FORECLOSURE AND RESIDENTIAL MORTGAGE LAWS EFFECTIVE IMMEDIATELY
On April 3, 2008, our Governor signed bills resulting in three new Maryland laws affecting the residential mortgage industry. As emergency actions, they are now in effect. Below you will find very brief synopses of the new legislation, as well as a fourth mortgage lending bill that we expect to be signed soon, with a focus on issues that need your most immediate attention. Shortly we will provide more details on all the provisions of these new laws. Please contact Chris Rahl if you have any questions.
We note that these represent only the first of many anticipated new laws affecting the Maryland financial services industry. Stay tuned!
Senate Bill 216/House Bill 365(Residential Mortgages and Foreclosure Process)
Chapters 1 and 2 of the 2008 Laws of Maryland mandate that security instruments (deeds of trust or mortgages) secured by “residential property” contain certain information about the involved mortgage brokers and lenders. The Commissioner of Financial Regulation is required to issue regulations to implement these provisions, including the consequences for failure to include this information in the mortgage or deed of trust. The law provides that until the Commissioner adopts regulations, failure to include the new information required when recording a mortgage or deed of trust may not be the basis for a clerk to fail to record the instrument.
This new law also significantly extends the timing and changes the process for commencing a foreclosure action as to “residential property” (with the same definition as described above). Due to the new law, an action to foreclose a security instrument on residential property may not be commenced until the later of: (1) 90 days after a default that allows the secured party to foreclose; or (2) 45 days after a “notice of intent to foreclose” has been sent. The “notice of intent to foreclose” must be sent by certified and first class mail to the borrower and to the record owner and a copy must be sent to the Commissioner of Financial Regulation. The notice must be in the form that the Commissioner prescribes by regulation.
There are new, detailed content requirements for foreclosure action filings. A foreclosure sale cannot occur until 45 days after the filed/docketed foreclosure complaint has been served on the borrower (the method of service is prescribed by the law).
Senate Bill 217/House Bill 360(Mortgage Fraud)
Chapters 3 and 4 of the 2008 Laws of Maryland make it a crime to commit “mortgage fraud,” which is defined in the statute. Both the Attorney General and the State's Attorney may prosecute cases of mortgage fraud. The statute also authorizes private causes of action for mortgage fraud and gives the court authority to award three times the actual damages.
Senate Bill 218/ House Bill 361(Protection of Homeowners in Foreclosure)
Chapters 5 and 6 of the 2008 Laws of Maryland address problems that have arisen in implementing Maryland's Protection of Homeowners in Foreclosure Act, first enacted in 2005 to combat the growing problem of foreclosure rescue scams. Among other changes, coverage of the law is expanded. Title insurers, title insurance producers, and mortgage brokers are no longer exempt from coverage. Further, the exemptions for certain loan owners, mortgage lenders, and real estate brokers and salespersons are narrowed. The law continues not to apply to banks and other insured depository institutions or their subsidiaries or affiliates while engaged in normal business activities.
Expected to be signed by the Governor soon after the end of this legislative session (which is midnight on April 7, 2008), this legislation imposes changes on lending and business practices of mortgage lenders and brokers in Maryland. Among other provisions, it: (1) eliminates the final vestige of a permissible prepayment penalty on consumer mortgage loans under Maryland law; (2) imposes the obligation on consumer mortgage loan lenders to consider the borrower's ability to repay; (3) requires mortgage brokers to add a provision to their written broker agreements clarifying that they are brokers and not lenders; (4) increases the surety bond amounts needed to maintain a Mortgage Lender license (which covers lenders, brokers, and servicers); and (5) imposes for the first time net worth requirements needed to maintain a Mortgage Lender license. This law is expected to become effective June 1, 2008.
© 2008 Gordon Feinblatt, LLC. MARYLAND LEGAL ALERT is intended for informational purposes only and is not legal advice to any person, entity or firm. The material included in MARYLAND LEGAL ALERT is obtained from a variety of public sources.