Maryland Legal Alert for Financial Services

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Maryland Legal Alert - December 2018

In This Issue:

MARYLAND ADDRESS CONFIDENTIALITY PROGRAM WILL EXPAND IN 2019

DOES YOUR INSTITUTION NEED TO PAY INTEREST ON MORTGAGE ESCROW?

BCFP TAKES ACTION AGAINST AUTO LENDER

SEVENTH CIRCUIT AFFIRMS SUMMARY JUDGMENT AGAINST RESPA PLAINTIFFS BASED ON LACK OF DAMAGES

Maryland’s Address Confidentiality Program Will Expand in 2019

As reported in two places in our 2018 Maryland Laws Update, Maryland’s address confidentiality programs for victims of domestic violence and human trafficking will expand in 2019. The expansion will impose obligations on all persons, not just the government, to keep a program participant’s location and other personally identifying information confidential and allow for shielding of certain residential real property records. Administered by the Maryland Secretary of State, these programs provide a substitute address for victims who move to a new location unknown to their abusers. Beginning in 2019, among other prohibitions, if a program participant requests that a person use the program’s substitute address as the participant’s address, the person must comply and may not require the participant to submit any different address unless the service or benefit the participant is seeking would be impossible to provide without knowledge of the participant’s physical location. The Secretary of State will make available a form notice that participants may use to advise of their program participation status and their substitute address. In addition, the Secretary of State will make available a different form notice to use when a participant requests the shielding of residential real property records. The legislation (HB633/SB578, enacted as Chapters 423/424) provided for a January 1, 2019 effective date. However, the legislation also provided that the Secretary of State must issue regulations to implement the new requirements in this law before those requirements become effective. Proposed regulations were published in the November 9, 2018 Maryland Register. Comments on these proposed regulations are due December 10, 2018. It is unclear whether these regulations will be final by January 1, 2019, but it appears they will be final early in 2019. Businesses (including all financial institutions) need to be prepared to handle address confidentiality and the shielding of residential real property records as soon as these regulations become final. If you have questions about implementation or have comments that you would like us to submit to the Secretary of State, please contact Margie Corwin.

Contact Marjorie Corwin

Does Your Institution Need to Pay Interest on Mortgage Escrow Accounts?

In our April 2018 Maryland Legal Alert, we published an article with this same title. In our earlier article, we reported that on March 2, 2018, the United States Court of Appeals for the Ninth Circuit decided that the National Bank Act does not preempt California’s law that requires financial institutions to pay interest on escrow accounts maintained in connection with certain residential mortgage loans. The Court reached that decision despite the Office of the Comptroller of the Currency’s regulations for national banks expressly preempting state laws governing escrow accounts. The Ninth Circuit denied the bank’s request for rehearing. On November 19, 2018, the Supreme Court denied the bank’s request for certiorari and will not review the Ninth Circuit Court’s decision. Maryland is not in the Ninth Circuit, which means this decision has no direct impact on Maryland law. However, on November 29, 2018, a class action case was filed in the United States District Court for the District of Maryland claiming that a national bank violated Maryland law by not paying interest on mortgage escrow accounts as required by our State’s law. Please contact Margie Corwin if you would like to discuss this subject in greater detail.

Contact Marjorie Corwin

BCFP Takes Action Against Auto Lender

On November 20, 2018, the Bureau of Consumer Financial Protection (BCFP) and a large auto lender entered into a consent order concerning the lender’s add-on product sales and payment deferral practices. The consent order involves the sale of a Guaranteed Asset Protection (GAP) contractual product offered by the lender. The GAP product was offered to cover the difference between a borrower’s primary auto property insurance coverage and the borrower’s loan balance if there was a total loss of the auto. The GAP product apparently did not cover the full “gap” for loans where the borrower’s loan-to-value (LTV) exceeds 125%. The BCFP alleged that the lender sold the GAP product in connection with loans with LTVs that exceeded 125% and did not disclose the coverage limitations to impacted borrowers. In addition, the BCFP alleged that the lender did not adequately inform borrowers who deferred past due payments that interest for the deferred payments would be collected from future payments first, before any amounts would be applied to principal reduction. The BCFP alleged that these practices constituted deceptive acts or practices under the Consumer Financial Protection Act of 2010. In entering into the consent order, the lender agreed to pay more than $9 million in borrower restitution, change its GAP and payment deferral practices, and pay a $2.5 million civil money penalty. For more information concerning this topic, please contact Christopher Rahl.

Contact Christopher Rahl

Seventh Circuit Affirms Summary Judgment against RESPA Plaintiffs Based on Lack of Damages

The Seventh Circuit recently issued an opinion that considered the extent to which a lack of evidence of damages can result in summary judgment against RESPA plaintiffs.  The appellant in this case was a borrower who was delinquent on his mortgage and whose house was foreclosed upon in a state court proceeding. Years after the foreclosure judgment and just two months before the scheduled sale, the borrower sent a letter to the bank which asked “twenty-two wide-ranging questions about his account.” The bank sent a letter that responded to some, but not all, of the questions. The borrower filed a complaint in federal court alleging, among other causes of action, violation of the federal Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. Assuming that the letter by the borrower was a Qualified Written Request (QWR) for purposes of RESPA, the trial court still granted summary judgment on the RESPA count based on lack of damages. The Seventh Circuit affirmed, noting that the borrower could not claim damages simply because he incurred out-of-pocket expenses from paying an attorney to review the response by the bank to the QWR. Holding otherwise “would allow a borrower to create a RESPA claim that pulls itself up by its own bootstraps, creating the required damages by pursuing the inquiry itself, at least with help from a lawyer.” Further, the Seventh Circuit found no evidence of emotional distress. The Seventh Circuit noted that any emotional distress was more likely caused by the foreclosure itself, rather to the bank’s response to the QWR.  Please contact Robert Gaumont for more information related to this topic.

Contact Bob Gaumont