These regulations prescribe the policies, procedures, and authorizations to make or purchase loans financed through the Special Purpose Investment Fund (SPIF) of the Community Development Administration. The Special Purpose Investment Fund was created and established by the Single Family Program General Bond Certificate to provide for investments by the Administration using funds that are not proceeds of bonds of the Administration. The Mortgage Yield Account was created as the initial account within the Fund to provide for the financing of mortgage loans to bear interest at rates that achieve yields required for attribution to other investments made under the General Bond Certificate. Other accounts may be established within the Fund in accordance with the General Bond Certificate and the Act. These regulations apply to mortgage loans financed through the Mortgage Yield Account of the Fund. The loans: Are not subject to the Internal Revenue Code; Are mortgage investments under the General Bond Certificate as described in Regulation .03B(13) of this chapter or mortgage loans that otherwise meet the requirements of the General Bond Certificate; Are pledged to the bond holders under the General Bond Certificate; May be ineligible for financing with proceeds of the Administration's mortgage revenue bonds or through other mortgage programs of the Department; Enable borrowers to acquire, rehabilitate, and refinance owner-occupied residential housing of one to four units; and May be made for acquisition of residential housing of one to four units in a project in accordance with forward commitments to developers for permanent take-out financing under the SPIF program. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development, Title 4, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency within the Division of Housing Finance of the Department. “Applicable codes and standards” means construction, health, safety, fire, occupancy, and other codes and standards in force in the political subdivision in which an eligible residence is located and which are applicable to that unit or to the construction of that unit. “Bonds” means mortgage revenue bonds of the Administration issued under the General Bond Certificate. “Closing costs” means: Financing costs such as points, if applicable, and fees for application, credit report, appraisal, survey, title examination, loan origination, and title insurance; and Title fees such as the attorney's fee, documentation and preparation fee, recording fee, State and local transfer tax, and documentary stamps. “Department” means the Department of Housing and Community Development. “Developer” means an individual or entity that owns, acquires, constructs, or rehabilitates a project of eligible residences, the purchases of which are to be financed by mortgage investments. “Families of limited income” means individuals or households meeting income limits established for this Program by written determination of the Secretary from time to time. “Fund” means the Special Purpose Investment Fund authorized by the General Bond Certificate and held by the Trustee under the Certificate for the benefit of the bondholders. “General Bond Certificate” means the Community Development Administration, Single Family Program General Bond Certificate, dated May 1, 1980, as amended and supplemented from time to time. “Loan” means an eligible loan financed by the Administration under the Program. “Manufactured home” means a housing unit that: Is intended for residential use by a single household; Is a multisectional structure fabricated after June 14, 1976, in an off-site manufacturing facility for installation or assembly at the building site; Is not less than 24 feet in width and 40 feet in length; Is installed permanently on an engineered foundation in conformance with the BOCA National Building Code (1987), which is incorporated by reference under COMAR 05.02.01, or the standards set by the American National Standards Institute, Inc. which are incorporated by reference under COMAR 05.02.02, and is not independently capable of movement; Has brick, wood, aluminum, or cosmetically equivalent exterior siding and pitched composition shingle or wood shake roof; Is certified by the United States Department of Housing and Urban Development as a manufactured home in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, or by the Department as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland, and complies with all requirements set forth in COMAR 05.02.04; Is installed on real property the borrower owns in fee simple or under a freely transferable ground rent lease, and the legal title to the improvements runs with the real property; Meets all applicable zoning requirements as to number of dwelling units, lot size, and building setbacks; and Is reasonably expected to have an economic life equal to or greater than the term of the loan. “Mortgage investment”, for purposes of the Program, means mortgage loans to families of limited incomes, either made directly by the Administration or purchased from mortgage lenders, for the financing of eligible properties of one to four dwelling units. “Mortgage Yield Account” means the account established within the Special Purpose Investment Fund for making mortgage investments and other investments in accordance with the General Bond Certificate. “Prepaid expenses” means costs due at the time of closing which are required to be paid in connection with closing a mortgage loan such as property taxes, ground rent, hazard insurance, condominium or homeowners association fees if applicable, and any mortgage insurance premiums. “Program” means the Administration's program to make or purchase mortgage investments with funds available in the Mortgage Yield Account of the Special Purpose Investment Fund. “Project” means a community development project within the meaning of the Act, that contains eligible existing, newly constructed, or rehabilitated one to four family residential housing units that include at least one owner-occupied unit. “Reservation of funds” means a commitment to a borrower, lender, or developer for a loan to be financed by the Fund. “Secretary” means the Secretary of Housing and Community Development. “Settlement costs” means closing costs and prepaid expenses. “Single family residence” means a residential housing unit intended for occupancy by one to four families meeting criteria specified for the Program. “Special Purpose Investment Fund” means the Fund created and established by §5.16(a) of the General Bond Certificate, and may include: A Mortgage Yield Account; An additional investment account; and Other accounts as may be created and established in accordance with the General Bond Certificate. The Administration may use funds available under the Program for any of the purposes set forth in this regulation. Preferred Uses. In the event of limited funds, the uses described in §§B(2)—(5) of this regulation may be given preference over the standard uses described in §C of this regulation. Designated Area Loans. Loans may be made for acquisition financing to borrowers purchasing residences in an area or neighborhood where the Secretary has determined home ownership should be encouraged through availability of Program loans. Accessory and Shared Housing. Acquisition financing may be provided for: Accessory housing that includes up to three dwelling units with complete, independent sleeping, cooking, and living facilities which are within, or attached to, or on the same parcel as, and subordinate to, but under the same ownership as a single family, owner-occupied dwelling, if a majority of all the units comprising the property are occupied by families of limited income; and Shared housing that provides sleeping facilities for up to four additional families and common, shared, or independent sanitary facilities and common or shared living, dining, and kitchen facilities, if a majority of the families occupying the property are of limited income. Refinancing of Existing Mortgages. Program loans may be made to refinance mortgages in order to assist eligible homeowners in critical circumstances, or to achieve the mortgage yield requirements of the Program. Prior Homeownership. Loans may be made to certain persons ineligible under the Administration's tax-exempt, bond-financed lending program because of prior home ownership, but who otherwise meet the requirements of that program. Standard Uses. Loans may be made under the program to borrowers who meet Program requirements but are ineligible to receive loans under the more restrictive income and purchase price and other limits of the Administration's tax-exempt bond-financed lending Program. Second Mortgage Loans. Loans may be made under the Program for second mortgage loans if the borrower is receiving a first mortgage loan financed by the Administration. Other uses, as determined from time to time by the Secretary, may be made. An eligible borrower shall: Be one or more members of a household that owns or is purchasing, and shall hold title to, an eligible residence as set forth in Regulation .06 of this chapter; Be 18 years old or older, unless married to a joint borrower who is 18 years old or older; Meet income eligibility requirements as may be determined from time to time by the Secretary both for eligible borrowers and for tenants of multi-unit residences financed under the Program in accordance with Housing and Community Development Article, §4-218, Annotated Code of Maryland; Reside or intend to reside after purchase in an eligible property; Have legal capacity to incur the obligations of the loan; and Agree to comply with the loan terms and requirements established by the Administration. Requirements. An eligible property shall: Contain one to four residential units, one of which is intended to be occupied by the borrower as the borrower's primary residence; Be real property owned by the borrower in fee simple or under a freely transferable, perpetually renewable, ground lease which permits the lessee to transfer the leasehold interest without the consent of the lessor; Have a purchase price that does not exceed the maximum program loan amount as described in Regulation .08 of this chapter, except in cases of additional financing provided by governmental or nonprofit organizations or other sources acceptable to the Administration; At the time of the loan closing, be unencumbered by any other lien except as may be acceptable to the Administration; Reasonably be expected to have an economic life equal to or greater than the term of the loan; and Meet all applicable codes and standards and other legal requirements at the time the mortgage investment is made or upon completion of rehabilitation. Requirements—Forward Commitments. An eligible property shall meet the requirements of §A of this regulation. If a project involves new construction or will change the type of use or increase the intensity of the existing use of the property, a property shall be eligible for forward commitments of permanent take-out financing to developers only if: The Department has complied with COMAR 05.01.06.06; and The Secretary has issued the written determination required under COMAR 05.01.06.07. Types of Units. An eligible property may be a: Modular home if it has the State seal of approval; Condominium unit approved by the mortgage insurer; or Manufactured home meeting the definition of Regulation .03B(11) of this chapter. An eligible property may not be a: Unit in a cooperative housing project; or Mobile home that does not meet the definition of manufactured home under Regulation .03B(11) of this chapter. Subject to the limitations of Regulation .08B of this chapter, the proceeds of a loan made under the Program may be used for payment of: Purchase price of the eligible residence; Down payment and settlement costs; Rehabilitation costs described in Regulation .07B of this chapter; or Costs associated with eligible refinancings, as described in §D of this regulation. Eligible rehabilitation costs include: The reasonable cost of correcting major structural defects; The reasonable cost of repairing or replacing plumbing, HVAC, or electrical systems; The reasonable cost of correcting any violations of local planning, zoning, or building codes, or other applicable laws; The reasonable cost of inspections; and Other reasonable rehabilitation costs that are approved by the Program, including the cost of cosmetic repairs, energy conservation improvements, accessibility modifications, or major appliances. The Administration, in its discretion, may make a loan under the Program to refinance an eligible residence, taking into consideration factors including the following: Critical financial or personal circumstances that require restructuring of prior home mortgage loans; Yield requirements of the Program; Promotion of community development which may be enhanced by refinancing to enable rehabilitation or sale for purposes of homeownership; or Borrower's ineligibility to continue home financing under other programs of the Administration due to an increase in a borrower's income. Uses for proceeds of an eligible refinancing loan under the Program include: The payoff and release of the existing mortgage loan or loans, including: The remaining principal balance of the existing mortgage loan or loans, and Accrued and unpaid interest due on an existing mortgage loan or loans at the time the loan closes; Eligible rehabilitation costs, if applicable; and Any of the following fees, taxes, premiums, or costs which are unpaid and due or overdue at the time the loan closes, up to a limit of 20 percent of the amount of the loan: Late fees, Real property taxes, Insurance premiums, Fees or costs, such as condominium or homeowners association fees as approved by the Administration, Reasonable costs previously expended by a mortgage lien holder in connection with initiating foreclosure, if approved by the Administration, or Application fees and loan review fees. Limits. The maximum loan amounts under the program shall be within limits set from time to time by the Secretary. For a residence containing one dwelling unit the limit, as of April 1, 1991, is 150 percent of the maximum loan amount for a newly constructed single dwelling unit under the Maryland Mortgage Program (MMP) of the Administration. For a property containing two dwelling units the limit, as of April 1, 1991, is 175 percent of the MMP limit for a newly constructed single dwelling unit. For a property containing three units or four units, limits will be determined by the Secretary on a case by case basis, taking into account: The public purpose being served; Regional costs for this housing; and Other factors deemed appropriate by the Secretary. Maximum loan amounts may be adjusted periodically by determination of the Secretary to: Reflect the annual rate of inflation; Reflect the number of dwelling units in the property; Reflect differing area property values; Respond to changes in average sales prices; Support State agency economic or community development initiatives; or Encourage innovative programs of the Administration. Except for any financed mortgage insurance premium, and subject to the maximum loan amount under §A of this regulation: A first mortgage loan made to finance the purchase of an eligible property may not exceed the lesser of the: Appraised value; or Purchase price of the residence; A second mortgage loan made to finance the purchase of an eligible property, when added to the amount of the first mortgage loan, may not exceed: The lesser of the: Appraised value; or Purchase price of the residence; plus The amount of any down payment and closing costs covered by the second mortgage loan, so long as the Administration determines that the loan meets the requirements of the General Bond Certificate; A loan made to finance the purchase and rehabilitation of an eligible residence may not exceed the lesser of: The total of: 100 percent of the purchase price, plus Estimated costs for rehabilitation of the eligible residence; or The after-rehabilitation appraised value; A loan made to refinance an existing mortgage loan may not exceed the lesser of: The total refinancing costs permitted in accordance with Regulation .07C of this chapter; or The appraised value of the eligible residence, after rehabilitation, if applicable. Each loan financed by the Fund shall comply with the conditions of this regulation. Security. Each loan shall be secured by a mortgage or deed of trust that shall be: In a lien position required by the Administration; and Executed and recorded in accordance with the requirements of existing law. Each deed of trust shall be the subject of a title insurance policy in an amount at least equal to the outstanding principal amount of the loan, insuring that the deed of trust constitutes a first lien, subject only to liens for taxes and assessments and permitted liens and encumbrances on the real property with respect to which the loan is secured. Mortgage Insurance or Guarantee. Primary Mortgage Insurance. Each first mortgage loan shall be the subject of primary mortgage insurance issued by a private or public mortgage insurer acceptable to the Administration. Except as provided in §C(1)(c) or (e) or C(2) of this regulation, each loan shall be subject to primary mortgage insurance either in the amount of: 100 percent of the unpaid principal amount of the mortgage loan, if issued by the Federal Housing Administration (FHA) or the Veterans Administration (VA); or 25 percent of the mortgage loan amount if issued by a private or governmental insurer acceptable to the Administration. A first mortgage loan need not be subject to primary mortgage insurance if the original principal amount of the mortgage loan is not in excess of 75 percent of the lesser of the: Appraised value; or Purchase price of the residence, excluding settlement costs. The Administration may permit termination of primary mortgage insurance if the unpaid principal amount of the mortgage loan is 75 percent or less of the original principal amount. A second mortgage loan may be required to be subject to primary mortgage insurance at the sole discretion of the Administration. Except for second mortgage loans, loans made under the Program are required to be subject to mortgage pool insurance from an insurer acceptable to the Administration, unless the loan is subject to primary mortgage issuance or guaranty under §C(1)(b)(i) of this regulation. Interest Rate. Loans financed from moneys in the Mortgage Yield Account may be subject to payment of points and shall bear interest at rates established from time to time by certificates of the Administration in order to achieve yields required for attribution to other investments made under the General Bond Certificate. Other loans financed under the Special Purpose Investment Fund may be made at rates of interest up to prevailing market rates of interest. Escrow. Each loan shall require escrow payments on the part of the mortgagor with respect to all taxes, assessments, water rates, ground rents, sewer rates, condominium or homeowners association fees, insurance premiums, including mortgage insurance premiums, and other charges, to the extent actually charged or assessed, and any prior liens at any time assessed or levied against the premises or any part of it, unless otherwise approved by the Administration. Property Insurance. Fire and extended hazard insurance coverage shall meet the following requirements: Policies shall be written by insurance companies authorized to transact business in the State; Policies shall be in force at the time of the mortgage loan closing; The Administration shall be named as the mortgagee in a standard mortgagee clause or endorsement attached to or printed in the policy; The insurance shall be in an amount at least equal to the lesser of: The original principal balance of the mortgage loan, or 100 percent of the replacement value of the improvements located on the property; The insurance shall be payable in an amount equal to any partial or total loss not exceeding the full amount of insurance to prevent the borrower from being a co-insurer; The terms and coverage of all insurance policies shall be satisfactory to the Administration. Forms and Documentation. The application and the loan shall be made upon form documents prescribed by the Administration. If application is being made for a forward commitment of permanent take-out financing by a developer, sufficient information and documentation shall be provided to determine the extent, if any, to which the project will change the type of use or increase the intensity of the existing use of the property. Delegation of Authority. An action or decision required or permitted to be taken or made by the Department under the Act or these regulations, except for actions when the Secretary is designated, may be delegated by the Secretary. Allocation of Funds. The Secretary from time to time may designate use of any portion of the moneys available under the Fund for a particular purpose consistent with the Act and the General Bond Certificate. Operational Manuals. The Administration may establish, from time to time, operational handbooks or manuals governing matters relating to the Fund including descriptive statements of procedures which do not affect directly the rights of, or the procedures available to, the public. Loan Servicing. The Administration may enter into servicing agreements with loan servicers acceptable to the Administration for the servicing of loans made under this chapter. Power of the Administration. With respect to loans made under this chapter, the Administration may do any of the following: Assign a mortgage or deed of trust for value; Release a mortgage or deed of trust; Foreclose a mortgage or deed of trust; Acquire property securing a loan in default; Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; Obtain and seek enforcement of a deficiency judgment; Forbear; or Restructure the loan. A borrower who knowingly makes or causes to be made any false material statement or material misstatement of fact, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Administration's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by Housing and Community Development Article, §4-225, Annotated Code of Maryland. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act if: Conformance to the requirements of any federal, State, or local programs or of the General Bond Certificate in connection with a loan necessitates waiver or variance of a regulation; or In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purpose of the Act. Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: January 20, 1992 (19:1 Md. R. 23) Regulation .02B amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .04D, E amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .06 amended effective January 2, 1994 (20:25 Md. R. 1941) Regulation .07A amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .08C amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .09 amended effective July 30, 2007 (34:15 Md. R. 1349) Regulation .10A amended effective January 2, 1994 (20:25 Md. R. 1941)