1654                                               LAWS OF MARYLAND                           [Ch. 420

OF AN EXPENSE OR ESCROW ACCOUNT THAT TENDS TO PROTECT THE
SECURITY OF THAT LOAN BY ACCUMULATING PONDS FOR THE
PAYMENT OF TAXES, INSURANCE PREMIUMS. OR OTHER EXPENSES.
SHALL [[EITHER (1) ACCOUNT FOR AND CREDIT PAYMENTS FOR
THESE EXPENSES MADE BY OR FOR THE BORROWER BY THE "DIRECT
REDUCTION METHOD" IN ACCORDANCE WITH THE PROCEDURES
PROVIDED BELOW IN SUBSECTION (F); OR (2)]] PAY THE
BORROWER INTEREST ON THE FUNDS ACCUMULATED IN THE EXPENSE
OR ESCROW ACCOUNT IN ACCORDANCE WITH THE PROCEDURE
PROVIDED BELOW [[IN SUBSECTION (G) .

(F) IF THE "DIRECT REDUCTION METHOD" IS ELECTED
FOR USE BY THE LENDING INSTITUTION, THE FOLLOWING
PROCEDURES MUST BE COMPLIED WITH:

(1) IF PAYMENTS ARE MADE BY THE BORROWER TO
COVER FUTURE TAXES. INSURANCE PREMIUMS. OR OTHER EXPENSES
TO PROTECT THE INTERESTS OF THE BORROWER. THE LENDING
INSTITUTION SHALL REDUCE THE OUTSTANDING AMOUNT OF THE
LOAN.

(2) IF PAYMENTS ARE MADE BY THE LENDING
INSTITUTION TO COVER FUTURE TAXES. INSURANCE PREMIUMS, OR
OTHER EXPENSES TO PROTECT THE INTERESTS OF THE BORROWER,
THE LENDING INSTITUTION SHALL ADD THE COST OF THESE
PAYMENTS TO THE OUTSTANDING AMOUNT OF THE LOAN.

(G) IF THE LENDING INSTITUTION ELECTS TO PAY
INTEREST ON THE EXPENSE OR ESCROW ACCOUNT. THE FOLLOWING
PROCEDURES MUST BE COMPLIED WITH;]] .

(1)    THE LENDING INSTITUTION SHALL PAY
INTEREST TO THE BORROWER AT THE RATE REGULARLY PAID BY
THE LENDING INSTITUTION ON REGULAR PASS BOOK SAVINGS
ACCOUNTS. BUT IN NO CASE SHALL THIS RATE OF INTEREST BE
LESS THAN 3%.

(2)    THE INTEREST SHALL BE COMPUTED ON THE
AVERAGE MONTHLY BALANCE ACCRUED IN THE EXPENSE OR ESCROW
ACCOUNT.

(3)    THE INTEREST SHALL BE PAID ANNUALLY TO
THE BORROWER BY CREDITING THE EXPENSE OR ESCROW ACCOUNT
WITH THE AMOUNT OF INTEREST DUE.

(4) THE PROVISIONS OF SECTION 13(B) SHALL
NOT APPLY TO LENDING INSTITUTIONS USING THE DIRECT
REDUCTION METHOD TO COVER FUTURE TAXES. INSURANCE OR
OTHER EXPENSES. IN USING THIS METHOD THE PRINCIPAL SHALL
BE CREDITED FOR THESE PAYMENTS.

(H) A LENDER MAY NOT REFUSE LOANS TO ANY PERSON
SOLELY ON THE BASIS OF THE GEOGRAPHIC AREA OR
NEIGHBORHOOD OR RACE. CREED. COLOR. AGE, SEX. MARITAL