It is the purpose of the Fund to use creatively its authority to insure mortgages so as to increase the housing opportunities of the residents of the State. More particularly, the Fund promotes the construction and rehabilitation of housing by insuring mortgages to finance multifamily housing funded by any qualified bank, trust company, savings and loan association, national bank association, public agency, insurance company, or other financial institution. This insurance makes these obligations more marketable, and permits them to be sold at more favorable rates than otherwise possible. The qualified public agencies include the Community Development Administration of the Department of Housing and Community Development, which is the State housing finance agency, and may include other public agencies which operate housing finance programs satisfactory to the Fund and which would benefit by Fund insurance. These regulations set forth the policies and procedures for issuance of mortgage insurance by the Maryland Housing Fund to insure multifamily residential property. Mortgage loans secured by residential multifamily real property may be insured by the Maryland Housing Fund under its Multifamily Insurance Reserve and these regulations. The Multifamily Insurance Reserve is governed by the Multifamily Insurance Agreement, as may be amended, by and between the Fund and the Community Development Administration. The Multifamily Reserve backs the insurance of multifamily loans under these regulations, and in addition backs the insurance of loans made under the multifamily Home and Energy Loan Program, COMAR 05.04.10, and the Special Housing Opportunity Program, COMAR 05.04.11. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland. “Appraised value” means the value of a property, as determined by a written valuation performed by a certified appraiser. “Borrower” means the original borrower under a mortgage loan and that borrower's successors and assigns by operation of law or as approved by the Fund. “Certified appraiser” means a certified general real estate appraiser entitled or qualified to provide real estate appraisal services under Business Occupations and Professions Article, §15.5-101 et seq., Annotated Code of Maryland. “Claim” means a request by an insured lender for reimbursement for any loss resulting from the occurrence of a default in a mortgage which is insured by the Maryland Housing Fund. “Condominium” means a multi-unit structure or project, subject to a condominium regime under Real Property Article, Title 11, Annotated Code of Maryland. A multifamily condominium may be comprised of five or more individual units. “Cooperative” means a multi-unit project operated for the benefit of members or shareholders who occupy the dwelling units in the project under a shareholders' or occupancy agreement. “Default” means the failure of a borrower to repay the obligation of a note, or otherwise to fully perform according to the terms provided in a deed of trust. “Department” means the Department of Housing and Community Development of Maryland. “Director” means the Director of the Division of Housing Credit Assurance of the Department. “Fund” or “MHF” means the Maryland Housing Fund, an agency within the Division of Housing Credit Assurance and, when appropriate, its authorized officers or personnel. “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland. Insured Lender or Lender. “Insured lender” or “lender” means the original lender of a mortgage loan and that lender's successors and assigns, by operation of law or as approved by the Fund. “Insured lender” includes any qualified bank, trust company, savings institution, savings and loan association, national bank association, public agency, insurance company, or other financial institution that makes a loan which the Fund insures in whole or in part. “Loan” means the delivery by a lender of a sum of money to a borrower, upon agreement that it be repaid. Mortgage. “Mortgage” means a written instrument evidencing or creating a lien against real property for the purpose of providing collateral to secure the repayment of a loan. “Mortgage” includes a deed of trust. “Multifamily project” or “project” means: A development of one or more structures containing five or more dwelling units; Other uses as may be permitted under Regulation .05B of this chapter; and The real property upon which a development in §B(16)(a) of this regulation is situated. Nonprofit Entity. “Nonprofit entity” means any corporation, foundation, or other legal entity, no part of the net earnings of which inures to the benefit of any private shareholder or individual holding an interest in the entity. This includes governmental bodies, local development agencies, and local development corporations. “Nonprofit entity” does not mean limited dividend corporations as defined in Housing and Community Development Article, §4-220, Annotated Code of Maryland. “Property” means the land upon which a multifamily project is situated, and all improvements constructed on it, including the rights and benefits of its ownership. “Public agency” means any board, commission, agency, department, or authority of the State or of any county or municipal corporation, including a county or municipal corporation. “Secretary” means the Secretary of Housing and Community Development of Maryland. “Statement of projected net revenues” means a statement of projected net revenues, as those terms are defined in the bond indentures authorizing issuance of the bonds. Types of Reserves. Insurance issued by the Fund is backed by an insurance reserve. There currently exist seven separate reserves, one for multifamily insurance, three for single family insurance, one for general use, one for business insurance, and an unallocated reserve for moneys not yet transferred to a specific reserve. More specifically, separate reserve funds have been established to back the following categories of insurance: Single family regular insurance; Revitalization program insurance formerly known as pilot program insurance; Single family home and energy loan insurance; Multifamily insurance; General reserve insurance; Business reserve insurance; and An unallocated reserve. Claims on Reserves. Except for the unallocated reserve, each specified category of reserve is maintained as a reserve to pay claims, when necessary or desirable to do so, arising from its respective category of insurance, and is not subject to claims arising from other categories of insurance except as provided in §B(2) of this regulation. Reserves are subject to payment of claims arising from single family regular and revitalization program insurance issued before August 20, 1975. The unallocated reserve may be used, as provided in §C of this regulation, for the payment of claims arising under any category of insurance. Earnings on Reserves. Investment earnings on each of the seven reserves which are retained by the Fund are credited to the unallocated reserve. The moneys in the unallocated reserve may be: Allocated and transferred by the Secretary into any or each of the identified reserves; Restricted by the Secretary as a reserve for the payment of a claim or potential claim under any category of insurance during any workout period; Applied by the Fund as payment of a claim, in whole or in part, under any category of insurance; or Retained in the unallocated reserve pending allocation, transfer, restriction, or use. Allocations to Reserves. The Secretary may issue determinations from time to time to make the discretionary allocations, transfers, or restrictions to or within the reserve funds. General. A multifamily project is eligible for Fund insurance if it: Is located in Maryland; When complete, conforms to all applicable federal, State, and local building, health, environmental, historic preservation, and housing codes or regulations; Is zoned to permit rental housing; and Secures a loan which is in all respects in conformance with these regulations. Uses. A multifamily project shall be used primarily for residential dwelling purposes, including space for living, dining, sleeping, and sanitary purposes. A multifamily project may include up to: 15 percent of the total building space for related noncommercial supporting purposes for use by the residents; and 5 percent of the total building space for incidental, ancillary, and supportive commercial or other nonresidential uses that may be used by residents and nonresidents. A project may include up to an additional 15 percent of the total building space for related noncommercial supporting purposes upon a written determination of the Director of the Fund that the nonresidential spaces and architectural configuration of the project are adaptable to other marketable uses. Loans secured by cooperatives are eligible for insurance. Loans secured by a qualified condominium of five or more units are eligible for insurance. General Criteria. Any for-profit or nonprofit entity or public agency may qualify as an eligible lender if, in the determination of the Fund, it: Makes loans as a substantial function of its operations; Provides evidence of responsibility, permanency, and financial capacity; and Has requisite administrative, loan underwriting, loan servicing, and construction loan monitoring capabilities. Office in State. The insured lender shall maintain an office in the State, be authorized to transact business in the State, and agree to receive service of process in and be subject to the jurisdiction and venue of the courts of the State. Certification of Lenders. An entity which meets the eligibility requirements under this regulation may request certification by the Fund that it qualifies to originate loans to be insured under this chapter. To become certified, an eligible lender shall submit an application to the Fund, which application may require information and supporting documentation regarding the lender's ability to satisfy all eligibility criteria. Disciplinary Prohibition. A lender may not be under an order suspending or debarring it from participating in the Department's programs under COMAR 05.01.05 at the time the loan is initially endorsed for insurance. The Department may decline to grant eligibility to an otherwise qualified lender that is suspended or disbarred from participating in the programs of any other state or federal agency. A limited partnership, corporation, or public agency may qualify as an eligible borrower if, in the determination of the Fund, it: Owns, at the closing of the loan, the property in fee simple or controls the property under a leasehold interest under a ground lease satisfactory to the Fund having a term not shorter than the term of the insured loan plus 25 years; Has all necessary legal and corporate authority to incur the obligations of the insured loan; Is in good standing and qualified to do business in Maryland; Can establish to the satisfaction of the Fund the: Financial capacity to complete the development of the project, including the satisfaction of all equity requirements, Experience, background, and construction capacity to construct the project, including the ability to provide all required guarantees, collateral, and escrows, and Managerial capacity to operate the project, together with the financial capacity to meet the normal and typical expenses of ownership; Has a general credit standing and an overall financial position acceptable to the Fund after a review of the borrower's: Total obligations, Contingent liabilities, Operating capital, and Other relevant information as may be required by the Fund; Is not under an order suspending or debarring it from participating in the Department's programs under COMAR 05.01.05, or under any similar order from any other State agency, nor has the Department declined to grant eligibility to an otherwise qualified borrower because the borrower is suspended or debarred from participating in the programs of any federal agency; and Agrees and certifies that it shall comply with all applicable federal, State, and local laws and Departmental policies and programs regarding discrimination and equal opportunity in employment, housing and credit practices, and drug-free 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, including the Fair Housing Amendments Act of 1988, For projects containing nonresidential uses, the Americans with Disabilities Act of 1990, as amended, The Governor's Code of Fair Practices, as amended, The Department's Minority Business Enterprise Plan, as amended, and Executive Order 01.01.1989.18 relating to drug and alcohol free workplaces, and any Departmental regulations adopted to carry out more specifically the requirements of the Order. To qualify as an eligible loan for a project, a loan shall meet the general terms in §§B—J of this regulation. Eligible Lender. The loan shall be originated by a lender who has been determined eligible under Regulation .06 of this chapter. First Lien. The loan shall be secured by a first lien upon the property. The loan shall be evidenced and secured using such documentation as is approved by the Office of the Attorney General, as counsel to the Fund. Insured Loan-to-Value Ratio. The maximum loan-to-value ratio of a loan insured by the Fund may not exceed 90 percent of the property's appraised value as of completion of the project, except as provided in §D(2)—(5) of this regulation. Notwithstanding the maximum insured loan-to-value ratio set forth in §D(1) of this regulation, 15 percent of the multifamily reserve may be used to back the outstanding principal of loans which have a maximum loan-to-value ratio of between 90 and 100 percent if the loan qualifies under §D(3), (4), or (5) of this regulation. The permitted loan-to-value ratio of an insured project may be over 90 percent if: A materially significant number of the units in the project are subsidized by federal rent subsidies and the rent subsidy contract extends to or beyond the time when the project is expected to achieve a 90 percent loan-to-value ratio; or The first 10 percent of the insured loss is covered by a: Governmental agency other than the Fund, Financial institution acceptable to the Fund, or Letter of credit from a financial institution acceptable to the Fund; or The loan being insured is a refinancing of an existing Fund-insured project and the reinsurance or continuation of insurance is essential to bring the loan current or otherwise avoid a claim to the Fund. A loan may be insured with a loan-to-value ratio up to 100 percent in order to achieve the public purposes of the Fund, if the: Project meets all other underwriting standards of the Fund; and Secretary has executed a determination of exceptional public purpose. The permitted loan-to-value ratio for insurance of a permanent loan for a project with an operating history, but not previously insured by the Fund, may be up to 100 percent of the property's appraised value if the project satisfies the following criteria: The loan is secured by a completed and occupied project; The project has a minimum of 5 years' operating history and has positive cash flow for a minimum of 3 years immediately before the application for insurance; The project has no greater than 5 percent annual average vacancy rate during the 3 years immediately before the application for insurance; The project has been assessed by an independent construction analyst or building engineer and requires no major systems or structural rehabilitation; and The borrower will not be receiving any cash or other return on equity from the project at the time the loan is insured. Interest. The loan shall bear interest at the rate agreed upon by the insured lender and the borrower and acceptable to the Fund. Proceeds. The proceeds of an insured loan shall be: Used for the financing or refinancing of acquisition, construction, or rehabilitation of a multifamily project; and Evidenced by a promissory note and secured by a mortgage. Amortization. Permanent loans shall contain amortization provisions satisfactory to the Fund for the complete amortization of the loan in monthly installments. The Fund may not insure a permanent loan that comes due before the expiration of its full term of years, which loan may be otherwise known as a balloon loan. Loan Term. The Fund may insure a permanent loan for a period of up to 40 years. Transfer of Property Insured. The loan shall provide that any transfer of the property, except by operation of law, shall require prior approval of the Fund for the insurance to remain in effect. The Fund's coverage will not be impaired by reason of a transfer in violation of covenants of the mortgage, unless the insured lender had actual advance knowledge of the transfer and is considered to have consented to it. Multiple Insured Loans. The Fund may insure more than one loan on any project if all insured loans, in the aggregate, comply with these regulations, including without limitation: The aggregated loans do not exceed the maximum loan-to-value ratio in §D of this regulation; The aggregated loans are all to be secured equably by a first lien deed of trust; If the loans are originated by different lenders, each lender has executed an intercreditor agreement in form and substance acceptable to the Fund; and The aggregated loans do not exceed the maximum insured loan requirements of Regulation .09 of this chapter. The maximum insurable loan amount that the Fund can insure is 25 percent of the multifamily insurance reserve, unless: Additional collateral is deposited with the Fund in accordance with §B of this regulation; or For projects in which the Fund participates in reinsurance, coinsurance, or shared insurance, the Fund's maximum exposure is 25 percent of the multifamily reserve, with adjustments, if any, calculated in accordance with Regulation .15 of this chapter. A loan may be insured even when the amount of the insurance by the Fund exceeds 25 percent of the multifamily reserve as of the date of making the loan, if the: Principal portion of the loan being insured which is in excess of the reserve amount will be supported by collateral or security acceptable to the Fund in an amount equal to or greater than the excess loan amount; Collateral or security is deposited with or held by the Fund for its benefit in the event of default for such period of time as determined necessary by the Fund; and Acceptable forms of collateral or security are: Cash; Securities of the following types: General obligations of or obligations guaranteed by the federal government, Certificates of deposit or other banking arrangements fully insured by the Federal Deposit Insurance Corporation, or Bonds or other obligations rated in one of the two highest rating categories by a nationally recognized credit rating agency and otherwise acceptable to the Fund; Letters of credit which are irrevocable, unconditional, renewable, transferable, and drawable at sight on an investment-grade, rated financial institution with acceptable combined capital and surplus, with a minimum term and all other provisions acceptable to the Fund; or Other collateral equivalent to that described in §B(3)(a), (b), or (c) of this regulation and otherwise acceptable to the Fund. The Fund may insure two or more loans secured by mortgages on adjacent projects which are under common ownership or sponsorship when the combined loans exceed the maximum insurable loan amount, if the Fund determines in writing that the: Adjacent projects have substantially different risks of insurance loss evidenced by each project having at least one of the following: Federal, State, or local rent subsidies committed to the project for a term of not less than 5 years for not less than 35 percent of the units in the project, or non-rental subsidies which result in at least a 10 percent reduction in the debt service of the loan, or Additional collateral or security deposited with the Fund for its benefit in the event of default, in one of the forms set forth in §B(3)(a), (b), (c), or (d) of this regulation, in an amount which, when added to the borrower's equity, equals 22.5 percent of the Fund-determined value for the second project to be insured; Loan for each adjacent project contains cross-default provisions providing that upon monetary default of one adjacent project the insured lender would be required, at the Fund's election to: Declare a default on either adjacent project, and Operate, sell, or transfer the adjacent project rather than assign the project to the Fund unless the adjacent project itself was in monetary default; and Likelihood of nonpayment of principal, interest, or other sums agreed to be paid to the mortgagee by the mortgagor is no greater than that of similar projects, taking into consideration all relevant factors, including the financial strength and experience of the developer and builder. In the event of a default on a loan insured under the provisions of §B or C of this regulation, the terms of the loan are required to give the insured lender the right to call on any collateral or security provided and apply the proceeds to a reduction in the amount of the insurance claim to be paid by the Fund. Environmental Review. Each loan to be insured by the Fund shall comply with applicable local, State, and federal environmental laws and regulations. A lender may be required, at the discretion of the Fund, to have a borrower conduct a screening of the proposed site for environmental conditions, such as man-made hazards, stormwater runoff, underground storage tanks, lead-based paint, radon gas, PCBs, asbestos, or other environmental hazards within the meaning of the environmental laws referred to in this section. If the initial screening indicates adverse or potentially adverse environmental conditions, the Fund may require a more detailed physical investigation, review of historic records, testing and treatment, or abatement of the environmental condition as a requirement of the mortgage insurance. The Fund may require the borrower to certify to it that no hazardous environmental conditions are present on the property, in addition to the screening required by this section. Title Insurance. The borrower shall provide to the insured lender a standard American Land Title Association Loan Policy — 1970, as amended, for an amount equal to the maximum principal amount of the loan, insuring the lender and the Fund that title to the building and the real property on which the building is located on the date of the loan closing is vested in the borrower, and containing only exceptions and encumbrances approved by the insured lender and the Fund. The title policy shall include American Land Title Association endorsement form 100, comprehensive coverage, and American Land Title Association endorsement form 8.1, environmental coverage, and such other endorsements as may be required by the insured lender and the Fund. The title insurance policy shall be accompanied by a survey certified in the manner required by the insured lender, the Fund, and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property except those acceptable to the insured lender and the Fund. Property, Liability, and Other Insurance. At or before closing of a loan, and at such other times as required by the Department, the borrower shall provide evidence that the borrower, contractor, and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §C(1) of this regulation shall meet the following requirements: Be written by a company registered with the Maryland Insurance Administration; Be in force at the time of closing; Not be terminable without prior notification to the Department; and Contain such other terms and coverage satisfactory to the Department. In addition to the requirements of §C(2) of this regulation, owner's liability insurance shall: Name the Department as an additional insured; and Remain in force for the duration of the loan. In addition to the requirements of §C(2) of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §C(2) of this regulation, owner's property or hazard insurance shall: Name the Department as an additional insured, loss payee, and mortgagee; and Remain in force for the duration of the loan. Appraisal Requirement. The Fund shall, at its option, either obtain, or have the lender obtain, an independent appraisal of any project for which insurance is sought, or require the borrower to submit an appraisal. Appraisal Report. The appraisal report shall be prepared by a certified appraiser and submitted by the borrower or an independent appraiser before initial insurance endorsement of a loan. The appraisal shall include the income, cost, and market comparable approaches to valuation. The Fund may determine in its sole discretion those projects for which an independent appraisal will be required, based upon the risk of insurance loss to the Fund and the project's cost, location, and market. An independent appraisal may be obtained by the Fund at its expense, but the cost shall be reimbursed to the Fund at the time the loan is endorsed for insurance. Appraisal Review. The Fund shall review each appraisal, whether provided by the borrower or an independent appraiser, to determine its accuracy, completeness, and adherence to accepted standards of appraisal practice. The Fund review shall consider the extent of research and methods used and shall otherwise determine that the appraisal was done in accordance with appropriate appraisal practice and standards. The Fund also may evaluate appraisals whether provided by the borrower or obtained independently by the Fund, and the valuation given by the Fund review appraiser doing the evaluation shall be used by the Fund in considering an application for mortgage insurance. This regulation is applicable to any construction advances under a mortgage insured by the Fund. This regulation applies to all construction advances, and in the case of a conflict between the provisions of this regulation and Regulations .08 — .10 of this chapter, the provisions of this regulation shall control. Insurance of Construction Advances. Loans to finance construction of multifamily projects are eligible for the insurance of advances by the Fund if either: The Fund also insures the permanent loan for the project; or At the time the construction loan is endorsed for insurance by the Fund: There is a commitment for a permanent loan for the projects, Terms and conditions on the commitment are acceptable to the Fund, and The lender is acceptable to the Fund. Construction Term. The Fund may insure construction advances for a period of 24 months. Depending on the size and complexity of a project, the Fund may extend the period of insurance for construction advances for up to an additional 12 months. For the purposes of this chapter, the construction period shall begin at initial endorsement of the insured loan, and shall end at the final endorsement of the insured loan for permanent mortgage insurance. Construction Period Disbursement. The insured lender shall: Conduct or contract for regular independent on-site inspections of the construction; Make construction loan disbursements on the basis of work in place, plus materials acceptably stored on site, less a retention of 10 percent of the construction contract amount; and Make disbursement for materials acceptably stored off site, if the materials are: In a bonded warehouse, Set aside and labeled with the project's name, Inspected by the insured lender or its contract inspector, and Documented by evidence of payment for the materials. Each construction draw shall be approved and endorsed by the Fund before its disbursement. Approval is based on: An acceptable title endorsement; Evidence of waivers of mechanics' liens; and At the option of the Fund, an on-site inspection to: Verify that the project is proceeding on schedule, and Confirm that there are sufficient funds in the construction budget to complete the project. In addition to the requirements of §E of this regulation, the final construction draw is subject to review and approval of certificates of completion and cost certification. If at any time during construction the Fund determines from its reconciliation of the project budget, in accordance with §E of this regulation, that the project does not have sufficient funds in the construction budget to complete the project, the Fund may refuse to endorse further construction advances until the construction budget is returned to balance through approved budget adjustments or contributions by the borrower. Disbursement records are subject to review by the Fund at any time, with or without notice. The Fund may also, at any time and with or without notice, conduct inspections of the project. Public Agency Lenders. For loans made by public agency lenders to a borrower, the Fund may insure up to 100 percent of the loan amount for an initial premium of 1 percent of the insured loan amount for 12-month coverage. The premium and fee schedule for all insurance is more fully set forth in Regulation .14 of this chapter. Private Lenders. For loans made by private lenders to nonprofit borrowers, the Fund may insure up to the top 25 percent of the loan amount for an initial premium of 1 percent of the insured loan amount for 12-month coverage, or additional coverage in accordance with §C of this regulation. For loans made by private lenders to for-profit borrowers, the Fund may insure up to the top 20 percent of the loan amount for an initial premium of 1 percent of the insured loan amount for 12-month coverage, or additional coverage in accordance with §C of this regulation. Additional Coverage for Private Lenders. The Fund may insure loans made by private lenders with more than a 25 percent loan to insurance coverage ratio, under Regulation .08C or D of this chapter, up to a maximum of 100 percent of the loan amount, upon the payment of higher initial and annual premiums as determined on a case-by-case basis by the Fund. Application Fee. The sponsor shall pay an application fee equal to the greater of: 1/10 of 1 percent (0.1 percent) of the loan amount for which insurance is requested; or $1,000. The application fee shall be paid to the Fund at the time the application for insurance is submitted by the lender. The Secretary may waive or postpone the time for payment of an application fee in the Secretary's sole discretion. The application fee shall be calculated at the time of application on the amount of the loan or part of it for which insurance is requested. Any adjustment for overpayment or underpayment shall be paid by or credited to the borrower at initial endorsement, provided that, at the sole discretion of the Fund, any overpayment may be credited towards the initial mortgage insurance premium. The application fee for an existing insured loan being refinanced out of refunding bonds is the greater of: $500; or 1 percent of any increase to the insured loan amount. Refund. Up to 1/2 of the application fee may be refunded within 60 days of the sponsor's submission of an application if the: Fund rejects the application upon initial review; or Sponsor submits a written request to withdraw the application. Refunds may not be made after 60 days from application submission. Commitment Extension Fees. A nonrefundable commitment extension fee of 1/20 of 1 percent (0.05 percent) of the loan amount for which insurance is requested may be charged by the Fund for each extension by the Fund of its commitment to insure a loan, under Regulation .18H of this chapter. Closing Fees. The Fund may charge fees to cover costs of closing a loan, including administrative and legal costs associated with endorsement of a loan for insurance. The closing fees may be paid at loan closing and may be paid with proceeds of the loan. Insurance Premiums. Construction Advances. The premium for insurance of a loan for construction advances is 1 percent of the total loan amount for each year or partial year within the construction period, and shall be paid to the Fund in full at the time of initial endorsement. If the construction period is less than 24 months, that portion of the prepaid construction premium for each full calendar month after the final endorsement of the insured loan shall be credited to the initial permanent mortgage insurance premium. If the construction period is extended after the initial 24 months, the premium for insurance of the loan for construction advances during the extension period is 1 percent of the insured loan amount, and shall be paid to the Fund in full before the extension period. Permanent Loans. The initial mortgage insurance premium is 1/2 of 1 percent (0.5 percent) of the insured permanent loan and shall be paid to the Fund at the time of endorsement of the insured loan for permanent mortgage insurance. The annual renewal premium is 1/2 of 1 percent (0.5 percent) of the outstanding principal balance of the insured permanent loan. When a permanent loan is insured by the Fund following Fund insurance of a construction loan: The construction period shall continue until the final endorsement of the insured loan for permanent mortgage insurance; and Only the annual renewal premium, not the initial premium, for the permanent mortgage insurance shall be charged. Modification of Premium Rates. The Fund may participate in a plan of shared insurance, coinsurance, or reinsurance under this regulation. In each of these instances, the Fund may charge an initial premium and annual renewal premium which is in excess of the standard mortgage insurance premiums set forth in §D(2) of this regulation. The Fund shall determine the amount of the excess premium in its sole discretion based on its analysis of the insurance risks. If the Fund insures a loan when a portion of the insurance provided is supported by collateral deposited with the Fund, including loans in excess of the maximum insurable amount under Regulation .09B of this chapter, the Fund may charge an increased premium under §E(1) of this regulation, or may in its sole discretion reduce the annual mortgage insurance premium based on its analysis of the insurance risks. The Fund may reduce the annual mortgage insurance premium payable on the entire insured loan by not more than the product of 1/2 of the collateral deposited for the annual period, multiplied by the percentage rate for the applicable insurance premium. The premium, or any portion of it, is not refundable except when an insured loan is paid in full. If a loan is prepaid in full, no further premium is due and a portion of the premium paid for the year shall be refunded, as prorated on a monthly basis. Insurance Fees and Premiums. Loans insured by the Fund may be reinsured or coinsured, or insurance may be shared by and with public or private mortgage insurers, or through federal guarantees, when available. Portions of risk on any loan insured by the Fund may be assigned to other eligible mortgage insurers on a participating basis. Any reinsurance, coinsurance, or shared insurance shall be made on terms and conditions satisfactory to the Fund. The reinsurer, coinsurer, or shared insurer shall be reputable and financially sound in the judgment of the Fund. The Fund may not retain contingent liability to pay an entire claim in the event of nonpayment of a claim by a reinsurer or coinsurer, except in exceptional circumstances by written determination of the Secretary that a heightened public purpose is served by the retention of the contingent insurance risk. The total of multifamily insurance considered standing for purposes of calculating the leverage ratios permitted may not be decreased by the amount of any reinsurance, coinsurance, or shared insurance with respect to which the Fund retains contingent liability. Property improvement loans or energy loans made or purchased by the Community Development Administration under its Home and Energy Loan Program, or by any other public agency mortgagee operating a similar program, the proceeds of which are to be used for the general improvement or rehabilitation of any multifamily project or for energy-conserving improvements to any multifamily project, may be insured by the Fund under the requirements of this section instead of Regulation .08B—D of this chapter. The loans shall be secured by a first or second mortgage upon the land and improvements. The maximum amount of the total of any mortgage loan to be insured and the then outstanding balance of any existing prior liens on the multifamily project may not exceed 85 percent of the property's appraised value as of completion of the improvements. The insurance coverage may be 100 percent of the mortgage loan to be insured. The total amount of liens on the property, including the mortgage loan to be insured, may not exceed 25 percent of the amount in the multifamily reserve. In the case of loans secured by a second mortgage, the: Fund shall examine any existing first mortgage and shall determine that the lender of the first mortgage meets the requirements of Regulation .06A of this chapter or, if the first lender is an individual or individuals, that the lender is financially responsible and has evidenced responsible management of the mortgage; Proposed second lender shall determine whether the first mortgage contains any restrictions upon second mortgages, and, if the first mortgage prohibits second mortgages or the first mortgage requires the mortgagor of the second borrower to obtain approval of the first lender before executing a second mortgage, the borrower shall obtain, in form and substance satisfactory to the Fund, a waiver of any prohibition against second mortgages or the approval by the first lender of the second mortgage; Borrower shall agree, and the first mortgage shall permit or the first lender shall agree, that: The Fund may have an opportunity to cure any defaults under the first mortgage, and Any defaults that the Fund is unable to cure shall be suspended, if the Fund keeps current any payments due under the first mortgage; Fund shall determine whether the borrower has made all payments of principal, interest, and escrows for expenses, if applicable, in compliance with the terms and conditions of the first mortgage; Borrower shall notify the first lender of the existence of the second mortgage, and the borrower and the first lender shall agree in writing to notify the second lender of any events of default under the first mortgage by the borrower; and Fund may not insure any loan if the first mortgage requires a mandatory payment before full amortization unless the: Loan to be insured has a term less than the remaining term of the first mortgage, and Fund determines, in its sole discretion, that the requirement of the mandatory payment does not jeopardize the borrower's ability to repay in full the second mortgage. Community Development Single-Family Projects Insured Under Multifamily Reserves. The Secretary has authorized an additional plan for community development projects, financed by the Community Development Administration, consisting of single-family or condominium residential units, when a mortgage for the project has been insured by the Fund under the reserve fund designated for the insurance of mortgages insured by multifamily properties. The Fund may insure 100 percent of a mortgage loan made by the Community Development Administration for a one-family unit, including a condominium unit. The mortgage shall satisfy all requirements of the Fund's single-family regulations under COMAR 05.06.06. The amount of the loan may not exceed the total sale price of the unit, including extras or options selected by the purchasers, but not including prepaid expenses and closing costs. Initial premium fees shall be based on the ratio of the amount of the mortgage to this sale price. The fee schedule is: The multifamily reserve fund, rather than the revitalization program reserve fund, applies to insurance provided under this regulation, and also to any insurance provided for a single-family community development project before November 9, 1977. The Fund's single-family regulations under COMAR 05.06.06 govern insurance under this regulation, when not inconsistent with this regulation. Additional Coverage for Bond-Financed Mortgages. The Fund may provide additional coverage with respect to mortgage loans: Which are made by a public agency lender; The principal and interest of which are pledged to the repayment of revenue bonds issued by a public agency; Which are insured to the extent of 100 percent under the multifamily program; and Which are secured by a multifamily rental project. The purpose of the additional coverage is to prevent imminent or prospective default on bonds, issued by a public agency, following a default on an insured mortgage which could result in a loss of revenues which had been expected to be derived from the insured mortgage loan for payment on the bonds. Eligible insureds are the Community Development Administration, upon the terms set forth here, and other public agencies, for which terms may be adopted by agreement in the future. The additional insurance shall be payable upon a: Default in the insured mortgage; and Certification by an authorized officer of the Administration that: Proceeds of the Fund's claim payment under its standard multifamily coverage shall be used to redeem bonds, After the redemption of the bonds as certified in §B(3)(b)(i) of this regulation, the Administration is unable to file a positive statement of projected net revenues, as defined in Regulation .03 of this chapter, for the current and all subsequent bond years, unless additional bonds are redeemed, due to the loss of revenues from the defaulted loan, The amount of the additional bonds which need to be redeemed to permit the Administration to file a positive statement of projected net revenues and the amount of money required to redeem these additional bonds, including interest on the additional bonds until they can be redeemed and any premium payable on the redemption and any expenses of the redemption, The amount of money then available to the Administration which is not pledged to the repayment of the bonds or to the repayment of any other obligations of the Administration or which, if so pledged, may be withdrawn free of the pledge and expended for any lawful purpose of the Administration, and which is not reasonably required to provide for operating costs, or other obligations and commitments of the Administration, in the current and next subsequent fiscal years. The amount of the additional insurance claim shall be the lesser of the: Excess of the amount certified in §B(3)(b)(iii) of this regulation, over the amount certified in §B(3)(b)(iv) of this regulation, or Sum of: Interest on the mortgage up to the bond redemption date, Any redemption premium payable on any redemption, The expenses of the redemption, and The amount, if any, by which the unpaid aggregate principal amount of the mortgage loan is less than the allocable unamortized principal amount of the bonds issued to finance the mortgage, or the bonds issued to refinance the bonds which financed the mortgage. The premium payable by the Community Development Administration to the Fund is an amount whose present value equivalent is 10 percent of the estimated maximum exposure of the Fund for this additional insurance, determined as of the time the bonds are issued. The premium shall be paid in equal annual installments over the term of the bonds issued to finance the insured mortgages, or the term of the bonds issued to refinance the bonds. The reserves applicable for the additional insurance are the multifamily insurance reserve. Guidelines for underwriting applications for insurance of multifamily loans are those set forth by the Maryland Housing Fund. Application. Applications for insurance shall: Be submitted by lenders on forms acceptable to or prescribed by the Fund; Be accompanied by all supporting documentation specified in the multifamily application checklist and the Fund's operating manual; and Include 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 property. Applications are not required for continuing insurance or re-endorsement for insurance of an existing Fund-insured loan after a refunding of the revenue bonds which provided the source of funds for the loan. Each application for insurance shall have a maximum processing period of 18 months from the date the application and fee are received to the date the commitment is issued. If the application cannot satisfy commitment requirements by the end of the 18-month period, the application expires unless the period is extended in writing at the sole discretion of the Fund. If the application expires and is not extended, a new application is required to be submitted and a new application fee paid before renewed consideration by the Fund. Review. Upon delivery of an application for insurance and all requisite documentation and payment of the required application fee, the Fund shall review the application to determine whether it complies with these regulations and underwriting guidelines, so as to determine the insurance amount, conditions, and terms. Eligibility. The Fund may, in its sole discretion, participate in particular projects and decline to participate in otherwise eligible projects based on its assessment of each project's overall risks and merits and each project's risks and merits relative to competing alternatives. The Fund may issue a written notice of eligibility, but all notices of eligibility shall state that it is within the discretion of the Fund to not participate in an eligible loan, and the notice of eligibility is not in any way a commitment to insure a particular loan. If the Fund determines that a project, a borrower, or a loan is not eligible for insurance, the Fund shall issue a written notice of ineligibility. The Fund shall provide the Housing Finance Review Committee with a report listing all insurance applications rejected during the month preceding each committee meeting. A borrower may request reconsideration of a rejection of an application due to ineligibility, or a rejection at the discretion of the Fund, by making written request for reconsideration to the Secretary within 30 days of the notice of rejection. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.02. Withdrawal of Application. A lender may withdraw an application for mortgage insurance at any time before the initial endorsement of the loan by providing written notice to the Fund. The borrower shall bear any costs incurred by the Fund for items other than internal processing including, without limitation, title examinations, credit reports, and appraisals. Approval. The Fund shall submit all proposed insurance commitments to the Housing Finance Review Committee for review and recommendation to the Secretary, except for those applications for mortgage insurance in an amount below the minimum amount established by the Housing Finance Review Committee, or in the case of an emergency when urgent action is required. Secretarial Determination. Applications for mortgage insurance in an amount below any minimum amount established by the Housing Finance Review Committee need not be submitted for review and recommendation. The Secretary shall consider the recommendation of the Housing Finance Review Committee and approve, disapprove, or approve with modifications the mortgage insurance and its terms. In an emergency when urgent action is required, the Secretary may act on an insurance request without the recommendation of the Housing Finance Review Committee. The Secretary shall execute a written determination that the insurance of the loan for the project is authorized by the Act and approve the insurance as recommended or with modifications before the issuance by the Fund of a commitment to insure a loan. A written Secretarial determination is required for the refinancing of an existing insured loan. Commitment. Upon approval of the insurance and execution of a determination by the Secretary, the Fund shall issue a commitment letter to the lender setting forth the: Terms of the insured loan; Terms and conditions of the insurance by the Fund; and Requirements to be satisfied before the insurance of the loan by the Fund. The commitment may remain valid for a period not to exceed 12 months, unless renewed at the discretion of the Fund. The Fund may renew a commitment one or more times, and each renewal may not exceed 6 months. If the Fund insures a permanent mortgage only, the Fund may issue the commitment at any time during the construction period, and the commitment may remain valid for up to 6 months following the anticipated date for completion of the project unless renewed at the discretion of the Fund. The insurance commitment may not be assigned without the prior written approval of the Fund. The Secretary's determination and an approval letter signed by the Director setting forth any conditions the Fund requires before a continuation of insurance or re-endorsement for insurance by the Fund shall be issued when a Fund-insured loan is refinanced. Effective Date of Insurance. At any time before the end of the commitment period and upon satisfaction of all conditions to the commitment, the Fund shall insure the loan. The insurance is effective as of the time the insured loan is endorsed for insurance, and upon receipt of the required premium by the Fund and certification by the lender that all conditions of the lender's loan commitment have been fulfilled. Notification. In the event of a default on an insured loan, the lender shall notify the Fund in writing within 30 days of the default. For insured lenders other than the Community Development Administration, all notices shall be sent by certified mail addressed to the Director. Preclaim Period—Public Agency Lenders. The provisions of this section apply to all public agency insured lenders. During the first 6 months after an insured loan is in default, the insured lender may not assign the insured loan and its rights under the mortgage to the Fund and make a claim for insurance unless it receives the prior written consent of the Fund. After the insured loan has been in default for 6 months, either the Fund or the insured lender may, without the written consent of the other, require the filing of a claim and the assignment of the insured loan to the Fund. Preclaim Period—Private Lenders. At the sole discretion of the Fund, the provisions of §B of this regulation may apply to private insured lenders. If the provisions of §B of this regulation are not applicable to a private insured lender, then at any time after 30 days after the insured lender has notified the Fund of a default in accordance with §A of this regulation, either the Fund or the insured lender may, without the written consent of the other, require the filing of a claim and the assignment of the insured loan to the Fund. Preclaim Action. Upon default and before assignment of the defaulted insured loan to the Fund: The Fund may require the insured lender to exercise any or all rights under the loan instruments or at law or in equity including, but not limited to: The appointment of a receiver, The assignment of rents and rent subsidies, The exercise of any or all remedies to enforce or collect the indebtedness against the collateral security, or exercising of any rights of offset, The exercise of any or all rights or the filing of any claims under the collateral project documents, including without limitation policies of title or casualty insurance, The enforcement of guarantees, An attempt to obtain a voluntary conveyance by means of a deed in lieu of foreclosure, and Any other actions as to the project, the borrower, and the insured loan as the loan documents permit and as the Fund may direct; The insured lender may not take any actions to foreclose, forbear, suspend payment, modify loan terms, or otherwise exercise any of the lender's rights upon default, without the prior written approval of the Fund; The lender shall: Advise the Fund as to the possibility of loan modification agreements, suspension of payments to escrows or reserve accounts, or other methods of forbearance or restructuring of the insured loans which would be helpful or appropriate, Consult with the Fund at all stages, advise the Fund of any possibility of contested proceedings, provide the Fund with monthly operating and management reports on the project, and notify the Fund in writing of all actions taken or proposed to be taken with regard to the project or the loan, and Propose alternative solutions to cure a default before assigning the insured loan to the Fund; If the lender fails to comply with §D(1) or (2) of this regulation, then in addition to the right of the Fund to terminate the insurance coverage as provided in Regulation .23B of this chapter, the lender shall pay to the Fund all costs incurred by or losses suffered by the Fund which arise directly or indirectly out of the lender's failure. Foreclosure. If the lender's actions under §D of this regulation are unsuccessful and it has not made an assignment of the mortgage to the Fund under §B, C, or F of this regulation, the Fund may direct the lender in writing to proceed with a foreclosure action. The insured lender may not proceed with any foreclosure action without the prior written approval of the Fund. The insured lender shall consult with the Fund at all stages of the foreclosure proceeding, including without limitation any anticipated acquisition of the project by the lender in satisfaction of its debt and the management and final disposition of a project which is acquired by the lender at foreclosure. The lender shall notify the Fund in writing when a foreclosure sale occurs, which notice shall include the identity of the party that acquires title to the property through foreclosure and the purchase price of the foreclosed project. Assignment of Mortgage to the Fund. If the lender assigns the insured loan to the Fund, it shall assign all documents evidencing or securing the insured loan. The assignment of the mortgage shall be in writing in a form suitable for recordation among the land records of the jurisdiction in which the project is located. The assignment shall include: An assignment to the Fund of all claims of the lender against the borrower; An assignment of all collateral agreements affecting the financing, construction, use, or operation of the project, including without limitation any leases, rents, federal, State, or local contracts for rent or operating subsidies, letters of credit, bonds, warranties, guarantees, and escrow accounts; and All policies of title or other insurance or surety bonds or other guarantees and all claims under them. Preclaim Payments. The provisions of this section apply to all public agency insured lenders, and to private insured lenders only at the sole discretion of the Fund. After receipt of notice of default, the Fund, upon request of an insured lender, shall make the periodic payments to the lender that are due under the terms of the insured mortgage, except late charges and mortgage insurance premiums. The periodic payments shall be made for all missed debt service payments beginning with the default for which the Fund is given notice in accordance with Regulation .19A of this chapter. The periodic payments shall continue until the default is cured or the insured loan is foreclosed upon by the lender or assigned to the Fund. If the default is cured, the amount of periodic payments made shall be reimbursed by the lender to the Fund. If the insured loan is foreclosed upon by the lender, the amount of periodic payments shall be excluded from the loss computed to the lender. If the loan is assigned to the Fund, the amount of periodic payments shall be included in the claim paid by the Fund in accordance with Regulation .21C(4) of this chapter. If the Fund makes periodic payments under this section, then it shall be considered to obtain from the lender the right to recover from the property or the borrower, as may be permitted under the loan documents, the total of all periodic payments plus that amount which equals the mortgage insurance premiums not paid to the Fund by the lender on behalf of the borrower. This right of recovery of payments is additional to and cumulative with all other rights arising from an assignment of an insured mortgage to the Fund. Periodic payments made to the lender by the Fund may not be considered a remedy of the borrower's default under the terms of the insured loan or any collateral agreements. Insurance Coverage. Inclusions. The Fund insures only monetary losses, as computed in accordance with Regulation .21C or D of this chapter. Exclusions. The Fund does not insure property losses, including without limitation title risk, the risk of loss from defective construction, casualty risk, or any other reduction in project value due to insurable risk or force majeure. Preclaim Property Loss. If any reduction in value due to casualty, title loss, act of God, or other damage to or destruction of the property occurs before the assignment of a loan to the Fund, the Fund has the option, at its sole discretion, to: Reduce the claim by the amount of the reduction in property value or anticipated loss and permit the lender to enforce its rights under any applicable insurance policies or at law or in equity; or Require the lender to assign to the Fund its rights, whether under insurance policies or at law or in equity, to be compensated for the loss, without reduction in the claim by reason of the reduced property value or anticipated loss. Claims Payment—General. The Fund shall pay the claims of the lender with interest at the interest rate of the loan from the date the claim is submitted until the date the claim is paid. Claims shall be paid in cash under §C of this regulation or by delivery of a promissory claim note in accordance with §D of this regulation. Claims Payment Without Assignment to the Fund. If the project is foreclosed upon by the insured lender, the amount of the claim to be paid by the Fund shall be calculated after the project is sold at foreclosure sale, as follows: If, at the foreclosure sale, the property is sold to a third party purchaser, the Fund shall pay to the insured lender the net loss after crediting gross proceeds of the sale; If the insured lender takes title to the property at the foreclosure sale, the Fund shall continue to direct the insured lender in its disposition of the property, and, in calculating the loss, the Fund may elect either to: Take title to the property and pay the full loss to the insured lender, or After sale or disposition of the property by the insured lender, pay the net loss after crediting gross proceeds of the disposition. For projects which have less than 100 percent coverage, the Fund may elect at any time to pay its declared percentage of the loss and waive any interest in the property. For any project, the Fund may elect at any time to take an assignment of the insured loan and pay the full claim. Claims Payment After Assignment—By Cash. If a claim is paid after an assignment of the insured loan to the Fund, then the claim shall be paid either in cash or by a claim note. If a claim is paid in cash, the amount of payment is calculated as follows: The lesser of: The unamortized principal balance of the insured loan at the time of default, or The unamortized principal balance of the insured loan on the date of the notice from the insured lender to the Fund; plus Interest at the mortgage rate on the unamortized principal balance of the insured loan from the date of: Default, through the date of claims settlement if notice was timely given under Regulation .19A of this chapter, or The notice under Regulation .19A of this chapter through the date of claim settlement, if notice was not timely given under Regulation .19A of this chapter; plus Expenses paid by the insured lender during the period of default in connection with preserving the project, including: Property taxes, Property and liability insurance premiums, Other customary and reasonable expenses of operating the project paid by the lender with the prior written approval of the Fund; plus Any periodic payments which the lender would have been entitled to under Regulation .20A of this chapter but for which no request was made; less All amounts received by the lender after default, or retained for the account of the borrower and not applied in reduction of the principal balance or interest due on the insured loan from: Any source, for the account of the borrower, and Rents or other income, after deducting actual and reasonable expenses for operating the property; less The amount of any expired or lapsed letters of credit, bonds, or collateralized guarantees in effect and held by the lender for the benefit of the project as of the date of the default but before an assignment to the Fund, that were intended or required by the terms of the loan documents to remain in effect but that are allowed to expire by the lender without prior written approval of the Fund. Claims Payment After Assignment—by Promissory Claim Note. The provisions of this section apply to all public agency insured lenders, but apply to private insured lenders only at the sole discretion of the Fund. A claim may be paid by delivery of a promissory claim note if all of the following conditions are satisfied: The lender consents; The Fund makes a cash payment to the lender equal to all delinquent principal and interest due on the loan through the date of claim settlement, plus or minus the amounts set forth in §C of this regulation; and The principal amount of the claim note, when aggregated with the outstanding principal amounts of all other claim notes issued by the Fund, does not exceed 25 percent of the multifamily insurance reserve. If payment by claim note is permitted under §D(2) of this regulation: The principal amount of the claim note may not be more than the principal balance of the insured loan which would have been outstanding at the date of the claim settlement, had all payments of principal and interest been timely made; The claim note shall require principal and interest payments equal to those required by the insured loan payable at the times payments were to have been made under the insured loan; The fund shall restrict an amount equal to the principal amount of the claim note in one or more of the unallocated reserve, the multifamily insurance reserve, or the cash operating account; The Fund's obligation to repay the claim note shall be backed generally by the multifamily insurance reserve and the unrestricted portion of the unallocated reserve; and Funds restricted in the multifamily insurance reserve under this section are not considered part of the multifamily insurance reserve for purposes of computing the leverage ratio under the amended and restated multifamily insurance agreement. A note issued in payment of a claim shall mature and be paid upon the first to occur of the following: Sale of the project financed by the loan; Maturity of the loan; 7 years from the date of issuance of the claim note; or The date on which the unrestricted amount of the multifamily insurance reserve is less than 75 percent of the unrestricted amount of the multifamily insurance reserve at the time the claim note was issued. The Fund may accept and make payment on a partial claim if all of the following conditions are satisfied: The lender requests approval to file a partial claim; At the time the claim is paid the: Partial claim payment is applied by the lender to reduce the unamortized principal balance of the insured loan, or Fund receives collateral of the type described in Regulation .09B of this chapter in an amount equal to the partial claim payment; The loan balance remaining on the insured loan after application of the partial claim payment can be amortized over its remaining term of years on terms that are feasible and the loan will otherwise conform to the initial insurance requirements of these regulations; Payment of the partial claim will cure the default and the lender will withdraw the notice of default issued; and The borrower shall give a promissory note to the Fund, secured by a subordinate lien on the project for the full amount of the partial claim payment, that provides for repayment to the Fund over the remaining term of the insured loan or from a sale or refinancing of the project, at an interest rate not less than the rate on the insured loan or on terms otherwise acceptable to the Fund. Instead of the Fund making payment for the amount of the partial claim, the lender may make an additional loan to the borrower to bring the original insured loan current and accept a note from the borrower, which the Fund may insure, if: The additional loan is secured equably with the original insured loan; The maximum insurable loan amount permitted under Regulation .09 of this chapter is not exceeded; and All other requirements of these regulations are satisfied. Maryland Housing Fund insurance coverage shall be terminated if: The lender requests cancellation; A claim is satisfied by the Fund; or The loan is paid in full. At the Fund's sole option, Maryland Housing Fund insurance coverage may be terminated if: A renewal mortgage insurance premium is not paid by the lender after its receipt of final demand for same from the Fund; Mortgage or loan terms are modified without prior written approval of the Fund; The insured lender permits noncompliance with the loan documents without the prior written consent of the Fund; The mortgage is assigned by the lender without prior written approval of the Fund; Without prior written approval of the Fund, the project's borrower, lender, general contractor, or management agent, as approved by the Fund at the time of loan closing, is substituted with the knowledge or consent of the lender; The property is transferred, conveyed, or encumbered in violation of the provisions of these regulations; The lender fails to fulfill its obligations under Regulation .19D of this chapter after demand to do so has been made by the Fund; The lender fails to fulfill its obligations under the loan documents, the underwriting guidelines, or these regulations, including, without limitation, its obligation to provide periodic project information to the Fund, after demand to do so has been made by the Fund; or The lender is debarred from participating in the Department's programs under COMAR 05.01.05. Lender Assignments. Insured loans may not be assigned to another lender without prior written notice to and approval of the Fund. A request for assignment of an insured loan shall be accompanied by submission of an application fee and supporting documentation as may be required by the Fund. Servicing of insured loans may not be transferred by the insured lender to another servicer without prior written notice to and approval of the Fund. Changes in Identity of Borrower, General Contractor, or Management Agent. The identity of the borrower or, if a partnership, the managing project's general partner, the identity of the general contractor, and the identity of the management agent may not be changed or substituted after the initial endorsement of an insured loan without prior written notice to and approval of the Fund. Incontestability. Evidence of insurance issued by the Fund under the Act is conclusive evidence of the eligibility of the insured loan for insurance. This insurance is incontestable except as to defenses based on fraud or misrepresentation. Books and Accounts. The lender shall require the borrower and its contractors, subcontractors, representatives, accountants, record keepers, and management agents to maintain such books, accounts, and records as the Fund may require. The borrower shall file with the lender such financial, operating, and other reports as the Fund may require. The books, accounts, and records required to be maintained are open to the inspection of representatives of the Fund or other agencies of the State during reasonable working hours. Books, accounts, and records of: The lender shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the lender and the Fund; The lender shall, with respect to each specific insured loan, be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the lender; and Contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between the contractor or subcontractor and the borrower. Specific information regarding the qualification of lenders, borrowers, and projects, the underwriting of insurance, and claims procedures is provided by the Fund. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or with agreements to which the Fund may be subject if: Conformance to the requirements of any federal agency for any project with respect to which federal assistance is sought necessitates a 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 purposes of the Act, A waiver would not be materially adverse to bondholders or others relying on the multifamily insurance reserve of the Fund, and The Office of the Attorney General has approved the form and legal sufficiency of the waiver. False Statements. A borrower or lender who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to cancellation of insurance, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Fund or to any other official or employee of the Department or the Fund the authority to execute or approve any program documents or loan documents, including commitments and letters of intent. Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland Effective date: November 15, 1972 Regulations .07A, .09A, B, and .17A amended as an emergency provision effective January 20, 1977 (4:4 Md. R. 276); emergency status expired June 14, 1977 Regulation .07A, B amended effective June 25, 1977 (4:13 Md. R. 1027) Regulation .07D amended effective August 4, 1976 (3:16 Md. R. 848) Regulation .07F amended effective October 27, 1976 (3:3 Md. R. 1249) Regulation .07 amended effective October 29, 1975 (2:27 Md. R. 1626) Regulation .09 amended effective June 25, 1977 (4:13 Md. R. 1027) Regulation .09A amended effective April 13, 1977 (4:8 Md. R. 632) Regulations .10—.20 amended effective August 20, 1975 (2:18 Md. R. 123) Regulations .10 and .16 amended effective October 29, 1975 (2:27 Md. R. 16) Regulations .10, .11C, .14—.16 amended effective August 30, 1974 (1:1 Md. R. 13) Regulation .17 amended effective January 31, 1976 (3:4 Md. R. 214) and June 25, 1977 (4:13 Md. R. 1027) Chapter revised as an emergency provision effective November 9, 1977 (4:22 Md. R. 1666); adopted permanently effective November 18, 1977 (4:24 Md. R. 1804) Regulation .01C amended effective December 5, 1983 (10:24 Md. R. 2184) Regulation .03E amended effective June 29, 1979 (6:13 Md. R. 1124) Regulations .06A, .07A, and .09A amended effective October 20, 1978 (5:21 Md. R. 1585) Regulations .06B, .09C, .10 adopted effective March 24, 1978 (5:6 Md. R. 464) Regulation .06C adopted effective October 20, 1978 (5:21 Md. R. 1585) Regulation .09A amended effective June 29, 1979 (6:13 Md. R. 1124); September 5, 1980 (7:18 Md. R. 1735) Regulation .10 amended effective June 29, 1979 (6:13 Md. R. 1124) Regulations .11K and .15N adopted as an emergency provision effective October 15, 1983 (10:22 Md. R. 1962); adopted permanently effective March 26, 1984 (11:6 Md. R. 548) Regulation .15B amended effective September 5, 1980 (7:18 Md. R. 1735) Regulation .15B amended as an emergency provision effective April 25, 1983 (10:15 Md. R. 1341); emergency status expired October 25, 1983 Regulation .17C repealed effective October 8, 1984 (11:20 Md. R. 1741) Regulation .18 adopted as an emergency provision effective March 22, 1979 (6:7 Md. R. 574); emergency status expired October 3, 1979 Regulation .18 adopted effective June 29, 1979 (6:13 Md. R. 1124) Regulation .18C adopted effective December 12, 1980 (7:25 Md. R. 2332) Regulation .18D adopted as an emergency provision effective April 25, 1983 (10:15 Md. R. 1341); emergency status expired October 25, 1983; adopted permanently effective November 7, 1983 (10:22 Md. R. 1965) Regulation .19 adopted as an emergency provision effective June 1, 1983 (10:12 Md. R. 1063); emergency status extended at 10:25 Md. R. 2262; adopted permanently effective December 5, 1983 (10:24 Md. R. 2184) Chapter recodified from COMAR 05.01.02 to COMAR 05.06.01 Regulation .01C amended effective March 4, 1991 (18:4 Md. R. 446) Regulation .02 amended effective November 14, 1988 (15:23 Md. R. 2657) Regulations .02, .07, and .18 amended as an emergency provision effective April 30, 1991 (18:10 Md. R. 1114) Regulation .02B amended effective September 16, 1991 (18:18 Md. R. 2003) Regulations .03—.08 repealed effective May 23, 1994 (21:10 Md. R. 841) Regulation .06 amended effective January 8, 1990 (16:26 Md. R. 2786) Regulation .06D amended effective March 4, 1991 (18:4 Md. R. 446) Regulation .07 amended effective September 16, 1991 (18:18 Md. R. 2003) Regulation .09 repealed and new Regulation .09 adopted effective March 4, 1991 (18:4 Md. R. 446) Regulation .10A amended effective March 4, 1991 (18:4 Md. R. 446) Regulation .11C amended effective November 14, 1988 (15:23 Md. R. 2657) Regulation .11L adopted effective November 14, 1988 (15:23 Md. R. 2657) Regulation .15B and E amended effective November 14, 1988 (15:23 Md. R. 2657) Regulation .16A amended effective April 30, 1990 (17:8 Md. R. 975) Regulation .16F amended and G adopted effective October 28, 1991 (18:21 Md. R. 2304) Regulation .16G amended effective June 22, 1992 (19:12 Md. R. 1132) Regulation .18A amended as an emergency provision effective June 28, 1989 (16:14 Md. R. 1562); adopted permanently effective October 30, 1989 (16:21 Md. R. 2260) Regulation .18 repealed and new Regulation .18 adopted effective September 16, 1991 (18:18 Md. R. 2003) Regulation .18 repealed effective May 23, 1994 (21:10 Md. R. 841) Chapter, Maryland Housing Fund, repealed and Regulations .01—.24, Maryland Housing Fund—Multifamily Program, adopted effective December 5, 1994 (21:24 Md. R. 1987) Regulation .02B amended effective September 29, 2014 (41:19 Md. R. 1076) Regulation .04A amended effective November 3, 2008 (35:22 Md. R. 1956) Regulation .04A, C amended effective March 26, 2018 (45:6 Md. R. 317) Regulation .05 amended effective April 5, 1999 (26:7 Md. R. 539) Regulation .10C amended effective April 19, 2010 (37:8 Md. R. 614) The Fund may provide limited insurance for bridge loans that provide interim financing until equity capital contributions are made by investors when the Fund expects a rental housing project to qualify for federal tax credits. The Fund may insure these bridge loans under this chapter instead of COMAR 05.06.01, except as provided in Regulation .14 of this chapter. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland. “Borrower” means the original borrower under a loan and the borrower's successors and assigns by operation of law or as approved by the Fund. “Bridge loan” means a loan to provide interim financing until equity capital contributions are made by investors in a project that qualifies for federal low income housing tax credits. “Construction risk” means the risk that a borrower will be unable to complete construction or rehabilitation of a project in the time anticipated at closing of the bridge loan. “Default” means the failure of the borrower to: Make required payments under the loan when due; or Perform any other obligation under the loan after the notice, lapse of time, and opportunity to correct, if any, which may be provided in the loan. “Fund (MHF)” means the Maryland Housing Fund, an agency within the Division of Credit Assurance, and, when appropriate, its authorized officers or personnel. “Initial rent-up” means that period before the number of units required to qualify for low-income housing credits is rented. “Insurance Agreement” means the Amended and Restated Multi-Family Insurance Agreement governing insurance of multi-family rental housing developments by the Fund dated August 30, 1988, as amended and restated on February 16, 2006, by and between the Fund and the Community Development Administration. “Investor” means an individual or an entity that makes an equity capital contribution to the borrower in exchange for a limited partnership or nonmanaging member interest in the borrower. Mortgage. “Mortgage” means a written instrument evidencing or creating a lien against real property for the purpose of providing collateral to secure the repayment of a debt. “Mortgage” includes a deed of trust. “Mortgagee” means the original lender under a loan and its successors and assigns. “Multi-family reserve” shall have the meaning ascribed to that term in the Insurance Agreement. “Operating fund” means the net amount of money or securities on deposit to the credit of the Fund with the State Treasurer and not allocated to any of the Fund's reserve funds. “Project” means a development of one or more structures containing residential units and which may include ancillary commercial, service, and social facilities, and the real property upon which the development is situated. “Secretary” means the Secretary of Housing and Community Development. The Fund may insure bridge loans to the extent of defaults on the bridge loan, including failure to make payments on the bridge loan, by the borrower which arise when an investor fails to make the capital contributions required to make timely payments on the bridge loan by reason of: A direct reduction or elimination of tax credits due to a change in the provision of the Internal Revenue Code authorizing the credit, issuance of regulations under that provision, or a ruling interpreting that provision. A reduction in the amount of the tax credit shall only be insured to the extent of the reduction. The borrower's failure to qualify for low-income housing credits because it failed, for reasons other than failure to complete construction in the time anticipated at loan closing, to rent a sufficient number of units in the project to qualified tenants with low incomes. The borrower's failure to complete construction or rehabilitation of a project in the time anticipated at closing of the bridge loan. Under most circumstances the Fund will require the bridge loan lender to retain the construction risk, but may insure some construction risk under the following circumstances: The Fund may insure construction risk in an amount not to exceed 75 percent of the insured amount of the bridge loan if the insured amount of the bridge loan, when added to the amount of any superior liens on the project, equals or exceeds: 85 percent of the project's appraised value as of completion of the improvements, taking into consideration the value of the tax credits for a for-profit borrower; or 90 percent of the project's appraised value as of completion of the improvements, taking into consideration the value of the tax credits for a borrower which is either wholly owned by a nonprofit entity or whose general partner is a nonprofit entity; or The Fund may insure construction risk in an amount up to the insured amount of the bridge loan if the insured amount of the bridge loan, when added to the amount of any superior liens on the project, is less than: 85 percent of the project's appraised value as of completion of the improvements, taking into consideration the value of the tax credits for a for-profit borrower; or 90 percent of the project's appraised value as of completion of the improvements, taking into consideration the value of the tax credits for a borrower which is either wholly owned by a nonprofit entity or whose general partner is a nonprofit entity. The inability of the borrower to claim an historic investment tax credit if: Upon completion of construction, the United States Department of the Interior notifies the borrower that it will not certify the project for historic tax credit purposes; and The borrower has secured: Preliminary approval of Parts I and II of the Certificate of Rehabilitation by the National Park Service before beginning construction, and Approval by the National Park Service of all change orders which the Fund determines will affect historic elements of the building. The Fund may not insure a general failure to pay by the investor (for example, insolvency or bankruptcy of the investor limited partner). Except as provided in §B of this regulation, the insured amount of the bridge loan, when added to the amount of any superior liens on the project, may not exceed 95 percent of the project's appraised value as of completion of the improvements, taking into consideration the value of the tax credits. The insured amount of the bridge loan may exceed the limit set forth in §A of this regulation if 100 percent of the tax credit units in the project are subsidized as to rental payments by the United States Department of Housing and Urban Development for the term of the bridge loan. The insured amount of the bridge loan may not exceed the amount of the investor's capital contributions. The Fund may insure bridge loans only if the loan proceeds are used for acquisition, construction, or rehabilitation and directly related soft costs, including developer fees, syndication fees, and an amount to cover a reasonable profit for the developer, required to complete the project. If the bridge loan is made from the proceeds of tax-exempt bonds, or other obligations on which the interest is excluded from gross income for federal income tax purposes, the bridge loan may only be used for costs approved by the Department's bond counsel. The Fund may insure a bridge loan having a term longer than the term of the Fund's insurance, but the insurance shall expire on the first to occur of the date which is: One month after the date on which the investor makes the final payment of all scheduled capital contributions to the borrower; or Five years after closing of the bridge loan. Insurance of the bridge loan shall terminate on the first to occur of: A change in the terms and conditions of the bridge loan without the prior written approval of the Fund; Five business days following the date on which the investor has made the final payment of all scheduled capital contributions to the borrower; Thirty business days after the maturity date of the bridge loan, unless extended with the prior written approval of the Fund; Repayment in full of the bridge loan; Payment in full of any claim; or Expiration of the term of the insurance. Bridge loans shall be secured by: A pledge of the investor's note or notes or other instruments evidencing the investor's obligations to make capital contributions; and One or more of the following: A mortgage on the project, which may be subordinate to mortgages securing new or existing debt on the project; A guaranty of payment equal to the insured amount of the bridge loan, backed by assets of quality and liquidity satisfactory to the Fund; A guaranty of completion of the project; or Such other collateral as the Fund deems appropriate related to the risk of the bridge loan and the project and other factors it deems relevant. The holder of any superior mortgage on the project shall agree that: The Fund shall have an opportunity to cure any monetary defaults under the superior mortgage; Any defaults that the Fund is unable to cure shall be suspended for a reasonable period, if the Fund elects to keep current any payments due under the superior mortgage; and The superior mortgagee shall notify the Fund of any events of default under the superior mortgage. Completion of construction of the project shall be assured by provision of either: Performance and payment bonds, each in an amount equal to 100 percent of the construction contract amount; Two irrevocable letters of credit equal to 25 percent, or cash or a pledge of depository accounts equal to 50 percent, of the construction contract amount; or Other assurances of equivalent value. Before closing of the bridge loan, the Fund shall review and give its written approval to the completed drawings and specifications for the project, and all loans relating to the project, whether junior or senior to the insured bridge loan. The Fund shall review financial statements and resumes for the general partners, the general contractor, and the management agent for the project. The financial statements shall show adequate liquidity to complete the project for the general partners and a consistent or increasing net worth for the contractor. The general contractor and the management agent shall have successfully constructed or managed, respectively, at least one comparable project and the general contractor shall have a record of timely completion of projects. The Fund shall approve the total budget for the project and each disbursement of the bridge loan. After closing of the bridge loan, the Fund shall review and give its written approval to any changes to the plans and specifications, any modifications to the bridge loan documents or documents relating to any superior loans, any change orders, and all requisitions for disbursement of the bridge loan. The Fund requires that either the holder of the first mortgage or the Fund be able to require replacement of the management agent, if either the first mortgagee or the Fund in conjunction with the first mortgagee determines that rent-up or other operation of the project is not progressing satisfactorily. The Fund may not permit more than 10 percent of its multi-family reserve to be committed for insurance of bridge loans under this regulation. Subject to §C of this regulation, the Fund may insure bridge loans from the multi-family reserve or any other monies of the Fund as may be restricted for that purpose. However, the Fund may not: Issue insurance under this section payable from the multi-family reserve in an aggregate principal amount greater than 8 times the amount of the multi-family reserve available for insurance of bridge loans; and Insure from any source more than an aggregate of $30 million of bridge loans that are not secured by a mortgage. The Fund shall insure a bridge loan during construction and initial rent-up from restricted funds in the operating fund and may, at its election, insure the bridge loan from the multifamily reserve upon completion of construction and initial rent-up. The Fund may charge an application fee, closing fee, and insurance premium. The amount of the premium shall be determined on the basis of each insured loan relative to the degree of risk, as determined by the Fund in its sole discretion. The amount of the fees shall be determined by the Fund in its sole discretion. The requirements of COMAR 05.06.01.06, 07, .10, .11, .18—.21, .23, and .24 shall also apply to bridge loans insured under this chapter. Housing and Community Development Article, §§3-203 and 3-206, Annotated Code of Maryland Effective date: April 30, 1990 (17:8 Md. R. 976) Regulation .03A amended effective February 1, 1993 (20:2 Md. R. 111) Chapter revised effective October 20, 2008 (35:21 Md. R. 1823) These regulations set forth the policies, procedures, and authorization for: Insurance by the Maryland Housing Fund (M.H.F.) of 100 percent or less of a mortgage loan for the purchase, or purchase and rehabilitation, of an owner-occupied home with four or less units; and Agreements with mortgage lenders to share financial risk and insurance fees in connection with certain loans insured by M.H.F. The insurance reserve fund for this Program is the reserve fund established in COMAR 05.06.01.01C(2) for the Revitalization Program. The ratio of the total outstanding amount of insurance provided through the Revitalization Program, to the total amount of the Revitalization Program Reserve Fund, may not exceed the ratio of 10:1. The Revitalization Program was formerly known as the Pilot Program which was governed by COMAR 05.06.01.09. The Maryland Housing Fund recognizes the important role homeownership plays in stabilizing and revitalizing neighborhoods and communities. The purpose of the Revitalization Program is to provide opportunities to lower the risk of lending by using M.H.F. insurance to stimulate the flow of private mortgage capital into areas which have suffered from decreasing homeownership and associated economic and social instability. In addition, the program makes homeownership possible for those who do not have the resources for a down payment and closing costs, both of which otherwise would be required without M.H.F. insurance. From 1973 to 1978, the predecessor to the Program operated in Baltimore City only, and was called the Baltimore City Pilot Program. The Program demonstrated that the level of losses can be acceptable for high loan-to-value mortgages in older urban areas, and together with other factors contributed to the decrease of red-lining practices and the resurgence of private conventional mortgage lending in Baltimore City. The experience in Baltimore City also demonstrated the feasibility of extending the Program Statewide. Starting in 1978, the Program has been available Statewide. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland, as amended. “Closing costs (financing)” means the credit report fee, survey fee, title examination, loan origination fee, title insurance fee, mortgage application fee, and the cost of the home inspection required in Regulation .04F of this chapter. “Closing costs (title)” means 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. “Designated revitalization area” means an area within the State designated by the Secretary as a revitalization area, taking into account the operation in that area of a nonprofit housing agency or a nonprofit financial or housing counseling agency. “M.H.F.” means the Maryland Housing Fund, and, when appropriate, its authorized officers or personnel. Mortgage. “Mortgage” means a written instrument evidencing or creating a lien against real property to provide collateral to secure the repayment of a debt. “Mortgage” includes a deed of trust. “Mortgagee” means the original lender under a mortgage and its successors and assigns. “Mortgagor” means the original borrower under a mortgage and the borrower's successors and assigns by operation of law or as approved by the Fund. Nonprofit Entity. “Nonprofit entity” means any organization exempt from taxation under the Internal Revenue Code of the United States, §501(c). “Nonprofit entity” includes local development agencies and local development corporations, as defined in Housing and Community Development Article, §4-201, Annotated Code of Maryland, and organizations exempt by reason of charitable or public purpose. “Nonprofit entity” does not include limited dividend corporations or partnerships. “Prepaid expenses” means taxes, ground rent, hazard insurance, and M.H.F. premiums to be paid at closing. “Property” means an owner-occupied, one- to four-family residential property which meets the applicable standards set forth in Regulation .04B of this chapter. “Secretary” means the Secretary of Housing and Community Development or the Secretary's designee. Insurance Coverage. M.H.F. may insure: Up to 100 percent of a mortgage loan that finances the purchase, or the purchase and rehabilitation, of an eligible property, provided that all of the requirements of these regulations are met; A mortgage loan on a cooperative unit in accordance with COMAR 05.06.01.10. Eligible Borrowers and Eligible Properties. The applicable standards for eligible borrowers of mortgage loans insured by M.H.F. are set forth in COMAR 05.06.06.06. The applicable standards for eligible properties securing mortgage loans insured by M.H.F. are set forth in COMAR 05.06.06.05, except that COMAR 05.06.06.05D does not apply to an insured loan that finances both the purchase and rehabilitation of the property. An eligible property shall be located in a designated revitalization area as defined in Regulation .03B(5) of this chapter. Eligible Uses of the Insured Mortgage Loan. The insured mortgage loan may be used to pay for the following costs and expenses: Purchase price of the property; Closing costs (financing); Closing costs (title); Prepaid expenses; and Rehabilitation costs permitted in §C(2), below. If the mortgage loan is for the rehabilitation as well as the purchase of an eligible property, then the mortgage loan also may be used for the following rehabilitation costs if the conditions set forth in §C(3) of this regulation are fulfilled: 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 performed in accordance with Regulation .05E, below; and Other reasonable rehabilitation costs, including the cost of cosmetic repairs, which are approved by M.H.F. In order for a mortgage loan for rehabilitation as well as purchase costs to be eligible for insurance, a nonprofit housing agency or nonprofit financial or housing counseling agency active in the applicable designated revitalization area shall certify that: The acquisition and rehabilitation of the property will stabilize or improve the neighborhood; Other resources are currently being targeted to the neighborhood; and The acquisition and rehabilitation of the property represents a significant public purpose action. Agreement with Mortgage Lender Required. A loan insured under this chapter shall be made by: A mortgage lender under an agreement with M.H.F described in Regulation .08 of this chapter; or The Department. Equity Capital. A borrower whose mortgage is to be insured by M.H.F. under the Revitalization Program shall meet M.H.F.'s requirement for equity capital in the mortgage loan transaction as set forth in §E(2)—(6) of this regulation. The borrower is required to pay in cash at least 2 percent of the first mortgage loan amount. Equity capital may be applied to one, a combination, or all of the following items: Purchase price of the property; Closing costs (financing); Closing costs (title); or Prepaid expenses. Equity capital may include gifts, except for those from: The realtor for the transaction; The seller of the property; or Any other party having an interest in the contract. Equity capital may not include loans, except for a loan secured by a 401(k) or other retirement account that is subject to a penalty for early withdrawal under the federal tax code. Once the equity capital amount has been satisfied in accordance with §E(2)—(5) of this regulation, the balance of funds necessary for settlement of the loan may include gifts, including seller concessions. Purchase Contract Inspection Contingency. M.H.F. 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. A copy of the inspection shall be supplied to M.H.F. by a lender with the application required in COMAR 05.06.06.09A. Appraisals. There shall be an appraisal of the property securing the loan to be insured by M.H.F. The appraisal shall: Establish an “as is” value for the property; and Be performed by an appraiser acceptable to M.H.F. In addition to the general terms and provisions required under Regulation .04 of this chapter, the terms and provisions in §§B—E of this regulation apply to M.H.F. insured mortgage loans that finance both the purchase and the rehabilitation of the property. Standards for Rehabilitation Work. The rehabilitated property shall satisfy the: State and local planning, zoning, and building codes, and other applicable laws; and Standards established by M.H.F. Unless an alternative process is approved by M.H.F., all rehabilitation work shall be supervised by a licensed general contractor, a local government agency, or a nonprofit corporation approved by M.H.F. Work Write-Up. The work write-up describing the rehabilitation work shall: Be prepared by the party undertaking or supervising the work; Be approved by M.H.F.; Include only those rehabilitation costs permitted under Regulation .04C(2) of this chapter; and Include both a draw schedule and a plan for implementing the work write-up. Rehabilitation work shall be performed: In accordance with the work write-up; and By State-licensed contractors or other entities approved by M.H.F. Inspections. Rehabilitation work shall be inspected in accordance with all of the requirements described below: Inspectors performing the inspections: Shall be knowledgeable and experienced about rehabilitation or construction work, Shall be acceptable to M.H.F. and the mortgage lender making the insured loan, and May be appraisers; The inspector shall prepare an inspection report for each inspection performed; The inspection report in §E(2), above, shall include: A description of the property, Name of the contractor, Name of the mortgage lender, Date of the inspection, Stage in the draw schedule, Work to be inspected, as described in the work write-up, and Whether the work performed was acceptable and complete; The final inspection report shall state whether all of the work done was: Acceptable and complete, Performed in a workmanlike manner, and In accordance with all applicable planning, zoning, and building codes, or other applicable laws; M.H.F. shall receive a copy of each inspection report. Draws. The mortgage lender may not permit a draw of mortgage money to pay for rehabilitation costs unless the requirements of §E, above, are fulfilled. Appraisal Requirements. When the loan insured by M.H.F. finances both purchase and rehabilitation, the appraisal shall establish the following two values in addition to the “as is” value established under Regulation .04E of this chapter: Predominant Neighborhood Value. The predominant neighborhood value: Is the value determined by an appraiser to best represent property value in the area surrounding the property being purchased and rehabilitated based on recent sales within that area; Is based primarily on sales when 90 percent or more of the purchase price was financed, and the first mortgage was a VA or FHA mortgage or was made by an institutional mortgage lender; and Excludes investor sales with depressed sales prices or sales involving assumptions or creative financing which artificially inflate the sales price. Value After Rehabilitation. The value after rehabilitation is the value estimated by the appraiser to be the value of the property securing the insured loan, once the rehabilitation work is complete. In order to be acceptable to M.H.F., the value after rehabilitation may not exceed 120 percent of the predominant value. Maximum Mortgage—General Limit. The maximum mortgage loan amounts insured by M.H.F. under the Revitalization Program shall be within limits set from time to time by the Secretary. If the mortgage covers either acquisition only, or acquisition and minor cosmetic improvements excluding rehabilitation costs set forth in Regulation .04C(2) of this chapter, then the maximum mortgage may not exceed the maximum loan amount for a single family dwelling unit under the Maryland Mortgage Program (MMP) of the Community Development Administration. If the mortgage covers permitted rehabilitation costs, the maximum mortgage may not exceed the following limits: For a property containing one dwelling unit, the limit is 150 percent of the maximum loan amount for a single family dwelling unit under the Maryland Mortgage Program (MMP) of the Community Development Administration; For a property containing two dwelling units, the limit is 175 percent of the MMP limit for a single family dwelling unit; For a property containing three or four units, limits shall 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 considered 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 the differing area property values; Respond to changes in average sales prices; Support State agency economic or community development initiatives; or Encourage innovative programs of M.H.F. Purchase-Only Mortgage Limit. A mortgage loan insured by M.H.F. which finances only the purchase of the property may not exceed the lesser of either the: Appraised “as is” value or the purchase price of the property, whichever is less, plus the: Sum of the: Closing costs (financing), Closing costs (title), and Prepaid expenses; minus Equity capital described in Regulation .04E of this chapter; or Maximum mortgage limit set forth in §A of this regulation. Purchase/Rehabilitation Mortgages Limit. The amount of the mortgage loan insured by M.H.F. may not exceed the lesser of the following: The sum of: The purchase price, plus Rehabilitation costs permitted in accordance with Regulation .04C(2) of this chapter, plus A contingency cost override of 10 percent of the permitted rehabilitation costs, plus The cost of construction period interest if approved by M.H.F., plus The sum of closing costs (financing), closing costs (title), and prepaid expenses, minus Equity capital required by Regulation .04E of this chapter; The sum of: The value after rehabilitation determined by the appraiser in accordance with Regulation .05G(2) of this chapter, plus Closing costs (financing), plus Closing costs (title), plus Prepaid expenses, minus Equity capital required by Regulation .04E of this chapter; or The maximum mortgage amount set forth in §A of this regulation. Insurance fees for the Revitalization Program are as follows: An initial premium of 2 percent of the initial loan balance; and A renewal premium of: 0.65 percent of the initial loan balance for 9 annual renewals, and 0.325 percent annually from year 10 to maturity. Under conditions set forth in this regulation, M.H.F. may enter into agreements with mortgage lenders who wish to make insured mortgage loans under the Revitalization Program. Each mortgage lender shall: Be an eligible mortgagee approved by M.H.F. under COMAR 05.06.01.04; and Establish the Revitalization Program as a priority as evidenced by the mortgage lender's endorsement of the Program in its Community Reinvestment Act statement. Each agreement: Shall include such terms and conditions as M.H.F. determines are necessary to balance the risk factors which exist in connection with the proposed agreement; Shall be approved by the Secretary; May provide for M.H.F. and the mortgage lender to share up to 1/2 of the insurance fees and a commensurate degree of financial risk of subsequent default in connection with mortgage loans made by the mortgage lender and insured by M.H.F.; and Shall require all borrowers receiving loans insured by M.H.F. to participate in a counseling program, administered by a counseling agency acceptable to M.H.F., which shall provide: Counseling on credit issues as required by M.H.F., At least one pre-purchase meeting and one post-purchase meeting, and Additional meetings as required by M.H.F. The following regulations under COMAR 05.06.06 apply to the Revitalization Program to the extent that their provisions do not conflict with these regulations for the Revitalization Program: COMAR 05.06.06.03, .06—.08, .10, .11, .15, and .16; COMAR 05.06.06.05, except that COMAR 05.06.06.05D does not apply to an insured mortgage that finances both the purchase and rehabilitation of the property securing the mortgage; and COMAR 05.06.06.09, except that COMAR 05.06.06.09C(6) is subject to agreements between the Fund and insurers under the Revitalization Program. Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland Effective date: March 4, 1991 (18:4 Md. R. 446) Regulation .01B amended effective February 28, 1994 (21:4 Md. R. 273) Regulations .02—.05 and .08 amended effective August 3, 1992 (19:15 Md. R. 1388) Regulations .03B and .04 amended effective June 7, 1993 (20:11 Md. R. 912) Regulation .03B amended effective November 7, 1994 (21:22 Md. R. 1873) Regulation .03B amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2025); 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. 2025); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .04C amended effective November 7, 1994 (21:22 Md. R. 1873) Regulations .06 and .07 repealed and new Regulations .06 and .07 adopted effective August 3, 1992 (19:15 Md. R. 1388) Regulation .06A amended effective November 7, 1994 (21:22 Md. R. 1873) Regulation .06B, C amended effective June 7, 1993 (20:11 Md. R. 912) Regulation .06B, C amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2025); amended permanently effective July 1, 1996 (23:13 Md. R. 939) Regulation .09 amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2025); amended permanently effective July 1, 1996 (23:13 Md. R. 939) This chapter sets forth the policies and procedures for insurance by the Maryland Housing Fund of mortgage loans for the refinancing, purchase and rehabilitation, or construction of special housing facility projects. The insurance reserve for this Program is the multifamily reserve fund established in accordance with COMAR 05.06.01. The objective of the Program is to provide insurance of mortgage loans made or purchased by the Community Development Administration to nonprofit organizations for the purpose of financing or refinancing special housing facility projects. This Program is intended to insure loans made or purchased by the Administration under its Special Housing Opportunities Program as contained in COMAR 05.04.11. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department. “Default” means the failure of the sponsor to: Make required payments under the mortgage loan when due including any applicable grace period; or Perform any other obligation under the mortgage loan after the notice, lapse of time, and opportunity to correct, if any, which may be provided in the mortgage. “Department” means the Department of Housing and Community Development, a principal department of State government. “Director” means the Director of the Maryland Housing Fund. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated under it. “Lender” means the Administration. “Maryland Housing Fund” or “the Fund” means the Maryland Housing Fund, an agency within the Division of Credit Assurance of the Department. “Nonprofit organization” means an organization: Whose organizational documents include among its charitable purposes the provision of housing to special needs populations; and Which is currently recognized by the Internal Revenue Service as a tax-exempt organization under §501(c)(3) of the Internal Revenue Code. “Program” means the Maryland Housing Fund mortgage insurance program of loans for special housing facility projects. “Project” means a special housing facility project within the meaning of the Act “Secretary” means the Secretary of Housing and Community Development. “Sponsor” means the borrower under a mortgage loan for a project and includes its successors and assigns by operation of law or as approved by the Maryland Housing Fund. Type of Loans. Loans made or purchased by the Administration under its Special Housing Opportunities Program, the proceeds of which are to be used to refinance, acquire, construct, or rehabilitate a project are eligible for mortgage insurance from the Fund. Interest. Loans shall bear interest at not more than the rate approved by the Fund. The Fund may not insure a loan that provides for an increased interest rate upon default. Payment. A sponsor is required to repay the loan in equal monthly payments of interest and principal in order that the loan is fully amortized over its term, except that if the term exceeds 30 years in accordance with §D of this regulation then, at the direction of the Administration, a sponsor may make initial payments of interest only for up to 18 months after the loan closing. Term. Loans for permanent financing of projects shall contain amortization provisions satisfactory to the Fund for the complete amortization of the loan in monthly installments in 30 years or less, except that if the project is funded initially from a source other than proceeds of revenue bonds, then, at the direction of the Administration, a sponsor may make initial monthly payments of interest only for up to 18 months after the loan closing, followed by monthly principal and interest payments that will fully amortize the loan over a term of 30 years. Loans for construction or rehabilitation financing of projects are eligible for insurance of advances by the Fund. Insurance of construction loans is conditioned upon the existence of a commitment for permanent financing which is acceptable to the Fund. Liens. The loan shall be secured by a mortgage or deed of trust. The mortgage shall be a first lien on: The land and improvements; or A leasehold interest in the land and improvements which extends at least 25 years beyond the term of the loan. The Administration may permit subordinate liens for other loans made by the Department or other lenders. Additional Security. The Fund may require the following additional instruments or guarantees securing an insured loan: For projects involving new construction or substantial rehabilitation: Payment and performance bonds each in an amount equal to 100 percent of the contract price, Cash or an irrevocable letter of credit equal to 50 percent of the contract price; or Other completion assurance as may be acceptable to the Fund; and Such other sureties or guarantees of the loan as may be determined necessary by the Fund. Assumption and Prepayment. Loans insured by the Fund under the Program may not be assumed by another sponsor without the prior written approval of the Fund. Loans may be prepaid only to the extent permitted in the loan documents. For acquisition, construction, or rehabilitation loans, the maximum amount of any loan that may be insured by the Fund under the Program may not exceed the lesser of: 75 percent of the appraised market value of the project; or The total cost of the project. For loans to refinance existing debt, the maximum loan amount that may be insured by the Fund under the Program may not exceed the lesser of: 75 percent of the appraised market value of the project; or The sum of the following: The amount of existing principal debt secured by the property; Improvements to be financed with the proceeds of the loan; Costs associated with closing the loan, including lender prepayment fees and charges; Legal, processing, packaging, title, and other closing fees; Other fees and charges relating to the existing debt to be paid off with proceeds of the loan; and Any other costs approved by the Fund. Environmental Conditions. Compliance with Law. The lender shall require the sponsor to certify that each mortgage loan to be insured by the Fund is in compliance with applicable local, State, and federal environmental laws and regulations. Permits. Before loan closing, the sponsor shall secure any required permits from the Department of Natural Resources and the political subdivision in which the project is located. Screening and Investigation. The lender may be required, at the discretion of the Fund, to require a sponsor to have a screening of the proposed site conducted for environmental conditions, such as man-made hazards, storm water runoff, underground storage tanks, lead-based paint, radon gas, PCBs, asbestos, and other environmental hazards within the meaning of the environmental laws referred to in §A(1) of this regulation. If the initial screening indicates adverse or potentially adverse environmental conditions, the Fund may require a more detailed physical investigation, review of historical records, testing and treatment, or abatement of the environmental condition as a requirement of the mortgage insurance. Registration. For properties built before 1950, the sponsor shall keep the property registered with the Maryland Department of the Environment under Environment Article, Title 6, Subtitle 8, Annotated Code of Maryland. Title Insurance. The sponsor shall provide to the lender a standard American Land Title Association Loan Policy or other form of title insurance policy approved by the Administration and the Office of the Attorney General for an amount equal to the maximum principal amount of the loan, insuring the lender and the Fund that title to the building and the real property on which the building is located on the date of the loan closing is vested in the sponsor and containing only exceptions and encumbrances approved by the lender, the Fund, and the Office of the Attorney General. The Fund, in its discretion, may require the title insurance policy to include ALTA endorsement form 100, comprehensive coverage, and ALTA endorsement form 8.1, environmental coverage, and such other endorsements as may be required by the lender and the Fund. The title insurance policy shall be accompanied by a survey certified in the manner required by the lender, the Fund, and the title company issuing the title insurance, showing that there are no easements or encroachments upon or other matters pertaining to the property except those acceptable to the lender, the Fund, and the Office of the Attorney General. The title insurance policy may not contain any survey exceptions. Property, Liability, and Other Insurance. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; Engineer's errors and omissions; and Flood insurance, if the project is located in a flood hazard zone. All insurance required under §C(1) of this regulation shall meet the following requirements: Be written by a company registered with the Maryland Insurance Administration; Be in force at the time of closing; Not be terminable without prior notification to the Department; and Contain such other terms and coverage satisfactory to the Department. In addition to the requirements of §C(2) of this regulation, owner's liability insurance shall: Name the Department as an additional insured; and Remain in force for the duration of the loan. In addition to the requirements of §C(2) of this regulation, contractor's liability and contractor's builder's risk insurance shall: Name the Department as an additional insured; and Remain in place through final closing or such later date as the Department requires. In addition to the requirements of §C(2) of this regulation, owner's property or hazard insurance shall: Name the Department as an additional insured, loss payee, and mortgagee; and Remain in force for the duration of the loan. A sponsor shall meet all of the following requirements to qualify as an eligible sponsor of an insured mortgage: Be a nonprofit organization; Be in good standing and qualified to do business in Maryland; Own, or upon closing of the loan will own, the property that secures the loan for which mortgage insurance is intended, and continue to own the property as long as the Maryland Housing Fund mortgage insurance is in force; Have all necessary legal and corporate authority to incur the obligations of the loan; Either: Be licensed to operate the project by the appropriate State agency, to the extent required by State law; or Have an agreement acceptable to the Fund, with a manager who: Is acceptable to the Fund, Is licensed in accordance with the requirements of §E(1) of this regulation, and Meets the requirements of §§A, B, F, G, H, and I of this regulation; Either: Have a contract, acceptable to the Fund, with a State agency or county government; or Have an agreement acceptable to the Fund, with a manager who is acceptable to the Fund and has a contract that meets the requirements of §F(1)(a) and (b) of this regulation; Demonstrate: Financial credibility and stability, The capability to undertake the project, and Either the ability: To manage the project as evidenced by at least 2 years of prior management of the project or comparable projects by the sponsor or an entity with an affiliation to the sponsor which is acceptable to the Fund, or Of a manager, acceptable to the Fund, with whom the fund has an agreement acceptable to the Fund, to manage the project as required in §G(3)(a) of this regulation; Not be under an order suspending or debarring the sponsor from participating in the Department's programs under COMAR 05.01.05, or under any similar order from any other State or federal agency; Agree and certify that it will comply with all applicable federal, State, and local laws and Departmental policies and programs regarding discrimination and equal opportunity in employment, housing and credit practices, and drug-free 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, including the Fair Housing Amendments Act of 1988, For projects containing nonresidential uses, the Americans with Disabilities Act of 1990, as amended, Article 49B, Annotated Code of Maryland; The Department's Minority Business Enterprise Program, as amended, and Executive Order 01.01.1989.18 relating to Drug and Alcohol Free Work Places, and any Departmental regulations adopted to carry out more specifically the requirements of the order; and Not have defaulted under a Department or other governmental loan. The lender may apply for mortgage insurance under the Program if the project meets the following minimum requirements: The project is located in Maryland; Title to the project is acceptable to the Fund; The project: Conforms to applicable State and local building, zoning, health, and housing codes, or in cases of proposed construction or rehabilitation, will conform to those codes when completed, and Is in compliance with the requirements of any State agency or local government where the project is located governing special housing facility projects; The project, in the determination of the Fund, has a useful life of a length satisfactory to the Fund; Upon closing of the loan, the project will be owned by the sponsor; The project is, or will be upon closing of the loan, subject to a contract with an agency of State or local government under terms and conditions, acceptable to the Fund; The project is a single family dwelling unit; and The project, if a condominium unit, is part of a condominium regime approved by the Federal Housing Administration, as required by the Fund. The Director, with the approval of the Secretary, shall establish schedules of premiums and fees for insurance of loans under the Program, as required by the Act. Appraisal. The Fund requires an appraisal report acceptable to the Fund, in its sole discretion, prepared by a qualified appraiser, before approval of any loan for mortgage insurance. An appraisal shall show the: Current market value of the property; and Expected value of the property after completion of the proposed improvements, if any. Types of Insurance Coverage. The Fund may insure a construction loan for a period of 12 months and, depending upon the size and complexity of a project, may renew the insurance for one additional 12-month term. The Fund may insure a permanent loan for up to 30 years, except that, if the Administration elects to fund the project initially from a source other than proceeds of tax-exempt bonds, then the term may not exceed 31 years and 6 months. The Fund may not insure construction advances only, without also insuring the permanent mortgage. Processing and Closing Fees. The sponsor shall pay a processing fee in an amount to be determined in accordance with the schedule of premiums and fees established under Regulation .10 of this chapter. The processing fee shall be paid to the Fund at or before closing. The Fund may waive or postpone the payment of the processing fee at its sole discretion. The sponsor shall pay a closing fee at or before the initial endorsement of the loan for insurance, in an amount to be determined in accordance with the schedule of premiums and fees established under Regulation .10 of this chapter. Insurance Premiums. Permanent Financing. The initial and annual renewal premiums for a mortgage loan for permanent financing shall be determined in accordance with the schedule of premiums and fees established under Regulation .10 of this chapter. When a permanent loan is insured by the Fund following Fund insurance of a construction loan, the annual renewal rather than initial premium for the permanent loan shall be charged. Construction or Rehabilitation Financing. The premium for insurance of a mortgage loan for construction or rehabilitation advances shall be determined in accordance with the schedule of premiums and fees established under Regulation .10 of this chapter. For public lenders, construction insurance may be renewed for one period of 6 months. The renewal premium shall be determined in accordance with the schedule of premiums and fees established under Regulation .10 of this chapter. There may not be refunds or credits for completion of construction in less than the initial 12 months or any renewal period. Refund of Mortgage Premium. The premium, or any portion of it, is not refundable except when an insured mortgage is prepaid in full. In those cases, no further premiums are due and a portion of the premium paid for the year shall be refunded in accordance with the short rate cancellation schedule. Effective Date. The mortgage insurance is effective as of the date the loan is closed if the: Fund has received payment of the required premium and fees; and Lender has certified to the Fund that all conditions of the loan and insurance commitments have been fulfilled. Insurance extends only to the amount of funds disbursed under a construction or rehabilitation loan. Incontestability. Any evidence of insurance issued by the Fund under the Act is conclusive evidence of the eligibility of the mortgage loan for insurance, and this insurance is incontestable, except as to defenses based on fraud or misrepresentation. Loan Assignment. Assignment by the lender of a loan insured by the Fund does not impair insurance coverage, if the: New lender is determined to be an eligible lender under the requirements in Regulation .08 of this chapter; and Fund is advised in writing of the: Assignment, Name of the assignor and its address, Name of the assignee and its address, Proposed date of the assignment, and Policy number of loans to be assigned. Loan servicing by the lender may not be transferred without the approval of the Fund. Insurance Termination. Insurance coverage may be terminated, at the sole option of the Fund and without liability to the Fund, if: The lender requests cancellation; A claim is satisfied by the Fund; The mortgage loan is paid in full; A renewal premium is not paid by the lender or sponsor after receipt of a notice from the Fund; The loan terms are modified without the prior written consent of the Fund; There is any change in the identity of the sponsor without the prior written consent of the Fund; The property is transferred, sold, conveyed, or encumbered other than by operation of law, without the prior written approval of the Fund; or The lender assigns the loan in contravention of the requirements under §G of this regulation. Application. Review. The Fund may review each application for a loan for which mortgage insurance is intended to determine whether it complies with this chapter and the insurance guidelines of the Fund. The Fund may delegate to the Administration authority to review one or more applications for insurance. Approval. Except in the case of an emergency when urgent action is required, the Administration, with concurrence of the Fund, shall submit insurance applications to the Housing Finance Review Committee of the Department for review and recommendation to the Secretary. The Secretary shall consider the recommendation of the Housing Finance Review Committee and approve, disapprove, or approve with modifications the mortgage insurance and its terms. Applications for mortgage insurance in an amount below the minimum amount established by the Housing Finance Review Committee need not be submitted to the Committee for review and recommendation. Insurance Determination. The Secretary shall execute a written determination that the mortgage insurance of the loan for the project is authorized by the Act and approved before the issuance by the Fund of a commitment to insure a loan. Commitment. Upon approval of the insurance and execution of a determination by the Secretary, the Fund shall issue a commitment letter setting forth: The amount of the insured loan; The maximum interest rate on the insured loan; The term of the insured loan; and Other terms and conditions that the Fund considers appropriate for the insurance of the loan. Rejection of Applications. If the Fund determines that a project or sponsor is not eligible for insurance, the Fund shall notify the lender. An applicant may request reconsideration of a rejection in accordance with the procedures contained in the Program guidelines. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.02. Withdrawal of Application. The lender may withdraw an application or request for mortgage insurance at any time before closing of the loan by written notice to the Fund. The sponsor shall bear any costs incurred for items other than internal processing, including, but not limited to, title examinations, credit reports, and appraisals. There is no refund of a processing fee if the insured loan fails to close. Notification. In the event of a default on an insured mortgage, the lender shall notify the Fund in writing within 30 days of the default. Preclaim Period. During the first 6 months after the loan is in default, the lender may not assign the mortgage loan and its rights under the mortgage to the Fund and make a claim for insurance unless it receives the prior written consent of the Fund. After the loan has been in default for 6 months, either the Fund or the lender may, without the written consent of the other, require filing of a claim and assignment of the loan to the Fund. Preclaim Actions. Upon default and before assignment of the defaulted mortgage loan to the Fund: The Fund may require the lender to exercise any or all rights under the loan instruments including, but not limited to: The appointment of a receiver; Assignment of rents; Realization of collateral security, or rights of offset; and Enforcements of guarantees; Action of forbearance may not be taken by the lender without the prior written approval of the Fund; The lender shall: Advise the Fund as to the possibility of loan modification agreements, recasting, or other methods of forbearance which would be helpful or appropriate; and Make a reasonable effort to cure a default before: Assigning the loan to the Fund, Beginning foreclosure action, or Accepting a deed instead of foreclosure. Preclaim Payments. After receipt of notice of default, the Fund, upon request of the lender, shall make those periodic payments to the lender that are due under the terms of the insured mortgage, except late charges and mortgage insurance premiums. These periodic payments shall continue: From the later of the: Time of default, or First day of the calendar month the lender notifies the Fund of the default; To the date: The insurance claim settlement is paid, or All monetary events of default have been remedied. The Fund has the right of subrogation with respect to all periodic payments made by it under §D of this regulation, including mortgage insurance premiums not paid to the Fund by the lender on behalf of the sponsor. That right is additional to and cumulative with all rights arising from an assignment of an insured mortgage to the Fund and the rights specified in §C(1) of this regulation. Preclaim payments made to the lender by the Fund may not be considered a remedy of the sponsor's default under the terms of the insured mortgage or any collateral agreements. Assignment. The assignment of the mortgage shall be in writing and in a form suitable for recording among the land records in the county where the project is located. The assignment shall include: An assignment to the Fund of all claims of the lender against the sponsor; An assignment of all State and local government contracts for reimbursement of operating costs; and All policies of title or other insurance or surety bonds or other guarantees and all claims under them. Limits. Coverage by the Fund does not include loss from: Casualty losses; Impaired title losses; or Default due to loss of tax-exempt status of the loan. Expenses incurred for property repair resulting from insurable causes including, but not limited to, negligence, flood, fire, infestation, vandalism, and defective construction are not eligible for claim payment. The repair of any damaged property by the lender is not a condition to payment of the lender's mortgage insurance claim by the Fund. Form of Payment. The Fund shall pay the claims of the lender in cash in accordance with §C of this regulation, or by delivery of a promissory claim note in accordance with §D of this regulation. Cash Payments. If a claim is paid in cash, the payment is calculated as follows: The principal amount of the insured mortgage loan at the time of default; plus Interest at the mortgage rate from the date of assignment or claim through the date of claim settlement; plus Expenses paid by the lender during the period of default in connection with preserving the mortgaged premises, including: Property taxes, Insurance premiums, Other customary expenses; plus Any periodic payments, not including principal payments, which the lender would have been entitled to under Regulation .13D of this chapter, but for which no request was made; minus All amounts: Received by the lender after default from any source on behalf of the sponsor or the project, including all rental receipts or other income, after deducting actual and reasonable expenses for operating the mortgaged property, and Retained for the account of the sponsor from any source including undisbursed loan proceeds. Promissory Claim Note Payments. A claim may be paid by delivery of a promissory claim note if all of the following conditions are satisfied: The insured mortgagee consents; The Fund makes a cash payment to the insured mortgagee equal to all delinquent principal and interest on the loan through the date of claim settlement, plus or minus the amounts set forth in §C of this regulation; and The principal amount of the claim note, when aggregated with the outstanding principal amounts of all other claim notes issued by the Fund, does not exceed 25 percent of the multifamily insurance reserve. If payment by claim note is permitted under §D(1) of this regulation: The principal amount of the claim note may not be more than the insured principal balance of the loan which would have been outstanding at the date of claim settlement had all payments of principal and interest been made timely; The claim note shall require principal and interest payments equal to those required by the loan payable at the times payments were to have been made under the loan; The Fund's obligation to repay the claim note shall be backed generally by the multifamily insurance reserve and the unrestricted unallocated reserve; The Fund shall restrict an amount equal to the principal amount of the claim note in one or more of the following accounts: The cash operating account, The unallocated reserve, or The multifamily insurance reserve; Funds restricted in the unallocated reserve or the cash operating account are not considered part of the multifamily insurance reserve for purposes of computing the leverage ratio under the Amended and Restated Multifamily Insurance Agreement dated August 30, 1988. A note issued in payment of a claim shall mature and be paid upon the first to occur of the following: Sale of the project financed by the loan; Maturity of the loan; 7 years from the date of issuance of the claim note; or The date on which the unrestricted amount of the multifamily insurance reserve is less than 75 percent of the unrestricted amount of the multifamily insurance reserve at the time the claim note was issued. The lender shall require the sponsor and its contractors and subcontractors to maintain such books, accounts, and records, and shall file with the lender such financial and other reports as the Fund from time to time may require. The books, accounts, and records required by §A of this regulation to be maintained shall be open to the inspection of representatives of the Fund or other agencies of the State during reasonable working hours. Books, accounts, and records of the sponsor shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the borrower and the lender. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationships between them and the sponsor. Reinsurance. Mortgage loans insured by the Fund may be reinsured or coinsured by and with public or private mortgage insurers, or through federal guarantees, when available. Portions of risk on any mortgage loan insured by the Fund may be assigned to other eligible mortgage insurers on a participating basis. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or with agreements to which the Fund may be subject if: Conformance to the requirements of any federal agency in connection with any project with respect to which federal assistance is sought necessitates a 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 purposes of the Act, Waiver would not be materially adverse to bondholders or others relying on the same reserves of the Fund, and Office of the Attorney General has approved the form and legal sufficiency of the waiver. False Statements. A sponsor or lender who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to cancellation of insurance, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director or to any other official or employee of the Department or the Fund the authority to execute or approve any program documents or loan documents, including commitments and letters of intent. Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland;Executive Order 01.01.1992.27C Effective date: June 22, 1992 (19:12 Md. R. 1132) Regulation .05C, D amended effective November 7, 1994 (21:22 Md. R. 1874) Regulation .06B amended effective January 2, 1993 (19:26 Md. R. 2283) Regulation .09E—G amended effective November 20, 1995 (22:23 Md. R. 1800) Regulation .10 amended effective January 2, 1994 (20:25 Md. R. 1943); April 5, 1999 (26:7 Md. R. 539) Regulation .10D amended effective June 5, 1995 (22:11 Md. R. 818) Regulation .10H adopted effective November 20, 1995 (22:23 Md. R. 1800) Regulation .12A amended effective January 2, 1994 (20:25 Md. R. 1943) Chapter revised effective March 31, 2003 (30:6 Md. R. 419) Regulation .07C amended effective April 19, 2010 (37:8 Md. R. 614) Effective date: September 27, 1993 (20:19 Md. R. 1471) Chapter repealed effective January 2, 2006 (32:26 Md. R. 1995) These regulations set forth the policies and procedures for issuance of mortgage insurance by the Maryland Housing Fund to insure single family residential property. Single Family Regular Program Reserve. Mortgage loans secured by residential real property may be insured by the Maryland Housing Fund under its Single Family Regular Program Reserve. Insurance for the following three programs is supported by the Single Family Regular Program Reserve: Single Family Lender Insurance—primary mortgage insurance coverage for public and private lenders; Single Family Public Mortgagee Insurance—primary and pool insurance coverage for public agency lenders; and Insurance of first mortgages purchased by public employee retirement systems or pension funds. Lender Primary Mortgage Insurance Program. Under this mortgage insurance program, the Fund may insure for approved public and private lenders the top 35 percent of loss on eligible first mortgages having up to 100 percent loan-to-value ratios plus financing of the initial mortgage insurance premium. Eligibility requirements for this program are set forth in Regulations .05—.09 of this chapter. Premiums and insurance plans for this program are found in Regulation .14 of this chapter. Minimum and maximum mortgage amounts are established by Secretarial determination. Public Lender Primary and Pool Mortgage Insurance Program. Under this mortgage insurance program, the Fund may insure both primary and pool insurance for first mortgages for approved public agency lenders. The aggregate loss limit or stop loss for a mortgage pool insurance policy is set forth in a policy with the public agency lender and is expressed as either a specific dollar amount or specific percentage of the total insured mortgage loan amounts. The Fund's obligation to pay any claim for loss on any mortgage loan in a pool ceases at the point the aggregate loss limit is reached and does not reoccur until the aggregate losses are reduced below the aggregate loss limit. Premiums under a pool policy remain payable with respect to a period of 3 months after the aggregate loss limit is reached and after that are not payable unless aggregate losses are reduced below the limit. Public Employee Retirement System or Pension Fund Program. Under this mortgage insurance program, the Fund may insure first mortgages financed by a public employee retirement system or pension fund. The requirements in Regulations .05—.09 of this chapter govern this insurance program, except as provided in §D(2)—(4) of this regulation. The mortgage program shall assist persons or families whose income standards are determined by the public employees retirement system or pension fund and are acceptable to the Fund and approved by the Secretary. The Fund will insure up to 100 percent of the mortgage loan. Closing costs or prepaid items may not be mortgaged. The Fund is not liable for more than 3 months interest in arrears on any reimbursable claim. Contents. The requirements for the programs insured under the Single Family Reserve are set forth in Regulations .04—.16 of this chapter. Applicability to Other Fund Regulations Under COMAR. The following regulations under this chapter apply to the Revitalization Program to the extent that their provisions do not conflict with the regulations for the Revitalization Program: Regulations .03, .06—.08, .10, .11, .15, and .16 of this chapter; Regulation .05 of this chapter, except that Regulation .05D of this chapter does not apply to an insured mortgage that finances both the purchase and rehabilitation of the property securing the mortgage; and Regulation .09 of this chapter, except that Regulation .09C(6) of this chapter is subject to agreements between the Fund and insurers under the Revitalization Program. In this chapter, terms appearing in the Act have the meanings as defined in the Act, and, in addition, the meanings used in these regulations. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland. “Aggregate loss limit” or “stop loss” means the maximum payout by the Fund in payment of claims under a particular mortgage pool insurance policy, whether stated as a dollar amount or a percentage of the total principal amount of mortgages insured by the policy. “Applicant” means an individual applying to a lender for a mortgage. “Appraisal” means a written evaluation of a property performed by a residential real estate appraiser licensed by the State. “Assignment of mortgage” means a transfer of ownership of a mortgage from one lender to another or to the Fund. “Assumption agreement” means an agreement by one borrower to pay an obligation originally incurred by another. “Beneficiary” means the lender named in a promissory note or any successor or assign of the lender. “Borrower” or “mortgagor” means the original borrower under a mortgage loan and that borrower's successors and assigns by operation of law or as approved by the Fund. “Claim” means the timely filed written request by an insured for payment by the Maryland Housing Fund on an insurance policy. “Closing costs” means: Financing costs such as the credit report fee, appraisal fee, home inspection fee, survey fee, title examination, loan origination fee, title insurance fee, and application fee; and Title fees such as the attorney's fee, documentation and preparation fee, recording fee, State and local transfer tax, and documentary stamps. “Co-insurance” means an agreement between two or more insurers regarding allocation of risk, and containing other terms or conditions agreed upon between the insurers. “Collateral” means the security given as a pledge for the fulfillment of an obligation. “Condominium” means a multi-unit structure or project subject to a condominium regime under Real Property Article, §11-102, Annotated Code of Maryland. “Condominium unit” means an individual unit in a condominium. “County” means a county of Maryland, including Baltimore City. “Deed of trust” means a written instrument, including a mortgage, creating a lien against real property for the purpose of securing repayment of a loan. “Default” means the failure of a borrower to repay the obligation of a note, or otherwise to fully perform according to the terms provided in a deed of trust. “FHLMC” means the Federal Home Loan Mortgage Corporation. “FNMA” means the Federal National Mortgage Association. “Forbearance” means the act of refraining from taking legal action against a borrower despite arrearage in a mortgage loan. “Foreclose” means legal action to deprive the borrower of all right, title, and interest in the collateral securing a loan in default. “Fund” or “MHF” means the Maryland Housing Fund. “Insurance” means protection against financial loss that may occur as a result of the collateral proving insufficient to repay a loan obligation that is secured by a mortgage. “Insurance endorsement” means the legally binding acceptance of an obligation to insure in accordance with the terms of the policy. “Lender” or “mortgagee” means the original lender of a mortgage loan and its successors and assigns. “Loan-to-value ratio” or “LTV” means the ratio of the mortgage loan amount to the appraised value of the property or the sales price of the property, whichever is less. The dollar amount of the mortgage loan is divided by the dollar amount of the appraised value of the property, or by the dollar amount of the sales price of the property, whichever is less. The resultant figure is expressed as a percent. “Manufactured home” means a structure designed to be used as a dwelling, which: Is a multisectional structure fabricated on or after June 15, 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 code promulgated by the BOCA National Building Code, which is incorporated by reference under COMAR 05.02.05, 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 and Maryland Housing Fund minimum property and appraisal standards and requirements; 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. “Mortgage loan” means a loan, repayment of which is secured by a mortgage or deed of trust. “Note” means a promissory note evidencing an obligation to repay a loan, repayment of which is secured by a mortgage or deed of trust, and setting forth the amount and terms for repayment of the loan. “Pool insurance” means insurance coverage subject to a policy of pool insurance which insures a lender against loss on a pool of mortgage loans, when losses exceed the limit of primary mortgage insurance coverage on loans within the pool. “Premium” means that amount paid for primary mortgage insurance coverage or for pool insurance coverage. “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 mortgage insurance premium. “Primary insurance” means mortgage insurance coverage which insures a lender against loss up to a percentage of the original mortgage loan amount, resulting from a borrower's default. “Project” means a group of eligible single family properties constructed or rehabilitated by a developer, which may be a: Subdivision or a portion of a subdivision; or Scattered-site project. “Public agency” means any Maryland county or municipal corporation, or any board, commission, agency, department, authority, or instrumentality of the State or of any Maryland county or municipal corporation. “Public mortgagee” means any qualified public agency that makes or purchases single family mortgages. “Qualified appraiser” means an appraiser who is licensed under applicable licensing requirements of the State and federal governments and submits work of a quality acceptable to the Maryland Housing Fund. “Real property” means land and the improvements on it, including the rights and benefits of ownership. “Reinsurance” means provision of insurance under an agreement between two or more insurers whereby a portion of risk is covered by the secondary insurer and having such other terms and conditions as the parties agree to. “Secretary” means the Secretary of Housing and Community Development. “Settlement costs” mean all closing costs and prepaid expenses. “Single family reserve” or “reserve” means the Single Family Regular Program Reserve as described in Regulation .04 of this chapter. “Single family property” means owner-occupied one-to-four unit residential property. Types of Reserves. All insurance issued by the Fund is backed by an insurance reserve. There currently exist the following seven separate reserves: One for multifamily insurance; Three for single family insurance; One for general reserve insurance; One for business reserve insurance; and An unallocated reserve for moneys not yet transferred to a specific reserve. The three separate reserve funds that have been established to back types of single family insurance are: Single family regular program insurance; Revitalization program insurance formerly known as pilot program insurance; and Single family home and energy loan insurance. Claims on Reserves. Except for the unallocated reserve, each specified category of reserve is maintained as a reserve to pay claims, when necessary or desirable to do so, arising from its respective category of insurance, and is not subject to claims arising from other categories of insurance except as provided in §B(2) of this regulation. All reserves are subject to payment of claims arising from single family regular and revitalization program insurance issued before August 20, 1975. The unrestricted unallocated reserve may be used, as provided in §C of this regulation, for the payment of claims arising under any category of insurance. Earnings on the Reserves. All investment earnings on each of the seven reserves which are retained by the Fund are credited to the unallocated reserve. The moneys in the unallocated reserve may be: Allocated and transferred by the Secretary into any or each of the identified reserves; Restricted by the Secretary as a reserve for the payment of a claim or potential claim under any category of insurance; Used by the Fund to make payment of a claim, in whole or in part, under any category of insurance; or Retained in the unallocated reserve pending allocation, transfer, restriction, or use. Allocations to Reserves. The Secretary may issue determinations from time to time to make the discretionary allocations, transfers, or restrictions to or within the reserve funds. Properties that are financed by mortgage loans insured by the Fund shall meet property eligibility requirements at the time of loan closing as follows: Be single family properties with not more than four units; Be located in the State; Have clear and merchantable title acceptable to the Fund; Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes; Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance; Have an appraisal and appraised value that are satisfactory to the Fund; Meet the minimum property standards of the Fund; and If the property is a condominium, meet the following requirements: Have either a: Certification that it is in compliance with FNMA or FHLMC standards, or Sales and management plan satisfactory to the Fund; and If the condominium is a conversion from a rental housing development: There shall be in place a relocation plan for tenants acceptable to the Fund, unless the buyer is a current tenant, The buildings shall have been vacant at least 12 months before start of the conversion, or The Secretary shall have determined that the conversion serves an exceptional public purpose. A person can be an eligible borrower subject to the following general requirements: The person shall be legally able to enter into contractual obligations; The borrower may not own any other real property at the time the insured mortgage loan closes, except a: Cemetery plot, Lot on which the residential housing unit to be financed with proceeds of the mortgage loan is to be built; If the applicable loan program permits prior ownership of a borrower's principal residence, the prior or existing residence of the borrower shall be subject to a contract of sale at the time of application for mortgage insurance from the Fund, and shall be conveyed by the time the Fund-insured mortgage loan is closed; The borrower shall establish to the satisfaction of the Fund the capacity to meet the financial obligations of the loan; The borrower shall have maintained a credit standing and history of financial management which is acceptable to the Fund. Mortgage loans shall meet the general eligibility requirements of this regulation. Security. Mortgage loans shall be secured by a first lien against the mortgaged property. Mortgage loans insured by the Fund shall be secured by real property that meets the requirements of the Fund. Escrow accounts for payment of taxes, insurance, condominium fees, or other customary expenses related to the first mortgage loan, as applicable, shall be satisfactory to the Fund. Types of Ownership. The borrower's interest may be either in fee simple or subject to a freely transferable ground rent leasehold with terms acceptable to the Fund. A leasehold mortgage shall have a remaining lease term of not less than the mortgage term plus 10 years. The leasehold estate shall be redeemable either by law or by negotiated agreements. Mortgage Terms. Mortgages may not exceed a term of 40 years unless the Secretary, by written determination for a particular loan or category of loans, agrees to a term exceeding 40 years. Long-term mortgages shall contain amortization provisions approved by the Fund, including the complete amortization of the mortgage in monthly installments over a specific time period. Mortgages shall bear interest at the rate agreed upon by the lender and the borrower, and committed upon by the Fund. Mortgage terms or principal balance due on an insured mortgage may not be modified without prior written approval of the Fund. Mortgages shall conform to the required documentation and eligibility criteria required by the Fund under the mortgage insurance program for which insurance is being requested. A lender shall meet the eligibility requirements of §B or C of this regulation in order to be approved for mortgage insurance issued by the Fund under the Fund master policy for primary mortgage insurance. The Fund will approve mortgage lenders that execute a certification that they are: A financial institution which has accounts insured by any agency of the United States; An institutional lender approved under a federal mortgage loan insurance agency; or Any FNMA or FHLMC approved institutional conventional seller. Any for-profit entity, nonprofit entity, or public agency which, in the opinion of the Fund, has as a primary or substantial function of its operation the making of residential mortgages, can be approved if it: Presents evidence satisfactory to the Fund of: Responsibility, Permanency, Financial adequacy, and Requisite administrative, technical, and mortgage servicing capabilities; and Submits an application and all supporting documentation that the Fund may require. A servicer of a Fund-insured loan, whether the lender or its agent, shall comply with the loan servicing requirements contained in the Fund's servicing manual. Failure to comply with these requirements may result in denial or withdrawal of the Fund's approval to service the Fund-insured loans. Application. A lender shall submit an application in the form prescribed by the Maryland Housing Fund which shall contain a complete credit package and any other documentation required by the Fund. If documentation is incomplete, the credit evaluation may be delayed and may result in the application's being returned. If an application is denied, the lender may request reconsideration by the Director of the Maryland Housing Fund. Underwriting and Appraisal. An application for mortgage insurance received from an approved lender is subject to underwriting and appraisal review in accordance with the requirements of the Fund. Limitations. Scope of Insurance Coverage. Mortgage insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk. Expenses incurred for property repair resulting from casualty loss, including losses due to negligence, flood, fire, termites, vandalism, and defective construction are not eligible for coverage. Expenses incurred by the lender in the preservation and normal maintenance of an insured property are covered in accordance with the terms and conditions of the master insurance policy governing the insured mortgage. Loan Assumptions. A transfer of title to a property that is the subject of an insured mortgage requires the prior approval of the Fund, except when the: Transfer cannot by law be prohibited; or Lender is without actual knowledge of the transfer. Insurance Certificates. A primary mortgage insurance certificate issued by the Fund is conclusive evidence of the eligibility of the mortgage for insurance as of the effective date of the insurance coverage, if: Insurance premiums are paid as due; and All conditions of the insurance are satisfied. The Fund may refuse payment of a claim on the basis of fraud or misrepresentation or material error or omission with respect to any claim, notwithstanding the issuance of an insurance certificate by the Fund. Deficiency Judgement. The right of the Fund to pursue the borrower for deficiency or loss shall exist in every case to the extent allowed by law, and may be enforced at the discretion of the Fund. Transfer of Property. The Fund shall be notified in advance of any transfer of the property, subject to the mortgage, indicating the identity of the purchaser. When the Fund is so notified, further approval of the Fund is not required if the original mortgagor remains liable. If the original mortgagor is to be released from liability, the assumption shall be underwritten by the mortgagee on the basis of the credit of the assumptor, with the underwriting being satisfactory to the Fund, and written approval of the Fund is required. The Fund's coverage is not impaired by reason of a transfer in violation of covenants of the mortgage, unless the mortgagee had actual advance knowledge of the transfer. Assignments. The sale by an insured lender of a Fund-insured mortgage does not impair coverage if the terms of the mortgage loan are not changed, and if the Fund has been advised of: The date of the sale; The name and address of the assignee; The name of the borrower; The certificate or policy number of the loan to be sold; and Whether servicing is to be transferred or retained. Loan Modification. A loan modification or refinancing of an existing insured mortgage requires Fund review and approval for continued mortgage insurance coverage. Notice of Delinquency. Notice of delinquency shall be submitted by a lender or its servicing agent to the Fund in writing within: 45 days if the first payment due under the loan is not paid when due; or 10 days after the account is in default for 60 days. Actions by Lender. General. The Fund may require a lender to take any of the actions described in Regulation .10 of this chapter in connection with a defaulted or delinquent mortgage. The right of the Fund to pursue a borrower for deficiency or loss exists in every case to the extent allowed by law, and may be enforced at the discretion of the Fund. Cure. A lender shall make all reasonable efforts to cure a default before recommending foreclosure action or acceptance of a deed in lieu of foreclosure or assignment of the mortgage or mortgage modification. Forbearance. A lender may not engage in any action or agreement of forbearance without obtaining prior written approval from the Fund, except for actions or agreements that: Deal with delinquencies of 3 months or less; or Provide for the loan to be brought current within 6 months. Any action of forbearance by a lender which impairs the mortgage that is not approved as described in this section or in writing by the Fund may terminate insurance coverage. Mortgage Modification. A lender shall advise the Fund in writing as to the advisability of entering into a mortgage modification agreement, a recasting of the mortgage, or methods of forbearance which the lender believes to be appropriate before pursuing further foreclosure measures. Deed in Lieu of Foreclosure. If all of a lender's efforts to bring the delinquent loan current fail, the lender shall recommend attempting to obtain a voluntary conveyance by means of a deed in lieu of foreclosure. If the Fund authorizes conveyance by a deed in lieu of foreclosure, it shall be on condition of conveyance by clear and marketable title. Foreclosure. If all efforts to cure the delinquency or to establish forbearance procedures or obtain a deed in lieu of foreclosure fail, the lender shall recommend foreclosure. Foreclosure proceedings may not be initiated by the lender without written approval of the Fund, except as may be provided in the Fund's servicing manual. A lender shall notify the Fund in writing within 5 working days after: A foreclosure sale; or Acquisition of title to the property by deed in lieu of foreclosure. Mortgage Assignment. Notwithstanding §B(1)—(6) of this regulation, the Fund may require a lender at any time to assign a delinquent mortgage to the Fund and file a claim in the full amount of the insurance. Maryland Housing Fund insurance coverage may be terminated by the Fund at its discretion under the following conditions: The lender requests in writing cancellation of the insurance; A claim is satisfied by the Fund; The mortgage loan is paid in full; A renewal premium is not paid after receipt of written notice from the Maryland Housing Fund; Failure of the lender to comply with these regulations, the servicing manual provided by the Fund, or the Fund's primary or pool insurance policy, as applicable; Modification of mortgage terms without the Fund's prior approval; or Other action with respect to a defaulted mortgage loan without the Fund's prior approval. General. The Fund may provide forward insurance commitments for permanent loans financing single family properties located in projects based upon a master appraisal for the project. The Fund may limit the number of single family units it will insure in any one project or subdivision. The Fund may require that approval of a project for a forward insurance commitment be obtained from the Fund if the Fund is expected to insure more than five mortgage loans in the project. Instead of providing a forward insurance commitment, the Fund may provide mortgage insurance certificates on a case-by-case or spot loan basis in a project based upon individual property appraisals at the time of application for permanent financing, if: The project involves diverse model types, pricing, staging, or phasing; The project is a scattered-site project; or Other circumstances are considered by the Fund to be appropriate for case-by-case consideration. New Construction Projects. Projects of newly constructed residences which are to be constructed or are less than 1 year old may be considered for a forward commitment of mortgage insurance. Types of new construction projects eligible for forward reservations are: Stick-built housing; Manufactured housing; and Modular or panelized housing. Rehabilitation Projects. Projects involving rehabilitation are eligible for approval of insurance for permanent financing if: The proposed rehabilitation will correct all code violations and bring the property to a standard acceptable to the Maryland Housing Fund and 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 Maryland Housing Fund and the Department; Except in cases of tenant conversion to homeownership, the buildings to be rehabilitated are owned or to be owned by the developer. Project Application Process. Approval of a project for a forward insurance commitment shall be initiated by submission of an application on forms prescribed by the Maryland Housing Fund by a Fund-approved lender in conjunction with the developer of the project. Applications shall contain all information, documents, and items that the Maryland Housing Fund requires, including: Subdivision and site plans; Appraisals satisfactory to the Maryland Housing Fund; Condominium or homeowners association documents, as applicable; Plans and specifications for each model type to be built by the developer; Local government resolution of approval; Warranty certification; Opinion of counsel for the developer; Current and valid FNMA 1027c or FNMA 1028; Minimum property standard certificate; and Other information and documentation as may be required by the Maryland Housing Fund. The lender or developer shall submit and satisfy all requirements of the application process. Factors which the Maryland Housing Fund 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 the Fund mortgage insurance has been made available; Regional demand and initial marketability of the product within its locale along with resale and distressed sale values; The number and amount of mortgages requested to be insured; The incomes of the households to be served; and The Maryland Housing Fund's prior experience with the developer and lender. The Fund is authorized to enter into reinsurance and coinsurance arrangements, as approved by the Secretary. The amount of any reinsurance or co-insurance may decrease the amount of the Fund reserves pledged to the Fund pool insurance policy only if the: Fund does not retain contingent liability under the reinsurance or co-insurance arrangement; or Reinsurer or coinsurer is a: Federal agency, or Private insurer having surplus as regards policy holders equal to at least $15,000,000, which is approved by FNMA or FHLMC. Premiums for Primary Mortgage Insurance and Coverage for Public and Private Lenders. The Maryland Housing Fund may insure permanent single family mortgages originated by public and private lenders that have been approved by the Maryland Housing Fund for mortgage insurance. The insurance is governed by Regulations .05—.09 of this chapter and by the provisions of the master policy for mortgage insurance issued to the lender. In general, primary mortgage insurance covers the top 35 percent of the original loan amount or such other amount as may be specified in a policy or certificate of insurance. Premiums for mortgage insurance shall be determined by the Maryland Housing Fund from time to time for various programs. Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include: Depth of insurance coverage; Length of mortgage term; Borrower's financial capabilities; Credit rating of borrowers; and Condition of property securing loan. The Fund shall maintain a publicly available premium rate sheet with a stated effective date for the premiums. Pool Insurance Coverage for Certain Public Agency Lenders. The Fund may offer insurance on mortgage loans eligible under Regulations .05—.09 of this chapter that are within a pool of mortgages as described in the applicable pool insurance policy. The pool insurance may cover the entire remaining loss after payment of primary mortgage insurance claims by the Fund or another private or governmental insurer or guarantor, as required by the pool insurance policy. Total coverage under a policy of pool insurance is subject to aggregate loss limits for the pool of mortgage loans, which may be described in relation to a single source of financing or collective sources, such as parity bonds issued under a common bond indenture. A pool insurance policy contains detailed claims computation, claims settlement procedures, and the aggregate loss limit for all loans covered by the pool policy. Coverage of individual mortgage loans in the pool is evidenced by endorsement or listing in a schedule. The annual premium for pool insurance and associated coverage is based on the original principal amount of the loan. It shall be determined from time to time and shall be maintained with a stated effective date for the premiums. Premium Refunds. A premium, or any portion of a premium, is not refundable except when an insured mortgage is prepaid in full. In those cases, no further premiums are due and a portion of the premium paid for the year shall be refunded in accordance with the Fund's cancellation schedule as described in the policy. Refunds shall be forwarded to the borrower unless the lender has demonstrated to the satisfaction of the Fund that the lender is entitled to the refund. When a claim is pending or satisfied, the premium, whether paid by the borrower, the lender, or the servicing agent, is earned and a premium refund may not be made. Filing. A claim may not be settled by the Fund until the lender has: Implemented the actions prescribed by the Fund to cure a defaulted mortgage loan; and Submitted to the Fund an application for settlement of a claim. A lender shall submit its claims on the Fund forms within 30 calendar days from the date of: A written request from the Fund to file a claim in the case of loan assignment under §D(1) of this regulation or fixed percentage settlement under §D(2) of this regulation; or The transfer of title under §D(3) or (4) of this regulation. Computation of Claims. The computation of a claim shall be made by: Adding together the following amounts: Unpaid principal balance due under the mortgage; Interest at the mortgage rate, not at a default or penalty rate, through the following date, as applicable: Foreclosure sale, Assignment to the Fund, Execution of a deed to the lender in lieu of foreclosure, or Settlement on a sale by the mortgagor to a third party; Any expenses of foreclosure or title acquisition, including attorney's fees not exceeding 3 percent of the principal and interest components of the claim, which are actually and reasonably incurred; Expense items such as property taxes, hazard insurance premiums, and ground rent which are paid by the lender or servicing agent, prorated as applicable; and Other necessary expenses incurred by the lender for preservation of the property in accordance with the requirements of the insurance policy; and Subtracting the following: All amounts received by the lender or account of the mortgage after the institution of foreclosure proceedings or the acquisition of the mortgaged property; All amounts received by the lender from any source relating to the mortgaged property on account of rent or other income after deducting reasonable expenses incurred in handling the mortgaged property; All cash retained by the lender, including amounts held or deposited for the account of the borrower or to which the borrower is entitled under the mortgage transaction that have not been applied in reduction of the principal of the mortgage indebtedness or otherwise expended; and If the Fund is only the pool mortgage insurer, any benefit due under a primary mortgage insurance policy. Items Not Covered. Coverage does not include: Loss due to: Casualty, or Title risk; Mortgage insurance premiums paid by the lender or servicing agent; Late charges; Expenses incurred for property repair resulting from: Accidental causes, Negligence or gross negligence, Flood, Fire, Termites, Vandalism, Defective construction, Undisclosed, preexisting conditions of environmental contamination, Physical damage, or Other causes except those permitted under §B(1)(e) of this regulation. Settlement of Claims. The Fund shall settle mortgage insurance claims in cash. Settlement shall be by one of the four methods in §D(3)—(6) of this regulation, at the Fund's election. Loan Assignment. The Fund takes an assignment of the mortgage and pays the claim. The claim may include all items described in §B(1) of this regulation except expenses related to foreclosure and acquisition of title. Fixed Percentage Settlement. When the Fund provides only primary mortgage insurance on the loan, the Fund pays the policy's stated percentage of the outstanding loan amount before foreclosure sale, and waives any interest in the property. Lender Acquisition Settlement. When the lender acquires title at foreclosure or by deed in lieu of foreclosure, and transfers title to the Fund, the Fund pays the: Full amount of the claim, if the Fund is both primary and pool insurer; or Amount of claim up to the percentage coverage specified in the primary mortgage insurance policy, if the Fund is only the primary mortgage insurer. Third Party Acquisition. When the property is sold to a third party under any of the following circumstances: At foreclosure; By the lender after taking title by deed in lieu of foreclosure; or By the borrower after the beginning of foreclosure proceedings, with the approval of the Fund in accordance with the following: If the Fund is both primary and pool insurer, the Fund pays the full amount of the claim as in §D(5)(a) of this regulation less net proceeds of the sale, or If the Fund provides only the primary mortgage insurance, the Fund pays the lesser of the amount of the claim up to the percentage coverage specified in the primary mortgage insurance policy as in §D(5)(b) of this regulation, before crediting net proceeds of the sale, or the full claim after crediting net proceeds of the sale. Access and Inspection. Before payment of a claim by the Fund, the insured shall provide access to the insured property for inspection by the Fund. Waiver. The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is not inconsistent with the Act or with agreements to which the Fund may be subject if: Conformance to the requirements of any federal, State, or local program in connection with a loan necessitates a 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 purposes of the Act, Waiver would not be materially adverse to bondholders or others relying on the single family reserve of the Fund, and Office of the Attorney General has approved the form and legal sufficiency of the waiver. False Statements. A borrower or lender who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to cancellation of insurance, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Fund or to any other official or employee of the Department or the Fund the authority to execute or approve any insurance documents or the Fund certificates. Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland Effective date: May 23, 1994 (21:10 Md. R. 841) Regulation .02A, B amended effective August 1, 2005 (32:15 Md. R. 1319) Regulation .02F amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2026); amended permanently effective July 1, 1996 (23:13 Md. R. 940) Regulation .03B amended as an emergency provision effective December 8, 1995 (22:26 Md. R. 2026); amended permanently effective July 1, 1996 (23:13 Md. R. 940) Regulation .04A amended effective November 3, 2008 (35:22 Md. R. 1956) Regulation .04A, C amended effective March 26, 2018 (45:6 Md R. 317) Regulation .06 amended effective August 1, 2005 (32:15 Md. R. 1319) Regulation .06B amended and C adopted as an emergency provision effective December 8, 1995 (22:26 Md. R. 2026); amended permanently effective July 1, 1996 (23:13 Md. R. 940) Regulation .07D amended effective August 1, 2005 (32:15 Md. R. 1319) Regulation .14 amended effective August 1, 2005 (32:15 Md. R. 1319) This chapter describes the policies, procedures, and authorizations for selling single-family properties owned by the Department to eligible nonprofit organizations on terms defined in the regulations, for the purpose of resale to purchasers who will occupy the properties. The basic objectives of the Program are to: Provide for the sale of single-family properties owned by the Department as a result of the Department's acquisition at foreclosure sale or by deed in lieu of foreclosure following a borrower default under the several loan programs or mortgage insurance program operated by the Department; Encourage the health and vitality of communities where these properties are located by reducing the period of vacancy for these properties and facilitating renovation and homeownership of these properties; and Encourage the participation of nonprofit organizations that work in these communities by allowing the nonprofit organizations to purchase these properties in order to return them to homeownership status. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, §§3-205, 4-805, and 4-909, Annotated Code of Maryland. “Area of operation” means the geographic area the nonprofit organization states to be the area within which it carries out its activities. “Deed-in-lieu” means a deed given by a borrower to a lender to satisfy a debt and avoid foreclosure. “Department” means the Department of Housing and Community Development, a principal department of the State. “Division” means the Division of Credit Assurance, a division of the Department. “Eligible property” means a single-family property owned by the Department that appears on a list of properties selected by the Division to be offered to eligible nonprofit organizations participating in the Program. “Internal Revenue Code” means the Federal Internal Revenue Code of 1986 and the regulations promulgated under it. “Nonprofit organization” means a not-for-profit corporation, foundation, or other legal entity that is exempt from federal income tax under §501(c)(3) of the Internal Revenue Code. “Settlement costs” means the following costs: Attorney fees, including title examination fees, not to exceed $500; Document preparation fees; Recordation fees; State and local transfer and recordation taxes; and Other costs approved by the Division in its sole discretion. “Program” means the Community Housing Support Program. “Property taxes” means the taxes assessed and levied against the property annually by the State, county, and municipality. “Single-family property” means a one-unit to four-unit residential property. Offer to Purchase. An eligible nonprofit organization approved for participation in the Program as described in Regulation .05 of this chapter may make an offer to purchase an eligible property, as defined in Regulation .03B of this chapter, that is located in the operational area of the nonprofit organization. The offering price shall be the sales price set by the Division for that property. The purchase contract shall be in the form required by the Division. Financing. The Department shall provide financing to the nonprofit purchaser on the following terms: The term of the loan shall be for 1 year from the date of purchase by the nonprofit organization, at which time the principal amount of the loan shall be repaid in full whether or not the nonprofit organization has sold the property as provided in §B(4) of this regulation; The interest rate shall be zero percent per year; The loan shall be secured by a deed of trust constituting a first lien on the property in favor of the Department; On or before the end of the 1-year loan term, the property shall be sold to a person or persons who intend to occupy the property as their principal residence, except as provided in §B(6) of this regulation; Before the Department releases the deed of trust, the nonprofit organization shall provide a copy of the contract with its purchaser and a certification by the purchaser of the intention to occupy the property as the purchaser's principal residence; If the nonprofit organization demonstrates to the satisfaction of the Department that it is not feasible to sell the property to a purchaser as provided in §B(4) of this regulation, the property may be rented or retained by the nonprofit organization; Renovation, marketing, sales, and other matters are solely the responsibility of the nonprofit organization that purchases the property; and The nonprofit organization shall agree that if the nonprofit organization fails to repay the loan when due, the nonprofit organization shall offer the Department a deed-in-lieu in the form approved by the Department, and the Department shall have the option of whether to accept the deed-in-lieu. Settlement and Payment Terms. The Department shall execute a deed in the form approved by the Department. The nonprofit organization shall execute loan documents, including a note and deed of trust, in the form approved by the Department. The Department will pay settlement costs as defined in Regulation .03B(9) of this chapter. The Department shall waive reimbursement by the nonprofit organization at settlement for the organization's pro rata share of property taxes paid in advance by the Department. Settlement shall occur within 45 days of the date of the purchase contract, at a date and time mutually acceptable to the Division and the purchaser. Limit on Number of Homes. An eligible nonprofit organization may not own, at any one time, more than two properties purchased through the Program. A nonprofit organization may apply for approval to participate in the Program by submitting the following documents for review by the Division: An application in the form required by the Division; A certification in the form required by the Department that the nonprofit organization shall abide by all requirements of: Titles VI and VII of the Civil Rights Act of 1964 as amended, Title VIII of the Civil Rights Act of 1968 as amended, and, for nonresidential facilities, the Americans with Disabilities Act of 1990, The provisions of the Governor's Code of Fair Practices, as amended, The Department's Minority Business Enterprise Program, and Governor's Executive Order 01.01.1989.18 relating to drug-free and alcohol-free workplaces, and any Department regulations adopted to carry out the requirements of that order; A contract affidavit in the form required by the Department; A copy of the following organizational documents for the nonprofit organization: A letter from the Internal Revenue Service granting tax-exempt status under §501(c)(3) of the Internal Revenue Code, Articles of incorporation or other applicable documents, Bylaws, Certificate of good standing, and A resolution authorizing application for participation in the Program and purchase and financing for a particular property where applicable, and the designation of the person or persons authorized to sign on behalf of the organization; and Any other information required by the Program. Additional Requirements. The nonprofit organization shall be in good standing and may not be under suspension or debarment from any of the Department's programs in any action under COMAR 05.01.05. The nonprofit organization may not be in default under any loan from the Department. At the time of settlement, the nonprofit organization shall have all necessary legal and corporate authorizations to purchase the property and incur the obligations of the Department loan. An action or decision required or permitted to be taken or made by the Department under Housing and Community Development Article, §§3-205, 4-805, and 4-909, Annotated Code of Maryland, or this chapter, except for waiver under Regulation .07 of this chapter, may be taken by the Director of the Division or the Director's designee. The Department may establish from time to time operational handbooks or manuals governing matters relating to the Program, including descriptive statements of program procedures that do not affect the rights of, or the procedures available to, the public. The Secretary may waive or vary particular provisions of this chapter to the extent that the waiver is not inconsistent with the Act if, 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 purposes of Housing and Community Development Article, §§3-205, 4-805, and 4-909, Annotated Code of Maryland. The Department may: Assign a mortgage for value; Release a mortgage; Foreclose a mortgage; Acquire property securing a loan in default; Encumber, sell, or otherwise dispose of property acquired in connection with a loan in default; or Obtain and seek enforcement of a deficiency judgment. In the event of default, as provided in the loan documents, or in the event of a prospective default, the Department, in its sole discretion, may: Modify the rate of interest; Modify the time or amount of payment; Modify the term of the loan; Modify the loan in any other way in order to promote repayment of the loan and achieve the purpose of the Program; or Accelerate the loan and foreclose on the deed of trust, or accept a deed in lieu of foreclosure. Housing and Community Development Article,§§3-205, 4-805, and 4-909, Annotated Code of Maryland; Executive Order 01.01.1992.27C Effective date: October 30, 2000 (27:21 Md. R. 1974) These regulations set forth the policies, procedures, and authorization for: Issuance of mortgage insurance and credit enhancement under the general reserve established in COMAR 05.06.01.04A(5); and Agreements with mortgage lenders and mortgage insurers to share financial risk and insurance fees in connection with loans insured by the Maryland Housing Fund under its general reserve. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland, as amended. “Department” means the Department of Housing and Community Development. “FHLMC” means the Federal Home Loan Mortgage Corporation. “FNMA” means the Federal National Mortgage Association. “Fund” means the Maryland Housing Fund, and, when appropriate, its authorized officers or personnel. Mortgage. “Mortgage” means a written instrument evidencing or creating a lien against real property to provide collateral to secure the repayment of a debt. “Mortgage” includes a deed of trust. “Mortgagee” means the original lender under a mortgage and its successors and assigns. “Mortgagor” means the original borrower under a mortgage and the borrower's successors and assigns by operation of law or as approved by the Fund. Nonprofit Entity. “Nonprofit entity” means any organization exempt from taxation under the Internal Revenue Code of the United States, 26 U.S.C. §501(c). “Nonprofit entity” includes local development agencies and local development corporations, as defined in Housing and Community Development Article, §4-201, Annotated Code of Maryland, and organizations exempt by reason of a charitable or public purpose. “Nonprofit entity” does not include limited dividend corporations or partnerships. “Secretary” means the Secretary of Housing and Community Development or the Secretary's designee. A property financed by mortgage loans insured by the Fund shall: Be a residential property or type of property permitted under the Act; Have clear and merchantable title acceptable to the Fund; Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes; Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance; Have an appraised value that is satisfactory to the Fund; and Meet any other standards of the Fund. A borrower shall establish to the satisfaction of the Fund the capacity to meet the financial obligations of the loan. A borrower shall have maintained a credit standing and history of financial management that is acceptable to the Fund. A mortgage loan shall be secured by a lien against the mortgaged property. Real property securing a loan shall meet the requirements of the Fund. An escrow account for payment of taxes, insurance, homeowner association fees, condominium fees, or other customary expenses related to a mortgage loan, as applicable, shall be satisfactory to the Fund. A mortgage may not exceed a term of 40 years unless the Secretary, by written determination for a particular loan or category of loans, agrees to a term exceeding 40 years. A mortgage shall bear interest at the rate agreed on by the lender and the borrower, and committed to by the Fund. A mortgage shall conform to the required documentation and eligibility criteria required by the Fund. The Department, or any agency of the Department, is an eligible lender approved for mortgage insurance issued by the Fund. All other lenders shall meet the eligibility requirements of §C or D of this regulation in order to be approved for mortgage insurance issued by the Fund. The Fund may approve a mortgage lender that is authorized to conduct business in Maryland and that executes a certification that it is: A financial institution that has accounts insured by any agency of the United States; An institutional lender approved under a federal mortgage loan insurance agency; or Any FNMA or FHLMC approved institutional conventional seller. Any for-profit entity, nonprofit entity, or public agency that, in the opinion of the Fund, has as a primary or substantial function of its operation the making of residential mortgages, may be approved if it: Presents evidence satisfactory to the Fund of: Responsibility; Permanency; Financial adequacy; and Requisite administrative, technical, and mortgage servicing capabilities; and Submits an application and all supporting documentation that the Fund may require. Application. If required by the Fund, a lender shall submit an application, in the form prescribed by the Fund, which shall contain a complete credit package and any other documentation required by the Fund. If documentation is incomplete, the credit evaluation may be delayed and may result in the rejection of the application. Underwriting and Appraisal. An application for mortgage insurance received from an approved lender may be subject to underwriting and appraisal review in accordance with the requirements of the Fund. Scope of Insurance Coverage. Mortgage insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk. Expenses incurred for property repair resulting from casualty loss, including losses due to negligence, flood, fire, termites, vandalism, and defective construction, are not eligible for coverage. Expenses incurred by the lender in the preservation and normal maintenance of an insured property may be covered in accordance with the terms and conditions of the applicable insurance policy governing the insured mortgage. To maintain insurance coverage, the following transactions require prior approval of the Fund on terms and conditions acceptable to the Fund: A transfer of any interest in the secured property; An assignment of the insured mortgage loan; An assumption of an insured mortgage loan; or Any change or modification of the terms of the insured mortgage. Premiums for mortgage insurance shall be determined by the Fund from time to time for various programs and types of mortgage insurance. Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include the: Depth of insurance coverage; Length of mortgage term; Financial capability of the borrower; Credit rating of the borrower; and Condition of property securing loan. The Fund shall maintain a publicly available premium rate sheet with a stated effective date for the premiums. The Fund may offer insurance on mortgage loans that are within a pool of mortgages as described in the applicable insurance policy. The Fund may enter into reinsurance, coinsurance, and risk-sharing arrangements with other insurers and lenders, as approved by the Secretary. The insured lender shall follow the procedures contained in the mortgage insurance policy upon default of an insured mortgage. Mortgage Assignment. The Fund may require a lender at any time to assign a delinquent mortgage to the Fund and file a claim in the full amount of the insurance. The right of the Fund to pursue a borrower for deficiency or loss exists in every case to the extent allowed by law and may be enforced at the discretion of the Fund. The Fund may refuse payment of a claim on the basis of fraud, misrepresentation, or material error or omission with respect to any claim. Waiver. The Secretary may waive or vary particular provisions of this chapter to the extent that the waiver is not inconsistent with the Act or with agreements to which the Fund may be subject if: Conformance to the requirements of any federal, State, or local program in connection with a loan necessitates a 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 purposes of the Act. Reconsideration. An applicant or a financial institution may request reconsideration of a Fund decision that a loan or claim is not eligible under this chapter by submitting a written request to the Secretary within 30 days following the date of the Fund's written decision. The request for reconsideration shall address each reason for the decision and provide documentation that supports reasons for reconsideration of the issues. The Secretary shall respond in writing to the applicant's request for reconsideration within 30 days of receiving the request. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02. The Secretary, in the Secretary's sole discretion, may delegate to an authorized officer of the Department the authority to approve, disapprove, or approve with modifications a request for reconsideration of a determination of ineligibility. False Statements. A borrower or lender who knowingly makes, or causes to be made, a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to cancellation of insurance, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Fund or to any other official or employee of the Department or the Fund the authority to execute or approve any insurance documents or Fund certificates. Housing and Community Development Article,§3-207(a), Annotated Code of Maryland Effective date: November 3, 2008 (35:22 Md. R. 1956) These regulations set forth the policies, procedures, and authorization for issuance of loan insurance and credit enhancement under the business reserve established in COMAR 05.06.01.04A and 05.06.06.04A. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland, as amended. Business Project. “Business project” means a project located in an area designated as a priority funding area under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. “Business project” means a project that is: Acquired, owned, developed, constructed, reconstructed, rehabilitated, or improved by a person or an entity for the purposes of carrying on a business whether or not for profit; or Eligible for funding from the Neighborhood Business Development Fund under Housing and Community Development Article, §6-310, Annotated Code of Maryland. “Department” means the Department of Housing and Community Development. “Fund” means the Maryland Housing Fund, and, when appropriate, its authorized officers or personnel. Mortgage. “Mortgage” means a written instrument evidencing or creating a lien against real property to provide collateral to secure the repayment of a debt. “Mortgage” includes a deed of trust. Nonprofit Entity. “Nonprofit entity” means any organization exempt from taxation under the Internal Revenue Code of the United States, 26 U.S.C. §501(c). “Nonprofit entity” includes local development agencies and local development corporations, as defined in Housing and Community Development Article, §4-201, Annotated Code of Maryland, and organizations exempt by reason of a charitable or public purpose. “Nonprofit entity” does not include limited dividend corporations or partnerships. “Secretary” means the Secretary of Housing and Community Development or the Secretary's designee. Real property financed by loans insured by the Fund shall: Have clear and merchantable title acceptable to the Fund; Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes; Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance; Have an appraised value that is satisfactory to the Fund; Be secured by a lien against the mortgaged property or other collateral acceptable to the Fund; and Meet any other standards of the Fund. Personal property financed by loans insured by the Fund shall: Have clear and merchantable title acceptable to the Fund; Have an appraised value that is satisfactory to the Fund; Be secured by a lien against real property, personal property or other collateral acceptable to the Fund; and Meet any other standards of the Fund. Loan to business project for credit, operating costs and administrative costs insured by the Fund shall: Be secured by a lien against real property, personal property or other collateral acceptable to the Fund; and Meet any other standards of the Fund. A borrower may be an individual, partnership, or any other type of legal entity. A borrower shall establish, to the satisfaction of the Fund, the capacity to meet the financial obligations of the loan. A borrower shall have maintained a credit standing and history of financial management that is acceptable to the Fund. The Department, or any agency of the Department, is an eligible lender approved for insurance issued by the Fund under this chapter. All other lenders shall meet the eligibility requirements of §C or D of this regulation in order to be approved for insurance issued by the Fund. The Fund may approve a lender that is authorized to conduct business in Maryland and that executes a certification that it is: A financial institution that has accounts insured by any agency of the United States; or An institutional lender approved under a federal mortgage or business loan insurance agency. Any for-profit entity, nonprofit entity, or public agency that, in the opinion of the Fund, has as a primary or substantial function of its operation, the making of business project loans, may be approved if it: Presents evidence satisfactory to the Fund of: Responsibility; Financial adequacy; Requisite administrative, technical, and loan servicing capabilities; and Submits an application and all supporting documentation that the Fund may require. Application. A lender shall submit an application, in the form prescribed by the Fund, which shall contain a complete credit package and any other documentation required by the Fund. Underwriting and Appraisal. An application for insurance received from an approved lender may be subject to underwriting and appraisal review in accordance with the requirements of the Fund. Scope of Insurance Coverage. Insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk. Expenses incurred for property repair or replacement resulting from casualty loss, including losses due to negligence, flood, fire, termites, vandalism, theft, and defective construction, are not eligible for coverage. Expenses incurred by the lender in the preservation and normal maintenance of an insured property may be covered in accordance with the terms and conditions of the applicable insurance policy governing the insured loan. Insurance on business project loans may be offered in the following forms: Mortgage or loan insurance; Credit enhancement; Loan guaranty; or Other type of insurance as approved by the Fund covering economic loss due to monetary default. The Fund may offer insurance on loans that are within a pool of loans as described in the applicable insurance policy. The Fund may enter into reinsurance, coinsurance, and risk-sharing arrangements with other insurers and lenders, as approved by the Secretary. To maintain insurance coverage on an existing loan, the following transactions require prior approval of the Fund on terms and conditions acceptable to the Fund: A transfer of any interest in the secured property; An assignment of the insured loan; An assumption of an insured loan; or Any change or modification of the terms of the insured loan. Premiums for insurance shall be determined by the Fund from time to time for various programs and types of insurance. Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include the: Depth of insurance coverage; Length of loan term; Financial capability of the borrower; Credit rating of the borrower; and Condition and type of collateral securing loan. The Fund shall maintain a publicly available premium rate sheet with a stated effective date for the premiums. The insured lender shall follow the procedures contained in the insurance policy or agreement upon default of an insured mortgage. The Fund may require a lender at any time to assign a delinquent loan to the Fund and file a claim in the full amount of the insurance. The right of the Fund to pursue a borrower for deficiency or loss exists in every case to the extent allowed by law and may be enforced at the discretion of the Fund. The Fund may refuse payment of a claim on the basis of fraud, misrepresentation, or material error or omission with respect to any claim. Waiver. The Secretary may waive or vary particular provisions of this chapter to the extent that the waiver is not inconsistent with the Act or with agreements to which the Fund may be subject if: Conformance to the requirements of any federal, State, or local program in connection with a loan necessitates a 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 purposes of the Act. Reconsideration. An applicant or a lender may request reconsideration of a Fund decision that a loan or claim is not eligible under this chapter by submitting a written request to the Secretary within 30 days following the date of the Fund's written decision. The request for reconsideration shall address each reason for the decision and provide documentation that supports reasons for reconsideration of the issues. The Secretary shall respond in writing to the request for reconsideration within 30 days of receiving the request. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02. The Secretary, in the Secretary's sole discretion, may delegate to an authorized officer of the Department the authority to approve, disapprove, or approve with modifications a request for reconsideration of a determination of ineligibility. False Statements. A borrower or lender who knowingly makes, or causes to be made, a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, is subject to cancellation of insurance, in addition to the criminal penalties authorized by the Act. Delegation. The Secretary may delegate to the Director of the Fund or to any other official or employee of the Department or the Fund the authority to execute or approve any insurance documents or Fund certificates. Housing and Community Development Article, §3-207(a), Annotated Code of Maryland Effective date: March 26, 2018 (45:6 Md. R. 317)