Maryland Legal Alert for Financial Services
Maryland Legal Alert - May 2010
In This Issue:
• MORTGAGE LOAN ORIGINATOR PRE-LICENSING EDUCATION UPDATE
• 2010 LEGISLATIVE SESSION – SOON TO BE EFFECTIVE LAWS
• RED FLAGS RULES: JUNE 1, 2010 IS THE NEWEST COMPLIANCE DEADLINE
• PEOPLE ARE CALLING ABOUT ... REPOSSESSION PROCEDURES
The Commissioner of Financial Regulation's April 2010 Maryland Licensing Update – Issue 13 describes how some mortgage loan originators can use previously completed (as early as January 1, 2005 and as late as December 31, 2009) Maryland-approved education to satisfy their 20 hours of pre-licensing education required under the SAFE Act mandate. This is a great, but limited time, opportunity for MLOs who are "Approved-Deficient" or who transitioned in 2009 or 2010 from a licensed mortgage originator to a licensed MLO. This DOES NOT affect the testing requirements. All Maryland MLOs must pass both the national and Maryland test components within applicable deadlines (see Maryland Licensing Update – Issue 10). These education and testing requirements do not apply to individuals who are employed by depository institutions or their subsidiaries. We continue to await federal regulations for guidance on registration for employees of depository institutions. For more information, please contact Chris Rahl.
The 2010 Maryland General Assembly ended on April 12, 2010, and the Governor has completed two bill signing sessions, with a third expected on May 20. Again this year, we will print our annual Maryland Laws Update, which will provide descriptions of and insights on the many new laws that impact financial service providers. In the meantime, following are a few bills (some of which already have been signed into law) that are expected to become effective very soon.
Mortgages and Deeds of Trust - Powers of Sale. SB 562/HB 633 clarify that a mortgage or deed of trust need not name an individual in order to exercise a "power of sale" or "assent to decree" of the property. The law applies retroactively to mortgages and deeds of trust on record on, and to those recorded on or after, June 1, 2010.
Taxes on Debt Forgiven in Short Sale. HB 590/SB 657, which will be effective immediately upon signing, clarify that the amount of any debt forgiven in a short sale of real property is not subject to recordation tax or state or county transfer tax.
Tax Sales - Notice to Foreclose Right of Redemption. SB 372 modifies the notice procedures that a certificate of sale purchaser must follow prior to filing a complaint to foreclose the right of redemption. The bill is to take effect July 1, 2010.
Residential Property Foreclosure Procedures and Foreclosure Mediation. HB 472 makes changes to the foreclosure process for owner-occupied residential property by, among other changes, imposing new notice requirements, requiring affidavits from the secured party regarding loss mitigation efforts, and granting a right to homeowners to request mediation prior to foreclosure. The effective date of this bill is July 1, 2010.
Tenants in Foreclosure. HB 711/SB 654 give certain rights (similar to those provided by federal law) to tenants occupying residential real property in the event of a foreclosure. However, unlike federal law (which leaves the form of notice up to the purchaser), this law prescribes the contents and form of the notice to vacate. These bills have a June 1, 2010 effective date.
Real Estate Settlements – Maryland's Anti-Kickback Law. HB 1471/SB 1019 expressly require persons involved in "affiliated business arrangements" to comply with RESPA's requirements for those arrangements. A violation of Maryland's anti-kickback law is a crime. These bills have a July 1, 2010 effective date.
Title Insurance Producers. HB 1470 makes title insurance producers responsible for "title insurance producer independent contractors" that they use and includes a requirement to disclose the independent contractor's involvement in a transaction. This bill becomes effective July 1, 2010.
Corporate Law. SB 688/HB 972 clarify the Maryland General Corporation Law by providing that the charter of a corporation may provide for separate series of capital stock having special rights and privileges; permitting a stockholders' meeting to be postponed before the date of the meeting, for up to 120 days; modernizing the Maryland General Corporation Law with respect to charter amendments by permitting corporations to provide stockholders with the text or a summary of the amendment through the Internet or upon written or oral request rather than with the meeting notice that is sent to stockholders; and by expanding the persons that are authorized to sign charter documents filed with the State Department of Assessments and Taxation. The law becomes effective June 1, 2010.
We again are coming up on a deadline for compliance with the Federal Trade Commission Red Flags Identity Theft Rules. After delaying enforcement of the rules a number of times, the FTC's new deadline for "creditors" is June 1, 2010. Please see our Legal Bulletin for background on this FTC rule. The FTC currently interprets the term "creditor" very broadly to include all persons that defer payment for services (even in the normal course of traditional billing practices). As a result, the Red Flags Rules cover businesses that maintain consumer-type accounts and that bill for services after services are rendered. The FTC published a template for low-risk businesses to use when developing a Red Flags Identity Theft Program. The FTC provides instructions on how to determine if a business qualifies as a low-risk business for identity theft. The template can be found here. Gordon Feinblatt has assisted numerous clients in determining whether the Red Flags Rules apply to their activities and developing Red Flags Identity Theft Programs. For more information, please contact Chris Rahl.
As all Maryland credit extenders know, Maryland has an array of credit laws that can or do cover different types of credit transactions. The Maryland credit laws that potentially govern loans and credit sales secured by personal property have unique repossession requirements, and require secured parties to follow procedures and provide notices that are different from the procedures and notices required under the Uniform Commercial Code. If you haven't looked at your repossession procedures and notices in a while, it may be a good time to dust them off and review them against the requirements of the Maryland credit laws. For more information, please contact Chris Rahl.