Maryland Legal Alert for Financial Services

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Maryland Legal Alert - April 2010

In This Issue:

WHEN MUST BANK EMPLOYEES REGISTER UNDER THE FEDERAL SAFE ACT?
EXEMPTION FROM WAGE LAWS FOR LOAN OFFICERS CLARIFIED
ANOTHER MARYLAND LIEN PRIORITY CASE: LENDER PREVAILS
PEOPLE ARE CALLING ABOUT ... 2010 MARYLAND GENERAL ASSEMBLY SESSION
WHEN MUST BANK EMPLOYEES REGISTER UNDER THE FEDERAL SAFE ACT?

Maryland was timely with its SAFE Act compliance, enacting a law effective July 1, 2009 requiring mortgage loan originators to become licensed. The federal banking agencies, however, have not been as timely, and we continue to await final rules on when and how bank employees must register under the federal SAFE Act. On March 9, 2010, the FFIEC published "frequently asked questions" to address the delay in these final rules. These FAQs do not focus on one concern: must bank employees obtain licenses under Maryland's Mortgage Loan Originator law at this time when the federal registration rules are not yet in place? Maryland's law expressly exempts from licensing employees of banks who are actually registered under the federal banking agencies' SAFE Act registration requirements. Because bank employees are not actually registered, does this exemption still apply? We believe the exemption still applies. The office of the Maryland Commissioner has been consistent in its message that bank employees should NOT pursue licensing under Maryland's law if those employees will be subject to the federal registration requirements when those federal registration requirements finally become effective. We believe that until we have final federal rules, there is nothing a bank or bank employees can or should do in connection with SAFE Act compliance. We expect final federal rules soon. For more information, please contact Chris Rahl.

EXEMPTION FROM WAGE LAWS FOR LOAN OFFICERS CLARIFIED

Maryland's minimum wage and overtime rules track similar federal rules very closely. That is why a careful review of the March 24, 2010 Department of Labor interpretation of the Fair Labor Standards Act is important for any mortgage lending or brokering business that relies on the "bona fide administrative employee" exemption to compensate loan originators. This DOL interpretation analyzes the "bona fide administrative employee" exemption in the context of mortgage lending, determines that a mortgage loan originator's primary duty is making sales, and clarifies DOL's position that this exemption is limited to employees whose primary duties relate to administrative operations of a business – not making sales. Please contact Chuck Bacharach if you would like to discuss how this DOL interpretation impacts your business practices.

ANOTHER MARYLAND LIEN PRIORITY CASE: LENDER PREVAILS

In the January 2010 Maryland Legal Alert, we reported on a Court of Special Appeals opinion that concluded the effective date of a deed of trust was, as to creditors, the date of its delivery regardless of the date the instrument was recorded and whether the creditor had notice. On March 29, 2010 the Court of Special Appeals issued its decision in Taylor Electric Co. Inc. v. First Mariner Bank, where the Court again examined the priority of a deed of trust lien, this time as to a mechanics' lien creditor. In Taylor Electric, the deed of trust, which was delivered in May 2006, was recorded in November 2006, but without a description of the real property collateral contained in the deed of trust. That property description was not included in the deed of trust in the land records until February 2007, when the deed of trust was "re-recorded to include the Legal Description." A mechanics' lien action relating to the property was filed in December 2006 (before the property description was added to the deed of trust on record) and the mechanics' lien was granted March 5, 2007 (after the property description was added). The mechanics' lienor argued it had priority over the beneficiary of the deed of trust. As in the opinion earlier this year, the Court again concluded that recordation does not determine whether a security interest exists. Further, the court concluded that the absence of a property description in this case did not invalidate the beneficiary's interest in the property because it was the clear intention of the parties at the time the deed of trust was delivered to include a description and create a lien against the property in favor of the beneficiary. For more information, please contact Chris Rahl.

PEOPLE ARE CALLING ABOUT . . . 2010 MARYLAND GENERAL ASSEMBLY SESSION

The 427th Session of the Maryland General Assembly is quickly coming to a close – session adjourns on April 12, 2010. We will be publishing our 2010 Maryland Laws Update after all of the bills are finalized and we have a chance to digest their impact. If, in the meantime, you have any questions about the impact of particular legislation, please contact Bob Enten.