Maryland Legal Alert for Financial Services

In This Issue:

• MORTGAGE LOAN ORIGINATOR LICENSING: MARYLAND LAWS UPDATE
• LENDER AND TITLE COMPANY DISMISSED FROM FORECLOSURE RESCUE SCHEME CASE
• COLLECTION AGENCIES ARE WARNED AGAIN BY MARYLAND’S COMMISSIONER
• IDENTITY THEFT ARISES OUT OF USE OF STOLEN CREDIT CARDS
• PEOPLE ARE CALLING ABOUT . . . WHAT'S HAPPENING WITH THE FTC IDENTITY THEFT RED FLAGS RULE?

MORTGAGE LOAN ORIGINATOR LICENSING: MARYLAND LAWS UPDATE

We continue to work through licensing issues for mortgage loan originators as Maryland shifts to the Nationwide Mortgage Licensing System (NMLS). In October, Margie Corwin presented for the Maryland Association of Mortgage Professionals a short update focusing on the new education and testing requirements. Click here for a copy of Margie’s slide presentation. Also attached as a two-page chart is an attempt to present the information in a simplified format. The Commissioner’s office recently provided guidance on licensing in its Mortgage Licensing Update, Issues 8 and 9. These Updates discuss, among others, the topics of fingerprinting, education, and incomplete applications. Please contact Margie Corwin if you have any questions about the mortgage industry in Maryland.

LENDER AND TITLE COMPANY DISMISSED FROM FORECLOSURE RESCUE SCHEME CASE

As previously reported in the February 2009 Maryland Legal Alert, at least one Maryland court has found that a lender, caught in the middle of a foreclosure rescue scheme, was protected as a “bona fide lender.” Recently, the United States District Court for Maryland (Northern Division), in Haley v. Corcoran, et al., Civil No.: WDQ-09-1338 (October 2, 2009), similarly found that a lender who unknowingly financed an alleged wrongdoer’s purchase of property in connection with a foreclosure rescue scheme was a “bona fide purchaser for value” and granted the lender’s motion to dismiss. In addition, the court granted a title insurer’s motion to dismiss, finding that an insurer is not responsible for a closing agent’s conduct other than conduct involved in the issuance of title insurance. We continue to defend cases on behalf of lenders that unknowingly become tangled in foreclosure rescue schemes. As home foreclosures continue to persist, we expect more activity in this area. Please contact Chris Rahl if you would like to discuss this subject.

COLLECTION AGENCIES ARE WARNED AGAIN BY MARYLAND’S COMMISSIONER

On October 2, 2009, the Maryland Commissioner of Financial Regulation issued yet another warning to collection agencies, this time reminding all that servicing home mortgage loans requires a Maryland Mortgage Lender license. This most recent Advisory Notice explains that mortgage loan servicing includes engaging, in whole or in part, in the business of servicing mortgage loans for others or collecting or receiving mortgage loan payments from borrowers for distribution to others. According to the Advisory, servicing includes collecting delinquent Maryland mortgage loans and operating a call center to negotiate terms of existing loans on behalf of a lender or another servicer. As described in our March 2009 Maryland Legal Alert, this appears to be yet another step in Maryland’s aggressive regulatory focus on debt collection activities. Please contact Andy Bulgin if you have any questions.

IDENTITY THEFT ARISES OUT OF USE OF STOLEN CREDIT CARDS

On October 2, 2009, the Court of Special Appeals of Maryland issued Clark v. State an opinion concerning, in pertinent part, whether the use of a stolen credit card constitutes identity theft under Maryland’s Criminal Law Article § 8-301(c). Section 8-301(c) prohibits identity theft, providing that a “person may not knowingly and willfully assume the identity of another . . . with fraudulent intent to . . . get a benefit, credit, good, service, or other thing of value.” The Court of Special Appeals held that fraudulent use of a credit card constitutes identity theft because “ordinarily, when a person tenders a stolen credit card to a merchant as payment for goods or services, the person so presenting implicitly represents that he or she is the cardholder.” Please contact Chris Rahl if you have any questions concerning identity theft issues.

PEOPLE ARE CALLING ABOUT . . . WHAT'S HAPPENING WITH THE FTC IDENTITY THEFT RED FLAGS RULE?

On October 30, 2009, yet again at the 11th hour, the FTC delayed enforcement of the requirement that certain "creditors" implement a written Identity Theft Red Flags program. This time the delay is in effect until June 1, 2010. Apparently, this most recent delay was prompted by requests from Congress. In a related event, also on October 30, the United States District Court for the District of Columbia agreed with the American Bar Association and enjoined the FTC from enforcing the Red Flags Rule against lawyers engaged in the practice of law. Please contact Chris Rahl if you would like to commiserate about this Rule.