Chapter 08. General Reserve Insurance
Regulation .01 General.LinkCopy Citation
These regulations set forth the policies, procedures, and authorization for:
A.
Issuance of mortgage insurance and credit enhancement under the general reserve established in COMAR 05.06.01.04A(5); and
B.
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.
Regulation .02 Definitions.LinkCopy Citation
A.
In this chapter, the following terms have the meanings indicated.
B.
Terms Defined.
(1)
“Act” means Housing and Community Development Article, Title 3, Subtitle 2, Annotated Code of Maryland, as amended.
(2)
“Department” means the Department of Housing and Community Development.
(3)
“FHLMC” means the Federal Home Loan Mortgage Corporation.
(4)
“FNMA” means the Federal National Mortgage Association.
(5)
“Fund” means the Maryland Housing Fund, and, when appropriate, its authorized officers or personnel.
(6)
Mortgage.
(a)
“Mortgage” means a written instrument evidencing or creating a lien against real property to provide collateral to secure the repayment of a debt.
(b)
“Mortgage” includes a deed of trust.
(7)
“Mortgagee” means the original lender under a mortgage and its successors and assigns.
(8)
“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.
(9)
Nonprofit Entity.
(a)
“Nonprofit entity” means any organization exempt from taxation under the Internal Revenue Code of the United States, 26 U.S.C. §501(c).
(b)
“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.
(c)
“Nonprofit entity” does not include limited dividend corporations or partnerships.
(10)
“Secretary” means the Secretary of Housing and Community Development or the Secretary's designee.
Regulation .03 Eligible Property.LinkCopy Citation
A property financed by mortgage loans insured by the Fund shall:
A.
Be a residential property or type of property permitted under the Act;
B.
Have clear and merchantable title acceptable to the Fund;
C.
Conform to all applicable federal, State, and local building, zoning, environmental, health, and housing codes;
D.
Be insured with hazard insurance issued by a company that is approved by the State Insurance Commissioner and, when applicable, flood insurance;
E.
Have an appraised value that is satisfactory to the Fund; and
F.
Meet any other standards of the Fund.
Regulation .04 Eligible Borrower.LinkCopy Citation
A.
A borrower shall establish to the satisfaction of the Fund the capacity to meet the financial obligations of the loan.
B.
A borrower shall have maintained a credit standing and history of financial management that is acceptable to the Fund.
Regulation .05 Mortgage Loan.LinkCopy Citation
A.
A mortgage loan shall be secured by a lien against the mortgaged property.
B.
Real property securing a loan shall meet the requirements of the Fund.
C.
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.
D.
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.
E.
A mortgage shall bear interest at the rate agreed on by the lender and the borrower, and committed to by the Fund.
F.
A mortgage shall conform to the required documentation and eligibility criteria required by the Fund.
Regulation .06 Eligible Lenders.LinkCopy Citation
A.
The Department, or any agency of the Department, is an eligible lender approved for mortgage insurance issued by the Fund.
B.
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.
C.
The Fund may approve a mortgage lender that is authorized to conduct business in Maryland and that executes a certification that it is:
(1)
A financial institution that 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.
D.
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:
(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.
Regulation .07 Mortgage Insurance.LinkCopy Citation
A.
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.
B.
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.
C.
Scope of Insurance Coverage.
(1)
Mortgage insurance coverage is limited to economic loss due to a monetary default and does not include loss due to casualty or title risk.
(2)
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.
(3)
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.
D.
To maintain insurance coverage, the following transactions require prior approval of the Fund on terms and conditions acceptable to the Fund:
(1)
A transfer of any interest in the secured property;
(2)
An assignment of the insured mortgage loan;
(3)
An assumption of an insured mortgage loan; or
(4)
Any change or modification of the terms of the insured mortgage.
Regulation .08 Premiums and Types of Coverage.LinkCopy Citation
A.
Premiums for mortgage insurance shall be determined by the Fund from time to time for various programs and types of mortgage insurance.
B.
Premiums may be set at different levels for different categories of loans and loan programs depending on the risk factors, which may include the:
(1)
Depth of insurance coverage;
(2)
Length of mortgage term;
(3)
Financial capability of the borrower;
(4)
Credit rating of the borrower; and
(5)
Condition of property securing loan.
C.
The Fund shall maintain a publicly available premium rate sheet with a stated effective date for the premiums.
D.
The Fund may offer insurance on mortgage loans that are within a pool of mortgages as described in the applicable insurance policy.
E.
The Fund may enter into reinsurance, coinsurance, and risk-sharing arrangements with other insurers and lenders, as approved by the Secretary.
Regulation .09 Default Procedures.LinkCopy Citation
A.
The insured lender shall follow the procedures contained in the mortgage insurance policy upon default of an insured mortgage.
B.
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.
C.
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.
D.
The Fund may refuse payment of a claim on the basis of fraud, misrepresentation, or material error or omission with respect to any claim.
Regulation .10 General Provisions.LinkCopy Citation
A.
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:
(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 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.
Reconsideration.
(1)
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.
(2)
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.
(3)
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.
C.
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.
D.
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.
Chapter annotations
Authority: Housing and Community Development Article,§3-207(a), Annotated Code of Maryland
History: Effective date: November 3, 2008 (35:22 Md. R. 1956)