Maryland law limits the loans and liabilities of one borrower to Maryland-chartered banks. Under the Maryland "Wildcard Law," Maryland banks alternatively may use the lending limit applied to national banks under OCC regulations. In response to Section 611 of the Dodd-Frank Act, the Maryland Commissioner of Financial Regulation issued a Wildcard Lending Limit Declaratory Ruling to confirm that, effective January 21, 2013, credit exposure arising from derivative transactions and securities financing transactions is included in "total liabilities" under the Maryland lending limit law.
To calculate credit exposure, Maryland-chartered banks are to follow the OCC's new rules, which also subject credit exposure arising from derivative transactions and securities financing transactions to the OCC lending limit. The Commissioner's ruling clarifies that a Maryland bank must follow either the Maryland lending limit or the OCC's lending limit consistently across its entire portfolio, and may not simultaneously use both limits.
Because banks are not permitted to simultaneously use both the Maryland lending limit and the OCC lending limit, Maryland banks should ensure that internal records indicate clearly which lending limit is being followed. The Commissioner will not consider liabilities incurred before the effective date to be violations of law during the existing contract term and any obligatory extension or renewal.
Please contact Chris Rahl for more information.
As in most jurisdictions, in Maryland it is typical that title companies are hired by property buyers, owners, and lenders to search and report on the status of title to real property.
The Court of Appeals of Maryland recently held, in 100 Investment Limited Partnership v. Columbia Town Center Title Company, that title companies can owe their customers, and perhaps others, a duty of care when performing a title search and issuing a title commitment. The Court found that, like accountants, lawyers, lenders, and others, title companies can be liable under a theory of tort.
For the Court, it boiled down to this: "Given the [intimate] relationship of the parties in the present case, the significance of the title search, the details outlined in the preliminary title commitment report, and the fact that an insured [the customer of the title companies] looks to the title commitment for the purpose of making business decisions, we conclude that the Title Companies, under the circumstances, had a duty to exercise reasonable care in conducting the preliminary title search and transmitting that information to its customer."
The Court noted that this duty of care might also be owed to others, such as a lender or a property seller, who the title company knows will rely on a particular search. The Court did not hold the title insurer in this case vicariously liable for the negligence of the title companies, but that decision was based on exculpatory language in the title insurance policy between the customer and the insurer which explicitly precluded a claim in negligence.
Based on the Court's analysis of when exculpatory clauses are deemed valid and invalid, we may soon see more exculpatory provisions in contracts between title companies and their customers.
Please contact Chris Rahl if you would like to discuss the implications of this decision.
Our Real Estate Group has recently published another issue of Relating to Real Estate, which summarizes recent developments in the real estate world. Please click here to see the publication. If you have any questions, please contact Ed Levin.