1. A. 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.

2. B. Claims Payment Without Assignment to the Fund.

   1. (1) 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:

      1. (a) 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;

      2. (b) 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:

         1. (i) Take title to the property and pay the full loss to the insured lender, or
         2. (ii) After sale or disposition of the property by the insured lender, pay the net loss after crediting gross proceeds of the disposition.
   2. (2) 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.
   3. (3) For any project, the Fund may elect at any time to take an assignment of the insured loan and pay the full claim.

3. C. 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:

   1. (1) The lesser of:

      1. (a) The unamortized principal balance of the insured loan at the time of default, or
      2. (b) The unamortized principal balance of the insured loan on the date of the notice from the insured lender to the Fund; plus

   2. (2) Interest at the mortgage rate on the unamortized principal balance of the insured loan from the date of:

      1. (a) Default, through the date of claims settlement if notice was timely given under Regulation .19A of this chapter, or
      2. (b) 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

   3. (3) Expenses paid by the insured lender during the period of default in connection with preserving the project, including:

      1. (a) Property taxes,
      2. (b) Property and liability insurance premiums,
      3. (c) Other customary and reasonable expenses of operating the project paid by the lender with the prior written approval of the Fund; plus
   4. (4) 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

   5. (5) 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:

      1. (a) Any source, for the account of the borrower, and
      2. (b) Rents or other income, after deducting actual and reasonable expenses for operating the property; less
   6. (6) 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.

4. D. Claims Payment After Assignment—by Promissory Claim Note.

   1. (1) 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.

   2. (2) A claim may be paid by delivery of a promissory claim note if all of the following conditions are satisfied:

      1. (a) The lender consents;
      2. (b) 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
      3. (c) 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.

   3. (3) If payment by claim note is permitted under §D(2) of this regulation:

      1. (a) 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;
      2. (b) 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;
      3. (c) 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;
      4. (d) 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
      5. (e) 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.

   4. (4) A note issued in payment of a claim shall mature and be paid upon the first to occur of the following:

      1. (a) Sale of the project financed by the loan;
      2. (b) Maturity of the loan;
      3. (c) 7 years from the date of issuance of the claim note; or
      4. (d) 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.

Authority: 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)