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09.03.06 - Financial Regulation - Proposed Regulations

PROPOSED ACTION ON REGULATIONS
MARYLAND REGISTER, VOLUME 46, ISSUE 5,
FRIDAY, MARCH 1, 2019

Subtitle 03 COMMISSIONER OF FINANCIAL REGULATION

09.03.06 Mortgage Lenders

Authority: Business Regulation Article, §2-105; Financial Institutions Article, §§2-105.1(b), 11-503, 11-503.1, 11-505(e)(3), 11-508(f), 11-511.1; Real Property Article, §3-104.1(c); Annotated Code of Maryland

Notice of Proposed Action
[19-043-P]

The Commissioner of Financial Regulation proposes to amend existing Regulations .02, .20, and .21, adopt new Regulations .03 and .23—.25, amend and recodify existing Regulations .03—.07, .09, .11, .15, .17, .18, and .23 to be Regulations .04—.08, .10, .12, .16, .18, .19, and .22, respectively, and recodify existing Regulations .08, .10, .12—.14, and .16 to be Regulations .09, .11, .13—.15, and .17, respectively, under COMAR 09.03.06 Mortgage Lenders.

Statement of Purpose

The purpose of this action is to update existing definitions by using terms defined in Regulation .02 of this Chapter, using terms defined in other State laws or federal regulations, remove ambiguous terms, and update and add definitions that have evolved based on the industry’s history and technological advancements; update ability to repay requirements and permit compliance through satisfaction of federal requirements; clarify the qualifications of a principal officer; state the filing time for license renewal applications in order for a licensee to process loans beyond the license expiration; clarify the license posting requirement; describe the required skills of the person designated to resolve complaints; clarify the approval of completed applications and trade names; explain the licensee’s responsibilities for preserving records, advertising, and supervising mortgage loan originators; update document and bond, letter of credit, and trust agreement requirements; clarify continuing education requirements; add mortgage disclosure requirements, data protection standards, certain event reporting requirements; generally remove outdated or invalid terminology and references; and correct typographical errors.

Comparison to Federal Standards

There is no corresponding federal standard to this proposed action.

Estimate of Economic Impact

I. Summary of Economic Impact. The proposed action is expected to have a positive impact on licensees. The amendments will provide clarity to licensees regarding their obligations, as well as make it easier for licensees to do business in Maryland. The amended regulations are tailored to the size and complexity of a licensee’s business operations and are expected to impose a minimal burden on licensees. With regard to the proposed change in the examination and investigation reimbursed costs charged to licensees for each day that the Commissioner’s employees are engaged in examinations or investigations, the costs will change from the current fixed $250 per day to the actual cost of the employees’ time incurred in conducting the examination or investigation. It is estimated that the average total reimbursed costs per examination will be $638.80.

Revenue (R+/R-)
 
II. Types of Economic
Impact.
Expenditure
(E+/E-)
Magnitude

A. On issuing agency: (R+) $136,064.40
 
B. On other State agencies: NONE  
 
C. On local governments: NONE
Benefit (+)
Cost (-)
Magnitude

D. On regulated industries or trade groups: (+) Indeterminable
 
E. On other industries or trade groups: NONE
 
F. Direct and indirect effects on public: (+) Indeterminable

III. Assumptions. (Identified by Impact Letter and Number from Section II.)

A. The proposed regulations will increase revenues by $136,064.40, based on the average cost increase of $638.80 multiplied by 213 closed examinations in fiscal year 2018.

D. Indeterminable.

F. Indeterminable.

Economic Impact on Small Businesses

The proposed action has a meaningful economic impact on small business. An analysis of this economic impact follows.

By providing clarity to and simplifying the supervisory process, the proposed action could reduce compliance costs for small business licensees. Some of this reduction is offset by the increase in reimbursed staff costs for examinations and investigations.

Impact on Individuals with Disabilities

The proposed action has no impact on individuals with disabilities.

Opportunity for Public Comment

Comments may be sent to Jedd Bellman, Assistant Commission for Non-Depository Supervision, Department of Labor, Licensing, and Regulation, 500 N. Calvert Street, Baltimore, MD 21202, or call 410-230-6390, or email to jedd.bellman@maryland.gov, or fax to 410-333-0475. Comments will be accepted through April 1, 2019. A public hearing has not been scheduled.

.02 Definitions.

A. (text unchanged)

B. Terms Defined.

(1) (text unchanged)

(2) “Annual percentage rate (APR)”[, under §B(13) of this regulation,] has the meaning stated in 12 CFR Part [226] 1026as it may be amended from time to time.

(3) (text unchanged)

(4) “Average prime offer rate” [means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics. The Board of Governors of the Federal Reserve publishes average prime offer rates for a broad range of types of transactions in a table updated at least weekly as well as the methodology the Board uses to derive these rates] has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.

(5) (text unchanged)

(6) “Breach of the security of a system” has the meaning stated in Commercial Law Article, §14-3501, Annotated Code of Maryland.

[(6)] (7) Broker.

(a) (text unchanged)

(b) For purposes of all Maryland laws and regulation applicable to mortgage lenders, a person is acting as a broker if:

(i) The person [procures a mortgage loan or arranges] aids or [otherwise] assists a borrower in obtaining a mortgage loan for a fee or other valuable consideration; and

(ii) The creditor identified in the loan documents is a different [entity than that] person than the person described in §B(7)(b)(i) of this regulation.

(c) There is no broker in a transaction solely because the lender contracts with a third party for processing or underwriting services if:

(i) The [entity] person contracting to perform the [underwriting or] processing or underwriting did not generate the loan application; and

(ii) (text unchanged)

[(7)] (8) — [(8)] (9) (text unchanged)

(10) “Customer information” has the meaning stated in 16 CFR Part 314, as it may be amended from time to time.

[(9)] (11) [Dwelling

(a)] “Dwelling” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(12) “Electronic record” has the meaning stated in Commercial Law Article, §21-101(h), Annotated Code of Maryland.

[(10)] (13) — [(11)] (14) (text unchanged)

[(12)] (15) “Fully indexed rate” [means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate] has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.

[(13)] (16) [Higher-Priced Mortgage Loan.

(a)] “Higher-priced mortgage loan” has the meaning stated in 12 CFR Part 1026, as it may amended from time to time [means a mortgage loan for which the annual percentage rate exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by:

(i) 1.5 or more percentage points for loans secured by a first lien on residential real estate; or

(ii) 3.5 or more percentage points for loans secured by a subordinate lien on residential real estate.

(b) Notwithstanding §B(13)(a) of this regulation, the calculation set forth therein for determining whether a loan is a higher-priced mortgage loan shall adjust as may be necessary to be consistent with the final rule codified at 12 CFR §226.35, as it may be amended from time to time.

(c) “Higher-priced mortgage loan” does not include a:

(i) Transaction to finance the initial construction of a dwelling on residential real estate;

(ii) Temporary loan with a term of 12 months or less, such as a loan to purchase residential real estate where the borrower plans to sell current residential real estate within 12 months;

(iii) Reverse mortgage transaction subject to 12 CFR §226.33; or

(iv) Home equity line of credit subject to 12 CFR §226.5b].

(17) “Information security program” has the meaning stated in 16 CFR Part 3, as it may be amended from time to time.

[(14)] (18) [Initial Application.

(a)] “Initial application” means the submission of a borrower’s financial information in anticipation of a credit decision relating to a mortgage loan, which shall include the borrower’s name, the borrower’s monthly income, the borrower’s social security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought [when:

(i) An applicant requests that a mortgage loan be made or obtained on the applicant’s behalf; and

(ii) The person to whom the request was made agrees to begin processing the loan application.

(b) A person may require an applicant to complete a written application before agreeing to begin processing the loan, if that requirement is explained to the applicant].

[(15)] (19) — [(19)] (23) (text unchanged)

(24) “Loan modification” means a change to a mortgage loan, excluding any change required due to a filing for bankruptcy, which alters the loan amount or one or more of the terms of repayment set forth in the document creating the debt.

(25) “Loss mitigation option” has the meaning stated in 12 C.F.R. Part 1024, as it may be amended from time to time.

(26) “Maryland loan” as used in this regulation means a mortgage loan secured by real property or a dwelling located in the State.

[(20)] (27) — [(22)] (29) (text unchanged)

(30) “Mortgage servicer” includes a person that engages in one or more of the following actions for the benefit of other persons in connection with mortgage loans:

(a) Collects or receives one or more of the following types of payments directly from borrowers for distribution to the owner of the mortgage loan or another third party, including a master servicer:

(i) Principal;

(ii) Interest;

(iii) Tax;

(iv) Insurance; or

(v) Any other payment due under a loan agreement or security instrument;

(b) Evaluates borrower eligibility for loss mitigation options;

(c) Communicates to the borrower regarding loss mitigation options;

(d) Is responsible for supervision of third parties that take action to protect a secured party’s interest in the property under the applicable security instrument, including:

(i) Maintenance of hazard and mortgage insurance coverage; and

(ii) Preservation of the property; or

(e) Conducts or supervises the foreclosure process, except if the person is an attorney representing a mortgagee or its successors and assigns, or acting as a substitute trustee in a foreclosure action under a mortgage or deed of trust.

[(23)] (31) [“NMLSR” means the Nationwide Mortgage Licensing System and Registry established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators] “ NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

[(24)] (32) — [(26)] (34) (text unchanged)

(35) “Service provider” has the meaning stated in 16 CFR Part 314, as it may be amended from time to time.

(36) Social Media.

(a) “Social media” means an Internet website or application software that:

(i) Requires a person to register or create an account to become a member; and

(ii) Allows two or more members to communicate directly with one another.

(b) “Social media” includes an Internet website or application software that allows members to communicate by means of one or more of the following:

(i) Text;

(ii) Video;

(iii) Still photograph; or

(iv) Audio.

(c) “Social media” does not include an electronic mail account.

(37) “Trade name” means any word or group of words used to identify a business to the public.

[(27)] (38) (text unchanged)

.03 Delivery and Receipt of Mortgage Disclosures.

A.  A licensee shall be deemed to have complied with a requirement under Commercial Law Article, Title 12, Subtitles 1, 3, 4, 8, 9, or 10, Annotated Code of Maryland, to provide a written disclosure or agreement within a specified time period after the date the loan application is completed if the mortgage disclosure or agreement is provided to an applicant in person, or placed in the mail, before the end of the time period specified in the applicable statute.

B. Electronic Disclosures.

(1) Mortgage disclosures required by Commercial Law Article, Title 12, Subtitles 1, 3, 4, 8, 9, 10, 12, or 13, Annotated Code of Maryland, may be provided to an applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. §7001 et seq.) and the Maryland Uniform Electronic Transactions Act (Commercial Law Article, Title 21, Annotated Code of Maryland).

(2) For the purpose described in §A of this regulation, unless otherwise agreed between the licensee and an applicant, the time of sending and receipt of a mortgage disclosure sent as an electronic record shall be governed by Commercial Law Article, §21-114, Annotated Code of Maryland.

[.03] .04 Licensing and Application Requirements.

A. Scope.

(1) — (4) (text unchanged)

(5) For purposes of Financial Institutions Article, §11-506(b)(4), Annotated Code of Maryland, a “principal officer” includes:

(a) An individual who owns, directly or indirectly, 10 percent or more of the business entity;

(b) An individual who serves on the board of directors or board of managers;

(c) An elected or appointed senior officer, including President, Executive Vice President, Senior Vice President, Treasurer, Secretary, Chief Executive Officer, Chief Operating Officer, Chief Legal Officer, Chief Credit Officer, and Chief Compliance Officer; or

(d) An individual, regardless of title, who has the power to direct the management or policies of the mortgage lending business.

B. — E. (text unchanged)

F. Loan Processing Under Expired License. [If a licensee is operating without a license because of a failure to timely renew, or an unauthorized change in location, the licensee may continue to process and close loans which were applied for before the deadline for renewal or the unauthorized change of location.]

(1) If a licensee files an application for license renewal with the Commissioner at least 2 calendar weeks before the license expires and the Commissioner has not approved the application before the license expires, the licensee may continue to process and close loans until the Commissioner takes final action on the application in accordance with State Government Article, §10-226(b), Annotated Code of Maryland.

(2) If a licensee files an application for license renewal with the Commissioner less than 2 calendar weeks before the license expires and the Commissioner has not approved the application before the license expires, the licensee shall cease processing and closing loans when the license expires.

G. Posting License.

(1) A licensee shall post its license for each licensed location[, on the premises in a conspicuous location accessible to the public.]:

(a) On the premises of the licensed location;

(b) In a manner that is accessible to the public; and

(c) In a conspicuous location within the licensed location.

(2) A licensee is not required to post its license if the licensee does not grant access to the licensed location to members of the general public.

H. Complaint Resolution.

(1) A licensee shall designate [an officer, director, or member of senior management] a person as being responsible for, and authorized to make, decisions regarding the resolution of complaints received from the Commissioner.

(2) [The] A licensee shall provide to the Commissioner the name of the person designated under §H(1) of this regulation [shall be provided to the Commissioner] as part of an application for:

(a) (text unchanged)

(b) [License] A license renewal.

(3) A person designated under §H(1) of this regulation shall have:

(a) The necessary skills and knowledge of the mortgage industry to be able to adequately respond to consumer complaints; and

(b) Authority to resolve the complaint, or shall report directly to an individual with such authority.

(4) A licensee shall notify the Commissioner through NMLS of any change in the person designated under §H(1) of this regulation within 10 business days of the change.

I. Designation of Mortgage-Related Activity.

(1) (text unchanged)

(2) Notification.

(a) A licensee shall notify the Commissioner in writing through NMLS if, after the issuance or the renewal of its license, the licensee begins conducting a new activity that the licensee did not designate under §I(1) of this regulation.

(b) A licensee shall deliver the notification through NMLS to the Commissioner within 10 business days after beginning the new activity.

J. [Transition to Nationwide Mortgage Licensing System and Registry] NMLS.

(1) Fingerprinting and Criminal Background Checks. Notwithstanding any provision of Financial Institutions Article, Annotated Code of Maryland, in connection with an initial application for a license, and at any other time that the Commissioner requests, an applicant or licensee shall provide fingerprints for use by the Federal Bureau of Investigation [and the Criminal Justice Information System Central Repository of the Department of Public Safety and Correctional Services] to conduct criminal history record checks [until:

(a) The NMLSR is able to accept fingerprints for submission to the Federal Bureau of Investigation and any other governmental agency or entity authorized to receive this information for a state, national, or international criminal history background check; and

(b) The Commissioner has developed and implemented procedures to allow the NMLSR to accept fingerprints for submission to the Federal Bureau of Investigation and any other governmental agency or entity authorized to receive this information for a state, national, or international criminal history background check].

(2) [Corporate Office] Principal Executive Office.

(a) A person applying for an initial or a renewal license through [the NMLSR] NMLS shall comply with [NMLSR] NMLS procedures by obtaining a license from the Commissioner for the applicant’s [corporate]principal executive office location by filing [the NMLSR] NMLS form MU-1.

(b) A person holding a license for its [corporate] principal executive office subject to [the NMLSR] NMLS form MU-1 may apply to the Commissioner for one or more licenses for additional locations by filing [the NMLSR] NMLS form MU-3.

K. [Incomplete] Applications.

(1) The Commissioner shall approve or deny an application for an initial license, a renewal license, or a license amendment within 60 days after the Commissioner receives a completed application, including, if applicable, a surety bond and all required fees.

(2) If the Commissioner notifies an applicant that an application for an initial license, a renewal license, or a license amendment is incomplete, the Commissioner shall itemize the steps that the applicant must take to complete the application.

(3) The application for an initial license, a renewal license, or a license amendment may not be approved until after the applicant completes all steps identified in the Commissioner’s notice.

(4) If an application for an initial license, a renewal license, or license amendment is incomplete when submitted and remains incomplete [for at least 60 days], the Commissioner may cease processing and deem the incomplete application [and return it to the applicantwithdrawn, provided that the Commissioner has previously notified  the applicant of the basis for incompleteness in accordance with §K(2) of this regulation, and given the applicant not less than 15 days to correct the incompleteness.

L. Trade Names.

(1) Prior to a licensee’s use of a trade name to engage in mortgage lending business in Maryland, the licensee shall:

(a) Register the trade name with the Maryland Department of Assessments and Taxation; and

(b) Obtain the approval of the Commissioner for the use of the trade name by:

 (i) Designating on an original license application or license renewal application through  NMLS, any trade name under which the licensee will engage in mortgage lending business in Maryland; and

(ii) Specifying on an original license application or license renewal application through NMLS, which licensed locations will utilize the trade name.

(2) At all times subsequent to obtaining the approval of the Commissioner for the use of the trade name, a licensee shall maintain registration of the trade name in accordance with the requirements of Corporations and Associations Article, §1-406, Annotated Code of Maryland, and accompanying regulations.

(3) A licensee shall immediately notify the Commissioner if the licensee amends, cancels, or otherwise fails to renew the registration of a trade name which the Commissioner has approved previously.

[.04] .05 Records.

A. Preservation of Records.

(1) A licensee shall preserve the records of a [mortgage] Maryland loan [transaction] in one or more of the following ways:

(a) — (c) (text unchanged)

(2) A licensee’s use of electronic or microphotographic preservation of records, or storage of books and records at a location other than the licensee’s place of business, shall be considered approved by the Commissioner if the licensee:

(a) Completes an attestation in the format prescribed by the Commissioner; and

(b) Uploads an electronic copy of the attestation to NMLS in accordance with directions provided by the Commissioner.

(3) A licensee who stores records in the form of electronic copies shall:

(a) Store the records in a format that shall allow the Commissioner to read the records using common, readily available software;

(b) Maintain electronic copies of the original documents that are:

(i) Complete;

(ii) Accurate;

(iii) Unaltered; and

(iv) Unabridged;

(c) Ensure that, when printed, the records will be legible;

(d) Protect the records from:

(i) Deletion;

(ii) Damage to or failure of electronic storage media; and

(iii) Unauthorized access, use, modification, or disclosure; and

(e) Be permitted to alter electronic documents in any manner that does not affect the content of the records.

(4) A licensee who stores records at a location other than its licensed address shall:

(a) Ensure that all records are:

(i) Complete;

(ii) Accurate;

(iii) Unaltered; and

(iv) Unabridged;

(b) Protect the records from:

(i) Deletion;

(ii) Damage to, or failure of, electronic storage media; and

(iii) Unauthorized access, use, modification, or disclosure; and

(c) Immediately notify the Commissioner when a licensee discovers or is notified of a potential loss of records, completes a reasonable and prompt investigation, and then determines that records have been lost or are reasonably likely to be lost.

[(2)] (5) Time Period.

(a) A lender shall retain records for [25] 37 months after a loan is denied, repayment of the loan is made in full, or the loan is sold, whichever occurs first.

(b) A mortgage servicer shall retain records for [25] 37 months after final payment is made or the [loan is sold] right to service the loan under either a servicing or subservicing agreement is terminated or transferred, whichever occurs first.

(c) If a licensee acts as a broker in a Maryland loan [transaction], records of the [transaction] Maryland loan shall be retained for [25] 37 months after the Maryland loan is made or denied.

[(3)] (6) — [(4)] (7) (text unchanged)

B. Content of Records.

(1) For each [mortgage] Maryland loan made or serviced by a licensee, a file shall be maintained which contains, at a minimum, the following:

(a) — (g) (text unchanged)

(h) An accurate [payment] history[;] or audit trail, since the date of loan closing, of the application of all:

(i) Payments;

(ii) Charges; and

(iii) Credits;

(i) — (k) (text unchanged)

(l) All required [truth-in-lending] State and federal disclosure documents;

(m) — (p) (text unchanged)

(q) Optional insurance:

(i) (text unchanged)

(ii) This paragraph does not apply to hazard insurance and flood insurance on the property securing the Maryland loan; [and]

(r) Records of any foreclosure action begun by the licensee by filing an order to docket or a complaint to foreclose including, if applicable:

(i) The name and [mortgage originator] license number or NMLS unique identifier of the mortgage originator that originated the loan if that information is contained in the security instrument underlying the foreclosure or is otherwise known to the licensee; [and]

(ii) The name and [mortgage lender] license number or NMLS unique identifier of the mortgage lender that originated the loan[.]; and

(iii) Copies of all documents provided to the borrower or filed with a court in conjunction with the foreclosure action;

(s) Copies of all documents filed by or on behalf of the licensee in a borrower’s bankruptcy proceeding involving the mortgage loan;

(t) If the licensee is a mortgage servicer:

(i) Copies of all written correspondence between the licensee or its vendors and the borrower;

(ii) Written records of verbal communications between the mortgage servicer or its vendors and the borrower; and

(iii) Copies of any audio recordings of communication with the borrower; and

(u) Other documents necessary to prove compliance with any State or federal statute or regulation applicable to the mortgage loan.

(2) Notwithstanding §B(1) of this regulation, a licensee acting as a broker in connection with a particular [transactionMaryland loan:

(a) — (b) (text unchanged)

(c) Shall retain a record of the lender to whom the loan was brokered; [and]

(d) Shall retain a record of the amount of any finder’s fee received;

(e) Shall retain a record of any compensation, as required by federal law; and

[(d)] (f) (text unchanged)

[(3) A licensee acting as a servicer shall compile and submit to the Commissioner, on or before the 25th day of each month, a report on the form required by the Commissioner that contains the following information for the preceding month:

(a) The number of mortgage loans the licensee is servicing;

(b) The number of mortgage loans that the licensee is servicing that are in payment default and a breakdown of these mortgage loans by length of payment delinquency, including 30-day, 60-day, and 90-day and longer delinquencies;

(c) Information on loss mitigation activities undertaken including, but not limited to, the following:

(i) The number of workout arrangements entered into by the licensee in connection with mortgage loans;

(ii) A description of the types of workout arrangements, including mortgage loan modifications, and the percentage of each type of workout arrangement entered into;

(iii) The proactive steps taken by the licensee to identify borrowers at a heightened risk of default, such as those with impending interest rate resets, including, but not limited to, contacts with borrowers to assess their ability to repay their mortgage loan obligations;

(d) The number of foreclosure actions commenced in this State in connection with mortgage loans the licensee is servicing;

(e) Information regarding adjustable rate mortgage loans; and

(f) Any other information that the Commissioner may consider necessary, including geographic information regarding applicable mortgage loans.

(4) The Commissioner may:

(a) Publish for public review the report required under §B(3) of this regulation, or any information contained in the report, except personally identifying information regarding borrowers;

(b) Require that the information contained in the report be for a period other than the preceding month; and

(c) Require that the report be provided to the Commissioner on a date later than the 25th day of each month or terminate the reporting requirement for such length of time as the Commissioner may consider appropriate.]

(3) A licensee shall maintain all records that demonstrate that the licensee meets the general qualifications for a license as described in Financial Institutions Article, §11-506, Annotated Code of Maryland.

[(5)] (4) (text unchanged)

C. Provision of Records to the Commissioner.

(1) A licensee who keeps books and records at a licensed location shall, at the request of the Commissioner, immediately make those books and records available to the Commissioner at the licensed location.

(2) A licensee who keeps books and records at a location other than the licensed location with prior permission by the Commissioner shall, within 5 business days of a request by the Commissioner, make those books and records available to the Commissioner at the licensed location.

(3) A licensee shall ensure that the Commissioner receives any records requested in writing by the Commissioner within 10 business days from the date of the request.

(4) When delivered to the Commissioner, records shall be:

(a) In an electronic format agreed to by the Commissioner;

(b) In paper form, if the licensee does not maintain its records in an electronic format; and

(c) Organized in the manner specified by the Commissioner.

D. Loss of Records. A licensee shall immediately notify the Commissioner when the licensee:

(1) Knows of any actual or potential loss of records required to be kept by this regulation; or

(2) Reasonably should know of any actual or potential loss of records required to be kept by this regulation.

[.05] .06 Advertising and Solicitation.

A. (text unchanged)

B. Licensee Name and Address.

(1) A [person] licensee may not advertise under any name or address other than a name or address [which appears on its license] that:

(a) Appears on its license; or

(b) Has been approved by the Commissioner pursuant to Regulation .04L of this chapter and is listed as a trade name on the licensee’s NMLS record.

(2) (text unchanged)

(3) Notwithstanding §B(1) of this regulation, a licensee may use an e-mail address or website address that is different from the name or address that appears on the licensee’s license, provided that the content of any e-mail correspondence, or of the website itself, uses only a name that appears on the licensee’s license or has been approved by the Commissioner pursuant to Regulation .04L of this chapter and is listed as a trade name on the licensee’s NMLS record.

(4) A licensee shall disclose its NMLS unique identifier in every advertisement.

(5) Notwithstanding §B(4) of this regulation, a licensee who utilizes social media for advertising purposes need not disclose the licensee’s NMLS unique identifier in each statement published through a social media platform, provided that the NMLS unique identifier is displayed prominently on the licensee’s profile page within the social media platform.

[(3)] (6) (text unchanged)

(7) A licensee is responsible for any advertisement disseminated by an employee of the licensee if such advertisement relates to activities performed by the licensee or by the employee in the employee’s capacity as an employee of the licensee.

[.06] .07 Financing Agreements.

A. — B. (text unchanged)

C. A financing agreement need not be provided under Commercial Law Article, §§12-125, 12-922, or 12-1022, Annotated Code of Maryland, if within 10 business days after initial application the:

(1) (text unchanged)

(2) Applicant receives a written commitment [that the loan will be made, which contains all material terms of the loan].

D. A licensee that provides disclosures that comply with 12 CFR Parts 1024 and 1026, as they may be amended from time to time, shall be deemed compliant with the requirement to:

(1) Provide a financing agreement; and

(2) Provide a commitment.

[.07] .08 Agreements with the Borrower.

A. Written Agreements.

(1) Agreements between a borrower and a licensee shall be:

(a) (text unchanged)

(b) Provided promptly to the borrower following execution by all parties.

(2) (text unchanged)

B. Agreements in Blank.

(1) (text unchanged)

(2) The prohibitions of §B(1) of this regulation do not apply to blanks for the signatures of a:

(a) (text unchanged)

(b) Witness who is not a borrower, guarantor, or obligor on the loan; or

(c) Person required to sign a certification or affidavit required by law for recordation.

C. Undisclosed Fees.

(1) — (2) (text unchanged)

(3) Compliance with applicable disclosures under the [federal] Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and corresponding regulations and applicable disclosures under the Truth in Lending Act (15 U.S.C. §1601 et seq.) and corresponding regulations shall be deemed compliance with §C(1) and (2) of this regulation.

(4) (text unchanged)

D. (text unchanged)

[.09] .10 Fees.

A. (text unchanged)

B. Timing of Collection.

(1) If a financing agreement is required under Commercial Law Article, §§12-125, 12-922, or 12-1022, Annotated Code of Maryland, and these regulations, a licensee may not collect any fee from the applicant before providing the financing agreement executed by the lender.

(2) (text unchanged)

C. — D. (text unchanged)

[.11] .12 Brokers.

A. — C. (text unchanged)

D. Cure of Unintentional Violation.

(1) This section applies only to a licensee [which] that engages in both brokering and lending in the regular course of its business.

(2) (text unchanged)

[.15] .16 Bonds, Letters of Credit, and Trust Accounts.

A. [A] The required amount of a bond, letter of credit, or trust account established to meet the requirements of Financial Institutions Article, §11-508, Annotated Code of Maryland, shall be [structured and maintained so that it is available for and subject to claims for 1 year following the expiration of the period for which it is issued] subject to recalculation at the time a license is renewed.

B. [A separate bond coverage, letter of credit, or trust account shall be obtained for each licensing period] The Commissioner shall use information provided by the licensee as well as the licensee’s last four quarterly call reports filed with NMLS to recalculate the required amount of the bond, letter of credit, or trust account.

C. Restitution awarded and to be paid from a [bond,] letter of credit[,] or trust account shall be paid as follows:

(1) (text unchanged)

(2) Awards resulting from an examination by the Commissioner [which] that will exceed the total available under the [bond,] letter of credit[,] or trust account[,] shall be paid on a pro rata basis;

(3) Claims against a letter of credit or trust account shall be filed by a claimant with the Commissioner within 3 years after the occurrence from which the claim arises; and

[(3)] (4) Notwithstanding §C(1) of this regulation, if the aggregate amount of all pending claims exceeds the amount of the letter of credit or trust account, the Commissioner may require a prorated distribution.

D. The Commissioner may require part or all of the funds in a letter of credit or trust account to remain on deposit [beyond the termination schedule established in this regulation] if:

(1) — (2) (text unchanged)

E. Claims against a bond, letter of credit, or trust account[:

(1) Shall be filed by the claimant if against a:

(a) Surety bond, directly with the surety,

(b) Letter of credit or trust account,with the Commissioner.

(2) Shall be filed in accordance with §E(1) of this regulation within 1 year after the occurrence from which the claim arises;

(3)  May] may not include:

[(a)] (1) — [(c)] (3) (text unchanged)

F. (text unchanged)

[.17] .18 Continuing Education.

A. Purpose and Applicability.

(1) (text unchanged)

(2) [Subject to Financial Institutions Article, §11-511.1, Annotated Code of Maryland, the] The continuing education requirement does not apply to the original application for a license.

B. (text unchanged)

C. Requirements.

(1) Except as provided in §A(2) [and (3)] of this regulation, in order to renew a license, each covered employee of a licensee shall successfully complete in the licensing period immediately preceding the current renewal period at least 8 hours of continuing education in approved courses.

(2) The required 8 hours of continuing education shall be the same as the continuing education requirements for mortgage loan originators set forth in Financial Institutions Article, §11-612, Annotated Code of Maryland, and COMAR 09.03.09.03, and include at least the following subjects in the number of hours indicated:

(a) Federal law and regulations relating to mortgage origination—3 hours;

(b) (text unchanged)

(c) Lending standards and loan terms for the nontraditional mortgage product market—2 hours; and

(d) Maryland [mortgage-related laws] law and regulations relating to mortgage lending and origination—1 hour.

(3) (text unchanged)

D. Reporting, Verification, and Record Keeping.

(1) [Except as provided in §A(2) of this regulation, a] A licensee, when applying for a license renewal, shall:

(a) — (b) (text unchanged)

(2) The Commissioner may [verify] require verification, on a random or other basis, of satisfactory completion of the requirements of this regulation.

(3) (text unchanged)

[G.] E. (text unchanged)

[.18] .19 [Special Rules for Covered Loans] Ability to Repay.

A. Purpose and Scope.

(1) (text unchanged)

(2) This regulation applies to [all covered loans made under the provisions of Commercial Law Article, Title 12, Subtitle 1, 3, 4, or 10, Annotated Code of Maryland] loans subject to Commercial Law Article, §§12-127, 12-311, 12-409.1, and 12-1029, Annotated Code of Maryland.

[B. Definitions. In this regulation, the following terms have the meanings indicated:

(1) “Consumer report” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.

(2) “Consumer reporting agency” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.

(3) “Covered loan” means a mortgage loan made under Commercial Law Article, Title 12, Subtitle 1, 3, 4, or 10, Annotated Code of Maryland, that meets the criteria for a loan subject to the Federal Home Ownership Equity Protection Act set forth in 15 U.S.C. §1602(AA, as modified from time to time by Regulation Z, 12 CFR §226, except that the comparison percentages for the mortgage loan shall be 1 percentage point less than those specified in 15 U.S.C. §1602AA, as modified from time to time by Regulation Z, 12 CFR§226.

(4) “Credit grantor” has the meaning stated in Commercial Law Article, §12-1001, Annotated Code of Maryland.

(5) Lender.

(a) “Lender” has the meanings stated in Commercial Law Article, §§12-101, 12-301, or 12-401, Annotated Code of Maryland, as the context may require.

(b) “Lender” includes a credit grantor under Commercial Law Article, Title 12, Subtitle 10, Annotated Code of Maryland.

(6) “Loan application” has the meaning stated in Commercial Law Article, §12-125(a), Annotated Code of Maryland.

(7) “Mortgage loan” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

C. Requirements.

(1) For purposes of Commercial Law Article, §§12-124.1(c), 12-311(e), 12-409.1(c), and 12-1029(c), Annotated Code of Maryland:

(a) A loan application is completed at the time of initial application; and

(b) In the case of loan applications received by a lender by mail, telephone, or other electronic means the requirement that the lender shall provide a written recommendation that the borrower seek home buyer education or housing counseling and a list of approved agencies and organizations is satisfied, if they are mailed or otherwise provided to the borrower at the time of the initial application or within 3 business days after completion of the initial application.

(2) Under Commercial Law Article, §§12-127(b), 12-311(d), 12-409.1(b), and 12-1029(b), Annotated Code of Maryland:

(a) If the residential real estate securing the covered loan of a borrower is not located in a metropolitan statistical area, the borrower’s monthly gross income shall be compared to the nonmetropolitan median family income for the county in which the property is located, as reported in the most recent estimates made available by the United States Department of Housing and Urban Development as of the date of initial application for a covered loan;

(b) A borrower’s total scheduled monthly payment obligations are the amounts required to be paid to satisfy the borrower’s legally enforceable minimum monthly financial obligations as of the date of initial application for a covered loan;

(c) A borrower’s total scheduled monthly payment obligations include secured and nonsecured debt, alimony, child support, and other similar legally enforceable financial obligations payable in two or more installments;

(d) A borrower’s total scheduled monthly payment obligations do not include any debts that are consolidated with, or paid off by, a covered loan;

(e) A lender’s consideration of a borrower’s scheduled monthly payment obligations may be limited to information provided directly by the borrower and verified by a consumer report from a consumer reporting agency, unless information provided by the borrower or the consumer reporting agency reasonably leads to further investigation by the lender; and

(f) A lender shall retain information used to determine a borrower’s ability to repay for at least 25 months after final payment is made or the covered loan is sold, whichever occurs first.]

B. Subject to §C of this regulation, a lender shall give due regard to the borrower’s ability to repay the mortgage loan, as follows:

(1) A borrower’s monthly gross income shall be compared to the nonmetropolitan median family income for the county in which the property is located, as reported in the most recent estimates made available by the United States Department of Housing and Urban Development as of the date of initial application for a loan if the residential real estate securing the loan of a borrower is not located in a metropolitan statistical area;

(2) A borrower’s total scheduled monthly payment obligations are the amounts required to be paid to satisfy the borrower’s legally enforceable minimum monthly financial obligations as of the date of initial application for a loan;

(3) A borrower’s total scheduled monthly payment obligations include secured and unsecured debt, alimony, child support, and other similar legally enforceable financial obligations payable in two or more installments;

(4) A borrower’s total scheduled monthly payment obligations do not include any debts that are consolidated with, or paid off by, a mortgage loan; and

(5) A lender’s consideration of a borrower’s scheduled monthly payment obligations may be limited to information provided directly by the borrower and verified by a consumer report from a consumer reporting agency, unless information provided by the borrower or the consumer reporting agency reasonably leads to further investigation by the lender.

C. Compliance with applicable provisions in 12 CFR Part 1026, as it may be amended from time to time, may be substituted for the obligations required by, and shall be sufficient to meet the requirements of, §B of this regulation.

.20 Duty of Care.

A. (text unchanged)

B. Method to Determine Net Tangible Benefit.

(1) (text unchanged)

(2) A licensee is considered to have conducted a reasonable inquiry of whether a refinance of a mortgage loan provides a net tangible benefit to a borrower if the mortgage lender has the borrower complete and sign a net tangible benefit worksheet on the form prescribed by the Commissioner, or a form that is substantially similar to the form prescribed by the Commissioner.

.21 Nontraditional and Higher-Priced Mortgage Loans.

A. — B. (text unchanged)

C. Risk Management Policies, Procedures, and Control Systems.

(1) (text unchanged)

(2) Policies and Procedures.

(a) — (c) (text unchanged)

(d) A licensee acting as a lender shall establish written [polices] policies and procedures to implement the requirements set forth in this subsection.

(3) (text unchanged)

[.23] .22 Fees.

A. (text unchanged)

B. Initial License Fee.

(1) (text unchanged)

(2) In addition to the initial license fee set forth in §B(1) of this regulation, an applicant for a license shall pay to [NMLSRNMLS the license application processing fee and any other fees that [NMLSR] NMLS imposes in connection with the application.

C. Renewal Fee.

(1) (text unchanged)

(2) In addition to the renewal fee set forth in §C(1) of this regulation, an applicant for a renewal shall pay to [NMLSRNMLS the renewal application processing fee and any other fees that [NMLSR] NMLS imposes in connection with the application.

D. Examination and Investigation Fee. [The fee] A licensee shall pay all reasonable costs, including the actual cost per day for each of the Commissioner’s employees engaged in examinations or investigations performed by the Commissioner as authorized by Financial Institutions Article, §11-515(c), Annotated Code of Maryland[, is $250 per day].

.23 Supervision of Mortgage Loan Originators.

A. A licensee who is the employer of a mortgage loan originator shall at all times reasonably and adequately supervise those activities of the mortgage loan originator that are conducted within the scope of the mortgage loan originator’s employment.

B. In order to determine whether supervision by the licensee is reasonable and adequate, the Commissioner may consider factors that include the following:

(1) The availability of:

(a) Experienced supervisory personnel to review and discuss:

(i) Mortgage loan terms;

(ii) Disclosure requirements; and

(iii) Advertising; and

(b)  Regularly updated policies and procedures that provide adequate guidance to mortgage loan originators in the following areas:

(i)  Licensing and education requirements;

(ii) State and federal mortgage lending laws and regulations, including any new requirements or changes to existing requirements;

(iii) The preparation, execution, and review of disclosures, agreements, and other documents; and

(iv) Advertising; and

(2) Evidence of:

(a) Review of disclosures, agreements, and other documents prepared or executed by mortgage loan originators;

(b) Compliance with the policies and procedures specified in §B(1)(b) of this regulation; and

(c) Dissemination of the policies and procedures specified in §B(1)(b) of this regulation.

C. If the Commissioner determines that the licensee does not provide reasonable and adequate supervision in the areas specified under §B of this regulation, the burden of proof shall be on the licensee to show that the supervision the licensee provides is reasonable and adequate.

.24 Data Protection.

A. A licensee that adequately demonstrates compliance with the federal Interagency Guidelines Establishing Information Security Standards, 12 CFR Part 30, Appendix B, as it may be amended from time to time, shall be deemed to be in compliance with §§B—G of this regulation.

B. A licensee shall develop, implement, and maintain a comprehensive information security program that is commensurate with the licensee’s size and complexity, the nature and scope of the licensee’s activities, and the sensitivity of any customer information at issue.

C. A licensee’s information security program shall be designed to achieve the following objectives:

(1)  Ensuring the security and confidentiality of customer information;

(2)  Protecting against any anticipated threats or hazards to the security or integrity of such information; and

(3)  Protecting against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

D. Governance over Information Technology.

(1) A licensee shall have an established governance process in place to control and monitor information security.

(2) The governance process shall include, as appropriate for the size and complexity of the licensee and its information technology systems:

(a) The establishment of policies and procedures related to information technology approved by the board of directors, ownership, or most senior level of management; and

(b) A management structure that encompasses:

(i) Assigning responsibilities and authorities for ensuring adherence to information technology policies and procedures;

(ii) Documenting accountability for functions to ensure compliance with information technology policies and procedures; and

(iii) Reporting to the board of directors, ownership, or most senior level of management, no less than annually, regarding the effectiveness of the information technology policies and procedures.

E. Information Technology Security Risk Assessment.

(1) A licensee shall complete an information technology security risk assessment on a periodic basis, but not less than once every 3 years.

(2) A licensee’s security risk assessment shall include:

(a) Identification of the data and information systems that need to be protected;

(b) Classification and ranking of sensitive data, systems, and applications; and

(c) Identification and assessment of threats and vulnerabilities.

F. Information Technology Security Testing and Monitoring.

(1) A licensee shall perform periodic testing and monitoring of information technology security controls as appropriate for the size and complexity of the licensee’s information technology systems.

(2) A licensee’s periodic testing and monitoring of information technology security controls shall include:

(a) Evaluating the effectiveness of existing internal controls;

(b) Taking corrective action to address any significant deficiencies identified during the course of licensee’s evaluation of the effectiveness of existing internal controls;

(c) Monitoring of external sources for new vulnerabilities; and

(d) Developing and implementing additional control frame works for any new or changed threats or risks identified by the licensee.

G. Third Party Provider Oversight. A licensee shall oversee third party service providers by:

(1) Taking reasonable steps to select and retain service providers that are capable of maintaining appropriate safeguards for the customer information at issue; and

(2) Requiring service providers by contract to implement and maintain such safeguards.

H. Reporting Obligations.

(1) A licensee shall obtain an annual certification as to the performance and results of the periodic testing required by §E(1) of this regulation and make the annual certification available at the request of the Commissioner.

(2) A licensee shall provide notice of a breach of the security of a system to the Commissioner prior to giving the notice required by Commercial Law Article, §14-3504(b), Annotated Code of Maryland.

.25 Significant Event Reporting.

A. A licensee shall comply with the duty to report set forth in COMAR 09.03.10.02.

B. A licensee shall notify the Commissioner in writing through NMLS, and, if applicable, amend the licensee’s information and disclosures in NMLS, within 2 business days of the occurrence of any of the following events:

(1) Insolvency, filing for bankruptcy or reorganization of the licensee, the placement into receivership by any court, or an assignment for the benefit of creditors;

(2) Receiving notification of any initiation of a settlement agreement or other form of consensual resolution, or entry of judgment in any administrative, civil, or criminal action against the licensee by any governmental entity;

(3) Expiration or nonrenewal of, or monetary or nonmonetary default under, a line of credit agreement or warehouse credit agreement;

(4) Suspension or termination of the licensee’s status as an approved seller or seller/servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, or a direct endorsement mortgagee by the Federal Housing Administration;

(5) A change to net worth resulting from market valuation or future loss liability or another change that causes the net worth of the licensee to fall below the requirements of Financial Institutions Article, §11-508.1, Annotated Code of Maryland;

(6) Cancellation or modification by the licensee, or termination by a surety of the licensee’s surety bond required by Financial Institutions Article, §11-508, Annotated Code of Maryland; and

(7) Becoming aware of  systemic violations of any provision of Financial Institutions Article, Title 11, Subtitle 5, Annotated Code of Maryland, any regulation adopted thereunder, or any other law regulating mortgage loan lending in the State.

C. The notice required by §B(2) of this regulation shall include, as applicable, a copy of the complaint, settlement agreement, or judgment that is the subject of the notice.

ANTONIO P. SALAZAR
Commissioner of Financial Regulation