MPDU - Realtors and Lenders

MPDU requirements are enforced through MPDU Covenants, which are placed on the property for a control period. An MPDU control period is a 30-year period of time, beginning on the settlement date of the initial sale of the MPDU. (If the MPDU was first purchased before April 1, 2005, the control period likely was 10 years.) 

Different rules apply at each stage of the MPDU process. For example: 

Pre-purchase rules:

• When an individual purchases an MPDU, there are no MPDU requirements regarding the loan nor any limitations on financing.
• If an MPDU is new construction, the sales office may work with an unrepresented MPDU purchaser.
• If an MPDU is new construction, since September 2021, an additional 3% buyers credit is included in the sales price that must be credited to the seller at closing.

Post-purchase rules:

• When an MPDU homeowner seeks to refinance, get a home equity line of credit (HELOC) or sell their property, there are certain MPDU lending and sale requirements that apply.
• If the MPDU is sold during the control period, the homeowner must work with the MPDU office and an MPDU trained realtor to sell the MPDU: 1) at an MPDU calculated amount; and 2) to another MPDU certified household. The 30-year control period will renew each time the MPDU is sold to a new buyer.
• If the homeowner sells their property after the control period expires, they must work with the County MPDU Office to determine the amount due and pay a share of profits to the County, if applicable.
• Once the control period has ended and Montgomery County has received its share of the excess profits, if applicable, the MPDU covenants are released.

See drop down menus below for additional details.

An MPDU homeowner who wants to sell their MPDU during the applicable control period must contact and work with the MPDU office.

MPDU owners must use a real estate agent if they decide to sell their MPDU. If the MPDU owner chooses an agent who lacks experience selling MPDUs, the real estate agent must attend a training session for listing agents. Training sessions are offered once a month. Only real estate agents with a listing agreement are allowed to attend.  

Real estate agents, appraisers, lenders and title companies should find the MPDU covenants reference on the first page of the deed for each MPDU. With the Book and Page references, anyone can look up the covenants in the Montgomery County land records. The covenants contain a list of all the MPDUs controlled by the covenants.  

Steps for selling an MPDU during the control period:

Step 1: The homeowner must send a request to the MPDU office to provide the "MPDU Maximum Resale Price." Within 21 days, the MPDU office will send the homeowner the MPDU Maximum Resale Price and an MPDU Marketing Form.

Step 2: If the homeowner decides to sell the MPDU, they complete the MPDU Marketing Form and return it to the MPDU office.

Step 3: Through the MPDU office, the homeowner must first offer the MPDU to the County and the Housing Opportunities Commission (HOC), each of which has the right of first refusal to purchase it – both during the control period and after controls expire. At this time, the County is not purchasing MPDUs and HOC rarely purchases resale MPDUs. However, this step is required. The MPDU office will notify the homeowner by email regarding HOC's response. 

Step 4: If the County or HOC does not purchase the MPDU, it must be offered to MPDU program participants. MPDU owners must use a licensed real estate agent who has received MPDU Resale training. The Real Estate Agent must contact the MPDU Office by email at [email protected] to request training. The Real Estate Agent must market the MPDU only to certified MPDU program participants. All MPDU resales are handled through a Random Selection Drawing (RSD) process. The unit is advertised on the DHCA website using information supplied by the Real Estate Agent, including a marketing flyer with photos and other information about the unit, as available. The marketing flyer must include contact information for the realtor who will be able to supply the Offering Code number necessary for applicants to enter into the resale RSD, and dates and time of open houses, if any will be provided.

Step 5: If, and only if, after the RSD is held, there are no interested certificate holders after all the persons on the marketing list have been contacted, the homeowner can request, in writing, permission to sell their MPDU to persons who do not participate in the MPDU program. The seller must email their request to [email protected]. The seller must wait for a written response from DHCA before marketing the unit to the general public on the Multiple Listing Service (MLS).  

The MPDU buyer must be a first-time homebuyer. When marketing the MPDU to the public, the real estate agent must clearly inform the interested purchaser that the MPDU will continue to be subject to the requirements of the MPDU law and regulations, including the Maximum MPDU Resale Price and resales restrictions. Further, any member of the general public who is interested in purchasing the unit must meet with an MPDU staff person prior to signing a sales contract to be informed about the requirements of the MPDU program. 

Step 6: Upon ratification of the sales contract, by either a certificate holder from Step 4 or a non-certificate holder from Step 5, the Real Estate Agent is responsible for getting the following documents to the MPDU office within fourteen (14) days:

• The purchaser’s original copy of the MPDU Certificate of Eligibility (In cases where permission to sell to a non-certificate holder has been granted this item does not apply.)
• The original signed Purchaser Agreement form (this is an extremely important document to DHCA for enforcement purposes).
• The signed original Receipt of Chapter 25A and MPDU Covenants.
• A copy of the executed sales contract.

After settlement, the Real Estate Agent is responsible to provide the MPDU Office the ALTA Settlement Sheet and a copy of the two-party deed. 

To refinance an MPDU or get a home equity line of credit (HELOC), an MPDU owner must complete the following steps.

Step 1: MPDU homeowner requests the current “MPDU Maximum Resale Price” from MPDU office.

Step 2: MPDU homeowner receives a letter from the MPDU office stating the current MPDU refinance/HELOC value of the unit.

Step 3: MPDU homeowner sends that letter to their lender and tells them their home is an MPDU within the control period.

Step 4: After the refinance loan or HELOC closes, the MPDU homeowner and/ or the lender sends email to: [email protected] with the below information:

• Lender: corporate name, address, phone, fax number and e-mail
• Settlement Agent: corporate name, address, phone, fax number and e-mail
• Title Company: corporate name and address
• Date of Settlement

Step 5: The MPDU Office sends the lender and the settlement company an official letter of refinance/HELOC. The letter will instruct the lender or title company to send a copy of the new recorded Deed of Trust and a copy of the Settlement Statement to the MPDU office no later than two weeks after recordation.  

Step 6: The lender and title company must ensure that the Deed for the MPDU states the MPDU covenants on the first page, with reference to the Book and Page and recordation date of the covenants, e.g., “Subject to covenants conditions and restrictions of record, including the Moderately Priced Dwelling Units (MPDU) Declaration of Covenants For Sale Subdivisions recorded in Book XXXXX at Page XXX.” With these references, anyone can look up the covenants online in the Montgomery County land records.

Step 7: Once the homeowner refinances or obtains a home equity loan, the MPDU Office will record a "Notice of Sale and Refinance" for the MPDU in the Montgomery County land records.

MPDU homeowners must be careful to adhere to these rules. Failing to do so could place an MPDU homeowner 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 nor 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. 

Note on MPDU "Resale Value": The MPDU resale value is essentially the original sales price of the MPDU, plus inflation and an allowance for improvements made to the unit. 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.

Note on MPDU "Market Value": An MPDU does not have a “market value" until the control period has expired.

Note on Reverse Mortgages: Reverse mortgages are not permitted for a unit in the MPDU Program that is under the control period.

To sell an MPDU after the control period has expired, applicable rules depend on when the MPDU was initially offered.  Check the MPDU covenants for confirmation of the rules applicable to the individual MPDU. With the Book and Page references, anyone can look up the covenants in the Montgomery County land records.
Refinancing an MPDU after the control period has expired should reflect the rules for shared profits, if applicable. See below for more information.

Post control period: MPDU Sales

For MPDU properties with an expired control period that was offered after March 20, 1989, the Excess Profit is the difference between the MPDU sales price and the contract sales price.  The MPDU sales price includes: 

• A credit for allowable improvements up to 10% of the resales price (see Calculation of Improvements Credit Request Form);
• An allowance for the increase in inflation, based on the difference in the Montgomery County and the Housing Opportunities Commission (HOC) have the right to buy the MPDU at the proposed fair market sales price within 30 days after receiving the signed sales contract. At this time, Montgomery County is not purchasing MPDUs and HOC rarely purchases resale MPDUs.
• Consumer Price Index (CPI-U) from when the MPDU was purchased and when it was put on the market;
• The real estate commission (up to 6%) of the sale price of the MPDU; and,
• One-half of the applicable transfer taxes and one-half of the recordation charges, up to a limit of 1.1% of the sales price. 

The payment the MPDU owner makes to Montgomery County is called the Shared Profit. The County uses these funds to finance and produce new affordable housing in Montgomery County for other low- and moderate-income families.

Montgomery County and the Housing Opportunities Commission (HOC) have the right to buy the MPDU at the proposed fair market sales price within 30 days after receiving the signed sales contract. At this time, Montgomery County is not purchasing MPDUs and HOC rarely purchases resale MPDUs. 

MPDU post-control sales process: 

Step 1: MPDU owner sends to the MPDU office:

• Completed copy of the Shared Profit Calculation Request Form;
• Calculation of Improvements Credit Request Form (if the MPDU owner is requesting credit for improvements made to the MPDU); and
• Copy of the first page of the signed Sales Contract.

Send all by e-mail to [email protected] (or MPDU Office, 1401 Rockville Pike, 4th floor, Rockville, MD 20852).

Step 2: The MPDU Program office sends to the MPDU owner the Shared Profit Calculation and sends copies to the Real Estate Agent and Settlement Agent listed on the Share Profit Calculation Request Form. Please allow at least 21 days before settlement for this calculation . The letter will also indicate that the MPDU Program will not buy this MPDU.

Step 3: The Settlement Company must send a check for the Shared Profit Payment and a copy of the settlement sheet to Montgomery County. Make the check payable to Montgomery County, Maryland. The check should be sent to: 

Attn: Shared Profit Calculation, Moderately Priced Dwelling Unit Program, Department of Housing and Community Affairs,1401 Rockville Pike, 4th floor, Rockville, MD 20852-1428

If the funds are to be wired, the Settlement Company should send an e-mail for wiring instructions. However, the MPDU office prefers that Shared Profits are paid by check whenever possible.

Example:  

The method used to calculate the Shared Profit owed to Montgomery County is set by the Executive Regulations governing the MPDU Program. The following example shows how the Shared Profit is calculated. The example assumes an initial purchase price of $65,000 in 1995, and a current market sales price of $200,000. 

 

How The Shared Profit Is Calculated

*CPI – the Consumer Price Index, a measure of inflation; this number will vary depending on the length of time you own the MPDU. The number shown above is only an example. **Credit for a Real Estate commission may only be given if the buyer and seller use licensed, third-party Real Estate Agents.

Step 4: Once the control period has ended and Montgomery County has received its share of the excess profits (if applicable), the County will terminate the MPDU covenants. 

Post control period: Refinance/Home Equity Loan

Anyone considering a cash out refinance should contact the MPDU Office before they refinance. Due to the shared profit provision of the MPDU law, enough equity should be left in the property so that the owner will be able to pay Montgomery County its shared profit when the unit is sold.  Montgomery County will not forgive shared profit owed due to an over-refinance of the property. To contact the MPDU office send an email to [email protected]

Once the control period has ended and Montgomery County has received its share of the excess profits (if applicable), the County will terminate the MPDU covenants.