Maryland Legal Alert for Financial Services

In this issue:

• MORTGAGE LENDERS: SUBMIT MLO SPONSORSHIP INFORMATION NOW
• GARNISHMENTS: MARYLAND RULES CHANGE TO CONFORM WITH FEDERAL RULE
• NEW MARYLAND LEGISLATION BECOMES EFFECTIVE SOON:

• TRANSPARENCY IN CONSUMER ARBITRATIONS ACT
• CHANGES TO FORECLOSURE REQUIREMENTS
• POWERS OF ATTORNEY TECHNICAL AMENDMENTS

MORTGAGE LENDERS: SUBMIT MLO SPONSORSHIP INFORMATION NOW
Every MLO in Maryland needs to be “sponsored” by one (and only one) employer that is registered with NMLS. Before NMLS was fully functional, sponsorship requests were handled directly with the Maryland Commissioner’s office. In April 2011, the Commissioner announced that all sponsorship requests must now be submitted through NMLS. Importantly, all sponsorship information previously submitted directly to the Commissioner’s office must be resubmitted through NMLS. Employers have until May 15, 2011 to resubmit all previously submitted sponsorship requests. After May 15, a licensed MLO whose employer has not submitted a sponsorship request through NMLS will have an “approved-inactive” status and will not be able to originate Maryland mortgage loans. For more information, see the Commissioner’s April 19 and May 3, 2011 Mortgage Licensing Updates. Please contact Margie Corwin with any questions.

GARNISHMENTS: MARYLAND RULES CHANGE TO CONFORM WITH FEDERAL RULE

On April 21, 2011, the Court of Appeals of Maryland adopted new Maryland garnishment rules to conform our State rules to the new federal rule regarding bank garnishments. For counsel and, when permitted, banks that file answers to Maryland writs of garnishment, the substantive changes are found in subsection (e) of new Maryland Rule 2-645.1 and 3-645.1. It provides that the bank's answer to a writ against an individual should state if a "protected amount" (as defined in the new federal rule) is in the judgment debtor's account. That answer does not need to specify the amount of any protected funds. Also, if the only property in the bank's possession belonging to the judgment debtor is protected funds, then a proposed Order must be filed asking that judgment be entered in favor of the bank terminating the garnishment. Please contact Margie Corwin or John Lee if you have any questions about bank garnishments in Maryland.

NEW MARYLAND LEGISLATION BECOMES EFFECTIVE SOON

Maryland’s 2011 General Assembly Session ended April 11. The Governor will continue to sign bills into law over the next month. We will issue our annual Maryland Laws Update shortly, but in the meantime, you may be interested in the following laws that have imminent effective dates.

TRANSPARENCY IN CONSUMER ARBITRATIONS ACT

Under House Bill 442, not yet signed but effective July 1, 2011, an arbitration organization that performs 50 or more binding consumer arbitrations during a five-year period must collect, publish, and make publicly available specified information about all consumer arbitration proceedings, including the parties involved, types of claims handled, and outcomes. The information must be updated by the organization at least quarterly and must be made available in a computer-searchable format that can be accessed and downloaded through the Internet (free of charge) and in writing upon request (for a reasonable fee). The Act is primarily focused on the obligations of arbitration organizations, rather than the parties involved in the arbitrations. However, it is important to note that the information provided by an arbitration organization under the Act may be considered in determining whether a consumer arbitration agreement is unconscionable or otherwise unenforceable.

CHANGES TO FORECLOSURE REQUIREMENTS

Several bills make changes to Maryland’s residential property foreclosure procedures:

Senate Bill 205/House Bill 366, signed as Chapters 36 and 37 and effective July 1, 2011, were introduced in response to robo-signing and amend requirements relating to the Notice of Intent to Foreclose (NOI). The law applies prospectively to foreclosure filings made on or after July 1, 2011. Agents of the secured party must now affirm under penalties of perjury that at the time the NOI was sent, its contents were accurate.

Senate Bill 450/House Bill 412, not yet signed but effective July 1, 2011, establish a legal process (a lost note affidavit) for addressing situations where the debt instrument is lost or cannot be produced. A lost note affidavit must: (i) identify the owner of the debt instrument and state from whom and the date on which the owner acquired ownership; (ii) state why a copy of the instrument cannot be produced; and (iii) describe the good faith efforts made to produce a copy of the debt instrument.

House Bill 728, not yet signed but effective June 1, 2011, clarifies that the NOI for non-owner-occupied residential property need not be accompanied by information relating to loss mitigation; rather it needs to be accompanied by written notice of the determination that the property is not owner-occupied, and a telephone number that the debtor can call to contest that determination. For owner-occupied residential property, the bill extends from 15 to 25 days the time within which a borrower may request mediation.

POWERS OF ATTORNEY TECHNICAL AMENDMENTS

In 2010, Maryland enacted a new, comprehensive power of attorney statute. Implementing last year’s law raised a few issues, leading to corrective and clarifying changes this year. Senate Bill 529/House Bill 247, signed as Chapters 74 and 75 and effective June 1, 2011 (with retroactive application), add definitions and add terms to the "banks and other financial institutions" authority in order to clarify the scope of certain powers granted to an agent under both statutory form powers of attorney. The new law also provides that a document will not be deemed a statutory form power of attorney if it incorporates another document by reference. Finally, the law clarifies that even if a power of attorney is not subject to Maryland’s comprehensive power of attorney statute (for example, an advance directive appointing a health care agent), that power of attorney nevertheless can be durable.

If you have any questions about these Maryland laws or any other matters concerning the 2011 General Assembly Session, please contact Bob Enten, Tim Perry, John Morton or Margie Corwin.