Maryland Legal Alert for Financial Services

MORTGAGE LENDERS/BROKERS: DEADLINE FOR RED FLAGS PROGRAM IS LOOMING

Federal rules require most financial businesses to have written programs in place by November 1, 2008 to identify, detect, and respond to “red flags” of possible identity theft. Each red flags program must be tailored to the size and nature of the business. We are presenting a hands-on workshop for mortgage lenders and brokers subject to the Federal Trade Commission's jurisdiction to explain the requirements and assist attendees in developing their identity theft programs. Please click here for more information.

PRE-NEED SERVICES: CHANGES TO BANK ACCOUNT ACCESS ON JANUARY 1, 2009

Chapter 532 (introduced as HB1090) addresses how morticians who sell pre-need services and merchandise must access accounts at banks. It prohibits the mortician from withdrawing any money deposited by a buyer under a pre-need contract unless the seller provides the bank with a copy of the death certificate of the person for whose benefit a pre-need contract is purchased (beneficiary). More importantly, Chapter 532 suggests that the bank could have liability if it were to release funds to the mortician without first receiving either a copy of the beneficiary's death certificate or a notarized statement and withdrawal request from the buyer or the buyer's legal representative. This section of Chapter 532 is effective January 1, 2009 and only applies prospectively (which means it does not apply to pre-need contracts entered into before that date).

Please note that while this change was made to the law applicable to morticians, no similar change was made to the pre-need burial contracts law applicable to cemeteries. Trust accounts established for monies paid in connection with pre-need burial contacts are accessed under different laws and rules. For more information, please contact Chris Rahl.

CONDOMINIUM INSURANCE: THE IMPACT OF ANDERSON

On April 15, 2008, the Court of Appeals of Maryland issued the opinion inAnderson v. Council of Unit Owners of The Gables on Tuckerman Condominium, 404 Md. 560, 948 A.2d 11 (2008). A Motion for Reconsideration was filed, but was denied by the Court of Appeals on June 10, 2008. The Court's holding in Anderson creates uncertainty in the manner in which condominium insurance is viewed. The Court held that the Maryland Condominium Act, §§ 11-101 et seq., of the Real Property Article, does not require a condominium association to repair or replace property of an individual condominium unit owner after a casualty loss that results in damage solely to the unit as opposed to damage to the common elements or structure of the condominium. Prior to Anderson, the general practice was for condominium associations to purchase master insurance policies that would provide primary coverage for casualty losses to the common areas, the actual structure, and the individual units, exclusive of improvements to the units. The holding in Anderson is now the law for determining liability when a casualty loss occurs that affects individual units of a condominium, however, legislation will be introduced in the next session of the Maryland General Assembly to clarify the uncertainty caused by the decision. For more information, please contact Chris Rahl.

HECM ADVISOR ACTIVITIES LIMITED TO HUD-APPROVED ENTITIES

Many banks and others involved in the mortgage industry facilitate older borrowers by acting as advisors to reverse mortgage loan applicants. On September 16, 2008, HUD issued Mortgagee Letter 2008-24 essentially prohibiting non-approved persons from acting as HECM advisors. Only HUD-approved persons may participate in the origination of HECM loans beginning October 1, 2008. For more information, please contact Chris Rahl.

Pursuant to U.S. Treasury Department Regulations, we are advising you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. No written opinion of a Gordon Feinblatt attorney on a federal tax issue should be understood to suggest a more likely than not favorable outcome unless the words “more likely than not” are actually used in the opinion.

© 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.