Chapter 04. Downpayment and Settlement Expense Loan Program

“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:

“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:

“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:

“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.

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.

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.

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.

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:

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.

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.

Change of Ownership. The loan shall become due and payable upon the sale or transfer of the real property securing the loan unless the:

Tenant Income. The Secretary shall determine maximum household income levels for tenants occupying units in the eligible residence.

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 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.