Before You Refinance an MPDU
Refinancing Your MPDU During the Control Period
MPDU owners whose control period has not expired are allowed to refinance their homes, or take out a home equity loan. However, under MPDU regulations, owners may not refinance their MPDU for more than the current MPDU resale value of the property. An MPDU does not have a “market value" until the controls have expired on the unit. Therefore, an owner must inform their lender prior to the appraisal that the unit is part of the Moderately Priced Dwelling Unit program.
Before refinancing or taking out a home equity loan, owners must obtain a letter from the MPDU Office which states the MPDU resale value of their home. Most lenders require this as part of the loan process. The MPDU resale value is essentially the original sales price of the MPDU, plus inflation and an allowance for imrovements made to the unit.
Please be aware that due to the resale price limit on the MPDU during the control period, as well as the shared profit requirement after the controls have expired, an owner who refinances for an amount in excess of the MPDU value will be in jeopardy of owing more money than they will be able to receive if the unit is sold.
Failing to adhere to these rules will place you in financial and legal jeopardy because:
- Montgomery County will not make special exceptions for MPDU owners who do not follow these rules.
- Montgomery County will not waive the MPDU resale price, or the amount of shared profit owed to the County.
- The County will pursue legal action against MPDU owners who knowingly or unknowingly violate these restrictions.
Following are the steps that should be followed:
- Contact your lender when you want to refinance or obtain a home equity loan;
- Make sure your lender is aware your unit is part of the MPDU Program;
- Send a letter to Maureen Harzinski in the MPDU office requesting the current MPDU value of your unit, stating your reason for requesting the value (is it for a refinancing or for a home equity loan). Include a list of any improvements made to the unit, as well as copies of the receipts for work performed. (DHCA will need 21 days to respond to your request, so plan accordingly).
- Provide the letter from the MPDU Office to your lender.
There is a "Notice of Sale and Refinance" recorded on your property in the land records of Montgomery County. This Notice must be updated by the MPDU Office after you refinance or obtain a home equity loan. Therefore, your Settlement Agent must submit to the MPDU Office a copy of the new Deed of Trust recorded in land records, as well as a copy of the HUD-1 Settlement Statement. This information must be received no later than two weeks after recordation.
Following these steps will ensure that you receive your information in a timely manner. The MPDU office cannot honor “last minute” requests for MPDU values. These requests should be made at the beginning of the loan process, not when the loan is ready to close.
Thank you for your cooperation in this process.