2023 Maryland Statutes › Commercial Law › Title 12 - Credit Regulations › Subtitle 4 - Secondary Mortgage Loans -- Credit Provisions › Section 12-409.1 - Home Buyer's Equity Protection

(a)    (1)    In this section the following words have the meanings indicated.
(2)    “Covered loan” means a mortgage loan made under this subtitle that meets the criteria for a loan subject to the federal Home Ownership Equity Protection Act set forth in 15 U.S.C. § 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. § 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.
(3)    “Fully indexed rate” means the index rate, as defined in the secondary mortgage loan documents, prevailing at the time the secondary mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate.
(4)    “Home buyer education or housing counseling” means instruction on preparing for home ownership, shopping for a home, obtaining a mortgage, loan closing, and life as a homeowner.
(b)    A lender may not make a secondary mortgage loan without giving due regard to the borrower’s ability to repay the secondary mortgage loan in accordance with its terms, including the fully indexed rate of the secondary mortgage loan, if applicable, and property taxes and homeowner’s insurance whether or not an escrow account is established for the collection and payment of these expenses.
(c)    (1)    Due regard to a borrower’s ability to repay a secondary mortgage loan must include:
(i)    Consideration of the borrower’s debt to income ratio, including existing debts and other obligations; and
(ii)    Verification of the borrower’s gross monthly income and assets by review of third–party written documentation reasonably believed by the lender to be accurate and complete.
(2)    Acceptable third–party written documentation includes:
(i)    The borrower’s Internal Revenue Service form W–2;
(ii)    A copy of the borrower’s income tax return;
(iii)    Payroll receipts;
(iv)    The records of a financial institution; or
(v)    Other third–party documents that provide reasonably reliable evidence of the borrower’s income or assets.
(3)    This subsection does not apply to a secondary mortgage loan:
(i)    Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or
(ii)    That refinances an existing mortgage loan if the refinance mortgage loan is:
1.    Offered under the federal Homeowner Affordability and Stability Plan; and
2.    Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.
(d)    (1)    In this subsection, “loan application” has the meaning stated in § 12–125 of this title.
(2)    At the time a borrower completes a loan application for a covered loan, the lender shall provide the borrower with:
(i)    A written recommendation that the borrower seek home buyer education or housing counseling; and
(ii)    A list of agencies and organizations approved by the county in which the residential real property securing the covered loan is located to provide home buyer education or housing counseling.