19 May Maryland Legislative Update
The Maryland legislature recently amended its laws governing surety bond requirements for licensees under the Maryland Mortgage Lender Law, effective June 1, 2017.
Maryland Senate Bill 924
With the application for a new license under the Maryland Mortgage Lender Law, an applicant must file a surety bond with the Maryland Commissioner of Financial Regulation in the Department of Labor, Licensing, and Regulation (“Commissioner”).
The bond must:
- Run to the Commissioner, as obligee, for the benefit of:
- The State of Maryland; and
- Any mortgage loan borrower who has been damaged by a violation committed by a licensee of any law or regulation governing the activities of mortgage lenders.
- Be in an amount determined by the Commissioner;
- Conditioned on the licensee complying with all Maryland laws regulating the activities of mortgage lenders and mortgage lending; and
- Issued by a surety company that:
- Is authorized to do business in Maryland; and
- Holds a Certificate of Authority issued by the Maryland Insurance Commissioner.
The liability of the surety:
- Must be continuous;
- May not be aggregated or cumulative, whether or not the bond is renewed, continued, replaced, or modified;
- May not be determined by adding together the penal sum of the bond, or any part of the penal sum of the bond, in existence at any two or more points in time;
- Must be considered to be one continuous obligation, regardless of increases or decreases in the penal sum of the bond;
- May not be affected by:
- The insolvency or bankruptcy of the licensee;
- Any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the licensee or an agent of the licensee; or
- The suspension of the licensee’s license;
- May not require an administrative enforcement action by the Commissioner as a prerequisite to liability; and
- Must continue for three years after the later of the date on which:
- The bond is canceled; or
- The licensee, for any reason, ceases to be licensed.
If an applicant has conducted a mortgage lending business any time during the 36 months prior to the filing of an original application, the applicant must provide a sworn statement setting forth the aggregate principal amount for mortgage loans secured or to be secured by property located in Maryland and applied for and accepted or serviced or mortgage loans secured or to be secured by property located in Maryland and applied for, procured, and accepted or serviced by the mortgage lender during the 12 months immediately preceding the month in which the application is filed (previously did not cover loans serviced).
If an applicant has conducted a mortgage lending business any time during the 36 months prior to the filing of an original application, but during that time has not acted as a mortgage lender in Maryland, the applicant must provide with the original application a sworn statement setting forth the aggregate principal amount of loans secured or to be secured by a dwelling or residential real estate located in states other than Maryland and applied for, procured and accepted or serviced by the mortgage lender during the 12 months preceding the month in which the application is filed (previously did not cover loans serviced).
The law also sets forth provisions related to cancellation of a surety bond by the surety or by the licensee.