Maryland Legal Alert for Financial Services

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Maryland Legal Alert - September 2010

In This Issue:

DODD-FRANK SURVIVAL GUIDE
MORTGAGE BROKERS: THERE’S A NEW CATCH TO COLLECTING APPRAISAL AND
CREDIT REPORT FEES

MORTGAGE LOAN ORIGINATOR LICENSING: THE UPDATES KEEP COMING
PEOPLE ARE CALLING ABOUT . . . OCTOBER 1 EFFECTIVE DATE FOR MARYLAND LAWS

DODD-FRANK SURVIVAL GUIDE

The first issue of our Dodd-Frank Survival Guide was published on August 23, 2010. We will be publishing the Survival Guide from time to time, focusing on discrete aspects of the Dodd-Frank Act, with an emphasis on Maryland law and on those parts of the Act that impact the day to day operations of community banks and other regulated financial service providers. Please be on the look-out for our next issue. If you have any questions about the topics we address, or if you would like us to focus on a particular topic of concern, please contact Andy Bulgin.

MORTGAGE BROKERS: THERE’S A NEW CATCH TO COLLECTING APPRAISAL AND CREDIT REPORT FEES
Don’t get caught in the unfortunate position of not being allowed to collect credit report and appraisal fees from your borrowers. As reported in our 2010 Maryland Laws Update, the types of third party fees that Maryland mortgage brokers may collect from borrowers will expand effective October 1, 2010. Under this new Maryland law, in addition to charging borrowers for the actual costs of credit reports and appraisals -- which charges have been authorized for many years -- mortgage brokers also may charge the actual costs of any condominium document or subordination agreement document obtained by the mortgage broker. But there is a catch! The new law allows mortgage brokers to charge these third-party fees, including the credit report and appraisal fees, only if those items are obtained at the written request of the borrower. The borrower’s request might be included in the written broker agreement required by Maryland law or might be in a separate written document, but if it is not provided, the broker must forego collecting these third-party costs from the borrower. The new law also will allow a mortgage broker to collect charges for the actual cost of any other good or service that is required in order to complete the loan application process and that, at the written request of the borrower, is paid by the broker to a third-party service provider but (another catch) only to the extent permitted by regulations issued by the Commissioner of Financial Regulation. No such regulations have yet been published. In light of this new law, mortgage brokers should review their form agreements to be sure they comply with applicable law (many form agreements fail miserably) and allow the broker to collect the fees as intended by the parties. For more information, please contact Chris Rahl.

MORTGAGE LOAN ORIGINATOR LICENSING: THE UPDATES KEEP COMING

The Commissioner’s Office continues to “tweak” MLO licensing as issues arise. Emergency Regulations were published in the August 27, 2010 Maryland Register explaining what happens to Maryland Interim MLO Licensees who fail to complete the fingerprinting, surety bonding, prelicensing education, and prelicensing testing requirements by September 30, 2010. (“Interim,” also know as “Approved Deficient,” licensing was permitted initially for individuals who were not required to be licensed prior to July 1, 2009. At the end of July, the Commissioner extended the time for completing these unfinished requirements from July 31 to September 30, 2010.) According to the Emergency Regulations, an Interim MLO Licensee who fails to complete these requirements by September 30 will be placed in nonactive status and may not engage in any activity for which an MLO license is required. Nonactive may return to active status when the licensee fulfills all of the unfinished requirements to the satisfaction of the Commissioner’s Office. The Commissioner’s Office also reminded MLOs of the September 30, 2010 deadline to obtain certification of previously completed Maryland-approved education to avoid the need to take new prelicensing education under the SAFE Act. This previously-approved education certification process will be unavailable after the end of September. Finally, as a reminder, regulations to implement SAFE Act registration for employees of depository institutions and of their subsidiaries were published in the Federal Register July 28, 2010. For more information, please contact Chris Rahl.

PEOPLE ARE CALLING ABOUT . . . OCTOBER 1 EFFECTIVE DATE FOR MARYLAND LAWS

The Maryland General Assembly was busy in its 2010 session and, come October 1, 2010, many of its efforts will come to fruition. Some of the numerous laws that will become effective on October 1 deal with: Refund Anticipation Loans, Reverse Mortgages, the Bankruptcy Homestead Exemption, Powers of Attorney, Deposit Accounts, Overtime Wages, Accounting Basis for Mortgage Broker Net Worth Requirements, etc. For a complete list of the 2010 laws affecting financial institutions doing business in Maryland, and their effective dates, please see our 2010 Maryland Laws Update. For more information, please contact Chris Rahl.