Md. Code Regs. 05.03.06.09

Current through Register Vol. 51, No. 24, December 2, 2024

Section 05.03.06.09 - Loan Terms and Requirements-General

A. Each loan financed by the Fund shall comply with the conditions of this regulation.

B. Security.

(1) Each loan shall be secured by a mortgage or deed of trust that shall be:

(a) In a lien position required by the Administration; and

(b) Executed and recorded in accordance with the requirements of existing law.

(2) Each deed of trust shall be the subject of a title insurance policy in an amount at least equal to the outstanding principal amount of the loan, insuring that the deed of trust constitutes a first lien, subject only to liens for taxes and assessments and permitted liens and encumbrances on the real property with respect to which the loan is secured.

C. Mortgage Insurance or Guarantee.

(1) Primary Mortgage Insurance.

(a) Each first mortgage loan shall be the subject of primary mortgage insurance issued by a private or public mortgage insurer acceptable to the Administration.

(b) Except as provided in §C(1)(c) or (e) or C(2) of this regulation, each loan shall be subject to primary mortgage insurance either in the amount of:

(i) 100 percent of the unpaid principal amount of the mortgage loan, if issued by the Federal Housing Administration (FHA) or the Veterans Administration (VA); or

(ii) 25 percent of the mortgage loan amount if issued by a private or governmental insurer acceptable to the Administration.

(c) A first mortgage loan need not be subject to primary mortgage insurance if the original principal amount of the mortgage loan is not in excess of 75 percent of the lesser of the:

(i) Appraised value; or

(ii) Purchase price of the residence, excluding settlement costs.

(d) The Administration may permit termination of primary mortgage insurance if the unpaid principal amount of the mortgage loan is 75 percent or less of the original principal amount.

(e) A second mortgage loan may be required to be subject to primary mortgage insurance at the sole discretion of the Administration.

(2) Except for second mortgage loans, loans made under the Program are required to be subject to mortgage pool insurance from an insurer acceptable to the Administration, unless the loan is subject to primary mortgage issuance or guaranty under §C(1)(b)(i) of this regulation.

D. Interest Rate.

(1) Loans financed from moneys in the Mortgage Yield Account may be subject to payment of points and shall bear interest at rates established from time to time by certificates of the Administration in order to achieve yields required for attribution to other investments made under the General Bond Certificate.

(2) Other loans financed under the Special Purpose Investment Fund may be made at rates of interest up to prevailing market rates of interest.

E. Escrow. Each loan shall require escrow payments on the part of the mortgagor with respect to all taxes, assessments, water rates, ground rents, sewer rates, condominium or homeowners association fees, insurance premiums, including mortgage insurance premiums, and other charges, to the extent actually charged or assessed, and any prior liens at any time assessed or levied against the premises or any part of it, unless otherwise approved by the Administration.

F. Property Insurance. Fire and extended hazard insurance coverage shall meet the following requirements:

(1) Policies shall be written by insurance companies authorized to transact business in the State;

(2) Policies shall be in force at the time of the mortgage loan closing;

(3) The Administration shall be named as the mortgagee in a standard mortgagee clause or endorsement attached to or printed in the policy;

(4) The insurance shall be in an amount at least equal to the lesser of:

(a) The original principal balance of the mortgage loan, or

(b) 100 percent of the replacement value of the improvements located on the property;

(5) The insurance shall be payable in an amount equal to any partial or total loss not exceeding the full amount of insurance to prevent the borrower from being a co-insurer;

(6) The terms and coverage of all insurance policies shall be satisfactory to the Administration.

Md. Code Regs. 05.03.06.09

Regulation .09 amended effective July 30, 2007 (34:15 Md. R. 1349)