WILLIAM DONALD SCHAEFER, Governor                         Ch. 397

CHAPTER 397
(House Bill 1599)

AN ACT concerning

Credit Regulation - Loans - Escrow Accounts

FOR the purpose of providing for the application of certain requirements regarding the
use of funds in escrow accounts; requiring a lender to return or credit to a borrower
a certain excess amount in an escrow account under certain circumstances; making
stylistic changes; and generally relating to the use of funds in escrow accounts.

BY repealing and reenacting, with amendments,
Article - Commercial Law
Section 12-109.1
Annotated Code of Maryland
(1990 Replacement Volume and 1992 Supplement)

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That the Laws of Maryland read as follows:

Article - Commercial Law

12-109.1.

(A) THE PROVISIONS OF THIS SECTION DO NOT APPLY TO ESCROW ACCOUNTS
MAINTAINED IN CONNECTION WITH LOANS DESCRIBED IN § 12-103(E)(1) OF THIS
SUBTITLE.

[(a)](B) [Funds] EXCEPT IN A FORECLOSURE, RELEASE, OR AS PROVIDED
IN SUBSECTION (C) OF THIS SECTION, FUNDS in any escrow account for use in paying
taxes, insurance premiums and ground rents may not be used to [ reduce]:

(1)      REDUCE the principal; OR

(2)      [, or to pay] PAY interest or other loan charges [except upon
foreclosure, release, or as provided in subsection (b)].

[(b)](C) If there is periodically [an overage] A BALANCE in the escrow account
THAT EXCEEDS THE AMOUNT PROVIDED FOR IN THE NOTE, LOAN AGREEMENT, OR
SECURITY INSTRUMENT, the borrower shall be given at least annually the option of:

(1)      [ receiving] RECEIVING a refund of the [overage] EXCESS AMOUNT;

(2)      [, applying] APPLYING the [overage] EXCESS AMOUNT to the payment
of principal and interest; or

(3)      [of leaving] LEAVING the [overage] EXCESS AMOUNT in the escrow
account.

(D) A refund of [the overage] ANY EXCESS AMOUNT shall be made:

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