Chapter 10. Home and Energy Loan Program
Regulation .01 General.LinkCopy Citation
These regulations prescribe the policies, procedures, and authorizations for establishing and administering a program to assist in financing improvements to residential dwellings throughout the State through the purchase of loans from lending institutions or through the making of loans by the Administration.
Regulation .02 Objective.LinkCopy Citation
The objective of the program is to provide financing assistance to encourage improvements to residential dwellings including the installation of property improvements, energy conservation improvements, and solar energy systems to upgrade and improve the livability and habitability of residential property, to reduce energy consumption in residential property, and to promote utilization of solar energy in residential property.
Regulation .03 Definitions.LinkCopy Citation
A.
Terms defined in the Act have the meanings set forth in the Act. In addition, the terms set forth below have the meanings indicated.
B.
Terms Defined.
(1)
“Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, as amended.
(2)
“Administration” means the Community Development Administration, a division of the Department of Housing and Community Development.
(3)
“Borrower” means a natural person or persons, partnership, corporation, or other business entity that is eligible for a loan under the program. Applicants for a loan are borrowers until they are determined ineligible for a loan.
(4)
“Code” means the Internal Revenue Code of 1954, as amended, and the regulations issued under that Code.
(5)
“Department” means the Department of Housing and Community Development.
(6)
“Energy loan” means a loan or a portion of a loan, the proceeds of which are used exclusively to finance energy conservation or solar energy improvements set forth in Regulation .06B, below.
(7)
“Families of limited incomes” means families or persons whose incomes do not exceed the income limits established by the Secretary for the program pursuant to the Act.
(8)
“FHA” means the Federal Housing Administration of the Department of Housing and Urban Development.
(9)
“Lender” means any lending institution that:
(a)
Maintains an office in the State;
(b)
Originates and services home improvement loans in the State;
(c)
Is a member of, or subject to regulation by, the Federal Savings and Loan Insurance Corporation, the Federal Deposit Insurance Corporation, the National Credit Union Administration, or Maryland Savings Share Insurance Corporation, or any successor, or is qualified to sell deeds of trust to and service deeds of trust for the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation;
(d)
Has a contract of insurance from the appropriate loan insuring entity;
(e)
As determined by the Administration, is able to repurchase property improvement loans if required to do so; and
(f)
As determined by the Administration, is able to make any representations and warranties that the Administration requires.
(10)
“Loan” means any loan made under the program.
(11)
“Mortgage” means any mortgage or deed of trust on a residential property, improvements to which are financed by a loan.
(12)
“MHF” means the Maryland Housing Fund, a division of the Department of Housing and Community Development.
(13)
“Multifamily property” means any residential property containing:
(a)
One or more dwelling units which are occupied by families other than the owner; or
(b)
Two or more units, one of which is occupied by the owner.
(14)
“Program” means the Administration's Home and Energy Loan Program.
(15)
“Property improvement loan” means a loan or portion of a loan, the proceeds of which are used to finance any eligible improvements set forth in Regulation .06A, below.
(16)
“Residential property” means any building that is used or proposed for use primarily for human dwelling purposes on a year-round basis.
(17)
“Secretary” means the Secretary of Housing and Community Development.
(18)
“Single family property” means any residential property containing not more than one unit which is the principal residence of the owner or which will be the principal residence of the owner by the earlier of the date of completion of improvements financed by the loan or 60 days from the date of the loan.
(19)
“Title I” means Title I of the National Housing Act as amended.
(20)
“Trust indenture” means any trust indenture, bond resolution, certificate, or other similar document, including amendments and supplements, that authorize the issuance and sale of bonds or other obligations of the Administration, the proceeds of which finance the loans.
Regulation .04 Eligible Borrowers.LinkCopy Citation
A.
For loans made to improve single family properties, each borrower shall meet the following requirements:
(1)
Be a natural person;
(2)
Own the property in fee simple or under a ground lease;
(3)
Occupy or intend to occupy, by the earlier of the date of completion of improvements financed by the loan or 60 days from the date of the loan, the property as a principal residence;
(4)
Have the legal capacity to incur the obligations of the loan;
(5)
Demonstrate creditworthiness and repayment ability acceptable to the Administration;
(6)
If the loan is a property improvement loan, be a family of limited income.
B.
For loans made to improve multifamily properties, each borrower shall meet the following requirements:
(1)
If a business entity, be in good standing and be qualified to do business in Maryland;
(2)
Own the property in fee simple or under a ground lease;
(3)
Have all necessary legal and corporate authorizations to incur the obligations of the loan;
(4)
Demonstrate creditworthiness and repayment ability acceptable to the Administration;
(5)
If the loan is a property improvement loan, agree in writing that not less than 51 percent of the total dwelling units shall be occupied by families of limited incomes;
(6)
Except in the case of a multifamily property of two or four units, one unit of which is occupied by the owner, covenant and agree in writing that not less than 20 percent (15 percent if the property is located within a “targeted area” within the meaning of §103 of the Code) of the units in each property are to be occupied by individuals of low or moderate income as determined by the Secretary of the United States Treasury in accordance with §103 of the Code. The Administration may require that this covenant be recorded among the land records of the jurisdiction in which the property is located.
Regulation .05 Eligible Properties.LinkCopy Citation
A.
All properties for which a borrower receives a loan under the program shall meet the following requirements:
(1)
The property shall be located in Maryland;
(2)
The property shall be a permanent structure used primarily for year-round residential use;
(3)
The property shall need property improvements or shall benefit from energy conservation measures in order to improve its habitability, livability, and energy efficiency;
(4)
The property shall be owned by an eligible borrower who shall provide assurance of title or evidence of ownership acceptable to the program; and
(5)
In the case of a multifamily property containing two to four dwelling units, one unit of which is occupied by the owner, all units shall have been used exclusively for residential purposes at least 5 years before the execution of the loan.
B.
Condominiums and cooperatives may be eligible if the requirements of §A of this regulation are met.
C.
Improvements to a multifamily property, except an owner-occupied multifamily property of two to four units, may not be financed by a loan unless the improvements to the property comply with the notice, public hearing, and public approval requirements of §103 of the Code.
D.
Improvements to multifamily properties may not be financed by loans unless the:
(1)
Secretary has issued a determination that the improvements constitute a community development project within the meaning of the Act.
(2)
Administration has received a certified copy of an approving ordinance or resolution duly adopted by the legislative body of the municipal corporation or county, or Board of Estimates in Baltimore City, in which the properties are located, and approving the making of loans under the program. The chief executive officer of the municipal corporation or county, except when the officer is a member of the legislative body, shall approve the ordinance or resolution.
Regulation .06 Eligible Improvements.LinkCopy Citation
A.
Proceeds of property improvement loans may finance any improvement, alteration, addition, and repair that substantially protects or improves the basic livability of a residential property and that is eligible for financing under the regulations and requirements of any loan insurer. Eligible home improvements include without limitation the following:
(1)
Enlarging structure;
(2)
Repairing or replacing plumbing and electrical systems;
(3)
Improving or replacing heating systems;
(4)
Painting and plastering;
(5)
Installing new bathrooms, kitchens, living rooms, bedrooms, and closets;
(6)
Repairing or replacing roofs, ceilings, windows, stairways, and floors;
(7)
Constructing private sidewalks, curbs, fences, or driveways;
(8)
Installing a septic tank or cesspool;
(9)
Drilling a well and installing pumping equipment and piping;
(10)
Installing fire safety equipment; and
(11)
Making any other improvements determined by the Administration to be consistent with the purpose of the program and the Act.
B.
Proceeds of energy loans may finance energy conservation or solar energy improvements that reduce the consumption of energy or increase the use of solar energy, including without limitation the following:
(1)
Caulking;
(2)
Weatherstripping;
(3)
Insulation, including ceilings, walls, floors, ducts, pipes, or water heaters;
(4)
Furnace efficiency modifications, including replacement burner, furnace or boiler, vent dampers, or intermittent pilot ignition device;
(5)
Replacement air conditioner;
(6)
Storm or thermal doors or windows;
(7)
Siding;
(8)
Heat reflecting and absorbing door or window materials;
(9)
Devices associated with electric load management techniques;
(10)
Clock thermostats;
(11)
Automatic energy control system;
(12)
Machinery, equipment, or a facility for using ground water as a heat source for a heating system or as a heat sink for an air-conditioning system;
(13)
Any other improvement bearing a manufacturer's certification that the product has energy conserving properties or any improvement that the Administration determines provides energy savings with a pay-back within the term of the loan;
(14)
Solar domestic hot water systems;
(15)
Active or passive solar space heating systems;
(16)
Additions, alterations, or improvements designed to use wind energy, energy produced by a wood burning appliance, or solar energy to reduce the energy requirements of the building;
(17)
Earth sheltering in which the sheltering substantially reduces the consumption of energy by the building;
(18)
Heating systems or appliances using renewable sources of energy;
(19)
Planning and technical services, an energy audit, and conversion from master utility meters to individual utility meters, any of which are related to or undertaken with the installation of any of the energy conservation or solar energy improvements described above;
(20)
Roof replacement to reduce energy loss caused by defective roofing materials where the replacement includes the installation of adequate attic or ceiling insulation;
(21)
Other energy conservation projects or solar energy projects within the meaning of the Act;
(22)
Other improvements determined by the Administration with the approval of the Secretary to conserve energy and to be consistent with the purposes of the Program and the Act.
C.
Installation of fireplaces, except as integral parts of a system that is designed to use solar energy, is not eligible for financing by an energy loan.
D.
Ineligible improvements include such items as barbecue pits, bathhouses, dumbwaiters, fire extinguishers, flower boxes, greenhouses, airplane hangars, kennels, kitchen appliances which are designed and manufactured to be free-standing and are not built-in and permanently affixed as an integral part of the kitchen in a residential structure, outdoor fireplaces or hearths, penthouses, photo murals, radiator covers or enclosures, stands, swimming pools, television antennas, tennis courts, tree surgery, waterproofing of a structure by pumping or injecting any substance in the earth adjacent to or beneath the basement or foundation or floors, entertainment facilities, landscaping, lawn sprinkling systems, saunas, and recreational facilities.
Regulation .07 Loan Insurance Requirements.LinkCopy Citation
A.
The Administration may require that each loan be subject to a loan insurance policy that provides coverage for the Administration in the case of a loan default with terms and conditions that the Administration approves.
B.
If loan insurance is provided by the FHA Title I Property Improvement Loan Program or any insurance program of the MHF or of any other insurer approved by the Administration, the purchase or making of loans by the Administration shall be regulated by the regulations, handbooks, or guidelines of the insurance programs.
Regulation .08 Loan Terms, Limits, and Requirements.LinkCopy Citation
A.
Loans originated or purchased by the Administration shall meet the following terms and conditions:
(1)
The Administration shall establish or determine an interest rate or rates and other charges and fees, if any, for loans that, together with other moneys made available for those purposes, are sufficient to meet the interest and other costs payable by the Administration for its revenue bonds or other obligations financing the loans, administrative expenses of the program, and possible losses due to loan defaults in the program. The interest rate or rates on loans may not exceed the maximum permitted by §103 or 103A of the Code as applicable.
(2)
The Administration shall set maximum and minimum terms for loans taking into account the terms of the revenue bonds or other obligations issued to fund loans.
(3)
Loans may be made in any amounts that are necessary to finance eligible improvements, but may not exceed the lesser of the limits set by any loan insurance program, if applicable, or:
(a)
$15,000 for each property containing from one to four units, one unit of which is occupied by the owner; or
(b)
$30,000 for the first dwelling unit and $20,000 for each additional dwelling unit for each property containing:
(i)
One to four units, all units of which are occupied by families other than the owner, or
(ii)
Five or more units.
(4)
Borrowers shall repay the loan in substantially equal monthly payments of interest and principal in order that the loan is fully amortized over its term.
(5)
Borrowers shall pay any servicing fees, loan insurance premiums, or late charges that the Administration or the loan insurer may require and that are permitted by State law.
(6)
Securing of Loans.
(a)
Loans shall be secured as required by the Administration and any loan insurer.
(b)
Property improvement loans shall be secured by a mortgage.
(c)
Energy loans in an original principal amount greater than $5,000 shall be secured by a mortgage.
(d)
The Administration may require that energy loans in an original principal amount of $5,000 or less be secured by a mortgage.
(7)
Borrowers shall maintain fire and extended insurance coverage in an amount not less than the outstanding principal amount of the loan and any other prior debt secured by the property.
(8)
The Administration may prohibit assumptions of loans.
(9)
Borrowers may prepay a loan to the extent permitted by the trust indenture.
(10)
Borrowers may not refinance existing debt or work in place before approval of the loan.
(11)
The loan shall comply with any restrictions or requirements of the trust indenture.
B.
Borrowers shall execute a note, a mortgage (if required), a borrower's affidavit, and any other documents that the Administration requires in order to evidence or secure the loan or to comply with the Code, the Act, these regulations, or the policies of the Department, Administration, or Program.
Regulation .09 Participation of Lenders.LinkCopy Citation
A.
Lenders participating in the Program shall be approved as originators in the FHA Title I Property Improvement Program, or the applicable loan insurance program of the MHF, or any other approved loan insurer, and be in compliance with all applicable State and federal laws, rules and regulations governing the business of the lender and the making of residential property improvement loans.
B.
The Administration may issue invitations to lenders to participate in the Program and to sell loans to the Administration if there are funds available to conduct the Program. Invitations will be mailed to all eligible lenders who request them or who are known to the Administration to be interested in participating in the Program. These invitations will include:
(1)
The date by which the application and other documents shall be submitted to be considered for acceptance and the date by which the Administration shall issue a notice of acceptance or approval if the application is accepted;
(2)
The time period during which the lender must commit to make loans and deliver loans to the Administration for purchase;
(3)
The time or times, if any, within which the Administration must sell and deliver bonds on terms satisfactory to it, as a condition of any obligation to purchase loans;
(4)
Other information which is necessary or desirable to inform lenders of the terms of the invitation.
C.
Lenders wishing to participate in the Program shall file an application with the Administration in response to the invitation. The application will include the aggregate principal amount of loans which the lender desires to originate and sell. The Administration may require commitment fees. Also, the Administration may require other information necessary or desirable to assist in approving applications and allocating funds.
D.
The Administration shall enter into a loan purchase agreement with lenders who are notified that their application has been accepted or approved. The agreement shall include detailed terms and conditions under which the lender will offer loans to the Administration for purchase and by which the Administration shall purchase the loans. The agreement shall require that as a condition of purchase of a loan that the loan satisfy all of the applicable requirements of §§103 and 103A of the Code.
Regulation .10 Participation of Political Subdivision.LinkCopy Citation
A.
Political subdivisions or public utility companies may be authorized as agents of the Administration if they evidence the staff capacity and capability to evaluate loan applications and monitor rehabilitation undertaken pursuant to the loans.
B.
Political subdivisions or public utility companies seeking approval as agents shall submit a written application to the Administration on a form prescribed by the Administration specifying:
(1)
Staff capacity and financial experience in lending, and experience in residential inspections;
(2)
Prior experience in operating loan programs;
(3)
Other relevant information the Administration may request which is necessary or desirable to assist in approving applications.
C.
Political subdivisions or public utility companies approved as agents of the Administration shall perform the following functions on behalf of the Administration:
(1)
Marketing and promotion;
(2)
Loan application intake;
(3)
Evaluation of financial and rehabilitation proposals;
(4)
Making recommendations to the Administration for loan approval or disapproval;
(5)
Coordination with borrowers for execution of closing documents; and
(6)
Monitoring rehabilitation and making recommendations to the Administration for release of construction draws.
D.
Political subdivisions or public utility companies approved as agents shall agree in writing to perform the functions in §C, above, in conformance with these regulations, the appropriate Program handbooks, and other procedures prescribed by the Administration.
E.
Political subdivisions or public utility companies approved as agents shall be required to secure the approval of the Administration or loan insurer, as applicable, before a loan is approved.
Regulation .11 Allocation of Funds.LinkCopy Citation
A.
The Administration may, in its sole discretion, allocate funds in aggregate amounts to lenders, political subdivisions, or the Administration between loans for single family properties and loans for multifamily properties.
B.
When applicable, funds will be allocated to targeted areas for the purposes of §103A of the Code.
C.
The Administration may accept or reject an application, and may specify in its notice of acceptance a lesser aggregate amount of loans than the amount requested in the application.
D.
All allocations will be made on the basis of need, population, demand for funds, and any other criteria that the Administration determines from time to time.
E.
Allocation of funds available or expected to be available among lenders will also be based on factors including:
(1)
Aggregate amounts and distribution by county of loans and commitments requested by all lenders and by each lender;
(2)
Financial condition of each lender;
(3)
Amount and number of property improvement loans made in the State by each lender in the 2-year period preceding the application; and
(4)
Previous participation of the lender in housing programs of the State or its subdivisions.
F.
The Administration will notify the lender of the aggregate principal amount of loans that the Administration will purchase from the lender; subject to the conditions of the loan purchase agreement and interest rate to be charged on the loans.
Regulation .12 Additional Requirements for Multifamily Properties.LinkCopy Citation
Loans for multifamily properties insured by the MHF multifamily insurance program shall meet the following requirements:
A.
The sum of the original principal amount of the loan and total amount of prior outstanding indebtedness encumbering the property at the time of the closing of the loan may not exceed the then applicable limits for MHF multifamily insurance.
B.
The appraisal of the property as rehabilitated shall be sufficient to meet the ratio of the loan plus the amount of prior indebtedness encumbering the property to the value of the property determined by the:
(1)
Administration in its applicable Program handbook; and
(2)
MHF in accordance with its regulations or guidelines.
C.
The Administration shall examine any prior indebtedness encumbering the property to ascertain that the prior indebtedness resulted from reasonable and responsible underwriting and evaluation.
D.
The mortgage may be subject to indebtedness encumbering the property having priority to the mortgage. The Administration may prohibit encumbrances junior to the mortgage.
Regulation .13 Loan Applications, Processing, and Purchase Procedures.LinkCopy Citation
A.
Applications shall be made upon form documents required by the Administration. 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.
B.
Lenders, or the Administration, as applicable, shall be responsible for originating loans under the program. This responsibility shall include the:
(1)
Acceptance of applications from borrowers;
(2)
Review of applications for completeness and compliance with program eligibility standards;
(3)
Determination of creditworthiness of the borrower using normal underwriting standards;
(4)
Execution by the borrower of a note, mortgage (if required), and all other documents required by the Administration and the disbursal of all loan proceeds;
(5)
Reporting of the loan for loan insurance and, in the case of lenders, the submission of the loan to the Administration for purchase.
C.
The Administration shall purchase all loans submitted by lenders for purchase after examination of the loans for compliance with the terms and conditions of the loan purchase agreement. Loans found not to be in conformance with the requirement of the agreement shall be returned to the lender.
D.
The Administration may delegate to political subdivisions some or all of the functions described in §A, above, in accordance with terms and conditions of the appropriate Program handbook. Loans found not to be in conformance with requirements of the Program handbook shall be returned to the political subdivisions.
E.
The Secretary may delegate to the Director of the Administration, or to other appropriate employees of the Department or the Administration, the execution or approval of any commitments to borrowers or lenders and any contracts, arrangements, agreements, or other documents that the Administration determines are necessary to evidence or secure any loan.
Regulation .14 Loan Servicing.LinkCopy Citation
Loans shall be subject to a loan servicing agreement to be prepared by the Administration. The agreement shall establish the procedures for the servicing of loans and may permit the deduction of a servicing fee by the servicer from the proceeds of loan repayments.
Regulation .15 Supplemental Programs.LinkCopy Citation
This Program is intended to work in conjunction with local, State, and federal programs to the maximum degree possible.
Regulation .16 Waiver.LinkCopy Citation
The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or the trust indenture if:
A.
Conformance to the requirement of any federal agency in connection with any rehabilitation with respect to which federal assistance is sought necessitates waiver of a regulation; or
B.
In the determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act.
Chapter annotations
Authority: Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland;
Executive Order 01.01.1992.27C
Executive Order 01.01.1992.27C
History: Effective date:
History: Regulations .01—.16 adopted as an emergency provision effective June 1, 1983 (10:12 Md. R. 1065); emergency status extended at 10:25 Md. R. 2262
History: Regulations .01—.16 adopted effective December 5, 1983 (10:24 Md. R. 2184)
History: Chapter recodified from COMAR 05.01.15 to COMAR 05.04.10
History: Regulation .05A amended effective January 2, 1994 (20:25 Md. R. 1942); April 5, 1999 (26:7 Md. R. 537)
History: Regulation .06B amended effective April 25, 1994 (21:8 Md. R. 671)
History: Regulation .13 amended effective January 2, 1994 (20:25 Md. R. 1942)