On November 25, new regulations in Maryland addressing shared appreciation agreements became effective. This action implements Ch. 568 (H.B. 1150) from 2023, which codified that shared appreciation agreements are mortgage loans subject to the Maryland Mortgage Lender Law (covered by InfoBytes here). The new regulations add key definitions, require certain disclosures, including a financing agreement and a commitment to borrowers (which includes a specified disclosure form) within 10 business days of a completed application. The new regulations also establish procedures for property value calculations and add a description of the ability to repay standard with respect to shared appreciation agreements.

Additionally, the regulations require that lenders must use a specified method for calculating property values, actual appreciation, and final payment amount. They also establish that a lender is deemed to have considered a borrower’s ability to repay (assuming all required disclosures have been provided) if (i) the agreement does not require periodic payments before termination and (ii) has a term of at least five years.