Legal Bulletins
Balloon Payments Disclosures for 2nd Mortgages
Drew v. First Guaranty Mortgage Corporation,379 Md. 318, 842 A.2d 1 (2003)
The Maryland Secondary Mortgage Loan Law permits lenders to schedule balloon payments only if the balloon payment is expressly disclosed to the borrower, agreed to by the borrower and lender in writing, and required to be postponed one time for 6 months at the borrower's request. The Maryland Court of Appeals held that lenders are not required to disclose the postponement requirement to borrowers, or even to state the requirement in the loan agreement, because there is no express disclosure requirement.
Practice Pointer: Subtitle 10 of the Maryland Credit Laws (Title 12 of the Commercial Law Article of the Maryland Annotated Code) has a similar postponement requirement and we believe the same result should apply to loans governed by Subtitle 10.