WILLIAM DONALD SCHAEFER, Governor                           S.B. 329

(B)      (1) A LENDING INSTITUTION THAT MAKES A LOAN TO A CONSUMER
BORROWER SECURED BY A FIRST MORTGAGE OR FIRST DEED OF TRUST ON
RESIDENTIAL REAL PROPERTY AND CREATES OR IS THE ASSIGNEE OF AN ESCROW
ACCOUNT IN CONNECTION WITH THAT LOAN SHALL PAY INTEREST TO THE
CONSUMER BORROWER ON THE FUNDS IN THE ESCROW ACCOUNT AT THE
GREATER OF:

(I)       A RATE OF 3 PERCENT PER ANNUM SIMPLE INTEREST; OR

(II)     THE RATE OF INTEREST REGULARLY PAID BY THE LENDING
INSTITUTION ON REGULAR PASSBOOK SAVINGS ACCOUNTS.

(2)      INTEREST ON THESE FUNDS SHALL BE:

(I)       COMPUTED ON THE AVERAGE MONTHLY BALANCE IN THE
ESCROW ACCOUNT; AND

(II)     PAID ANNUALLY TO THE BORROWER BY CREDITING THE
ESCROW ACCOUNT WITH THE AMOUNT OF INTEREST DUE.

(3)      THE LENDING INSTITUTION SHALL ANNUALLY PROVIDE THE
CONSUMER BORROWER WITH A STATEMENT OF THE ESCROW BALANCE.

(4)      THE PROVISIONS OF THIS SUBSECTION DO NOT APPLY TO A
LENDING INSTITUTION THAT PROVIDES FOR THE PAYMENT OF TAXES, INSURANCE,
OR OTHER EXPENSES UNDER THE DIRECT REDUCTION METHOD BY WHICH THESE
EXPENSES, WHEN PAID BY THE LENDING INSTITUTION, ARE ADDED TO THE
OUTSTANDING PRINCIPAL BALANCE OF THE LOAN.

(5)       (I) THIS SUBSECTION DOES NOT APPLY IF THE LOAN:

1.        IS PURCHASED BY AN OUT-OF-STATE LENDER THROUGH
THE FEDERAL NATIONAL MORTGAGE ASSOCIATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION, OR THE FEDERAL HOME LOAN MORTGAGE
CORPORATION; AND

2.        THE OUT-OF-STATE LENDER ELECTS TO SERVICE THE
LOAN AS A CONDITION OF PURCHASE.

(II) NOTWITHSTANDING SUBPARAGRAPH (I) OF THIS PARAGRAPH,
THIS SUBSECTION SHALL APPLY IF THE OUT-OF-STATE LENDER:

1.        SELLS THE LOAN TO A MARYLAND LENDER; OR

2.         PLACES THE LOAN WITH A MARYLAND LENDER FOR
SERVICING.

(C)      (1) EXCEPT UPON FORECLOSURE, RELEASE, OR AS PROVIDED IN
PARAGRAPH (2) OF THIS SUBSECTION, FUNDS IN ANY ESCROW ACCOUNT
MAINTAINED BY A CREDIT GRANTOR ON BEHALF OF A CONSUMER BORROWER FOR
USE IN PAYING TAXES, INSURANCE PREMIUMS, AND GROUND RENTS MAY NOT BE
USED:

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