Maryland Code, COMMERCIAL LAW 12-118
Terms Used In Maryland Code, COMMERCIAL LAW 12-118
- including: means includes or including by way of illustration and not by way of limitation. See
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Variable Rate: Having a "variable" rate means that the APR changes from time to time based on fluctuations in an external rate, normally the Prime Rate. This external rate is known as the "index." If the index changes, the variable rate normally changes. Also see Fixed Rate.
(1) The loan is secured by an interest in real property;
(2) Any such provision limits adjustments in the rate on an obligation as follows:
(i) The increase and decrease in the rate is determined by an objective index which is not directly controlled by the lender and which is agreed upon by the parties to the agreement.
(ii) The rate may not be adjusted more frequently than once in a 6 month period.
1. The amount of increase in any 6 month period may not be more than the equivalent of 1 percentage point above the rate in effect prior to the rate change.
2. Notwithstanding subparagraph (i) of this paragraph, if the rate of change in any index so allows, the rate may be increased to not more than the originally contracted for rate if authorized by the loan agreement. The agreed upon additional increases must comply with subparagraph (i).
3. Notwithstanding subparagraph (i) of this paragraph, the lender may decrease the rate at any time and by any amount;
(3) Interest rate decreases warranted by decreases in the agreed upon index shall be mandatory except to the extent that past increases in the index have not been implemented by the lender, either at his option or because the lender was subject to the rate change limitation of paragraph (2) of this section;
(4) The loan instrument shall specify the circumstances under which the rate may increase or decrease, any limitations on an increase or decrease, and the effects of an increase or decrease;
(5) A lender must allow the borrower the choice of implementing the variable rate feature of the loan either by changes in the amount of periodic payments or by extending or reducing the length of the term of the obligation;
(6) Through a periodic billing statement or other written notice, the borrower is notified of the basis and effect of a change in rate, including any change in the required periodic payment amount, at least 15 days prior to the due date of the first payment that reflects the changed rate; and
(7) No new closing costs, processing fees or similar fees are imposed on the borrower as a result of adjustments in rate.