Program; or

  (5) Accelerate the loan and foreclose on the mortgage or accept a deed in lieu of foreclosure.

B. 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.

#### Regulation .12 Financial Counseling.

*COMAR 05.03.03.12*

A. 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.

B. In order to be acceptable to the Department, a financial counseling program shall:

  (1) Require financial counseling before the loan is approved and after the loan closes, to the extent determined necessary by the Program;

  (2) Provide credit counseling, including counseling about budget planning;

  (3) Provide mortgage delinquency counseling, including a plan to address alternatives to a program loan such as:

    (a) A repayment plan with the mortgagee or mortgagees,

    (b) A forbearance agreement,

    (c) A refinancing of the existing mortgage debt,

    (d) Assistance from federal and private programs, and

    (e) Sale by the owner directly to a third party instead of foreclosure.

#### Regulation .13 Program Operation and Administration.

*COMAR 05.03.03.13*

A. Forms and Documentation. The application and the loan documents shall be made upon standard forms prescribed by the Program.

B. Program Fund Allocations.

  (1) It is the intent of the Department that Program funds be distributed Statewide to eligible applicants and borrowers.

  (2) Program funds shall be made available to eligible loan applicants on a first-come first-served basis.

  (3) The Secretary may reserve a portion of the Program funds to be used for emergency circumstances.

C. 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.

D. 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.

E. Loan Servicing. The Department may enter into:

  (1) Servicing agreements with mortgage loan servicers acceptable to the Department;

  (2) Agreements with financial counseling agencies described in Regulation .12.

F. Power of the Department. The Department may do any of the following:

  (1) Assign a mortgage for value;

  (2) Release a mortgage;

  (3) Foreclose a mortgage;

  (4) Acquire property securing a loan in default;

  (5) Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; or

  (6) Obtain and seek enforcement of a deficiency judgment.

#### Regulation .14 Waiver.

*COMAR 05.03.03.14*

The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if:

A. Conformance to the requirements of any federal, State, or local programs in connection with a loan necessitates waiver or variance of a regulation; or

B. 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.

#### Regulation .15 False Statements.

*COMAR 05.03.03.15*

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.