J. Paul Rieger, Jr. of First American Title Insurance Company has provided a Summary of Select Legislation Passed by the 2014 Maryland General Assembly that is available on the Real Property Section’s web site under “Section Documents.” His summary of Chapter 634 (HB1045) amending Real Property Art. 7-112 is below:
Maryland’s “automatic subordination” law presently provides that a mortgage or deed of trust (collectively, “mortgage”) on residential property which refinances, in full, a first mortgage at an interest rate lower than the first mortgage will, upon recording, have the same lien priority over an existing, junior mortgage as the first mortgage being refinanced provided that: (1) the principal amount secured by the junior mortgage does not exceed $150,000; (2) the principal amount secured by the refinance mortgage does not exceed the unpaid outstanding principal balance secured by the first mortgage plus an amount to pay closing costs not exceeding $5,000; and (3) the refinance mortgage contains the required statutory statement** in bold or capitalized letters. This bill revises the statute to provide that the $5,000 amount by which the refinance mortgage may exceed the unpaid outstanding principal balance secured by the first mortgage, may now be comprised of both closing costs and “escrow costs.” Escrow costs are defined as “money to pay property taxes, hazard insurance, mortgage insurance, and similar costs associated with real property secured by a refinance mortgage that a lender requires to be collected at closing and held in escrow.”
Effective October 1, 2014 and construed to apply prospectively, only, and not to have any effect on, or application to, a refinance mortgage recorded or having an effective date prior to October 1, 2014.
**EDITOR’S NOTE: Last year, we posted a summary of the bill adopting Real Property Art. 7-112 that has been amended by the bill summarized above. The required statutory statement is identified in the summary – available here.