# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 06 — Housing Insurance

### Chapter 06 — Single Family Insurance Program

**Authority:** Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland

**Administrative History:** Effective date: May 23, 1994 (21:10 Md. R. 841)

**Administrative History:** Regulation .02A, B amended effective August 1, 2005 (32:15 Md. R. 1319)

**Administrative History:** 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)

**Administrative History:** 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)

**Administrative History:** Regulation .04A amended effective November 3, 2008 (35:22 Md. R. 1956)

**Administrative History:** Regulation .04A, C amended effective March 26, 2018 (45:6 Md R. 317)

**Administrative History:** Regulation .06 amended effective August 1, 2005 (32:15 Md. R. 1319)

**Administrative History:** 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)

**Administrative History:** Regulation .07D amended effective August 1, 2005 (32:15 Md. R. 1319)

**Administrative History:** Regulation .14 amended effective August 1, 2005 (32:15 Md. R. 1319)

#### Regulation .01 General.

*COMAR 05.06.06.01*

These regulations set forth the policies and procedures for issuance of mortgage insurance by the Maryland Housing Fund to insure single family residential property.

#### Regulation .02 Scope.

*COMAR 05.06.06.02*

A. 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:

  (1) Single Family Lender Insurance—primary mortgage insurance coverage for public and private lenders;

  (2) Single Family Public Mortgagee Insurance—primary and pool insurance coverage for public agency lenders; and

  (3) Insurance of first mortgages purchased by public employee retirement systems or pension funds.

B. 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.

C. Public Lender Primary and Pool Mortgage Insurance Program.

  (1) Under this mortgage insurance program, the Fund may insure both primary and pool insurance for first mortgages for approved public agency lenders.

  (2) 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.

  (3) 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.

  (4) 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.

D. Public Employee Retirement System or Pension Fund Program.

  (1) 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.

  (2) 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.

  (3) The Fund will insure up to 100 percent of the mortgage loan. Closing costs or prepaid items may not be mortgaged.

  (4) The Fund is not liable for more than 3 months interest in arrears on any reimbursable claim.

E. Contents. The requirements for the programs insured under the Single Family Reserve are set forth in Regulations .04—.16 of this chapter.

F. 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:

  (1) Regulations .03, .06—.08, .10, .11, .15, and .16 of this chapter;

  (2) 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

  (3) 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.

#### Regulation .03 Definitions.

*COMAR 05.06.06.03*

A. 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.

B. Terms Defined.

  (1) “Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland.

  (2) “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.

  (3) “Applicant” means an individual applying to a lender for a mortgage.

  (4) “Appraisal” means a written evaluation of a property performed by a residential real estate appraiser licensed by the State.

  (5) “Assignment of mortgage” means a transfer of ownership of a mortgage from one lender to another or to the Fund.

  (6) “Assumption agreement” means an agreement by one borrower to pay an obligation originally incurred by another.

  (7) “Beneficiary” means the lender named in a promissory note or any successor or assign of the lender.

  (8) “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.

  (9) “Claim” means the timely filed written request by an insured for payment by the Maryland Housing Fund on an insurance policy.

  (10) “Closing costs” means:

    (a) 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

    (b) Title fees such as the attorney's fee, documentation and preparation fee, recording fee, State and local transfer tax, and documentary stamps.

  (11) “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.

  (12) “Collateral” means the security given as a pledge for the fulfillment of an obligation.

  (13) “Condominium” means a multi-unit structure or project subject to a condominium regime under Real Property Article, §11-102, Annotated Code of Maryland.

  (14) “Condominium unit” means an individual unit in a condominium.

  (15) “County” means a county of Maryland, including Baltimore City.

  (16) “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.

  (17) “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.

  (18) “FHLMC” means the Federal Home Loan Mortgage Corporation.

  (19) “FNMA” means the Federal National Mortgage Association.

  (20) “Forbearance” means the act of refraining from taking legal action against a borrower despite arrearage in a mortgage loan.

  (21) “Foreclose” means legal action to deprive the borrower of all right, title, and interest in the collateral securing a loan in default.

  (22) “Fund” or “MHF” means the Maryland Housing Fund.

  (23) “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.

  (24) “Insurance endorsement” means the legally binding acceptance of an obligation to insure in accordance with the terms of the policy.

  (25) “Lender” or “mortgagee” means the original lender of a mortgage loan and its successors and assigns.

  (26) “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.

  (27) “Manufactured home” means a structure designed to be used as a dwelling, which:

    (a) 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;

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

    (c) 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;

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

    (e) Is certified by:

      (i) 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

      (ii) The Department of Housing and Community Development as an industrialized building in accordance with Public Safety Article, §12-308, Annotated Code of Maryland;

    (f) Complies with all requirements set forth in COMAR 05.02.04 and Maryland Housing Fund minimum property and appraisal standards and requirements;

    (g) 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;

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

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

  (28) “Mortgage loan” means a loan, repayment of which is secured by a mortgage or deed of trust.

  (29) “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.

  (30) “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.

  (31) “Premium” means that amount paid for primary mortgage insurance coverage or for pool insurance coverage.

  (32) “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.

  (33) “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.

  (34) “Project” means a group of eligible single family properties constructed or rehabilitated by a developer, which may be a:

    (a) Subdivision or a portion of a subdivision; or

    (b) Scattered-site project.

  (35) “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.

  (36) “Public mortgagee” means any qualified public agency that makes or purchases single family mortgages.

  (37) “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.

  (38) “Real property” means land and the improvements on it, including the rights and benefits of ownership.

  (39) “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.

  (40) “Secretary” means the Secretary of Housing and Community Development.

  (41) “Settlement costs” mean all closing costs and prepaid expenses.

  (42) “Single family reserve” or “reserve” means the Single Family Regular Program Reserve as described in Regulation .04 of this chapter.

  (43) “Single family property” means owner-occupied one-to-four unit residential property.

#### Regulation .04 Reserves.

*COMAR 05.06.06.04*

A. Types of Reserves.

  (1) All insurance issued by the Fund is backed by an insurance reserve.

  (2) There currently exist the following seven separate reserves:

    (a) One for multifamily insurance;

    (b) Three for single family insurance;

    (c) One for general reserve insurance;

    (d) One for business reserve insurance; and

    (e) An unallocated reserve for moneys not yet transferred to a specific reserve.

  (3) The three separate reserve funds that have been established to back types of single family insurance are:

    (a) Single family regular program insurance;

    (b) Revitalization program insurance formerly known as pilot program insurance; and

    (c) Single family home and energy loan insurance.

B. Claims on Reserves.

  (1) 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.

  (2) All reserves are subject to payment of claims arising from single family regular and revitalization program insurance issued before August 20, 1975.

  (3) 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.

C. 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:

  (1) Allocated and transferred by the Secretary into any or each of the identified reserves;

  (2) Restricted by the Secretary as a reserve for the payment of a claim or potential claim under any category of insurance;

  (3) Used by the Fund to make payment of a claim, in whole or in part, under any category of insurance; or

  (4) Retained in the unallocated reserve pending allocation, transfer, restriction, or use.

D. 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.

#### Regulation .05 Eligible Property.

*COMAR 05.06.06.05*

Properties that are financed by mortgage loans insured by the Fund shall meet property eligibility requirements at the time of loan closing as follows:

A. Be single family properties with not more than four units;

B. Be located in the State;

C. Have clear and merchantable title acceptable to the Fund;

D. Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes;

E. Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance;

F. Have an appraisal and appraised value that are satisfactory to the Fund;

G. Meet the minimum property standards of the Fund; and

H. If the property is a condominium, meet the following requirements:

  (1) Have either a:

    (a) Certification that it is in compliance with FNMA or FHLMC standards, or

    (b) Sales and management plan satisfactory to the Fund; and

  (2) If the condominium is a conversion from a rental housing development:

    (a) There shall be in place a relocation plan for tenants acceptable to the Fund, unless the buyer is a current tenant,

    (b) The buildings shall have been vacant at least 12 months before start of the conversion, or

    (c) The Secretary shall have determined that the conversion serves an exceptional public purpose.

#### Regulation .06 Eligible Borrowers.

*COMAR 05.06.06.06*

A person can be an eligible borrower subject to the following general requirements:

A. The person shall be legally able to enter into contractual obligations;

B. The borrower may not own any other real property at the time the insured mortgage loan closes, except a:

  (1) Cemetery plot,

  (2) Lot on which the residential housing unit to be financed with proceeds of the mortgage loan is to be built;

C. 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;

D. The borrower shall establish to the satisfaction of the Fund the capacity to meet the financial obligations of the loan;

E. The borrower shall have maintained a credit standing and history of financial management which is acceptable to the Fund.

#### Regulation .07 Eligible Mortgage Loans.

*COMAR 05.06.06.07*

A. Mortgage loans shall meet the general eligibility requirements of this regulation.

B. Security.

  (1) Mortgage loans shall be secured by a first lien against the mortgaged property.

  (2) Mortgage loans insured by the Fund shall be secured by real property that meets the requirements of the Fund.

  (3) 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.

C. Types of Ownership.

  (1) 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.

  (2) 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.

D. Mortgage Terms.

  (1) 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.

  (2) 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.

  (3) Mortgages shall bear interest at the rate agreed upon by the lender and the borrower, and committed upon by the Fund.

  (4) Mortgage terms or principal balance due on an insured mortgage may not be modified without prior written approval of the Fund.

  (5) 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.

#### Regulation .08 Eligible Lenders.

*COMAR 05.06.06.08*

A. 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.

B. The Fund will approve mortgage lenders that execute a certification that they are:

  (1) A financial institution which has accounts insured by any agency of the United States;

  (2) An institutional lender approved under a federal mortgage loan insurance agency; or

  (3) Any FNMA or FHLMC approved institutional conventional seller.

C. 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:

  (1) Presents evidence satisfactory to the Fund of:

    (a) Responsibility,

    (b) Permanency,

    (c) Financial adequacy, and

    (d) Requisite administrative, technical, and mortgage servicing capabilities; and

  (2) Submits an application and all supporting documentation that the Fund may require.

D. 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.

#### Regulation .09 Primary Mortgage Insurance Conditions.

*COMAR 05.06.06.09*

A. Application.

  (1) 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.

  (2) If an application is denied, the lender may request reconsideration by the Director of the Maryland Housing Fund.

B. 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.

C. Limitations.

  (1) Scope of Insurance Coverage.

    (a) Mortgage insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk.

    (b) 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.

    (c) 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.

  (2) 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:

    (a) Transfer cannot by law be prohibited; or

    (b) Lender is without actual knowledge of the transfer.

  (3) Insurance Certificates.

    (a) 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:

      (i) Insurance premiums are paid as due; and

      (ii) All conditions of the insurance are satisfied.

    (b) 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.

  (4) 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.

  (5) 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.

  (6) 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:

    (a) The date of the sale;

    (b) The name and address of the assignee;

    (c) The name of the borrower;

    (d) The certificate or policy number of the loan to be sold; and

    (e) Whether servicing is to be transferred or retained.

  (7) Loan Modification. A loan modification or refinancing of an existing insured mortgage requires Fund review and approval for continued mortgage insurance coverage.

#### Regulation .10 Default Procedures.

*COMAR 05.06.06.10*

A. Notice of Delinquency. Notice of delinquency shall be submitted by a lender or its servicing agent to the Fund in writing within:

  (1) 45 days if the first payment due under the loan is not paid when due; or

  (2) 10 days after the account is in default for 60 days.

B. Actions by Lender.

  (1) General.

    (a) 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.

    (b) 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.

  (2) 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.

  (3) Forbearance.

    (a) 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:

      (i) Deal with delinquencies of 3 months or less; or

      (ii) Provide for the loan to be brought current within 6 months.

    (b) 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.

  (4) 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.

  (5) Deed in Lieu of Foreclosure.

    (a) 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.

    (b) If the Fund authorizes conveyance by a deed in lieu of foreclosure, it shall be on condition of conveyance by clear and marketable title.

  (6) Foreclosure.

    (a) 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.

    (b) 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.

    (c) A lender shall notify the Fund in writing within 5 working days after:

      (i) A foreclosure sale; or

      (ii) Acquisition of title to the property by deed in lieu of foreclosure.

  (7) 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.

#### Regulation .11 Termination of Insurance.

*COMAR 05.06.06.11*

Maryland Housing Fund insurance coverage may be terminated by the Fund at its discretion under the following conditions:

A. The lender requests in writing cancellation of the insurance;

B. A claim is satisfied by the Fund;

C. The mortgage loan is paid in full;

D. A renewal premium is not paid after receipt of written notice from the Maryland Housing Fund;

E. 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;

F. Modification of mortgage terms without the Fund's prior approval; or

G. Other action with respect to a defaulted mortgage loan without the Fund's prior approval.

#### Regulation .12 Forward Insurance Commitments.

*COMAR 05.06.06.12*

A. General.

  (1) 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.

  (2) The Fund may limit the number of single family units it will insure in any one project or subdivision.

  (3) 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.

  (4) 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:

    (a) The project involves diverse model types, pricing, staging, or phasing;

    (b) The project is a scattered-site project; or

    (c) Other circumstances are considered by the Fund to be appropriate for case-by-case consideration.

B. New Construction Projects.

  (1) 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.

  (2) Types of new construction projects eligible for forward reservations are:

    (a) Stick-built housing;

    (b) Manufactured housing; and

    (c) Modular or panelized housing.

C. Rehabilitation Projects. Projects involving rehabilitation are eligible for approval of insurance for permanent financing if:

  (1) The proposed rehabilitation will correct all code violations and bring the property to a standard acceptable to the Maryland Housing Fund and the Department;

  (2) The structures to be rehabilitated are unoccupied at the time of commitment, except in cases of:

    (a) Occupancy by tenants who are to become homeowners, or

    (b) Adoption of a relocation plan acceptable to the Maryland Housing Fund and the Department;

  (3) Except in cases of tenant conversion to homeownership, the buildings to be rehabilitated are owned or to be owned by the developer.

D. Project Application Process.

  (1) 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.

  (2) Applications shall contain all information, documents, and items that the Maryland Housing Fund requires, including:

    (a) Subdivision and site plans;

    (b) Appraisals satisfactory to the Maryland Housing Fund;

    (c) Condominium or homeowners association documents, as applicable;

    (d) Plans and specifications for each model type to be built by the developer;

    (e) Local government resolution of approval;

    (f) Warranty certification;

    (g) Opinion of counsel for the developer;

    (h) Current and valid FNMA 1027c or FNMA 1028;

    (i) Minimum property standard certificate; and

    (j) Other information and documentation as may be required by the Maryland Housing Fund.

  (3) 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:

    (a) Cost, unit size, type of building, quality of construction, energy efficiency, and location of the project;

    (b) Geographic distribution of all projects for which the Fund mortgage insurance has been made available;

    (c) Regional demand and initial marketability of the product within its locale along with resale and distressed sale values;

    (d) The number and amount of mortgages requested to be insured;

    (e) The incomes of the households to be served; and

    (f) The Maryland Housing Fund's prior experience with the developer and lender.

#### Regulation .13 Arrangements with Other Insurers.

*COMAR 05.06.06.13*

A. The Fund is authorized to enter into reinsurance and coinsurance arrangements, as approved by the Secretary.

B. 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:

  (1) Fund does not retain contingent liability under the reinsurance or co-insurance arrangement; or

  (2) Reinsurer or coinsurer is a:

    (a) Federal agency, or

    (b) Private insurer having surplus as regards policy holders equal to at least $15,000,000, which is approved by FNMA or FHLMC.

#### Regulation .14 Premiums and Types of Coverage.

*COMAR 05.06.06.14*

A. Premiums for Primary Mortgage Insurance and Coverage for Public and Private Lenders.

  (1) 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.

  (2) 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.

  (3) Premiums for mortgage insurance shall be determined by the Maryland Housing Fund from time to time for various programs.

  (4) Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include:

    (a) Depth of insurance coverage;

    (b) Length of mortgage term;

    (c) Borrower's financial capabilities;

    (d) Credit rating of borrowers; and

    (e) Condition of property securing loan.

  (5) The Fund shall maintain a publicly available premium rate sheet with a stated effective date for the premiums.

B. Pool Insurance Coverage for Certain Public Agency Lenders.

  (1) 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.

  (2) 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.

  (3) 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.

  (4) 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.

  (5) 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.

C. 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.

#### Regulation .15 Claims.

*COMAR 05.06.06.15*

A. Filing.

  (1) A claim may not be settled by the Fund until the lender has:

    (a) Implemented the actions prescribed by the Fund to cure a defaulted mortgage loan; and

    (b) Submitted to the Fund an application for settlement of a claim.

  (2) A lender shall submit its claims on the Fund forms within 30 calendar days from the date of:

    (a) 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

    (b) The transfer of title under §D(3) or (4) of this regulation.

B. Computation of Claims. The computation of a claim shall be made by:

  (1) Adding together the following amounts:

    (a) Unpaid principal balance due under the mortgage;

    (b) Interest at the mortgage rate, not at a default or penalty rate, through the following date, as applicable:

      (i) Foreclosure sale,

      (ii) Assignment to the Fund,

      (iii) Execution of a deed to the lender in lieu of foreclosure, or

      (iv) Settlement on a sale by the mortgagor to a third party;

    (c) 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;

    (d) 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

    (e) Other necessary expenses incurred by the lender for preservation of the property in accordance with the requirements of the insurance policy; and

  (2) Subtracting the following:

    (a) All amounts received by the lender or account of the mortgage after the institution of foreclosure proceedings or the acquisition of the mortgaged property;

    (b) 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;

    (c) 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

    (d) If the Fund is only the pool mortgage insurer, any benefit due under a primary mortgage insurance policy.

C. Items Not Covered. Coverage does not include:

  (1) Loss due to:

    (a) Casualty, or

    (b) Title risk;

  (2) Mortgage insurance premiums paid by the lender or servicing agent;

  (3) Late charges;

  (4) Expenses incurred for property repair resulting from:

    (a) Accidental causes,

    (b) Negligence or gross negligence,

    (c) Flood,

    (d) Fire,

    (e) Termites,

    (f) Vandalism,

    (g) Defective construction,

    (h) Undisclosed, preexisting conditions of environmental contamination,

    (i) Physical damage, or

    (j) Other causes except those permitted under §B(1)(e) of this regulation.

D. Settlement of Claims.

  (1) The Fund shall settle mortgage insurance claims in cash.

  (2) Settlement shall be by one of the four methods in §D(3)—(6) of this regulation, at the Fund's election.

  (3) 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.

  (4) 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.

  (5) 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:

    (a) Full amount of the claim, if the Fund is both primary and pool insurer; or

    (b) Amount of claim up to the percentage coverage specified in the primary mortgage insurance policy, if the Fund is only the primary mortgage insurer.

  (6) Third Party Acquisition. When the property is sold to a third party under any of the following circumstances:

    (a) At foreclosure;

    (b) By the lender after taking title by deed in lieu of foreclosure; or

    (c) By the borrower after the beginning of foreclosure proceedings, with the approval of the Fund in accordance with the following:

      (i) 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

      (ii) 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.

E. 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.

#### Regulation .16 General Provisions.

*COMAR 05.06.06.16*

A. 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:

  (1) 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

  (2) In the written determination of the Secretary, the:

    (a) Application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act,

    (b) Waiver would not be materially adverse to bondholders or others relying on the single family reserve of the Fund, and

    (c) Office of the Attorney General has approved the form and legal sufficiency of the waiver.

B. 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.

C. 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.