Title 09 — Subtitle 03. Commissioner of Financial Regulation

Chapter 01. Credit Unions

Regulation .01—.07 Repealed.Link Copy Citation

Regulation .08 Real Estate Lending.Link Copy Citation

Definitions.

(1)

“Appraisal” means an objective estimate of value established using a real estate appraisal policy approved by the board of directors in accordance with all applicable federal and State laws and regulations and in conformity with secondary market guidelines including but not limited to the Federal National Mortgage Association (FNMA) and/or Federal Home Loan Mortgage Corporation (FHLMC).

(2)

“Appraiser” means an individual who performs appraisals under the authority of real estate appraisal policies and procedures approved by the Commissioner of Financial Regulation under Financial Institutions Article, §2-110, Annotated Code of Maryland.

(3)

“Construction mortgage” means an interim loan covering residential construction and development costs in which funds are advanced at specific stages of construction with a portion held back until completion of the project.

(4)

“Escrow account” means either a special limited-withdrawal share account or an accounts payable account used for the accumulation of funds to pay for not more than 1 year's taxes, ground rent, assessments, insurance premiums, or other charges that could affect the credit union's lien position.

(5)

“Flood insurance” means insurance affording protection against loss or damage from flood and other hazards covered by a standard mortgage clause in favor of the credit union and subsequent purchasers of the mortgage.

(6)

“Hazard insurance” means property insurance affording protection against loss or damage from fire and other hazards covered by a standard extended coverage endorsement with a standard mortgage clause in favor of the credit union and subsequent purchasers of the mortgage.

(7)

“Insured or guaranteed loan” means a loan that is fully or partially insured or guaranteed by the federal government, State government, local government, or any agency of these governments.

(8)

“Lender's title insurance” means insurance that protects:

(a)

The credit union against loss due to clouds or defects in title to real property in an amount equal to the current principal balance of the loan; and

(b)

Subsequent purchasers of the mortgage or deed of trust.

(9)

“Market value” means the highest price that real property will bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller acting in a prudent and knowledgeable manner, and assuming the price is not affected by undue stimulus.

(10)

“Net worth” means retained earnings as defined under generally accepted accounting principles. Retained earnings include, but are not limited to, undivided earnings, regular reserves, and any other appropriations designated by management or the Commissioner.

(11)

“Permanent financing” means a longer-term mortgage loan greater than 10 years in maturity and covering development costs, construction costs, legal expenses, and other related costs. Permanent financing is also known as a take-out loan for a construction loan.

(12)

“Principal residence” means a structure where the owner will be domiciled or will reside permanently within the time period established by the applicable federal loan programs or within 60 days after initial disbursement of the loan.

(13)

“Private mortgage insurance” means mortgage insurance that is purchased for conventional loans on that amount of the loan that is in excess of 80 percent loan to value.

(14)

Purchase Money Mortgage.

(a)

“Purchase money mortgage” means the acquisition of property through the use of a first mortgage or first deed of trust.

(b)

“Purchase money mortgage” does not include refinances or seasoned loans.

(15)

“Refinance—cash out” means the repayment of an existing mortgage debt from the proceeds of a new mortgage that has the same borrower and the same security property, which:

(a)

Is settled in accordance with existing underwriting guidelines; and

(b)

May include:

(i)

The unpaid principal balance of the existing first mortgage,

(ii)

Closing costs,

(iii)

Points,

(iv)

The amount required to satisfy any outstanding subordinate mortgage liens, and

(v)

Additional cash that the borrower may use for any purpose.

(16)

“Refinance—no cash out” means the repayment of an existing mortgage debt from the proceeds of a new mortgage that has the same borrower and the same security property, which:

(a)

Is settled in accordance with existing underwriting guidelines; and

(b)

May include:

(i)

The unpaid principal balance of the existing first mortgage,

(ii)

Closing cost,

(iii)

Points, and

(iv)

The amount required to satisfy any outstanding subordinate mortgage liens.

(17)

Residential Real Property.

(a)

“Residential real property” means a structure designed for residential use by not more than four families, at least one unit of which shall be occupied by the owner of the structure.

(b)

“Residential real property” includes a one- to four-family unit in a planned unit development or condominium project where certain portions of the secured property are owned in common with others.

(c)

“Residential real property” does not include a unit in a cooperative project.

(18)

“Secondary mortgage loan market” means a nationally recognized market, the most common of which has been created by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), where first mortgages are securitized or sold, or both, separately to investors.

(19)

“Secondary residence” means one structure in addition to a principal residence:

(a)

Where the owner resides for at least 2 weeks every calendar year; or

(b)

Which the owner will not rent to others for at least 2 weeks every calendar year.

(20)

“Security instrument” means either a deed of trust or a mortgage that constitutes a lien.

(21)

“Value” means the lower of the appraised market value or the purchase price.

Requirements. A credit union may make loans secured by residential real property only in accordance with a written loan policy adopted by the board of directors. The policy shall have four sections, if applicable, as follows:

(1)

General real estate lending policy;

(2)

Purchase money mortgages, refinances;

(3)

Construction ,mortgage—permanent financing;

(4)

Second mortgages, home equity loans/lines of credit; and

(5)

Nonconforming real estate loans.

General Real Estate Lending Policy Section.

(1)

The general real estate lending policy section shall, at a minimum, address the following:

(a)

Types of real estate loans to be offered, for example:

(i)

Purchase money mortgages, refinances—cash out, or refinances—no cash out with fixed or adjustable rates;

(ii)

Second mortgages, home equity loans/lines of credit, open-end, closed-end with fixed or adjustable rates;

(iii)

Nonconforming real estate loans; and

(iv)

Construction mortgages;

(b)

The Maryland lending statute under which each type of loan is written;

(c)

Total real estate lending limits determined by the board of directors, which:

(i)

Do not exceed the lesser of 30 percent of total credit union assets that can be invested in real estate loans, or four times total credit union capital that can be invested in real estate loans, and

(ii)

May not be exceeded unless approved in writing by the Commissioner;

(d)

The credit union's market area for real estate loans;

(e)

The terms and pricing of real estate loans;

(f)

The qualifications and experience needed by personnel involved in making real estate loans;

(g)

Monitoring and quality control standards and procedures that address the loan portfolio, collateral, and interest rate risk;

(h)

Any requirement that a borrower contribute funds to an escrow account maintained in the credit union for accumulation of funds to pay real estate taxes, hazard insurance, ground rents, flood insurance, PMI, and any other similar expense items;

(i)

Any requirement that a borrower have hazard insurance, as permitted by the Commercial Law Article, Annotated Code of Maryland, and with the following provisions:

(i)

The hazard insurance company may be chosen by the borrower, and

(ii)

The credit union should be listed as the loss payee on the insurance policy;

(j)

Any requirement that a borrower provide a termite inspection on the improvements of the real property;

(k)

Any requirement that a borrower provide a perc test if the real property has a septic tank system;

(l)

Any requirement that a borrower provide a chemical/bacteriological and yield test if the property has a well water system;

(m)

Any requirement that a borrower provide a survey of the real property; and

(n)

Provisions that notify loan officers of the requirements of §C(2)—(6) of this regulation.

(2)

The loan application, security instrument, and note, if a deed of trust is used, shall be executed on the most current version of the Federal Housing Administration (FHA), Veterans' Administration (VA), Federal Home Loan Mortgage Corporation (FHLMC), or Federal National Mortgage Association (FNMA) standard forms or uniform instruments for the jurisdiction in which the property is located. If FHA, VA, FHLMC, or FNMA uniform instruments do not exist, the credit union shall have on file a current attorney's opinion stating that the forms in use meet the requirements of applicable federal, State, and local law.

(3)

The loan shall be:

(a)

Secured by a properly executed and recorded mortgage or deed of trust on real property naming the credit union as the secured party or beneficiary; and

(b)

If a deed of trust is used, supported by a properly executed promissory note.

(4)

A credit union shall comply with all requirements of the Flood Disaster Protection Act.

(5)

A credit union shall require that real estate loans in excess of $100,000 have an appraisal prepared and signed by the appraiser before the date of the approval of the loan. In the case of an insured or guaranteed loan, the appraisal form shall comply with the requirements of the insuring or guaranteeing agency. All negative comments by the appraiser shall be explained or reflect financial adjustments, or both.

(6)

Appraisal Guidelines.

(a)

In accordance with Financial Institutions Article, §2-110, Annotated Code of Maryland, the credit union shall have on file with the Commissioner an approved real estate appraisal policy and procedure which includes the following appraisal guidelines:

(i)

The appraiser may not have a financial interest in the real estate being appraised;

(ii)

The appraiser shall be independent of influence from the credit union, the borrower, the seller, or any other related third party; and

(iii)

The appraiser shall have demonstrated experience in appraising property similar in type and value to the real property that is being considered for the loan.

(b)

The credit union shall maintain evidence of the appraiser's professional certification, license, or any other recognized measure of competence in their field.

Purchase Money Mortgages, Refinances Policy.

(1)

The purchase money mortgages, refinances policy section shall, at a minimum, address the following:

(a)

A policy statement adopted by the board of directors that all purchase money mortgages will be underwritten to be sold on the secondary market if liquidity conditions or the interest rate risk exposure to the credit union makes the sale necessary;

(b)

A description of the loan products offered, for example, purchase money mortgages, refinances—cash out, and refinances—no cash out;

(c)

A statement that any loan made under this section of the written loan policy shall be a loan to finance the purchase of a principal residence or secondary residence by a borrower or to refinance an existing mortgage or deed of trust by a borrower;

(d)

A requirement that loan maturities may not exceed 30 years;

(e)

The requirements for and the release of private mortgage insurance;

(f)

Underwriting guidelines that are consistent with nationally recognized secondary mortgage market standards such as the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC); and

(g)

Provisions notifying loan officers of the requirements of §D(2)—(5) of this regulation.

(2)

A loan, including an adjustable rate loan, shall be amortized by substantially equal installments sufficient to retire the loan at maturity except when allowed by law. Installments shall be payable at least monthly.

(3)

A loan made under this section of the real estate policy may not exceed 80 percent of the appraised value of the property securing the loan at the time of disbursement, except that:

(a)

An insured or guaranteed loan may equal the maximum amount acceptable to the insuring or guaranteeing agency;

(b)

The loan amount may equal up to 95 percent of the value of the property if private mortgage insurance is obtained for the amount of the loan in excess of 80 percent of the value;

(c)

A loan made in accordance with any Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), federal, State, county, or municipal program may equal the maximum loan-to-value amount acceptable under the program and shall be originated to be sold in the secondary market without recourse or with recourse if the program permits.

(4)

A credit union shall require that a borrower provide an opinion or certificate of title signed by an attorney licensed to practice in the jurisdiction in which the property is located, or a lender's title insurance policy affirming the quality and position of the lien.

(5)

Loan Documentation. A loan file shall be maintained for each loan, and, at a minimum, contain all of the following:

(a)

A loan application supported by an executed sales contract, or other applicable documents and any modifications, bearing the signature or signatures of principal parties to the transaction;

(b)

A written appraisal, if required, prepared and signed by the appraiser before the date of the approval of the loan;

(c)

In the case of an insured or guaranteed loan, an appraisal form which complies with the requirements of the insuring or guaranteeing agency;

(d)

When applicable, a private mortgage insurance certificate or documentation that the loan is insured or guaranteed;

(e)

When applicable, a complete settlement statement (Form HUD-1 or HUD-1A) detailing all charges and fees and distribution of the loan proceeds;

(f)

An opinion or certificate of title signed by an attorney licensed to practice in the jurisdiction in which the property is located, or a lender's title insurance policy affirming the quality and position of the lien;

(g)

A current hazard insurance policy;

(h)

A current flood insurance policy, if required;

(i)

A properly executed security instrument and note, if a deed of trust is used, and a document indicating the date or dates and place or places of recording of the instruments;

(j)

When applicable, evidence of compliance with the Federal Truth in Lending Act, 15 U.S.C. §1601 et seq., which is incorporated by reference;

(k)

When applicable, disclosure required by the Real Estate Settlement Procedures Act, 12 U.S.C. §2601 et seq., which is incorporated by reference;

(l)

Any and all other required loan documents including but not limited to credit documentation, verifications, surveys, and appraisals.

Construction Mortgage—Permanent Financing. The construction mortgage—permanent financing loan policy section shall, at a minimum, address the following:

(1)

The maturity of the construction loan may not exceed 2 years unless a time extension is granted in writing by the credit union for unusual circumstances;

(2)

The credit union may collect interest-only payments during the term of the construction loan;

(3)

The loan-to-value ratio for construction mortgages may not exceed 95 percent;

(4)

The appraisal requirements for construction loans are the same as those in §C(5) and (6) of this regulation;

(5)

The construction mortgage agreement with the borrower shall contain, at a minimum, the following provisions:

(a)

A detailed description of the various stages at which funds will be disbursed and the inspection requirements for each stage;

(b)

A requirement that the final draw for the construction loan may not be made until the final use and occupancy permit from the appropriate local jurisdiction is obtained; and

(c)

A requirement that before the construction loan is granted, all required building permits, perc tests, wetland determinations, surveys, and other required documents shall be completed;

(6)

If the construction loan amount is greater than $150,000, the borrower shall purchase a performance bond to ensure the contractor fulfills the contractor's obligations;

(7)

If applicable, when the permanent financing pays off the construction mortgage, all applicable provisions of §D of this regulation shall apply to the purchase money mortgage; and

(8)

If applicable, provisions for permanent financing shall be addressed.

Second Mortgage, Home Equity Loan/Line of Credit Policy.

(1)

The second mortgage, home equity loan/line of credit policy section shall, at a minimum, address the following:

(a)

A description of the various loan products offered, for example, second mortgages, and home equity lines of credit;

(b)

Underwriting guidelines that are consistent with prudent loan underwriting standards for second mortgages and home equity lines of credit or secondary market conditions as they may exist; and

(c)

Provisions that notify loan officers of the requirements of §F(2)—(6) of this regulation.

(2)

Any loan made under this section shall be secured by the borrower's principal residence or secondary residence.

(3)

Loan maturities may not exceed 30 years in the case of home equity loan/lines of credit with a draw period. The payback period may not exceed 20 years.

(4)

A loan, including an adjustable rate loan shall be amortized by substantially equal installments sufficient to retire the loan at maturity except when allowed by law. Installments shall be payable at least monthly.

(5)

A loan made under this section of the real estate policy may not exceed 105 percent of the appraised value of the property securing the loan at the time of disbursement.

(6)

A credit union shall require a written bring-to-date title opinion or certificate of title signed by an attorney licensed to practice in the jurisdiction in which the property is located, or a lender's title insurance policy affirming the quality and position of the lien.

Nonconforming Real Estate Loan Policy.

(1)

The nonconforming real estate loan policy section shall, at a minimum, address the following:

(a)

A description of what constitutes the various loan products offered, for example, first mortgages, second mortgages, and home equity loans/lines of credit, which may be any of the following:

(i)

Purchase money mortgages that do not conform to secondary mortgage market standards,

(ii)

Purchase money mortgages that exceed secondary mortgage market requirements for debt ratios, property requirements, etc.,

(iii)

Second mortgages to borrowers who are rolling over unsecured debt into secured debt under a board of directors/credit committee approved work-out situation;

(b)

A methodology to segregate this category of real estate loans from the regular mortgage loan portfolio so that effective monitoring can be achieved that recognizes the higher risks associated with this type of loan;

(c)

Underwriting guidelines that are consistent prudent loan underwriting standards; and

(d)

Provisions that notify loan officers of the requirements of §G(2)—(7) of this regulation.

(2)

The nonconforming loan policy shall limit nonconforming loans to not more than 10 percent of the total real estate loan limit as described in §C(1)(c) of this regulation.

(3)

A loan made under this section of the approved written loan policy shall be a loan secured by the borrower's principal residence or secondary residence.

(4)

Loan maturities may not exceed 30 years.

(5)

(6)

A loan made under this section of the real estate loan policy may not exceed 100 percent of the appraised value of the property securing the loan at the time of disbursement unless the purpose of the loan is to secure existing unsecured debt with the credit union and no cash out is given in the transaction.

(7)

A credit union shall require a bring-to-date title opinion or certificate of title signed by an attorney licensed to practice in the jurisdiction in which the property is located, or a lender's title insurance policy affirming the quality and position of the lien.

Any violation of this regulation, or any lending practices that may be considered unsafe or unsound at the discretion of the Commissioner, may result in the termination or restriction of the credit union's real estate lending policy.

Regulation .09 Repealed.Link Copy Citation

Regulation .10 Investments.Link Copy Citation

In this regulation, the following terms have the meanings indicated.

Terms Defined.

(1)

“Adjusted trading” means any method or transaction used to defer a loss whereby a credit union sells a security to a vendor at a price above its current market price, and simultaneously purchases or commits to purchase from the vendor another security at a price above its current market price.

(2)

Options or Futures Contracts.

(a)

“Option or futures contracts” means commitment to either buy or sell a security, on or before a future date, at a predetermined price.

(b)

“Option or future contract” does not include the subscription for the purchase of initial offering of an investment permitted by Financial Institutions Article §6-705, Annotated Code of Maryland.

(3)

“Short sale” means the sale of a security not owned by the seller.

A credit union may not engage in adjusted trading.

A credit union may not invest in options or futures contracts or engage in short sales.

Regulation .11 Accounting Procedures and Records Retention.Link Copy Citation

A credit union shall maintain books and financial records that:

(1)

Accurately and fully reflect the fiscal affairs of the credit union; and

(2)

Are sufficient to enable an independent certified public accountant to perform a complete audit of the credit union.

A credit union shall maintain at least the following types of financial records:

(1)

Cash receipts journal;

(2)

Cash disbursements journal;

(3)

General ledger;

(4)

Manual or automated ledger or card system for all share or deposit accounts, or both;

(5)

Manual or automated loan ledger or card system;

(6)

Income account ledger;

(7)

Expense account ledger;

(8)

Checkbook, cancelled checks, deposit receipts, bank statements, and bank reconciliations, or micro-reduced copies of them; and

(9)

Any other records required to be kept by the corporation under Corporations and Associations Article, §2-111, Annotated Code of Maryland.

A credit union shall use the double entry accounting system.

A credit union shall ensure that its books and records are protected against destruction by fire or other calamity.

A credit union may use computer-stored financial data to keep its books and records, if it maintains an adequate off-premises back-up data file for use in the event of system failure resulting in destruction of the primary data file.

A credit union:

(1)

Shall promptly post entries in its books and records;

(2)

Shall balance its books and records at least quarterly;

(3)

May use machine posting of its books and records, if settlement or summary sheets are supported with machine tapes and all other necessary information; and

(4)

May use a journal voucher system if the vouchers are numbered sequentially and retained as required by §G of this regulation.

A credit union shall retain all of its accounting records, tapes, trial balances, books, ledgers, audits, share and deposit account records, and supporting documentation for a minimum of 5 years.

Credit unions shall use the accounting procedures contained in the “Standardized Accounting Manual for State Chartered Credit Unions”, which is incorporated by reference. This manual is published by the National Association of Credit Union Supervisors.

Failure To Comply with this Regulation.

(1)

Upon a determination that a credit union has failed to comply with the requirements of this regulation, the Commissioner of Financial Regulation may take any of the following actions:

(a)

Order the officers of the credit union to take steps to bring the credit union into compliance;

(b)

Order immediate turnover of all existing books and records;

(c)

Suspend the treasurer, chief executive officer, comptroller, or any other person responsible for maintaining the books and records, from continuing in that capacity; and

(d)

Cause an immediate audit, examination, or investigation to be conducted at the cost of the credit union.

(2)

Before the order or suspension becomes effective, the Commissioner of Financial Regulation shall give the credit union an opportunity for a hearing.

Regulation .12 and .13 Repealed.Link Copy Citation

Regulation .14 Member Business Loans.Link Copy Citation

In this regulation, the following terms have the meanings indicated:

(1)

“Associated member” means a member with shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower.

(2)

“Development or construction loan” or both means a financing arrangement for acquiring property or rights to property, including land or structures, with the intent to convert it to income-producing property such as residential housing for rental, sale, commercial use, industrial use, or a similar use.

(2-1)

“Family member” means a spouse or other family member living in the same household.

(3)

“Loan-to-value ratio or LTV” means the aggregate amount of all sums borrowed including outstanding balances plus any unfunded commitment or line of credit from all sources on an item of collateral divided by the market value of the collateral used to secure the loan.

(4)

“Member business loan” means a loan, line of credit, or letter of credit (including an unfunded commitment), the proceeds of which will be used for a commercial, corporate, other business investment property or venture, or agricultural purpose.

(5)

“Member business loan” does not include a loan or loans:

(a)

That is fully secured by a lien on a one-to-four-family dwelling that is the member's primary residence;

(b)

That is fully secured by shares or deposits in credit unions, or savings and deposits in other financial institutions;

(c)

For which a federal, state, or local political subdivision fully insures repayment, guarantees repayment, or provides an advance commitment to purchase in full;

(d)

To a member or associated member which is equal to or less than $50,000; or

(e)

Granted to a credit union by a corporate credit union.

(6)

“Net worth” means retained earnings as defined under Generally accepted accounting principles. Retained earnings include, but are not limited to, undivided earnings, regular reserves, and any other appropriations designated by management or the Commissioner.

(7)

“Senior management employee” means the chief executive officer (typically the president or treasurer/manager), the assistant chief executive officer (typically the assistant president, vice president, or assistant treasurer/manager), or the chief financial officer (typically the comptroller).

Requirements. A credit union may make member business loans only in accordance with the following requirements:

(1)

Written Business Loan Policy.

(a)

The board shall adopt a written business loan policy, which may be included in the credit union's overall lending policy required by Financial Institutions Article §6-605, Annotated Code of Maryland.

(b)

The board shall review the policy at least annually.

(c)

At a minimum, the policy shall address the following:

(i)

The types of business loans that will be made;

(ii)

The credit union's trade area for business loans;

(iii)

The maximum amount of credit union assets, in relation to net worth, that will be invested in business loans;

(iv)

The maximum amount of credit union assets, in relation to net worth, that will be invested in a given category or type of business loan;

(v)

The maximum amount of credit union assets, in relation to net worth, that will be loaned to any one member or group of associated members, subject to §B(4) of this regulation;

(vi)

The qualifications and experience of personnel involved in making and administering business loans, which must include at least 2 years experience in the applicable type of lending;

(vii)

The methodology used in determining the ability of the borrower to repay the loan, which shall include analysis of the balance sheet, cash flow analysis, income and expense, tax data, analysis of leveraging, and comparison with industry averages, excluding any document not generally available for a particular type of business loan if stated in the business loan policy;

(viii)

The receipt and periodic updating of financial statements, tax returns, or other documentation;

(ix)

Collateral requirements, including loan-to-value ratios, appraisal, title search and insurance requirements, steps to be taken to secure various types of collateral, and how often the value and marketability of collateral is reevaluated;

(x)

Appropriate interest rates and maturities of business loans;

(xi)

Loan monitoring, servicing, and follow-up procedures, including collection procedures;

(xii)

Guidelines for purchase and sale of member business loans and loan participations, if the credit union intends to engage in that activity; and

(xiii)

Restrictions on member business loans to officials, senior management employees, and their family members as stated in §D of this regulation.

(2)

Under §B(1)(b)(iii) of this regulation, the aggregate amount of member business loans shall be limited to the lesser of 12.25 percent of total assets or 1.75 times the credit union's net worth.

(3)

Collateral and Security Requirements.

(a)

A member business loan secured by collateral on which the credit union will have a first lien may have an LTV greater than 80 percent only if:

(i)

The value in excess of 80 percent is covered through private mortgage insurance or equivalent insurance acceptable to the credit union; or

(ii)

The loan is insured or guaranteed or subject to advance commitment to purchase by an agency of the federal government, State, or any of its political subdivisions.

(b)

A member business loan secured by collateral on which the credit union will have a second or lesser priority lien may not exceed an 80 percent LTV ratio.

(c)

A member business loan secured by collateral on which the credit union will have a first lien as well as a second or lesser priority lien may have an LTV greater than 80 percent and not greater than 95 percent, only if:

(i)

The value in excess of 80 percent is covered through private mortgage insurance or equivalent insurance acceptable to the credit union; or

(ii)

The loan is insured or guaranteed or subject to advance commitment to purchase by an agency of the federal government, State, or any of its political subdivisions.

(d)

Member business loans secured by collateral on which the credit union will have a first, second, or lesser lien may not exceed a 95 percent LTV ratio.

(4)

Loans to One Borrower.

(a)

The aggregate amount of outstanding member business loans, including any unfunded commitments, to any one member or group of associated members may not exceed the greater of:

(i)

15 percent of the credit union's net worth; or

(ii)

$100,000.

(b)

If a portion of a member business loan is fully secured by a one-to-four-family dwelling that is the member's primary residence, by shares in the credit union, by savings or deposits in another financial institution, or is subject to an advance commitment to purchase by an agency of the federal government or of a state or any of its political subdivisions, that portion may not be taken into account in determining the 15 percent limit.

(c)

The Commissioner may grant a higher limit upon written request by the credit union as described in §F(2) of this regulation.

(5)

Development and Construction Loans.

(a)

Loans made for the purpose of development or construction or both are subject to the following additional requirements:

(i)

The aggregate amount of all development or construction loans or both may not exceed 15 percent of net worth;

(ii)

The borrower shall have a minimum of 30 percent equity interest in the project being financed if the loan is for land development;

(iii)

The borrower must have a minimum of 25 percent equity interest in the project being financed if the loan is for construction or for a combination of development and construction; and

(iv)

The funds for the project may be released only after on-site, written inspections by qualified personnel and according to a preapproved draw schedule and any other conditions as set forth in the loan documents.

(b)

The Commissioner may grant a higher limit upon written request by the credit union as described in §F(2) of this regulation.

(6)

Prohibition of Member Business Lending. A credit union may not make a member business loan if its net worth is less than 7 percent or its CAMEL composite rating is 4 or 5.

Classification of Problem Business Loans.

(1)

Business Loan Categories.

(a)

A business loan may be classified by credit union management or the Commissioner into one or more of the categories described in this subsection upon a regular review.

(b)

Substandard. A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or the value of any collateral pledged. Loans classified as substandard have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the credit union will sustain some loss if the weaknesses are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

(c)

Doubtful. A loan classified as doubtful has all the weaknesses inherent in a substandard loan, with the added characteristic that the weaknesses make collection or liquidation in full highly improbable, on the basis of currently existing facts, conditions, and values. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may strengthen the loan, its classification as an estimated loss may be deferred or limited until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation actions, capital injection, perfecting liens on additional collateral, and refinancing plans.

(d)

Loss. A loan classified as loss is considered uncollectable and of such little value that its continuance as a loan on the books of a credit union is not warranted. This classification does not necessarily mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset even though partial recovery may occur in the future.

(2)

Allowance for Loan Losses.

(a)

The determination whether a member business loan will be classified as substandard, doubtful, or loss for purposes of the valuation allowance for loan losses, will be based on factors not limited to the delinquency of the loan, including, but not limited to, the adequacy of analysis and documentation.

(b)

An allowance for loan losses shall be maintained for the specified classified loans as follows:

(i)

Loss loans at 100 percent of outstanding balance;

(ii)

Doubtful loans at 50 percent of outstanding balance; and

(iii)

Substandard loans at 10 percent of outstanding balance unless other factors (for example, history of these loans at the credit union) indicate a greater or lesser amount is appropriate.

Restrictions on Member Business Loans to Officials, Senior Management Employees, and Their Family Members.

(1)

A credit union may make member business loans to officials, senior management employees, and their family members subject to the following restrictions:

(a)

The official, senior management employee, or their family member who will receive the proceeds of a member business loan may take no part in the decision-making process for approval of the loan;

(b)

All member business loans to officials, senior management employees, or their family members that, when added to the aggregate of all other credit union loans for which the official, senior management employee, or their family member is a debtor, guarantor, endorser, or cosigner, are in excess of $25,000 shall be approved by the board; and

(c)

The rates, terms, and conditions for any member business loan for which an official, senior management employee, or their family member is a debtor, guarantor, endorser, or cosigner may not be more favorable than the rates, terms, and conditions for a comparable loan to another member of the credit union.

(2)

Equity Agreements/Joint Ventures. A credit union may not grant a member business loan if a portion of the amount of income to be received by the credit union, officials, senior management employees, or their family members is tied to the profit or sale of the business or commercial endeavor for which the loan is made.

Records Requirements. Aggregate member business loans shall be identified on the credit union's financial statements and each category of member business loan shall be separately identified in the credit union's records.

Waiver of Limits.

(1)

A credit union may request a waiver of certain limits as listed in this regulation as follows:

(a)

Loan-to-value ratios and requirements for collateral and security under §B(3) of this regulation;

(b)

Maximum loan amount to one borrower or associated group of borrowers under §B(4) of this regulation; and

(c)

Development or construction loan limits, or both, under §B(5) of this regulation.

(2)

Upon written request by a credit union, the Commissioner may waive the limitations listed in §F(1) of this regulation. Federally insured credit unions need the approval of the Commissioner and the Regional Director of the National Credit Union Administration. The Commissioner shall approve or deny the request within 45 calendar days of the date the complete request was received by the Commissioner. The request for waiver shall contain the following:

(a)

A copy of the business loan policy;

(b)

A statement of the higher limit sought;

(c)

An explanation of the need to raise the limit;

(d)

Documentation to support the credit union's ability to manage the activity;

(e)

An analysis of the credit union's prior experience making member business loans, including at a minimum:

(i)

The history of loan losses and loan delinquency;

(ii)

Volume and cyclical or seasonal patterns;

(iii)

Diversification;

(iv)

Concentrations of credit to one borrower or group of associated borrowers in excess of 15 percent of the credit union's net worth;

(v)

Underwriting standards and practices;

(vi)

Types of loans grouped by purpose and collateral; and

(vii)

The qualifications of personnel responsible for underwriting and administering member business loans.

(3)

If the credit union's policies or practices violate safe and sound lending principles, the Commissioner may restrict all limits as listed in this chapter or revoke the credit union's approval to make member business loans.

Regulation .15 Maximum Loans to a Single Member.Link Copy Citation

The term “indirectly to any one member”, as used in Financial Institutions Article, §6-604, Annotated Code of Maryland, includes a loan or extension of credit made to any member who, acting directly or indirectly, individually or in concert with one or more other persons or entities, or through one or more subsidiaries:

Acts in a common enterprise;

Owns or controls any entity, or holds proxies for, or otherwise has power to vote, 10 percent or more of the voting shares, rights, or interests of any association or corporation; or

Controls in any manner the election or appointment of a majority of the directors of that association or corporation.

Regulation .16 Reports to the Commissioner of Financial Regulation.Link Copy Citation

The Commissioner of Financial Regulation shall require, as additional reports pursuant to Financial Institutions Article, §6-404(b), Annotated Code of Maryland, that a Report of Condition be received by the Commissioner on or before:

(1)

July 30th of each year, reporting the financial condition of the credit union as of June 30th of that year; and

(2)

February 1st of each year, reporting the financial condition of the credit union as of December 31st of that year.

A copy of the Report of Condition due on or before February 1st may be submitted as the annual report required to be filed on or before March 31st under Financial Institutions Article, §6-404(a), Annotated Code of Maryland.

Regulation .17 Boards of Directors — Electronically Conducted Elections.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Electronically” means the use of one or more electronic devices.

(2)

“Electronic device” means a device having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities and may include, but is not limited to, telephones, voice response units, computer systems, and electronic mail systems.

(3)

“Electronic notice members” means members of the credit union who have opted to receive notices or statements electronically.

(4)

“Electronic voting instruction sheet” means the specific instructions for the electronically conducted election procedure, including, but not limited to:

(a)

How to access and use the electronic voting system;

(b)

The period of time in which votes will be taken; and

(c)

A description of the opt-out method.

(5)

“Envelope” means a postage prepaid and preaddressed envelope conforming to Financial Institutions Article, §6-329(d)(2)(ii), Annotated Code of Maryland.

(6)

“Identification form” means an identification form conforming to Financial Institutions Article, §6-329(d)(2)(iii), Annotated Code of Maryland.

(7)

“Notice of ballot” means a notice that includes all information that is on the printed ballot.

(8)

“Printed ballot” means a printed ballot conforming to Financial Institutions Article, §6-329(d)(2)(i), Annotated Code of Maryland.

(9)

“Secretary” means the secretary of the credit union.

(10)

“Tellers” means the tellers of election appointed by the board of directors pursuant to Financial Institutions Article, §6-329(e), Annotated Code of Maryland.

Provided that the board of directors has duly authorized electronically conducted elections, a credit union may elect its directors electronically using the following procedure.

(1)

All Members. Except as provided in §C(2) of this regulation, the secretary shall mail to each member in good standing, at least 20 days before the annual meeting:

(a)

Either a printed ballot and an identification form or one printed form that represents a combined printed ballot and identification form;

(b)

An envelope; and

(c)

An electronic voting instruction sheet.

(2)

Electronic Notice Members. The secretary may electronically transmit only the notice of ballot and electronic voting instruction sheet to electronic notice members at least 20 days before the annual meeting.

(3)

Optional Electronically Conducted Voting Methods. In addition to the procedures in §C(1) and (2) of this regulation, the board of directors may allow members to vote electronically in person at one or more locations of the credit union. If such voting is available, the electronic voting instruction sheet shall include the relevant details concerning this process and make clear that voting at such location or locations is optional.

Verification of Identity.

(1)

The tellers shall verify, or cause to be verified, the identity of each voter opting to vote electronically by name, address, credit union account number and an additional verification method.

(2)

The additional verification method may include:

(a)

The use of a verification control number on a printed ballot, notice of ballot, or identification form;

(b)

The use of an unique identifier, such as date of birth or last four digits of a Social Security Number; or

(c)

Any other method that insures the integrity of the electronic voting process.

(3)

The electronic voting instruction sheet shall include a description of the verification method and explain how a member uses any verifiers when voting electronically.

Opt-Out Methods. The electronic voting instruction sheet shall notify the members of their right to opt-out of electronic voting.

(1)

Any member mailed a printed ballot may opt-out of electronic voting by returning the printed ballot in the envelope by the date specified on the electronic voting instruction sheet.

(2)

Any electronic notice member may opt-out of electronic voting by requesting a printed ballot from the secretary as indicated on the electronic voting instruction sheet. Promptly upon the receipt of any such request, the secretary shall mail an envelope, printed ballot and identification form, or one printed form that represents a combined printed ballot and identification form, to the member.

The tellers shall test the integrity of the balloting systems at regular intervals during the election period.

In the event of malfunction of the electronic voting system, the board of directors may in its discretion order elections to be held by printed ballot only. The printed ballots shall be mailed to all eligible members 20 days before the annual meeting. The board of directors may make reasonable adjustments to the voting time frames or postpone the annual meeting when necessary, to complete the elections before the annual meeting.

Chapter 02. General Regulations

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Assessment” means the annual assessment authorized under Financial Institutions Article, §2-120, Annotated Code of Maryland.

(2)

“Commissioner” has the meaning stated in Financial Institutions Article, §1-101(g), Annotated Code of Maryland.

(3)

“Licensed location” means any location listed by the licensee in NMLS.

(4)

“Licensed person” has the meaning stated in Financial Institutions Article, §2-120, Annotated Code of Maryland.

(5)

“Mobile unit” has the meaning stated in Financial Institutions Article, §12-101, Annotated Code of Maryland.

(6)

“NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(7)

“Regulated person” has the meaning stated in Financial Institutions Article, §2-120, Annotated Code of Maryland.

Regulation .02 Repealed.Link Copy Citation

Regulation .03 Repealed.Link Copy Citation

Regulation .04 Books and Records of Certain Regulated Persons.Link Copy Citation

Definition.

(1)

In this regulation the following term has the meaning indicated.

(2)

Term Defined. “Loan” means:

(a)

A loan as defined in Financial Institutions Article, §11-201, Annotated Code of Maryland;

(b)

An installment loan as defined in Financial Institutions Article, §11-301, Annotated Code of Maryland;

(c)

An installment sale agreement as defined in Financial Institutions Article, §11-401, Annotated Code of Maryland;

(d)

A retail credit account transaction as defined in Commercial Law Article, §12-501, Annotated Code of Maryland; and

(e)

A transaction that deals with home improvement, as defined in Business Regulation Article, §8-101, Annotated Code of Maryland, made between other parties, if collateral security is required by and given to the contractor as a condition to the transaction.

Each regulated person required to hold a license issued under Financial Institutions Article, Subtitles 2, 3, and 4, Annotated Code of Maryland, shall maintain the following records:

(1)

Loan Register. All loans shall be listed in a register in numerical order showing, in addition to the loan number, the date of loan, name of principal borrower, and amount of loan.

(2)

Individual Ledger Record. A separate ledger record shall be maintained for each borrower, showing the loan number, borrower's name and address, names of endorsers, comakers, guarantors or sureties, the amount of loan, the schedule of payments, and the type of security. In addition, the record shall show the date and amount of all payments of interest and principal as well as the principal balance due.

(3)

File of Original Papers. For each borrower or loan account, a separate file shall be maintained containing all papers relating to the borrower or the loan, except that promissory notes and security instruments may be kept in a separate legal paper file bearing the same account number. If notes have been hypothecated, the file shall reveal where and to whom these notes are hypothecated.

(4)

Receipts and Disbursement Record. All receipts from or for the account of borrowers and all disbursements to or for the account of borrowers shall be clearly recorded in a manner that makes the transactions readily identifiable.

(5)

Index of Obligors. An alphabetical index of all borrowers, endorsers, guarantors, or comakers shall be maintained, showing the related loan numbers.

(6)

Litigation and Repossession Records. The records of the licensee (individual ledger record or similar record) shall show all essential details with respect to litigation or repossession, or both. This detail with respect to litigation shall include the amount and date of judgments and any costs charged to the borrowers. With respect to repossession, the record shall include the date, amount then due, type of security repossessed, and the amount realized from sale of the security.

(7)

Acceptance of Equivalent Records. Records and accounting systems maintained in whole or in part by mechanical or electronic data processing methods may be used instead of the books and records required by this regulation if they contain equivalent information.

(8)

Credit Life Claim Register. Each licensee shall maintain a register of death claims showing the following minimum information:

(a)

Loan or account number;

(b)

Name of insured borrower;

(c)

Date of death of insured;

(d)

Date of official notification to licensee;

(e)

Date claim submitted to insurer;

(f)

Date settlement received from insurer;

(g)

Amount of settlement received by principal beneficiary;

(h)

Amount of settlement, if any, received by second beneficiary;

(i)

Amount of refund of unearned accident and health premium, if any.

(9)

Accident and Health Claim Register. Each license shall maintain a register of claims involving accident and health insurance showing the following minimum information:

(a)

Loan or account number;

(b)

Name of insured borrower;

(c)

Waiting period, if any, in order to qualify for payment;

(d)

Date disability began;

(e)

Date disability ended;

(f)

Date of doctor's certificate certifying disability and date certificate received by licensee;

(g)

Date claim submitted to insurer by licensee;

(h)

Dates and amount of payments received from insurer by licensee.

(10)

Purchased Loan Account Register. Within 30 days after the purchase of loan accounts from another licensee, the purchasing licensee shall maintain a list of these purchased accounts. The licensee shall also keep a list of “double loan” accounts resulting from the purchase, including the borrower's name, address, account number, and the amount of loan outstanding. The licensee shall maintain this register in compliance with Financial Institutions Article, §11-213, Annotated Code of Maryland.

Regulation .05 Unfair and Deceptive Trade Practices.Link Copy Citation

Advertising.

(1)

Each consumer loan licensee shall comply with all provisions of Regulation Z, promulgated under the Federal Consumer Credit Protection Act, Truth-in-Lending, that relate to the advertising of credit terms.

(2)

A consumer loan licensee may not use blind advertisements, such as giving only telephone numbers or box number addresses. A licensee may not advertise that any loan business will be conducted at any place other than the licensed address.

(3)

A consumer loan licensee may not advertise or otherwise communicate to any borrower that payments will be waived for any contingency without also advising the borrower that daily interest charges will continue during the waiver period, if this is the fact.

Filing of Suits and Legal Process. In connection with any debt arising out of a consumer loan, a licensee may not file suit against a debtor in a foreign jurisdiction when the debtor is domiciled and regularly employed in the State. This prohibition extends to any proceedings in attachment against the debtor.

Merchant Referral Loans.

(1)

Loans may not be contracted for by a licensee who knows that the borrower is purchasing the merchandise under duress or misrepresentation connected with the financing of the merchandise.

(2)

A licensee may not compel the borrower to use the proceeds of the loan for the prospective purchase. A check will not be made payable to the merchant, or endorsed payable to the merchant at the direction of the licensee.

(3)

A licensee may not pay to or accept from a merchant anything of value for making a loan to a borrower referred to the licensee by a merchant.

Regulation .06 Contested Case Hearings Before the Commissioner.Link Copy Citation

Except as otherwise provided in §§C, D, and E of this regulation, all contested case hearings before the Commissioner are governed by COMAR 09.01.02.

For a hearing under Financial Institutions Article, §11-415, Annotated Code of Maryland, the Commissioner shall send the hearing notice described in COMAR 09.01.02.07B:

(1)

At least 10 days before the hearing; or

(2)

If the parties have agreed to a date for which 10 days notice cannot be given, at the earliest time possible.

For a hearing under Financial Institutions Article, §11-518, Annotated Code of Maryland, the Commissioner shall send the hearing notice described in COMAR 09.01.02.07B:

(1)

At least 30 days before the hearing; or

(2)

If the parties have agreed to a date for which 30 days notice cannot be given, at the earliest time possible.

For a hearing under Financial Institutions Article, §12-428, Annotated Code of Maryland, the Commissioner shall send the hearing notice described in COMAR 09.01.02.07B:

(1)

At least 15 days before the hearing; or

(2)

If the parties have agreed to a date for which 15 days notice cannot be given, at the earliest time possible.

Regulation .07 Contested Case Hearings Delegated to the Office of Administrative Hearings.Link Copy Citation

All contested case hearings delegated to the Office of Administrative Hearings are governed by COMAR 09.01.03.

Regulation .08 Remote Work for Employees of Licensees.Link Copy Citation

Scope.

(1)

This regulation governs the conduct of any employee operating from a location other than that which appears on the employer’s license or licenses.

(2)

Notwithstanding §A(1) of this regulation, this regulation does not apply to the conduct of an employee if:

(a)

The employer is licensed under Financial Institutions Article, Title 11, Subtitle 5, Annotated Code of Maryland;

(b)

The employee is licensed under Financial Institutions Article, Title 11, Subtitle 6, Annotated Code of Maryland; and

(c)

The employee is taking a loan application or offering or negotiating the terms of a loan in compliance with COMAR 09.03.09.07.

(3)

Nothing contained in this regulation shall be deemed to prohibit an employee of a licensee from conducting any business for which a license is required at a location other than the locations set forth on the employer’s license or licenses if applicable law or regulation does not limit that conduct to the location shown on the license.

(4)

A licensee may not use this regulation to evade the requirements of any applicable law or regulation.

Definitions.

(1)

Terms Defined.

(2)

In this regulation, the following terms have the meanings indicated.

(a)

“Affiliate” means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person.

(b)

“Authorized delegate” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(c)

“Board” has the meaning stated in Business Regulation Article, §7-101, Annotated Code of Maryland.

(d)

“Breach of the security of a system” has the meaning stated in Commercial Law Article, §14-3504, Annotated Code of Maryland.

(e)

“Consumer” means an individual who resides in Maryland.

(f)

“Employee” means an employee of a licensee who is not an independent contractor or an authorized delegate.

(g)

“Independent contractor” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(h)

“License” means any of the following:

(i)

A license issued by the Board under Business Regulation Article, Title 7, Annotated Code of Maryland, to do business as a collection agency;

(ii)

A license issued by the Commissioner under Commercial Law Article, Title 14, Subtitle 19, Annotated Code of Maryland, to engage in the business of a credit services business;

(iii)

A license issued by the Commissioner under Financial Institutions Article, Title 11, Subtitle 2, Annotated Code of Maryland, to make loans under the Maryland Consumer Loan Law;

(iv)

A license issued by the Commissioner under Financial Institutions Article, Title 11, Subtitle 3, Annotated Code of Maryland, to make installment loans;

(v)

A license issued by the Commissioner under Financial Institutions Article, Title 11, Subtitle 4, Annotated Code of Maryland, to engage in business as a sales finance company;

(vi)

A license issued by the Commissioner under Financial Institutions Article, Title 11, Subtitle 5, Annotated Code of Maryland, to engage in business as a mortgage lender;

(vii)

A license issued by the Commissioner under Financial Institutions Article, Title 12, Subtitle 1, Annotated Code of Maryland, to provide check cashing services;

(viii)

A license issued by the Commissioner under Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland, to engage in the business of money transmission; or

(ix)

A license issued by the Commissioner under Financial Institutions Article, Title 12, Subtitle 9, Annotated Code of Maryland, to provide debt management services.

(i)

“Licensee” means a person issued a license or licenses for the purpose of conducting the business for which the license or licenses are issued.

(j)

“Personal information” has the meaning stated in Commercial Law Article, §14-3501, Annotated Code of Maryland.

(k)

“Records” has the meaning stated in Commercial Law Article, §14-3501, Annotated Code of Maryland.

(l)

“Security program” means a written program created by or on behalf of a licensee for the purpose of allowing the licensee’s employees to safely and securely access the licensee’s information technology systems, other systems, and data from a location authorized by this section.

Certain Remote Work Permitted. An employee of a licensee may work remotely and is not considered conducting business for which a license is required at a location other than the address that appears on the license or licenses of that licensee if the conditions set forth in this regulation are met.

Locations. The location from which the employee is working:

(1)

May not be owned or leased by the licensee or an affiliate of a licensee, or for the benefit of the licensee or an affiliate of the licensee;

(2)

May not be a location that offers temporary office space unless the employee is using the location on a temporary basis due to the unavailability of the employee’s regular work location;

(3)

May not be held out to the public by use of signage, advertisement, or other means, as a location at which the licensee conducts business for which a license is required;

(4)

May not provide work space, telephone service, or internet service maintained in the name of the licensee or an affiliate and that is not intended primarily for the purpose of conducting business for which a license is required;

(5)

May not be a location where the employee will meet in person with nonemployees in connection with the business for which a license is required;

(6)

May not be a location that will receive or dispense cash, negotiable instruments, or other monetary value in connection with the business for which a license is required, other than compensation paid to the employee by the licensee;

(7)

May not be used for the receipt of mail relating to business for which a license is required;

(8)

May not be used for storage of books or records, in any form, relating to business for which a license is required unless:

(a)

The records were produced or used in the normal course of employment by the employee working at that location and the licensee maintains and administers procedures for the employee to promptly and securely transmit those records to its location for the storage of books and records; or

(b)

The licensee is permitted by applicable law or regulation to store the books or records of the licensee at that location;

(9)

Shall provide a workspace that is secure, provide for appropriate protection of personal information as required under applicable law, and have the appropriate technological security measures and physical safeguards in place to protect personal information;

(10)

Shall be a location used only by a single employee unless:

(a)

Other employees using the location maintain a common household with each other; or

(b)

The location is used for a period not exceeding 2 weeks every calendar quarter to facilitate business or nonbusiness travel;

(11)

May not be used to conduct a specific act that applicable law or regulation requires be conducted only at specified locations; and

(12)

Shall be authorized by the licensee as a location from which the employee may work.

Security Standards.

(1)

A licensee that allows any employee to work at a location authorized by this section shall develop, implement, and maintain a security program that is consistent with all applicable laws and regulations, meets or exceed standards of the industry in which the licensee conducts its business, addresses known vulnerabilities, and is commensurate with the licensee’s size and complexity.

(2)

The licensee’s security program may be part of the licensee’s comprehensive data and cyber security program.

(3)

A licensee’s security program shall consider the following objectives:

(a)

Allowing employees working at locations authorized by this section to access the licensee’s information technology system, other systems, and data needed to perform the employee’s job functions in a safe and secure manner;

(b)

Ensuring the security and confidentiality of the licensee’s data containing personal information and other sensitive information;

(c)

Protecting the licensee’s information technology systems, other systems, and data against security breaches and unauthorized access, including unauthorized access by employees;

(d)

Identifying the types of devices an employee may use to access the licensee’s information technology systems, other systems, and data, and protecting those devices from security breaches and unauthorized access; and

(e)

Providing training and support of the licensee’s employees necessary to ensure compliance with the security program and establishing appropriate sanctions for failures to comply.

(4)

A licensee shall have an established governance process in place to control and monitor the security program which shall include, as appropriate for the size and complexity of the licensee and its information technology systems, other systems, and data:

(a)

The approval of the security program 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 the security program;

(ii)

Documenting accountability for functions to ensure compliance with the security program; and

(iii)

Reporting to the board of directors, ownership, or most senior level of management, no less than annually, regarding the effectiveness of the security program.

(5)

In connection with the security program, a licensee shall complete a comprehensive remote access and data security risk assessment, including:

(a)

Identification and assessment of risks and vulnerabilities created by allowing employees to work at locations authorized by this section and to access the licensee’s information technology systems, other systems, and data from such locations; and

(b)

Identification of the devices, data, information technology system, and other systems that need to be protected.

(6)

A licensee shall perform periodic testing and monitoring of the security program as appropriate for the size and complexity of the licensee’s information technology and other systems, including:

(a)

Evaluating the effectiveness of the security program;

(b)

Evaluating employee compliance with the security program;

(c)

Taking corrective action to address any significant deficiencies identified during the course of licensee’s evaluation of the effectiveness of the security program;

(d)

Monitoring of external sources for new vulnerabilities;

(e)

Updating, as appropriate, its remote access and data security risk assessment; and

(f)

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

(7)

A licensee shall review the security program at least annually and make changes necessary to achieve the objectives of the security program.

(8)

A licensee that adequately demonstrates compliance with standards issued by the National Institute of Standards and Technology, United States Department of Commerce, relating to remote workers and remote access, as such may be revised from time to time, shall be deemed to be in compliance with this section.

Supervision of Employees.

(1)

A licensee shall at all times reasonably and adequately supervise the work-related activities of each employee working at a location authorized by this section.

(2)

If the Commissioner determines that the licensee does not provide reasonable and adequate supervision of the employee, after written notice from the Commissioner, and within 5 business days of receiving such notice, the licensee will terminate the employee’s eligibility to work at a location provided for under this regulation.

(3)

A licensee shall maintain and update, as appropriate, written records with respect to an employee working from locations provided for in this section, including the initial authorization to work from any such location, any updated authorization, and information regarding the location and any due diligence the license has undertaken to ensure compliance with this regulation.

(4)

The licensee shall retain the records required by §F(3) of this regulation for the greater of 2 years from the date the employee ceases using such location in connection with the business for which a license is required or any retention period required by applicable law or regulation.

Identification of Licensee. The employee may not, in connection with the business for which a license is required, conceal, misrepresent or otherwise mislead any person with respect to the identity of the licensee.

Principal Executive Office. The licensee shall, at a minimum, maintain a principal executive office.

Security Breach. If a breach of the security of a system occurs at a location provided for in this regulation, the following steps shall be taken:

(1)

Upon learning of the breach of the security of a system, the employee shall immediately notify the licensee;

(2)

Upon learning of the breach of the security of a system, the licensee shall within 72 hours notify the Commissioner and make any other notifications that may be required under applicable law or regulation;

(3)

The licensee shall investigate the breach of the security of a system and document its findings, including the remedial steps, if any, that have been undertaken by the licensee to remediate any harm to consumers and to update policies, procedures, and processes as a result of the findings; and

(4)

If requested by the Commissioner, the licensee shall provide a copy of the documentation of the investigation required in this section.

Regulation .09 Approval for Addition, Deletion, or Change of Location or Trade Name.Link Copy Citation

Approval to Add, Delete, or Change a Licensed Location.

(1)

A regulated person who wishes to add, delete, or change the address of a licensed location shall provide the Commissioner notice of the addition, deletion, or change of address through NMLS.

(2)

Any addition, deletion, or change of address of a licensed location will be deemed approved by the Commissioner no less than 30 days after it is provided through NMLS unless the Commissioner has either requested additional information or denied the addition, deletion, or change of address.

(3)

A regulated person may not delete or change the address of its principal executive office as designated within the person’s NMLS Form MU1 except by amending the address within the person’s NMLS Form MU1, or such form as NMLS may prescribe to replace Form MU1 for this purpose, in the manner prescribed by NMLS.

(4)

The licensee has 15 days after the Commissioner requests any additional information to provide that information or the regulated person’s application to add, delete, or change an address may be deemed withdrawn.

Approval to Add, Delete, or Change a Trade Name.

(1)

A regulated person who wishes to add, delete, or change a trade name shall provide the Commissioner with notice of the addition, deletion, or change through NMLS and comply with the provisions of Financial Institutions Article, §2-121, Annotated Code of Maryland.

(2)

No later than 30 days after the information is provided through NMLS, the Commissioner shall respond to the regulated person with an approval, denial, or request for additional information.

(3)

The licensee has 15 days after the Commissioner requests any additional information to provide that information or the regulated person’s application to add, delete or change a trade name may be deemed withdrawn.

Regulation .10 Non-Depository Licensee Assessment.Link Copy Citation

Timing of Assessment.

(1)

The Commissioner shall notify licensed persons of an assessment no earlier than May 1 or later than June 1 of each year regardless of whether any sum is due.

(2)

The assessment shall be based on information available to the Commissioner at the time of the assessment.

Information Included in the Assessment Notice. The Commissioner shall include the following information in each notice of Assessment:

(1)

The amount of the assessment, if any, due that year;

(2)

The means the Commissioner used in calculating the licensed person’s assessment; and

(3)

How the licensee can dispute the amount of assessment if they believe it was calculated incorrectly.

Impact of License Surrender Prior to Assessment.

(1)

A licensee incurs an obligation to pay an assessment on January 1 of the year in which the assessment is imposed or on the date in which the licensee becomes licensed, if not licensed on January 1.

(2)

Surrender of a license does not relieve a licensee of their obligation to pay an assessment.

Information on Assessment. In conjunction with the assessment, the Commissioner shall provide licensees with information regarding the manner in which the assessment was calculated.

Regulation .11 Licensees Providing Check Cashing Services.Link Copy Citation

Definition.

(1)

In this regulation, the following term has the meaning indicated.

(2)

Term Defined. “Licensee” has the meaning stated in Financial Institutions Article, §12-101, Annotated Code of Maryland.

Any licensee listing a mobile unit as a licensed location shall provide information identifying the geographic area the mobile unit will serve.

The Commissioner shall deem a licensee compliant with §B of this regulation if the person makes a reasonable and good faith effort to identify the Maryland counties or cities the mobile unit will serve.

Regulation .12 Licensees Providing Money Transmission Services.Link Copy Citation

Definitions.

(1)

In this regulation, the following terms have the meanings indicated.

(2)

Terms Defined.

(a)

“Licensee” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(b)

“Self-service financial kiosk” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland .

Any licensee listing a self-service financial kiosk as a licensed location shall provide information identifying the geographic area the self-service financial kiosk will serve.

The Commissioner shall deem a licensee compliant with §B of this regulation if the person makes a reasonable and good faith effort to identify the Maryland counties or cities the self-service financial kiosk will serve.

Regulation .13 Availability of List of Licensed Locations.Link Copy Citation

Upon written request by any person the Commissioner shall provide the list of Licensed Locations that any Licensed Person has provided.

Chapter 03. Procedure for Handling Applications

Regulation .01 Scope.Link Copy Citation

Regulations under this chapter contain procedures by which the Commissioner of Financial Regulation of the State of Maryland may reach informed decisions with respect to:

Applications to charter state banking institutions and credit unions pursuant to Financial Institutions Article, Title 3, Subtitle 2, and Title 6, Subtitle 2, Annotated Code of Maryland;

Applications by banks for merger or consolidation pursuant to Financial Institutions Article, Title 3, Subtitle 7, Annotated Code of Maryland;

All other applications where the Presiding Officer deems it desirable to employ the procedures established here in determining legislative-type facts.

Regulation .02 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Hearing panel” means the Presiding Officer and other individuals designated by him to hear the case; however, the decision shall be made by the Presiding Officer.

(2)

“Presiding Officer” means the Commissioner of Financial Regulation or the Deputy Commissioner when acting pursuant to Financial Institutions Article, §2-103(e), Annotated Code of Maryland (Deputy Commissioner to act in case of vacancy).

Regulation .03 Publication.Link Copy Citation

Within 30 calendar days after an application is filed with the Commissioner of Financial Regulation, he shall publish in the Maryland Register a notice containing the name of the applicant, its proposed location, the subject matter of the application, and the date upon which the application was filed.

Regulation .04 Solicitation of Comments.Link Copy Citation

In addition to publication under Regulation .03 of this chapter, the Commissioner of Financial Regulation may solicit comments from each person or organization he believes has information concerning the application.

Regulation .05 Comments and Request for a Hearing.Link Copy Citation

Any interested person or organization may submit to the Commissioner of Financial Regulation written comments concerning the application. These comments and all requests for a hearing should be received by the Commissioner of Financial Regulation within 20 calendar days from the date of publication under Regulation .03 of this chapter.

Regulation .06 Public Information.Link Copy Citation

The Commissioner's file on the application shall include all information received from any person or organization in regard to that application. The information available for public inspection consists of that portion of the file which may be disclosed under State Government Article, Title 10, Subtitle 6 (Access to Public Records) and Financial Institutions Article, §5-209 (Confidentiality of Information), Annotated Code of Maryland.

Regulation .07 Scheduling of a Hearing.Link Copy Citation

The Commissioner of Financial Regulation may schedule a hearing on the application in the following instances:

Upon a request made within the time limit set forth in Regulation .05 of this chapter by a person or organization other than the applicant, unless the Commissioner of Financial Regulation finds that the objections raised to the application are frivolous and insubstantial;

Upon specific request of the applicant in the application; or

If he deems a hearing helpful in obtaining additional information.

Regulation .08 Notice of Hearings.Link Copy Citation

If a hearing is scheduled, at least 20 calendar days before the scheduled date of the hearing, notice shall be mailed to:

The applicant;

Those who made a timely request for a hearing under Regulation .05 of this chapter; and

Other persons designated by the Presiding Officer.

Regulation .09 Hearing Rules.Link Copy Citation

Only the persons or organizations receiving notice under Regulation .08 of this chapter are parties to the hearing.

All hearings shall be open to the public.

Each party to the hearing shall be permitted to make a short opening statement outlining his position.

Following the opening statements, the applicant and then each of the other parties to the hearing shall present its data and materials, oral and documentary.

Each party is responsible for obtaining the party's witnesses for the hearing. All witnesses shall be sworn.

The Presiding Officer may admit and give probative effect to evidence which possesses probative value commonly accepted by reasonable and prudent men in the conduct of their affairs. The Presiding Officer shall give effect to the rules of privilege recognized by law. He may exclude incompetent, irrelevant, immaterial, and unduly repetitious evidence.

Each party may cross-examine the witnesses who testify and may submit rebuttal evidence.

At appropriate points during a hearing, the Presiding Officer may recognize anyone for the purpose of asking questions of a witness. The hearing panel may call witnesses of its own or recall witnesses of a party for the purpose of eliciting facts or opinions. The hearing panel may call for the production of documents relevant to the proceedings and may file them in the case.

The Presiding Officer shall arrange to have all hearings recorded. Parties requesting copies of the transcript shall bear the expense of the copies.

The record shall consist of all the information submitted to the Presiding Officer and the testimony and exhibits presented at the hearing that information which is protected from disclosure in accordance with Regulation .06 of this chapter does not lose that status by virtue of its having been considered by the hearing panel.

Judicial Notice and Expertise. The Presiding Officer may take notice of judicially cognizable facts and, in addition, may take notice of general, technical, or scientific facts within his specialized knowledge. The parties shall be notified either before or during the hearing, or by reference in preliminary reports or otherwise, of the material so noticed, and shall be afforded an opportunity to contest the facts so noticed. The Presiding Officer may utilize his experience, technical competence, and specialized knowledge, and that of the other members of the hearing panel, in the evaluation of the evidence presented to the hearing panel.

Regulation .10 Decision.Link Copy Citation

If a hearing is held, the Presiding Officer shall state his decision and reasons for it in writing. A copy of the decision and reasons shall be mailed to all parties.

Regulation .11 Retained Authority.Link Copy Citation

If the Presiding Officer in his sole discretion determines that the operation of any of the aforegoing rules in a particular case would not aid him in fulfilling his statutory duties, and if he shall also determine that the suspension or modification of the rule in question would not prevent him from handling the application in an efficient and orderly manner, he may suspend or modify the rule accordingly and shall so notify the parties.

Chapter 04. Retail Installment Sellers

Regulation .01 Repossession.Link Copy Citation

In every case where written notice is delivered or sent to the obligor as required by Commercial Law Article, §12-624(d), Annotated Code of Maryland, this notice will state, as part of the buyer's right to redeem and the amount payable for it, the following:

If written notice of intention to repossess was served on the buyer pursuant to Commercial Law Article, §12-624(c), Annotated Code of Maryland, the actual cost of towing or retaking, the exact daily rate of storage, and any other costs relating to retaking and storing which the buyer may be required to pay shall be stated in the notice.

If written notice of intention to repossess was not served on the buyer pursuant to Commercial Law Article, §12-624(c), Annotated Code of Maryland, the notice shall state that:

(1)

The buyer is not required to pay any of the expenses of retaking or storing and

(2)

If there is an attempt by any person to require the buyer to pay any amount for retaking or storing, the charge is illegal.

In addition to the above, all payments by the buyer to redeem any goods repossessed shall be made at a single address of the holder or his designated agent. The exact address, as required by Commercial Law Article, §12-624(d), Annotated Code of Maryland, shall be stated in the written notice. If there is more than one obligor, the required notice shall be sent to all obligors on the contract if the obligors have different addresses.

The Commissioner may hold hearings in accordance with applicable statutory authority in order to determine whether any notice after repossession is in compliance with the law and this regulation.

Regulation .02 Application of Proceeds of Resale by Holder of Repossessed Goods.Link Copy Citation

In all cases of private sale of repossessed goods, a full accounting shall be made to the buyer in writing. The seller shall retain a copy of this accounting for at least 24 months.

The accounting shall contain the following information:

(1)

The unpaid balance at the time the goods were repossessed;

(2)

The refund credit of unearned finance charges and insurance premiums, if any;

(3)

The remaining net balance;

(4)

The proceeds of the sale of the goods;

(5)

The remaining deficiency balance, if any, or the amount due the buyer;

(6)

All expenses incurred as a result of the sale;

(7)

The purchaser's name, address, and business;

(8)

The number of bids sought and received; and

(9)

Any statement as to the condition of the goods at the time of repossession which would cause their value to be increased or decreased above or below the market value for goods of like kind and quality.

Upon compliance with Commercial Law Article, §12-631, Annotated Code of Maryland, if the Commissioner finds that any sale of repossessed goods was not a bona fide sale, the Commissioner may require the seller to show cause why a determination should not be made that he has not complied with Commercial Law Article, §12-626, Annotated Code of Maryland. If the seller contends that the sale was a bona fide sale in compliance with the statute, he shall have an opportunity to be heard pursuant to the Rules of Procedure of the Commissioner of Financial Regulation. Upon a determination after hearing that the sale was not bona fide, an order disallowing any claim of deficiency liability may be entered.

The Commissioner from time to time may issue reasonable regulations to determine whether the public or private sale is bona fide.

Regulation .03 Insurance.Link Copy Citation

Except as provided elsewhere in this regulation, if an insurance premium is financed as part of an installment sale agreement, whether for dual interest physical damage insurance or third-party liability insurance, or both, and the insurance is terminated for any reason by the insurer and the unearned premium returned to the holder of the installment sale agreement, the holder immediately shall remit the unearned premium to the buyer less only those amounts then due and payable under the contract.

Upon receipt by the holder of the installment sale contract of notice of cancellation of the dual interest coverage, if the holder orders single interest physical damage insurance, the premium for this coverage shall be considered due and payable on the date the coverage is effective. The cost of this single interest coverage may be deducted by the holder from the return premium received by the holder from the insurance company which terminated the dual interest coverage, but only if proper notice is given to the buyer that the unearned premium refund will be so applied and the buyer is given a reasonable opportunity to secure physical damage dual interest coverage from an insurance agent, broker, or company of his choice.

If single interest coverage is procured by the holder, and the buyer later independently procures dual interest coverage, the single interest coverage promptly shall be cancelled by the holder upon proper notice that dual interest coverage is effective. Except as provided below, the return premium refund resulting from cancellation shall be remitted promptly to the buyer less only those amounts then due and payable under the contract.

While the buyer in all cases shall have an absolute right to receive, and the holder to remit, net funds in cash, in which event the buyer shall remain obligated to the holder to repay the same as part of the indebtedness under the contract, the holder may make available to the buyer the following options:

(1)

To receive these net funds, in whole or in part, in cash, in which event the buyer's indebtedness under the contract will not be reduced;

(2)

To have these net funds, in whole or in part, applied to reduce pro rata the monthly installment payments due for the remaining term of the contract;

(3)

To have these net funds, in whole or in part, applied to the last installment payable, but not yet due, in which event, if this application results in prepayment in full of the buyer's remaining indebtedness under the contract, the buyer shall be entitled to a rebate of the finance charge to the extent required by Commercial Law Article, §12-620, Annotated Code of Maryland;

(4)

To have these net funds, in whole or in part, applied to the next installment payable, but not yet due, in which event, if this application results in prepayment in full of the buyer's remaining indebtedness under the contract, the buyer shall be entitled to a rebate of the finance charge to the extent required by Commercial Law Article, §12-620, Annotated Code of Maryland;

(5)

To make another disposition of the funds as the parties may mutually agree upon in writing.

In any case, the holder may elect to remit the unearned premium to the buyer, less any amounts then due and payable, if remittance is made not later than 10 days after the holder's receipt of the unearned premium by check delivered by first class mail to the last known address of the buyer. If the holder makes this election, the holder is not required to offer the buyer any option as described in §D of this regulation, and the full amount of the buyer's indebtedness under the contract, including the amount so remitted, shall remain intact.

Notwithstanding contract conditions to the contrary, notification explaining the above options shall be presented to the buyer in writing not later than 10 days after the holder's receipt of the notice of cancellation, delivered to the buyer's last known address by certified mail, return receipt requested. If the buyer fails to respond to this notice within 15 days from the date of mailing or within 15 days from the date of the holder's receipt of the unearned premium, whichever is later, the holder promptly shall send to the buyer a check for the net amount due and the buyer's indebtedness under the contract, including the amount so remitted, will remain intact. If delivery of this notification or of the check cannot be accomplished by the postal authorities, the holder shall hold the funds for the benefit of the buyer and when the debt is reduced to the point at which the funds held for the benefit of the buyer offset the remaining indebtedness due, the buyer will be notified that the contract has been paid in full.

If, at any time, the buyer defaults in the performance of any requirement under the contract, nothing contained in this regulation shall prohibit the holder from electing to accelerate the entire indebtedness and repossess the collateral, pursuant to the rights granted to the holder by Commercial Law Article, §12-624, Annotated Code of Maryland, and, in this event, the holder has the right to credit against the unpaid balance due under the contract, the return premium funds held for the benefit of the buyer.

Chapter 05. Code of Conduct—Mortgage Brokers and Mortgage Bankers

Repealed

Chapter 06. Mortgage Lenders

Regulation .01 Scope.Link Copy Citation

This chapter governs the conduct of any person engaged in mortgage lending, mortgage brokering, or mortgage servicing of loans secured by residential real estate located in this State, unless specifically exempt from licensure under Financial Institutions Article, §11-502, Annotated Code of Maryland.

Regulation .02 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Advertisement” means a statement in any medium used or intended to induce any person to apply for a mortgage loan.

(2)

“Annual percentage rate (APR)” has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.

(3)

Applicant.

(a)

“Applicant” means a borrower who has not received a commitment from a licensee to make the loan requested.

(b)

“Applicant” does not include a person whose request for a mortgage loan has been denied.

(4)

“Average prime offer rate” has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.

(5)

“Borrower” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(6)

“Breach of the security of a system” has the meaning stated in Commercial Law Article, §14-3504, Annotated Code of Maryland.

(7)

Broker.

(a)

This section defines whether a person is acting as a broker or a lender in a particular transaction.

(b)

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

(i)

The person aids or 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 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 person contracting to perform the processing or underwriting did not generate the loan application; and

(ii)

The loan is closed in the name of the lender which did generate the loan application.

(8)

“Commissioner” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(9)

“Commitment” has the meaning stated in Commercial Law Article, §12-125(a)(3), Annotated Code of Maryland.

(10)

“Corporate governance” means the management structure of the licensee and the processes by which the business is managed, including the corporate controls, rules, policies, processes, and practices used to oversee and manage the institution.

(11)

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

(12)

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

(13)

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

(14)

“Escrow account” has the meaning stated in Commercial Law Article, §12-109(a)(3), Annotated Code of Maryland.

(15)

“External audit” means the formal report prepared by an independent certified public accountant expressing an opinion on whether the financial statements are presented fairly, in all material aspects, in accordance with the applicable financial reporting framework, and is inclusive of an evaluation of the adequacy of a company’s internal control structure.

(16)

“Financing agreement” has the meaning stated in Commercial Law Article, §12-125(a)(4), Annotated Code of Maryland.

(17)

“Fully indexed rate” has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.

(18)

“Higher-priced mortgage loan” has the meaning stated in 12 CFR Part 1026, as it may amended from time to time.

(19)

“Information security program” has the meaning stated in 16 CFR §314.2, as it may be amended from time to time.

(20)

“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.

(21)

“Internal audit” means the internal independent and objective assurance and consulting activity performed to evaluate and improve the effectiveness of a licensee’s operations, risk management, internal controls, and governance processes.

(22)

Lender.

(a)

“Lender” means a person who makes a mortgage loan.

(b)

“Lender”, as used in these regulations, does not include a person acting as a:

(i)

Mortgage broker; or

(ii)

Mortgage servicer.

(23)

“License” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(24)

“Licensed location” means any location listed by the licensee in NMLS.

(25)

“Licensee” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(26)

“Loan” as used in these regulations, unless the context indicates otherwise, means a mortgage loan.

(27)

“Loan application” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(28)

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

(29)

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

(30)

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

(31)

“Mortgage loan originator” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(32)

Mortgage Servicer.

(a)

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

(b)

“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:

(i)

Performs the routine administration of mortgage loans as agent of a servicer or MSR investor under the terms of a subservicing contract;

(ii)

Invests in and owns mortgage servicing rights and relies on subservicers to administer the mortgage loans on its behalf;

(iii)

Collects or receives payments directly from borrowers for distribution to the owner of the mortgage loan or another third party, including a master servicer;

(iv)

Evaluates borrower eligibility for loss mitigation options;

(v)

Communicates with the borrower regarding loss mitigation options;

(vi)

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, such as maintenance of hazard and mortgage insurance coverage and preservation of the property; or

(vii)

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

(33)

“Mortgage servicing rights” or “MSR” means the contractual right to service a mortgage loan on behalf of the owner of the associated mortgage in exchange for specified compensation in accordance with the servicing contract.

(34)

“MSR Investor” means a person who invests in and owns mortgage servicing rights and relies upon subservicers to administer the mortgage loans on the person’s behalf, and who may be referred to as a master servicer.

(35)

“NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(36)

“Person” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(37)

“Processing”, when used in the context of processing a loan application, means the:

(a)

Collection of data, documents, and other materials which a lender or broker requires in order to evaluate whether a loan will be granted or denied;

(b)

Preparation of all materials necessary for closing a loan; and

(c)

Scheduling of the closing of a loan.

(38)

“Residential real estate” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(39)

“Risk management program” means the policies, procedures, and internal controls designed to identify, measure, monitor and mitigate risk.

(40)

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

(41)

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.

(42)

“Subservicer” means a person performing the routine administration of mortgage loans as an agent of a servicer or MSR investor under the terms of a subservicing contract.

(43)

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

(44)

“Underwriting” means the evaluation of information and materials about the loan, the applicant, and the property which will secure the loan, to determine whether the loan will be made or denied.

Regulation .03 Delivery and Receipt of Mortgage Disclosures.Link Copy Citation

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.

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.

Regulation .04 Licensing and Application Requirements.Link Copy Citation

Scope.

(1)

If otherwise required to be licensed under Financial Institutions Article, §11-502, Annotated Code of Maryland, a person is not exempt because the person:

(a)

Is an out-of-State deposit-taking financial institution;

(b)

Does not have offices in Maryland;

(c)

Does not have tax situs in Maryland; or

(d)

Is not required to register as a foreign corporation doing business in Maryland.

(2)

Repealed.

(3)

For purposes of Financial Institutions Article, §11-506, Annotated Code of Maryland, an individual is considered to have at least 3 years of experience in the mortgage lending business if:

(a)

The individual has received compensation in connection with a minimum of 12 closed mortgage loans per year for each of the 3 years; or

(b)

The individual has worked in the mortgage lending business at least an average of 20 hours per week for each of the 3 years.

(4)

The Commissioner may consider the totality of an individual's particular duties and activities while engaged in the mortgage lending business to determine whether the individual has at least 3 years of experience.

(5)

For purposes of Financial Institutions Article, §11-506, 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.

Unlicensed Mortgage Lender. A licensee may not broker a loan to, or accept a loan referral from, a person the licensee knows is not licensed by the Commissioner, unless the licensee reasonably and in good faith believes that the person is properly licensed or exempt from the licensing requirement.

Renewals.

(1)

A licensee may renew a license by filing a completed renewal application before the expiration of its current license.

(2)

A person who fails to comply with §C(1) of this regulation shall file an application for a new license with all application and investigation fees, unless the renewal application is filed with the Commissioner within 30 days after the date on which the current license expired.

Bond Termination.

(1)

If a licensee's bond, letter of credit, or trust account is cancelled, expired, or closed and no substitute bond or authorized security is in place:

(a)

Upon notice of the termination from the bond surety, or issuer of the letter of credit or trust account, the licensee shall immediately cease doing any business as a mortgage lender; and

(b)

The mortgage lender's license is suspended.

(2)

If the termination remains in effect for more than 30 days, an application for a new license shall be filed with all application and investigation fees.

Loan Processing Under Expired License.

(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.

Complaint Resolution.

(1)

A licensee shall designate a person as being responsible for, and authorized to make, decisions regarding the resolution of complaints received from the Commissioner.

(2)

A licensee shall provide to the Commissioner the name of the person designated under §G(1) of this regulation as part of an application for:

(a)

A new license; and

(b)

A license renewal.

(3)

A person designated under §G(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 §G(1) of this regulation within 10 business days of the change.

Designation of Mortgage-Related Activity.

(1)

A licensee shall designate on its original license application and on any license renewal application whether it will act, under its license, as one or more of the following:

(a)

A lender;

(b)

A mortgage broker; or

(c)

A mortgage servicer.

(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 §H(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.

NMLS.

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, the Commissioner may cease processing and deem the incomplete application withdrawn, provided that the Commissioner has previously notified the applicant of the basis for incompleteness in accordance with §J(2) of this regulation, and given the applicant not less than 15 days to correct the incompleteness.

Regulation .05 Records.Link Copy Citation

Preservation of Records.

(1)

A licensee shall preserve the records of a mortgage loan in one or more of the following ways:

(a)

Original books, accounts, and files;

(b)

An approved electronic equivalent; or

(c)

An approved microphotographic copy.

(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.

(5)

Time Period.

(a)

A lender shall retain records for 61 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 61 months after final payment is made or the 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 mortgage loan, records of the mortgage loan shall be retained for 61 months after the mortgage loan is made or denied.

(6)

Records required to be retained shall be maintained separately from the records of any other business of the licensee or its employees.

(7)

Notwithstanding §A(3) of this regulation, a licensee may commingle records of mortgage loans with records of other types of loans made, brokered, or held by the licensee, if the mortgage loans can be readily retrieved for an examination.

Content of Records.

(1)

For each mortgage loan made or serviced by a licensee, a file shall be maintained which contains, at a minimum, the following:

(a)

The date of the loan closing;

(b)

The annual percentage rate of interest payable on the loan;

(c)

Documentation of all charges and fees disbursed from the proceeds of the loan or collected directly from the borrower;

(d)

Documentation of disbursements of loan proceeds to creditors of the borrower;

(e)

Documentation of any broker's agreement signed by the borrower if a broker fee is paid from the loan proceeds at closing;

(f)

The amount of any origination or discount fee;

(g)

A notation of any applicable governmental loan program for each loan;

(h)

An accurate history or audit trail, since the date of loan closing, of the application of all:

(i)

Payments;

(ii)

Charges; and

(iii)

Credits;

(i)

The objective index used to determine the interest rate from time to time if the loan has an adjustable rate;

(j)

If the loan was assigned by the licensee, the name of the assignee, and the date of the assignment;

(k)

Any document which indicates whether the security interest is in first or second lien position at the time the loan is made;

(l)

All required State and federal disclosure documents;

(m)

Records of all monies received from a borrower for fees to be paid to third parties for services in connection with the loan;

(n)

Records indicating that the services were provided and the fees paid by the licensee to the third party;

(o)

A record of dates on which a credit report, appraisal, and other services or items were ordered by the licensee;

(p)

Any other document on which the licensee relied in underwriting the loan;

(q)

Optional insurance:

(i)

Insurance information regarding optional insurance coverage purchased by the borrower in connection with the loan, including the premium charged, the types of coverages, and written authorization from the borrower for each type of coverage;

(ii)

This paragraph does not apply to hazard insurance and flood insurance on the property securing the mortgage loan;

(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 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;

(ii)

The name and 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 mortgage loan:

(a)

Shall retain copies of all records listed in §B(1) of this regulation which the licensee obtains in the course of processing or underwriting a loan;

(b)

Shall retain a copy of the broker agreement between the licensee and the borrower;

(c)

Shall retain a record of the lender to whom the loan was brokered;

(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

(f)

Is not responsible for retaining any record unless the licensee at some time is in physical possession of a copy of that record.

(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.

(4)

Records retained for longer than the minimum time period shall be made available to the Commissioner upon the Commissioner's reasonable request.

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 any manner requested by the Commissioner.

Loss of Records. A licensee shall immediately notify the Commissioner of any actual or potential loss of records required to be kept by this regulation.

Regulation .06 Advertising and Solicitation.Link Copy Citation

A person may not publish, or cause to be published, any advertisement, or make or cause to be made any representation, that:

(1)

Contains any false, misleading, or deceptive statements regarding the making, brokering, or servicing of mortgage loans; or

(2)

Misrepresents terms, availability, rates, or charges incident to a mortgage loan.

Licensee Name and Address.

(1)

A licensee may not advertise under any name or address other than a name or address that:

(a)

Is listed as a licensed location in NMLS; or

(b)

Has been approved by the Commissioner pursuant to COMAR 09.03.02.09A.

(2)

Notwithstanding §B(1) of this regulation, an advertisement:

(a)

Need not disclose any address of the advertiser; and

(b)

May use the trade name of a parent corporation.

(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 website 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] COMAR 09.03.02.09B 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.

(6)

A licensee is responsible for a violation of §A of this regulation even if a parent corporation's trade name is used as permitted in §B(2)(b) of this regulation.

(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.

Regulation .07 Financing Agreements.Link Copy Citation

For purposes of Commercial Law Article, §§12-125, 12-922, and 12-1022, Annotated Code of Maryland:

(1)

An application is completed at the time of initial application;

(2)

Settlement occurs when the loan proceeds are disbursed by the person conducting settlement to the borrower or to third parties as required by the lender's instructions;

(3)

Settlement has not occurred when the loan proceeds are disbursed from the lender to the custody of an escrow agent pending expiration of a time period during which the borrower is entitled by statute to rescind the loan.

In a loan transaction where there is a separate broker and lender, only one financing agreement need be provided to the applicant.

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)

Loan is closed; or

(2)

Applicant receives a written commitment.

Regulation .08 Agreements with the Borrower.Link Copy Citation

Written Agreements.

(1)

Agreements between a borrower and a licensee shall be:

(a)

In writing; and

(b)

Provided promptly to the borrower following execution by all parties.

(2)

Exact copies of original documents may be provided to the borrower to satisfy this section.

Agreements in Blank.

(1)

A person may not obtain a borrower's or guarantor's signature on any of the following documents if blanks remain to be filled in after execution by the borrower:

(a)

A note;

(b)

A deed of trust;

(c)

A mortgage;

(d)

An affidavit by the borrower;

(e)

Any written certification or statement by the borrower as to use of loan proceeds;

(f)

Any other instrument granting a security interest in property;

(g)

Any other document which constitutes a debt obligation of the borrower; and

(h)

A finder's fee agreement required under Commercial Law Article, §12-805, Annotated Code of Maryland.

(2)

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

(a)

Notary public;

(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.

Undisclosed Fees.

(1)

Unless disclosed in written agreements signed by the borrower, a licensee may not, directly or indirectly, impose any fee or charge payable by or on behalf of the borrower.

(2)

In this section “written agreements” includes all closing documents signed by the borrower.

(3)

Compliance with applicable disclosures under 12 CFR §§1026.37 and 1026.38 shall be deemed compliance with §C(1) and (2) of this regulation.

(4)

This section does not apply to changes in amounts collected to be placed in an escrow account maintained after the loan is made.

Security Instruments. Licensees shall comply with the requirements relating to security instruments to be recorded in connection with the inclusion of the name and licensee number of the mortgage lender and mortgage originator, or an affidavit in lieu thereof, as set forth in Real Property Article, §3-104.1, Annotated Code of Maryland.

Regulation .09 Loan Processing.Link Copy Citation

A mortgage lender:

(1)

May not cause or permit any loan to be characterized as a commercial loan if there are circumstances known to the licensee which indicate that any portion of the loan proceeds will not be used for commercial purposes;

(2)

Which cannot guarantee acceptance of a borrower's application into a particular loan program, shall disclose that fact to the applicant in writing;

(3)

Shall keep an applicant generally informed of the progress of the processing of a loan application in the event that problems arise in the processing or underwriting of a loan which may delay closing; and

(4)

Shall comply with all State and federal laws and regulations applicable to a particular loan.

If a mortgage lender elects to make a loan under Commercial Law Article, Title 12, Subtitle 9 or Subtitle 10, Annotated Code of Maryland, the lender shall make that election in writing in the:

(1)

Agreement, note, or other evidence of an extension of closed end credit; or

(2)

Agreement governing a revolving credit plan.

Regulation .10 Fees.Link Copy Citation

A licensee may not retain a fee, or any portion of a fee, collected from the borrower if the fee is represented as a charge to be paid to a third party for services in connection with the loan.

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)

Notwithstanding §B(1) of this regulation, a licensee may collect fees which are to be fully paid to third parties for services in connection with the loan, before providing a financing agreement.

A licensee may condition the making of a loan on the real estate seller's paying certain fees only if:

(1)

The seller has agreed in writing to pay those fees; or

(2)

At the time the borrower elects the type of loan applied for, the licensee discloses in writing:

(a)

Fees which the seller may be required to pay,

(b)

The fact that the borrower has the responsibility for informing the seller about the fees, and

(c)

The fact that the loan will not be made unless the seller, or someone other than the borrower, pays those fees.

If a licensee fails to comply with §C of this regulation, the licensee may not:

(1)

Fail to close the loan solely because the seller refuses at closing to pay certain fees; or

(2)

Threaten at closing to refuse to make the loan unless the seller pays certain fees.

Regulation .11 Closing.Link Copy Citation

Disbursement of Loan Proceeds.

(1)

A licensee shall disburse all loan proceeds in a timely manner as provided in the loan documents.

(2)

Disbursement of all loan proceeds to a third-party closing agent is deemed compliance with this section.

A licensee may not collect a separate settlement fee in a loan when closing is conducted by:

(1)

The lender;

(2)

A subsidiary of the lender;

(3)

A sister corporation of the lender;

(4)

An owner or part owner of the lender;

(5)

A partner of the lender; or

(6)

A director, officer, or employee of the lender.

Duties on Failure to Close.

(1)

If a loan transaction is not closed, the licensee shall, upon written request by the applicant, return to the applicant:

(a)

All original documents and other materials which were supplied to the licensee by the borrower; and

(b)

If paid for by the borrower, a copy of the appraisal report.

(2)

Section C(1)(b) of this regulation does not apply to any portion of an appraisal report which any federal law or regulation prohibits the licensee from releasing to the applicant.

(3)

The licensee may retain copies of all documents returned to the borrower.

(4)

This section does not apply to a written application for a loan.

Regulation .12 Brokers.Link Copy Citation

A person acting as a mortgage broker in a loan transaction may not obtain an exclusive dealing or exclusive agency agreement from any borrower.

Notwithstanding §A of this regulation, a person acting as a mortgage broker may obtain an agreement from a borrower that, in the event the loan is not made, restricts the borrower from obtaining a loan within 180 days after the borrower's initial application to the broker, from any lender identified to the borrower by the broker.

Fees.

(1)

Except for a fee to be paid to a third party for services in connection with the loan, a person acting as a broker in a loan transaction may not collect a fee from an applicant before the loan is closed.

(2)

Section C(1) does not authorize any fee not permitted under applicable sections of Commercial Law Article, Title 12, Annotated Code of Maryland.

Cure of Unintentional Violation.

(1)

This section applies only to a licensee that engages in both brokering and lending in the regular course of its business.

(2)

At the time a loan application is received, a licensee that collects a fee which would be prohibited under §C(1) of this regulation may cure a violation by tendering a refund of the impermissible fee collected if:

(a)

At the time the loan application was received the licensee believed in good faith that the licensee was acting as a lender not a broker in the transaction; and

(b)

Within 5 business days after determination by the licensee that the loan will be closed in the name of a third-party lender, the licensee:

(i)

Tenders to the applicant a refund of all impermissible fees, and

(ii)

Provides the applicant with a written broker agreement as required under Commercial Law Article, §12-805(d), Annotated Code of Maryland.

Regulation .13 Expedition.Link Copy Citation

A licensee shall act expeditiously in processing and underwriting loan applications.

A licensee may not:

(1)

Issue any agreement that locks in or sets an interest rate and points on the loan applied for, if the licensee knows that the time period established in the agreement after which the rate may change is not sufficient for the loan to be closed;

(2)

Accept more applications than the licensee can reasonably expect to be processed and closed within established lock-in periods; or

(3)

Delay the settlement of a loan with the specific intent to, and for the purpose of:

(a)

Increasing any cost to the borrower; or

(b)

Avoiding any legal obligation to the borrower.

Ordering Underwriting Documents — Timing.

(1)

This section applies only to:

(a)

Purchase money mortgage loan applications; and

(b)

Loan applications in which the licensee establishes a deadline for closing, after which the loan terms offered to the applicant may change.

(2)

If a licensee fails to close a loan by the expiration date of a contract of sale supplied by the borrower, or by a deadline for closing established by the licensee, there is a rebuttable presumption that the licensee failed to process the loan expeditiously if the licensee fails to order:

(a)

A credit report and property appraisal within 5 business days after initial application; or

(b)

Within 5 business days, other reports from third parties needed for underwriting after discovery that the reports will be needed.

(3)

This section does not apply to:

(a)

Verification of employment; and

(b)

Verification of deposits.

Regulation .14 Payoff and Accounting Statements — Releases.Link Copy Citation

Within 5 business days after written request by the borrower, a licensee shall provide the borrower or the borrower's designee with a written statement of the dollar figure which will repay a loan in full.

Upon written request by the borrower, a licensee shall provide, within a reasonable time, but not in excess of 45 days, an accounting statement to the borrower, setting forth:

(1)

All payments made on the loan;

(2)

All amounts credited to principal and interest; and

(3)

Any other charges.

If a loan is being serviced by a different entity than the licensee, this regulation applies when the servicer of the loan is in receipt of a written request from the borrower for a payoff or accounting statement.

Within 30 days from the date a loan is repaid in full, a licensee shall:

(1)

Prepare and forward to the borrower documents sufficient for the borrower to obtain a release of the lien securing the loan; or

(2)

Prepare and deliver to the appropriate city or county land records office documents which are sufficient to release the lien securing the loan.

Regulation .15 Waivers.Link Copy Citation

An act, agreement, or statement of an applicant may not constitute a valid waiver of any benefit or protection provided to an applicant under these regulations or applicable law.

Nothing in this regulation affects the validity of any waiver specifically permitted under the Commercial Law Article, Annotated Code of Maryland.

Regulation .16 Bonds, Letters of Credit, and Trust Accounts.Link Copy Citation

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 subject to recalculation at the time a license is renewed.

Restitution awarded and to be paid from a letter of credit or trust account shall be paid as follows:

(1)

Awards resulting from individual complaints shall be paid in the order in which they are received by the Commissioner;

(2)

Awards resulting from an examination by the Commissioner that will exceed the total available under the 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

(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.

The Commissioner may require part or all of the funds in a letter of credit or trust account to remain on deposit if:

(1)

There are unresolved pending claims against the account or letter of credit, which were timely filed; and

(2)

The amount required by the Commissioner to be maintained is reasonably calculated to cover the payment of those claims.

Claims against a bond, letter of credit, or trust account may not include:

(1)

Attorneys' fees;

(2)

Damages for personal injury; or

(3)

Punitive damages.

A surety under a bond issued under Financial Institutions Article, §11-508, Annotated Code of Maryland, shall:

(1)

Pay directly to a claimant any meritorious claim; and

(2)

Immediately notify the Commissioner when it pays a claim to a claimant.

Regulation .17 Enforcement.Link Copy Citation

A person who violates these regulations is subject to the enforcement provisions of Financial Institutions Article, §11-517, Annotated Code of Maryland.

Regulation .18 Continuing Education.Link Copy Citation

Purpose and Applicability.

(1)

The State legislature has determined that it is in the public interest to require licensees to comply with a continuing education requirement as a prerequisite to the renewal of a mortgage lender license.

(2)

The continuing education requirement does not apply to the original application for a license.

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

(1)

“Continuing education course” or “course” means an educational program related to mortgage lending or brokering which contributes directly to the enhancement of professional competence of a covered employee to engage in the mortgage lending business, as defined in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(2)

Covered Employees.

(a)

“Covered employees” means the person with the required experience under Financial Institutions Article, §11-506(b)(2), (3), and (4), Annotated Code of Maryland, and the manager of each branch office licensed, or required to be licensed, by the Commissioner.

(b)

“Covered employees” does not include an employee who:

(i)

Has been employed by the licensee for less than 6 months before the expiration date of the licensee's current license; and

(ii)

Had no prior experience as a covered employee with any other licensee.

Requirements.

(1)

Except as provided in §A(2) 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)

Ethics, including instruction on fraud, consumer protection, and fair lending issues — 2 hours;

(c)

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

(d)

Maryland law and regulations relating to mortgage lending and origination — 1 hour.

(3)

Hours in excess of the minimum requirement during any licensing period may not be carried over to a successive period.

Reporting, Verification, and Record Keeping.

(1)

A licensee, when applying for a license renewal, shall:

(a)

Provide to the Commissioner any information or certification as the Commissioner may require as proof of satisfactory completion of each covered employee's education requirements; and

(b)

Submit to the Commissioner, in the manner the Commissioner requires, a list of all covered employees.

(2)

The Commissioner may require verification, on a random or other basis, of satisfactory completion of the requirements of this regulation.

(3)

A licensee shall retain the evidence reasonably acceptable to the Commissioner to verify satisfactory completion of the requirements of this regulation for a period of at least 3 years after issuance of the renewal license to which it applies.

Nonrenewal, Suspension, or Revocation of License.

(1)

Subject to the notice and hearing requirements of Financial Institutions Article, §11-518, Annotated Code of Maryland, failure to comply with the requirements of this regulation is grounds for:

(a)

Denial of a license renewal under Financial Institutions Article, §11-511(b), Annotated Code of Maryland; or

(b)

Suspension or revocation of a license or other sanctions pursuant to Financial Institutions Article, §11-517, Annotated Code of Maryland.

(2)

The Commissioner may issue to a licensee a cease and desist order under Financial Institutions Article, §11-517, Annotated Code of Maryland, which:

(a)

Prohibits a covered employee who has failed to comply with this regulation from qualifying as the person with the required experience under Financial Institutions Article, §11-506(b)(2), (3), and (4), Annotated Code of Maryland, or acting as a manager of a branch office; and

(b)

Continues in effect until the licensee demonstrates to the Commissioner completion by the covered employee of all educational requirements of this regulation.

Regulation .19 Ability to Repay.Link Copy Citation

Purpose and Scope.

(1)

The General Assembly has determined that it is in the public interest to require lenders to comply with special rules with respect to certain mortgage loans.

(2)

This regulation applies to loans subject to Commercial Law Article, §§12-127, 12-311, 12-409.1, and 12-1029, Annotated Code of Maryland.

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.

Compliance with applicable provisions in 12 CFR Part 1026.43, 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.

Regulation .20 Duty of Care.Link Copy Citation

Good Faith and Fair Dealing. A licensee has a duty of good faith and fair dealing in communications, transactions, and course of dealings with a borrower in connection with the advertisement, solicitation, making, servicing, purchase, or sale of any mortgage loan, including, but not limited to:

(1)

The duty to recommend to a borrower or induce a borrower to enter into only a mortgage loan refinancing that has a net tangible benefit to a borrower, considering all of the circumstances, including the terms of a loan, the cost of a loan, and the borrower's circumstances;

(2)

The duty to provide to a borrower who is offered a higher-priced mortgage loan information about the non-higher-priced mortgage loans that the licensee can make available and for which the borrower may qualify; and

(3)

The duty when servicing mortgage loans to:

(a)

Promptly provide borrowers with an accurate accounting of the debt owed when borrowers request an accounting;

(b)

Make borrowers in default aware of loss mitigation options and services offered by the licensee;

(c)

Provide trained personnel and telephone facilities sufficient to promptly answer and respond to borrower inquiries regarding their mortgage loans; and

(d)

Pursue loss mitigation when possible.

Method to Determine Net Tangible Benefit.

(1)

When determining whether a refinance of a mortgage loan will provide a net tangible benefit to the borrower, a licensee shall make a reasonable inquiry of the borrower to determine what net tangible benefit, if any, the borrower will receive from a mortgage loan. Net tangible benefits may include, but are not limited to:

(a)

Obtaining a lower interest rate;

(b)

Obtaining a lower monthly payment, including principal, interest, taxes, and insurance;

(c)

Obtaining a shorter amortization schedule;

(d)

Changing from an adjustable rate to a fixed rate;

(e)

Eliminating a negative amortization feature;

(f)

Eliminating a balloon payment feature;

(g)

Receiving cash-out from the new loan in an amount greater than all closing costs incurred in connection with the loan;

(h)

Avoiding foreclosure;

(i)

Eliminating private mortgage insurance; and

(j)

Consolidating other existing loans into a new mortgage loan.

(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.

Regulation .21 Nontraditional and Higher-Priced Mortgage Loans.Link Copy Citation

In this regulation, the following terms have the meanings indicated:

(1)

“Interest-only mortgage loan” means a mortgage loan on which, for a specified period of time, the borrower is required to:

(a)

Pay only the interest due on the mortgage loan; and

(b)

After the interest-only period ends, make payments that include both principal and interest.

(2)

“Nontraditional mortgage loan” means any mortgage loan that allows the borrower to defer repayment of principal, interest, or both, including, but not limited to, all interest-only mortgage loans and payment-option ARMs.

(3)

“Payment-option ARM” means an adjustable rate mortgage loan:

(a)

That allows the borrower to choose from a number of different payment options, which may include, but are not limited to:

(i)

A minimum payment option based on an introductory interest rate; or

(ii)

A fully amortizing principal and interest payment based on a 15-year or 30-year loan term, plus any required escrow payments; and

(b)

For which, at a certain point in the mortgage loan term, the monthly payment amount is required to be set at an amount that will fully amortize the outstanding balance of the loan over the remaining loan term.

(4)

“Reduced documentation mortgage loan” means a mortgage loan for which the lender sets reduced or minimum documentation standards to substantiate the borrower's income and assets.

Marketing and Promotion.

(1)

Licensee marketing and promotional communications and materials for nontraditional and higher-priced mortgage loans shall include information about the costs, terms, features, and risks of nontraditional and higher-priced loans that can assist consumers in their product selection, including, as applicable, information on the following:

(a)

Payment shock resulting from potential interest rate increases, including how the new payment will be calculated when the introductory fixed-rate period expires;

(b)

Negative amortization, including:

(i)

That the effect of negative amortization is the increase in the principal mortgage loan amount and the decrease of home equity; and

(ii)

Any other negative consequences, such as the possibility that a negatively amortizing mortgage loan could make it more difficult to refinance or to obtain cash upon a sale;

(c)

Prepayment penalties that may be imposed if the mortgage, or any part of it, is paid off before maturity, including how any prepayment penalty may be calculated and when it may be imposed;

(d)

Balloon payments, including:

(i)

That a balloon payment is a scheduled lump sum usually due at the end of the mortgage loan term that is significantly larger than the other regularly scheduled periodic payments; and

(ii)

That the inability to make a balloon payment could result in a foreclosure;

(e)

Responsibility for taxes and insurance when:

(i)

The borrower is required to make payments for real estate taxes and property insurance, in addition to the loan payment; and

(ii)

The lender does not establish an escrow account for the collection and disbursement of these payments, including the fact that the cost of taxes and insurance may be substantial; and

(f)

Cost of reduced documentation loans when there is a pricing premium attached to a reduced documentation or stated income mortgage loan.

(2)

Illustrations.

(a)

In complying with this regulation, a licensee may utilize the sample illustrations included in:

(i)

The Illustrations of Consumer Information for Nontraditional Mortgage Borrowers issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration as final guidance on June 8, 2007; and

(ii)

Any consumer information for higher-priced or subprime mortgage lending that may be issued by the foregoing federal regulators or a similar interagency group as final guidance.

(b)

A licensee may revise and adapt the illustrations described in §B(2)(a) of this regulation to make them applicable to the specific mortgage loan products offered by the licensee.

Risk Management Policies, Procedures, and Control Systems.

(1)

A licensee acting as a lender offering nontraditional or higher-priced mortgage loans shall adopt risk management policies, procedures, and controls for these products.

(2)

Policies and Procedures.

(a)

A licensee acting as a lender that offers or originates nontraditional or higher-priced mortgage loan products shall train its lending personnel to convey information to consumers about the product terms and risks in a timely, accurate, and complete manner. If the lender offers new or additional nontraditional or higher-priced mortgage loan products, the lender shall provide lending personnel with additional training as necessary to enable the lending personnel to convey information to consumers in a timely, accurate, and complete manner. The lender shall monitor lending personnel to determine whether the personnel are conveying information in the manner required.

(b)

A licensee acting as a lender shall review consumer complaints to identify potential noncompliance and other risks. The review shall include:

(i)

A legal review as appropriate; and

(ii)

A review to ensure that compensation programs do not improperly encourage lending personnel to direct consumers to particular products.

(c)

A licensee acting as a lender that originates, invests in, or services nontraditional or higher-priced mortgage loan products using a mortgage broker, correspondent, or other third party shall take appropriate steps to ensure third-party practices are consistent with the policies of the lender, including, but not limited to:

(i)

Conducting due diligence and establishing other criteria for entering into and maintaining relationships with a third party;

(ii)

Designing third-party compensation incentives to avoid nontraditional or higher-priced mortgage loan product originations that are not consistent with the policies of the lender;

(iii)

Setting requirements for agreements with a third party;

(iv)

Establishing procedures and systems to monitor third-party compliance with applicable agreements, polices, and laws; and

(v)

Implementing appropriate corrective actions if a third party fails to comply with applicable agreements, policies, or laws.

(d)

A licensee acting as a lender shall establish written policies and procedures to implement the requirements set forth in this subsection.

(3)

Control Systems.

(a)

A licensee acting as a lender shall design and implement control systems, including quality control, compliance, and audit procedures to focus on mortgage lending activities that pose high risk.

(b)

The procedures shall include controls to monitor compliance with underwriting standards and monitor exceptions to those standards.

(c)

A licensee acting as a lender shall have systems and controls in place for establishing and maintaining relationships with third-party originators, including procedures for performing due diligence.

(d)

Lender oversight of third parties shall involve monitoring the quality of originated nontraditional and higher-priced mortgage loans to ensure that the products:

(i)

Reflect the lending standards of the lender; and

(ii)

Comply with applicable laws and regulations.

(e)

A licensee acting as a lender shall develop and use control systems to monitor whether the lender's actual practices are consistent with the policies and procedures of the lender relating to nontraditional and higher-priced mortgage loans.

Regulation .22 Fees.Link Copy Citation

Application Investigation Fee. The nonrefundable investigation fee required by Financial Institutions Article, §11-507(b)(1), Annotated Code of Maryland, is $1.

Initial License Fee.

(1)

The license fee required by Financial Institutions Article, §11-507(b)(2), Annotated Code of Maryland, is $1,000 for a 1-year license term.

(2)

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

Renewal Fee.

(1)

The renewal fee required by Financial Institutions Article, §11-511(b)(2), Annotated Code of Maryland, is $1,000 for a 1-year renewal term.

(2)

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

Examination and Investigation 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.

Regulation .23 Supervision of Mortgage Loan Originators.Link Copy Citation

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.

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.

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.

Regulation .24 Data Protection.Link Copy Citation

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.

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.

A licensee’s information security program shall consider 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.

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.

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.

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.

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.

Reporting Obligations. 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.

Record Retention. A licensee shall provide copies of risk assessments under §E of this regulation and results of periodic testing under §F of this regulation to the Commissioner upon request.

Regulation .25 Significant Event Reporting.Link Copy Citation

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

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.

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.

Regulation .26 Corporate Governance.Link Copy Citation

Corporate Governance — Generally.

(1)

A licensee shall establish, document, and maintain sufficient corporate governance.

(2)

Each element of a licensee’s corporate governance shall be commensurate with the size, operational complexity, and overall risk profile of the licensee.

(3)

For purposes of this regulation, the operational complexity and risk profile of a licensee shall, in part, be defined by the results of regulatory examinations, any external audits, and internal audits.

(4)

A licensee bears the burden of demonstrating to the Commissioner that its corporate governance is sufficient and commensurate with its size, operational complexity, and overall risk profile.

(5)

A licensee’s corporate governance shall, at a minimum, include:

(a)

Clearly defined responsibilities and accountability;

(b)

Internal controls, policies, processes, and practices for monitoring, testing, and ensuring compliance with the corporate governance framework;

(c)

Internal controls, policies, processes, and practices for training of employees on corporate governance requirements; and

(d)

Internal controls, policies, processes, and practices addressing internal audits, external audits, and risk management as set forth in §§B, C and D of this regulation.

(6)

Each licensee shall, not less than annually, conduct a review of its corporate governance to determine its overall effectiveness, address emerging risks, and otherwise assure that the corporate governance remains commensurate with the size, operational complexity, and overall risk profile of the licensee.

(7)

Any documentation, controls, policies, procedures, requirements, audits, reports, or other materials included in this regulation shall be made available to the Commissioner upon the Commissioner’s request.

Internal Audit.

(1)

A licensee shall establish internal audit requirements that are appropriate for the size, complexity, and risk profile of the licensee.

(2)

Unless impracticable given the size of the licensee, internal audit functions shall be performed by employees of the licensee who report to the licensee’s owners or board of directors and who are not otherwise supervised by the persons who directly manage the activities being reviewed.

(3)

Employees performing internal audit functions shall have sufficient knowledge, training, and resources to provide a reliable evaluation of the licensee’s operations, risk management, internal controls, and governance processes.

External Audit.

(1)

If the Commissioner determines based on the size, operational complexity, and overall risk profile of the licensee that an external audit is appropriate, the Commissioner may direct a licensee to receive an external audit.

(2)

If the Commissioner directs a licensee to receive an external audit, that external audit shall include:

(a)

Annual financial statements, including a balance sheet, statement of operations (income statement), and cash flows, including notes and supplemental schedules prepared in accordance with generally accepted accounting principles;

(b)

Assessment of the internal control structure;

(c)

Computation of tangible net worth;

(d)

Validation of MSR valuation and reserve methodology, if applicable;

(e)

Verification of adequate fidelity and errors and omissions (E&O) insurance;

(f)

Testing of controls related to risk management activities, including compliance and stress testing, if applicable; and

(g)

Any other element the Commissioner deems appropriate.

(3)

Nothing in this section is intended to abrogate a requirement of a licensee to receive an external audit under any other law, rule, regulation, or bylaw, policy, or procedure of the licensee.

Risk Management.

(1)

A licensee shall at all times maintain a risk management program that identifies, measures, monitors, and controls risk sufficient for the size, operational complexity, and overall risk profile of the licensee.

(2)

The risk management program shall have appropriate processes and models in place to measure, monitor and mitigate financial risks and changes to the risk profile of the licensee.

(3)

Evidence of risk management activities throughout the year shall be maintained, including findings of issues and the response to address those findings.

Authority to Address Risk as Necessary. If risk is determined by a formal review of a licensee to be extremely high, the Commissioner may order or direct the licensee to satisfy additional conditions necessary to ensure that the licensee will continue to operate in a safe and sound manner and be able to continue to engage in business as a mortgage lender in compliance with State and federal law and/or regulation.

A covered institution as defined in Regulation .27 of this chapter is not subject to this regulation.

Regulation .27 Enhanced Prudential Standards for Certain Mortgage Servicers.Link Copy Citation

Definitions.

(1)

In this regulation, the following terms have the meanings indicated.

(2)

Terms Defined.

(a)

“Agency” means Fannie Mae, Freddie Mac, and Ginnie Mae.

(b)

“Allowable assets for liquidity means” those assets that may be used to satisfy the liquidity requirements herein, including unrestricted cash and cash equivalents and unencumbered investment grade assets held for sale or trade (for example, agency MBS, obligations of Fannie Mae or Freddie Mac, or U.S. Treasury obligations).

(c)

“Board of directors” means the formal body established by a covered institution that is responsible for corporate governance and compliance with this regulation.

(d)

“Covered institution” means a licensee who is a mortgage servicer with servicing portfolios of 2,000 or more one-unit to four-unit residential mortgage loans serviced or subserviced for others, excluding whole loans owned, and loans being interim serviced prior to sale as of the most recent calendar year end, reported in the NMLS Mortgage Call Report, and who operates in two or more states, districts, or territories of the United States, either currently or as of the prior calendar year end.

(e)

“Fannie Mae” means Federal National Mortgage Association.

(f)

“FHFA” means the Federal Housing Finance Agency.

(g)

“Freddie Mac” means Federal Home Loan Mortgage Corporation.

(h)

“Ginnie Mae” means Government National Mortgage Association.

(i)

“Interim serviced prior to sale” means the activity of collecting a limited number of contractual mortgage payments immediately after origination on loans held for sale but prior to the loans being sold into the secondary market.

(j)

“Mortgage Call Report” means the quarterly or annual report of residential real estate loan origination, servicing, and financial information completed by companies licensed in NMLS.

(k)

“Mortgage-backed security” or “MBS” means a financial instrument, often a debt security, collateralized by residential mortgages.

(l)

“Operating liquidity” means the funds necessary to perform normal business operations, such as payment of rent, salaries, interest expenses, and other typical expenses associated with operating the entity.

(m)

“Residential mortgage loans serviced” means the specific portfolio or portfolios of residential mortgage loans for which a licensee is contractually responsible to the owner or owners of the mortgage loans for the defined servicing activities.

(n)

“Reverse mortgage loan” has the meaning stated in Commercial Law Article, §12-1201, Annotated Code of Maryland.

(o)

“Risk management assessment” means a functional evaluation performed under the risk management program and any report thereof provided to the board of directors under the relevant governance protocol.

(p)

“Servicing liquidity” or “liquidity” means the financial resources available to the licensee to meet such financial obligations as may arise from the servicing of mortgage loans, including, but not limited to, acquiring and financing MSRs, hedging costs associated with the MSR asset and financing facilities, including margin calls, and advancing or financing the advance of principal, interest, taxes, insurance, and any other servicing related advances.

(q)

“Subserviced for others” means the contractual activities performed by subservicers on behalf of a servicer or MSR investor.

(r)

“Tangible net worth” means total equity less receivables due from related entities, less goodwill, and other intangibles, less pledged assets.

(s)

“Whole loans” means those loans for which a mortgage and the underlying credit risk is owned and held on the balance sheet of the entity with all ownership rights.

Applicability — Exclusions.

(1)

This regulation shall be applicable to covered institutions as defined. For entities within a holding company or affiliated group of companies, applicability shall be at the covered institution level.

(2)

The following exclusions apply:

(a)

This regulation does not apply to a not-for-profit mortgage servicer or a housing finance agency.

(b)

Section C of this regulation does not apply to a mortgage servicer solely owning and/or conducting reverse mortgage loan servicing, or the reverse mortgage loan portfolio administered by a covered institution or the whole loan portion of portfolios.

Financial Condition.

(1)

A covered institution shall maintain capital and liquidity in compliance with this section.

(2)

For the purposes of complying with the capital and liquidity requirements of this section, all financial data shall be determined in accordance with generally accepted accounting principles.

(3)

A covered institution that meets the FHFA Eligibility Requirements for Enterprise Single-Family Seller/Servicers for capital, net worth ratio, and liquidity, regardless of whether the covered institution is approved for Fannie Mae or Freddie Mac servicing, meets the requirements of §C(1) and (2) of this regulation.

(4)

A covered institution shall maintain written policies and procedures implementing the capital and servicing liquidity requirements of this section. Such policies and procedures shall include a sustainable written methodology for satisfying the requirements of §C(3) of this regulation and be available to the Commissioner upon request.

(5)

Operating Liquidity.

(a)

A covered institution shall maintain sufficient allowable assets for operating liquidity in addition to the amounts required for servicing liquidity, to cover normal business operations.

(b)

A covered institution shall have in place sound cash management and business operating plans that match the size, operational complexity, and overall risk profile of the covered institution to ensure normal business operations.

(c)

A covered institution’s management shall develop, establish, and implement plans, policies, and procedures for maintaining operating liquidity sufficient for the ongoing needs of the covered institution. Such plans, policies, and procedures shall contain sustainable, written methodologies for maintaining sufficient operating liquidity and be available to the Commissioner upon request.

Corporate Governance.

(1)

Each element of a covered institution’s corporate governance shall be commensurate with the size, operational complexity, and overall risk profile of the covered institution.

(2)

(3)

For purposes of this regulation, the operational complexity and risk profile of a covered institution shall, in part, be defined by the results of regulatory examinations, external audits, and internal audits.

(4)

A covered Institution shall establish and maintain a board of directors responsible for oversight of the covered institution.

(5)

For a covered institution that is not approved to service loans by Fannie Mae, Freddie Mac, or Ginnie Mae, or if these agencies have granted approval for a board alternative, an institution may establish a similar body constituted to exercise oversight and fulfill all board of directors’ responsibilities in this section.

(6)

In addition to any other responsibilities required of the board of directors under State or federal law, or these regulations, the board of directors shall be responsible for:

(a)

Establishing a written corporate governance framework, including appropriate internal controls designed to monitor corporate governance and assess compliance with the corporate governance framework;

(b)

Monitoring and ensuring institution compliance with the corporate governance framework and these regulations; and

(c)

Accurate and timely regulatory reporting, including the requirements for filing the Mortgage Call Report.

(7)

Internal Audit.

(a)

The board of directors shall establish internal audit requirements that are appropriate for the size, complexity, and risk profile of the covered institution.

(b)

Internal audit functions shall be performed by employees of the covered institution who report to the board of directors or its authorized equivalent under this section and who are not otherwise supervised by the persons who directly manage the activities being reviewed.

(c)

Employees performing internal audit functions shall have sufficient knowledge, training, and resources to provide a reliable evaluation of the covered institution’s operations, risk management, internal controls, and governance processes.

(8)

External Audit.

(a)

A covered institution shall receive an external audit, which shall include audited financial statements and audit reports, conducted by an independent public accountant annually.

(b)

The external audit shall include at a minimum:

(i)

Annual financial statements including a balance sheet, statement of operations (income statement), and cash flows, including notes and supplemental schedules prepared in accordance with generally accepted accounting principles;

(ii)

Assessment of the internal control structure;

(iii)

Computation of tangible net worth;

(iv)

Validation of MSR valuation and reserve methodology, if applicable;

(v)

Verification of adequate fidelity and errors and omissions (E&O) insurance; and

(vi)

Testing of controls related to risk management activities, including compliance and stress testing, if applicable.

(9)

Risk Management.

(a)

A covered institution shall establish a documented risk management program under the oversight of the board of directors that identifies, measures, monitors, and controls risk sufficient for the size, operational complexity, and overall risk profile of the covered institution.

(b)

The risk management program shall have appropriate processes and models in place to measure, monitor, and mitigate financial risks and changes to the risk profile of the covered institution and assets being serviced.

(c)

The risk management program shall be scaled to the complexity of the covered institution, but shall be sufficiently robust to manage risks in several areas, including, but not limited to:

(i)

Credit risk — the potential that a borrower or counterparty will fail to perform on an obligation;

(ii)

Liquidity risk — the potential that the covered institution will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding or that it cannot easily unwind or offset specific exposures;

(iii)

Operational risk — the risk resulting from inadequate or failed internal processes, people, and systems or from external events;

(iv)

Market risk — the risk to the covered institution’s condition resulting from adverse movements in market rates or prices;

(v)

Compliance risk — the risk of regulatory sanctions, fines, penalties, or losses resulting from failure to comply with laws, rules, regulations or other supervisory requirements applicable to the covered institution;

(vi)

Legal risk — the potential that actions against the covered institution that result in unenforceable contracts, lawsuits, legal sanctions or adverse judgments can disrupt or otherwise negatively affect the operations or condition of the covered institution; and

(vii)

Reputation risk — the risk to earnings and capital arising from negative publicity regarding the covered institution’s business practices.

(d)

Risk Management Assessment. A covered institution shall conduct a risk management assessment on an annual basis, concluding with a formal report to the board of directors. Evidence of risk management activities throughout the year shall be maintained and made part of the report, including findings of issues and the response to address those findings.

Authority to Address Risk as Necessary.

(1)

If risk is determined by a formal review of a specific covered institution to be extremely high, the Commissioner may order or direct the covered institution to satisfy additional conditions necessary to ensure that the covered institution will continue to operate in a safe and sound manner and be able to continue to service loans in compliance with State and federal law and/or regulation.

(2)

If risk is determined by a formal review of any covered institution to be extremely low, the Commissioner may provide notice that all or part of this regulation is not applicable to that covered institution.

(3)

If economic, environmental, or societal events are determined to be of such severity to warrant a temporary suspension of all or certain sections of this regulation, the Commissioner may provide public notice of such temporary suspension.

Regulation .28 Examination of Licensees.Link Copy Citation

Definitions.

(1)

In this regulation, the following terms have the meanings indicated.

(2)

Terms Defined.

(a)

“Examination” means the Commissioner’s examination of a licensee pursuant to Financial Institutions Article, §11-515(a), Annotated Code of Maryland.

(b)

“Report of examination” means a report issued by the Commissioner or a responsible supervisory agency following the examination of a mortgage lender.

(c)

“Responsible supervisory agency” means the supervisory agency of any state primarily responsible for the supervision and examination of mortgage lenders operating in its state.

Examinations.

(1)

When exercising the Commissioner’s authority to examine a licensee, the Commissioner may consider the report of examination for that licensee issued by a responsible supervisory agency, and accept the information contained therein, if:

(a)

The responsible supervisory agency issued its report of examination on a date which satisfies the Commissioner’s examination schedule for that licensee under Financial Institutions Article, §11-515(a)(2), Annotated Code of Maryland;

(b)

The Commissioner reasonably determines the responsible supervisory agency possesses supervision and examination authority over mortgage lenders operating in that agency's state substantially similar to the supervision and examination authority the Commissioner has over a licensee operating in Maryland;

(c)

The Commissioner reasonably determines the responsible supervisory agency has standards for the purposes of examining mortgage lenders that are reasonably equivalent to the requirements of Financial Institutions Article, §11-501 et seq., Annotated Code of Maryland; and

(d)

The Commissioner reviews the report of examination prepared by the responsible supervisory agency and determines the report of examination is in form and scope substantially similar to a report of examination the Commissioner would issue following its examination of the licensee.

(2)

The Commissioner’s consideration of the report of examination of a responsible supervisory agency pursuant to §B(1) of this regulation does not limit the Commissioner’s ability to:

(a)

Examine an aspect of the licensee’s business not addressed in that report of examination;

(b)

Further examine an aspect of the licensee’s business addressed in that report of examination;

(c)

Request documents or other information from the licensee or otherwise require the licensee to make its books and records available to the Commissioner;

(d)

Interview or examine officers, directors, employees, or agents of the licensee;

(e)

Take other actions consistent with the examination of a licensee; or

(f)

Require the licensee to pay to the Commissioner examination related fees as set forth in Financial Institutions Article, §11-515(c), Annotated Code of Maryland.

Commissioner's Report of Examination.

(1)

The Commissioner may adopt, in whole or in part, the report of examination of a responsible supervisory agency the Commissioner considered under §B of this regulation as the Commissioner’s report of examination.

(2)

The Commissioner may supplement a report of examination of a responsible supervisory agency adopted as the Commissioner’s report of examination under §C(1) of this regulation with information the Commissioner considers relevant.

Treatment of Report of Examination.

(1)

The Commissioner shall treat the report of examination of a responsible supervisory agency the Commissioner considers under §B of this regulation in its examination of a licensee as information obtained in the course of examining that licensee, as set forth in Financial Institutions Article, §2-117 Annotated Code of Maryland.

(2)

A report of examination of a responsible supervisory agency adopted by the Commissioner pursuant to §C of this regulation, together with any information added to that report of examination by the Commissioner, is the Commissioner’s report of examination and property of the Commissioner.

(3)

Any report of examination of a responsible supervisory agency considered or adopted by the Commissioner pursuant to §B or C of this regulation shall remain subject to the terms and conditions of the agreement under which the responsible supervisory agency shared such report of examination with the Commissioner.

Chapter 07. Credit Reporting Agencies

Regulation .01 Scope.Link Copy Citation

This chapter governs certain registration requirements and business operations of consumer reporting agencies who collect credit information and furnish consumer reports on residents of this State. The provisions of this chapter are to promote accuracy in consumer reports.

Regulation .02 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Breach of the security of a system” has the meaning stated in Commercial Law Article, §14-3504, Annotated Code of Maryland.

(2)

“Business customer” means a person who supplies to a consumer reporting agency information for inclusion in a consumer report.

(3)

“Collection agency” has the meaning stated in Business Regulation Article, §7-101, Annotated Code of Maryland.

(4)

“Commissioner” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.

(5)

“Consumer” means an individual who resides in Maryland.

(6)

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

(7)

Consumer Reporting Agency.

(a)

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

(b)

“Consumer reporting agency” does not include a person who regularly extends credit to consumers and is:

(i)

Licensed to extend credit by the Commissioner; or

(ii)

A financial institution chartered under the laws of this State or the laws of the United States, the lending operators of which are subject to supervision, examination, and regulation by a State or federal agency.

(8)

“Control person” means a person who has the power, directly or indirectly, to direct the management or policies of a consumer reporting agency, whether through ownership of securities, by contract, or otherwise.

(9)

“File” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.

(10)

“Nationwide Mortgage Licensing System and Registry” or “NMLS” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(11)

“Person” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.

(12)

“Personal information” has the meaning stated in Commercial Law Article, §14-3501, Annotated Code of Maryland.

(13)

“Simple and easy to understand” has the meaning stated in 16 CFR §642.2.

(14)

“Specialty consumer reporting agency” means a consumer reporting agency that prepares and retains files for one or more of the following:

(a)

Residential history;

(b)

Tenant history; or

(c)

Employment history.

Regulation .03 Annual Registration.Link Copy Citation

During the time period established by the Commissioner under §B of this regulation, each consumer reporting agency shall:

(1)

Obtain and maintain a valid unique identifier issued by NMLS when an account is created with NMLS; and

(2)

Transfer registration information to NMLS.

The Commissioner shall establish a time period that is not less than 2 months after the effective date of these regulations within which a registrant must transfer registration information to NMLS.

At least 30 days before the transfer period begins, the Commissioner shall:

(1)

Notify all registrants of the transfer period; and

(2)

Provide instructions for the transfer of registration information to NMLS.

Subject to §A of this regulation, a consumer credit reporting agency submitting an initial registration or a registration renewal shall apply for the initial registration or registration renewal through NMLS on or after November 1 of the year in which these regulations are effective and annually thereafter.

To register, the consumer reporting agency shall provide all information required by the Commissioner through NMLS, including:

(1)

The address of the principal executive office;

(2)

The name of a responsible official of the consumer reporting agency who is available to respond expeditiously to inquiries or complaints referred by the Commissioner or the Commissioner's designee;

(3)

A toll-free telephone number for use by the Commissioner or the Commissioner's designee, at which the responsible official required to be identified in this section may be reached;

(4)

A toll-free telephone number or numbers maintained by the consumer reporting agency which is available to all Maryland residents for making inquiries;

(5)

A certification by a control person that the consumer reporting agency has trained personnel sufficient to promptly and properly investigate and respond to consumer complaints and inquiries available;

(6)

The mailing address or addresses to which a consumer may correspond with the consumer reporting agency in order to:

(a)

Obtain a copy of their consumer report, and

(b)

File written complaints or disputes about the accuracy of information contained in their consumer report;

(7)

A certification by a control person who has primary oversight responsibility for the consumer reporting agency’s technology system that the consumer reporting agency is in compliance with all applicable data security requirements, including the requirements of the Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and, if applicable, the Gramm-Leach-Bliley Act (15 U.S.C. §6801 et seq.) and their respective implementing regulations;

(8)

A copy of the declaration page, certificate of liability, or similarly summarized coverage page of the consumer reporting agency’s cyber risk insurance policy, if applicable;

(9)

A list of all websites and web applications where there is consumer access to a service offered by the consumer reporting agency;

(10)

The total number of consumer reports the consumer reporting agency assembled or evaluated over the previous 12 months; and

(11)

The name of any third-party technology vendor that the consumer reporting agency utilizes to assemble, evaluate, or store consumer reports prepared by the consumer reporting agency.

If, except for the information required in §E(10) and (11) of this regulation, the information supplied in a consumer reporting agency's registration becomes inaccurate at any time during the calendar year, the consumer reporting agency shall immediately submit the changes to the Commissioner through NMLS.

Regulation .04 Bond.Link Copy Citation

The amount of a consumer reporting agency surety bond shall be determined as follows based on the number of consumer reports that the consumer reporting agency assembled, evaluated, or sold during the prior calendar year:

(1)

Less than or equal to 10 percent of the total population of Maryland as published by the United States Census Bureau and listed on the Commissioner’s website shall file through NMLS a $100,000 bond;

(2)

More than 10 percent but less than or equal to 25 percent of the total population of Maryland as published by the United States Census Bureau and listed on the Commissioner’s website shall file through NMLS a $250,000 bond;

(3)

More than 25 percent but less than or equal to 50 percent of the total population of Maryland as published by the United States Census Bureau and listed on the Commissioner’s website shall file through NMLS a $500,000 bond;

(4)

More than 50 percent but less than or equal to 75 percent of the total population of Maryland as published by the United States Census Bureau and listed on the Commissioner’s website shall file through NMLS a $750,000 bond; or

(5)

More than 75 percent of the total population of Maryland as published by the United States Census Bureau and listed on the Commissioner’s website shall file through NMLS a $1,000,000 bond.

In considering a request to grant an exemption to the requirement for a consumer reporting agency to file a surety bond with the Commissioner at the time of registration or registration renewal, the Commissioner may grant to a consumer reporting agency an exemption from the surety bond required under §A of this regulation if the Commissioner determines that the following conditions are met:

(1)

The granting of an exemption is not detrimental to the public interest;

(2)

The consumer reporting agency has conducted its business in a lawful manner;

(3)

The consumer reporting agency has complied, and has the capability and systems in place to continue to comply, with the provisions of the Maryland Personal Information Protection Act, Commercial Law Article, §14-3501, et seq., Annotated Code of Maryland; and

(4)

The consumer reporting agency demonstrates the financial ability to pay potential claims by establishing any of the following:

(a)

The tangible net worth of the consumer reporting agency, as reported on an unconsolidated basis and certified by a control person, is equal to or greater than twice the amount of the surety bond required under §A of this regulation or this section;

(b)

The consumer reporting agency’s short-term credit rating by a nationally recognized rating agency is at least equal to P2, A2, or F2 or an equivalent rating;

(c)

The consumer reporting agency has regularly maintained and, during the registration period shall maintain, liquid assets, in form acceptable to the Commissioner, and in an amount that is at least equal to or greater than twice the amount of the surety bond required under §A of this regulation or this section; or

(d)

In the case of a specialty consumer reporting agency, the consumer reporting agency maintains a current accreditation by the Professional Background Screening Association or any similar accreditation program approved by the Commissioner.

Regulation .05 Operational Procedures.Link Copy Citation

A consumer reporting agency shall devise procedures to identify inaccurate information in consumer credit information submitted to it by a person who furnishes information to a consumer reporting agency.

As a part of the procedures required in §A of this regulation, a consumer reporting agency:

(1)

Shall comply with 15 U.S.C. §1681i;

(2)

May not include in a consumer’s file any loan, regardless of the date of the loan, that has been determined to be usurious or otherwise void or unenforceable under Maryland law pursuant to a court order or final order issued by the Commissioner and for which the credit reporting agency received said order from a court, the Commissioner, a consumer or consumer’s representative to which the information relates, or identified through any other process instituted by the credit reporting agency that would notify them of such a determination; and

(3)

Shall use personal information and publicly available information to match tax liens and judgments to the appropriate consumer report, except that this requirement does not apply to a consumer reporting agency that is acting as a “reseller” as defined under 15 U.S.C. §1681a(u) with respect to that consumer report.

Complaints — General.

(1)

This section does not apply to a report of information made to a consumer reporting agency before the effective date of this chapter.

(2)

A consumer reporting agency may not list information which was received from a collection agency in a consumer's file unless there is also included in the consumer's file information sufficient to enable the consumer to identify the creditor who referred the debt to the collection agency.

Complaints — Specific Types.

(1)

This section does not apply:

(a)

If the consumer reporting agency has reason to believe that the consumer complaint:

(i)

Is fraudulent; or

(ii)

Has been previously investigated by the consumer reporting agency and found to be without merit;

(b)

Unless the consumer complaint contains the consumer's:

(i)

Full name;

(ii)

Date of birth;

(iii)

Social Security number;

(iv)

Home addresses for the preceding 3 years; and

(v)

Signature;

(c)

If the complaint is filed by or with the assistance of a credit repair agency that is required to be licensed, but is not licensed, by the Commissioner under Commercial Law Article, Title 14, Subtitle 19, Annotated Code of Maryland.

(2)

Except as provided in §D(1) of this regulation, this section applies to a written complaint submitted to a consumer reporting agency in which the consumer alleges that there is false information contained in the consumer report attributable to the:

(a)

Consumer having been the victim of credit fraud; or

(b)

Mixing of the information in the consumer's file with that of another person.

(3)

There is a rebuttable presumption that a consumer complaint to which this section is applicable, and which is submitted to a consumer reporting agency, is:

(a)

Legitimate; and

(b)

Not frivolous.

(4)

The presumption established by this section is rebutted if the consumer reporting agency receives verification from the source of the disputed information in the consumer report that the information pertains to the consumer.

(5)

Complaints subject to the presumption established by this section shall receive expedited handling by the consumer reporting agency.

(6)

The consumer reporting agency shall include in its investigation of a consumer complaint to which this section is applicable, an attempt to verify the disputed information using the consumer's Social Security number.

(7)

If the presumption established by this section is:

(a)

Rebutted, the consumer reporting agency shall mail a written notice to the consumer stating:

(i)

That the information was verified; and

(ii)

The rights of the consumer under Commercial Law Article, Title 14, Subtitle 12, Annotated Code of Maryland;

(b)

Not rebutted, the consumer reporting agency shall delete the information from the consumer's file and mail:

(i)

Written notice of the correction to the consumer and to each person designated by the consumer to receive a copy of the correction in accordance with Commercial Law Article, §14-1208, Annotated Code of Maryland; and

(ii)

A statement of the rights of the consumer under Commercial Law Article, Title 14, Subtitle 12, Annotated Code of Maryland.

Costs. A consumer reporting agency shall pay the actual cost per day for each investigator engaged in an investigation by the Commissioner.

Regulation .06 Permissible Purposes of Consumer Reports.Link Copy Citation

If the Commissioner finds that a person is in the business of making loans that are usurious or otherwise void or unenforceable under Maryland law or can use information in credit reports in connection with the making of loans that are usurious or otherwise void or unenforceable under Maryland law, and issues a written order to a consumer reporting agency not to furnish credit reports to that person, the consumer reporting agency shall comply with the order within 30 days of receipt of the written order.

If the Commissioner finds that a loan is usurious or otherwise void or unenforceable under Maryland law or that a person is in the business of making loans that are usurious or otherwise void under Maryland law, and issues a written order to a consumer reporting agency prohibiting the consumer reporting agency from including the loan in a consumer’s file, the consumer reporting agency shall comply with the written order within 30 days of receipt of the written order.

Regulation .07 Current Listing of Consumer Reporting Agencies.Link Copy Citation

The Commissioner shall make available to the public a current listing of the names, addresses, and telephone numbers of registered consumer reporting agencies through the NMLS Consumer Access portal.

Chapter 08. Debt Management Services

Repealed

Chapter 09. Mortgage Loan Originators

Regulation .01 Scope.Link Copy Citation

This chapter governs the conduct of any individual employed as a mortgage loan originator with respect to residential real estate located in this State.

Regulation .02 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Applicant” means an individual applying for a license.

(2)

“Average prime offer rate” has the meaning stated in 12 CFR Part 1026, as may be amended from time to time.

(3)

“Commissioner” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(4)

“Continuing education” or “course” means an educational program related to mortgage lending or brokering which contributes directly to the enhancement of professional competence of a mortgage loan originator to engage in the mortgage lending business, as defined in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(5)

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

(6)

“Higher-priced mortgage loan” has the meaning stated in 12 CFR Part 1026 as may be amended from time to time.

(7)

“License” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(8)

“Licensed location” means any location listed by the licensee in NMLS.

(9)

“Licensee” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(10)

“Mortgage lending business” has the meaning state in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(11)

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

(12)

“Mortgage loan originator” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(13)

“NMLSR” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(14)

“Residential real estate” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

Regulation .03 Education and Testing Requirements.Link Copy Citation

Prelicensing Education. To qualify for a license, a mortgage loan originator shall have:

(1)

Successfully completed at least 20 hours of prelicensing education as required by Financial Institutions Article, §11-606, Annotated Code of Maryland, which shall include at least the following subjects in the number of hours indicated:

(a)

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

(b)

Ethics, including instruction on fraud, consumer protection, and fair lending issues — 3 hours;

(c)

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

(d)

Maryland law and regulations relating to mortgage lending and origination — 3 hours;

(e)

Maryland finder's fee law as stated in Commercial Law Article, §12-801 et seq., Annotated Code of Maryland — 2 hours; and

(f)

Undefined or elective instruction on mortgage origination — 7 hours; and

(2)

Achieved a passing grade on a written examination as required by Financial Institutions Article, §11-606.1, Annotated Code of Maryland.

Continuing Education. To renew a license, a mortgage loan originator shall have successfully completed in the 12 months immediately preceding the current renewal period at least 8 hours of continuing education in approved courses, as required by Financial Institutions Article, §11-612, Annotated Code of Maryland, which shall include at least the following subjects in the number of hours indicated:

(1)

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

(2)

Ethics, including instruction on fraud, consumer protection, and fair lending issues — 2 hours;

(3)

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

(4)

Maryland law and regulations relating to mortgage lending and origination — 1 hour.

Reporting, Verification, and Record Keeping.

(1)

A mortgage loan originator, when applying for an initial license or for a renewal license, shall provide to the NMLSR and to the Commissioner such information or certification as they may respectively require as proof of satisfactory completion of the education and testing requirements of this regulation.

(2)

The Commissioner may require verification, on a random or other basis, of satisfactory completion of the requirements of this regulation.

(3)

A licensee shall retain evidence acceptable to the Commissioner to verify satisfactory completion of the requirements of this regulation for at least 3 years after issuance of the license to which it applies.

Denial, Nonrenewal, Suspension, or Revocation of License. Subject to the notice and hearing requirements of Financial Institutions Article, §11-616, Annotated Code of Maryland, failure to comply with the requirements of this regulation is grounds for:

(1)

Denial of a license under Financial Institutions Article, §11-607(e), Annotated Code of Maryland; or

(2)

Suspension or revocation of a license or other sanctions pursuant to Financial Institutions Article, §11-615, Annotated Code of Maryland.

Regulation .04 Duty of Care.Link Copy Citation

Good Faith and Fair Dealing. A mortgage loan originator has a duty of good faith and fair dealing in communications and transactions with a borrower, including, but not limited to:

(1)

(2)

Method to Determine Net Tangible Benefit.

(1)

When determining whether a refinance of a mortgage loan will provide a net tangible benefit to the borrower, a mortgage loan originator shall make a reasonable inquiry of a borrower to determine what net tangible benefit, if any, the borrower will receive from a mortgage loan. Net tangible benefits may include, but are not limited to:

(a)

Obtaining a lower interest rate;

(b)

Obtaining a lower monthly payment, including principal, interest, taxes, and insurance;

(c)

Obtaining a shorter amortization schedule;

(d)

Changing from an adjustable rate to a fixed rate;

(e)

Eliminating a negative amortization feature;

(f)

Eliminating a balloon payment feature;

(g)

Receiving cash-out from the new loan in an amount greater than all closing costs incurred in connection with the loan;

(h)

Avoiding foreclosure;

(i)

Eliminating private mortgage insurance; and

(j)

Consolidating other existing loans into a new mortgage loan.

(2)

A mortgage loan originator 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 loan originator has the borrower complete and sign a net tangible benefit worksheet on the form prescribed by the Commissioner for that purpose, or a form that is substantially similar to the form prescribed by the Commissioner.

Regulation .05 Applications.Link Copy Citation

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 which the applicant must take to complete the application.

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.

If an application for an initial license, a renewal license, or a license amendment is incomplete when submitted and remains incomplete, the Commissioner may cease processing and deem the incomplete application withdrawn, provided that the Commissioner has previously notified the applicant of the basis for incompleteness in accordance with §B of this regulation, and gives the applicant not less than 15 days to correct the incompleteness.

Regulation .06 Fees.Link Copy Citation

Application Investigation Fee. The nonrefundable investigation fee required by Financial Institutions Article, §11-604(c)(1), Annotated Code of Maryland, is $1.

Initial License Fee.

(1)

The license fee required by Financial Institutions Article, §11-606(b)(2), Annotated Code of Maryland, is $225 for a 1-year license term.

(2)

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

Renewal Fee.

(1)

The renewal fee required by Financial Institutions Article, §11-609(b)(2), Annotated Code of Maryland, is $225 for a 1-year renewal term.

(2)

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

C-1.

Licensing Fees for Affiliated Insurance Producer-Mortgage Loan Originator Subject to Financial Institutions Article, §11-603.1, Annotated Code of Maryland.

(1)

Application Investigation Fee. The nonrefundable investigation fee required by Financial Institutions Article, §11-604(c)(1), Annotated Code of Maryland, is $1.

(2)

Initial License Fee.

(a)

The license fee required by Financial Institutions Article, §11-604(b)(2), Annotated Code of Maryland, is $700 for a 1-year Affiliated Insurance Producer-Mortgage Loan Originator license term.

(b)

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

(3)

Renewal Fee.

(a)

The renewal fee required by Financial Institutions Article, §11-609(b)(2), Annotated Code of Maryland, is $700 for a 1-year renewal term.

(b)

In addition to the renewal fee set forth in §B(3)(a) of this regulation, an applicant for a renewal shall pay to NMLSR the renewal application processing fee and any other fees that NMLSR imposes in connection with the application.

Investigation Fee. The fee for each of the Commissioner's employees engaged in investigations performed by the Commissioner as authorized by Financial Institutions Article, §11-613(b), Annotated Code of Maryland, is $250 per day.

License Amendment Fee. The license amendment fee required by Financial Institutions Article, §11-603(c)(2), Annotated Code of Maryland, is $20.

Regulation .07 Locations.Link Copy Citation

A mortgage loan originator may not conduct mortgage lending business at any location different from a licensed location that is listed for the mortgage loan originator or the mortgage loan originator's employer on NMLS.

Notwithstanding §A of this regulation, a mortgage loan originator may take a loan application or offer or negotiate terms of a mortgage loan at a location other than the licensed location of the mortgage loan originator or the mortgage loan originator's employer if neither the mortgage loan originator nor the mortgage loan originator's employer:

(1)

Owns or leases the location for the purpose of conducting mortgage lending business;

(2)

Indicates or suggests by use of signage that the mortgage loan originator or the mortgage loan originator's employer utilizes the location for taking mortgage loan applications or offering or negotiating terms of mortgage loans;

(3)

Advertises that the mortgage loan originator or the mortgage loan originator's employer takes mortgage loan applications or offers or negotiates terms of mortgage loans at the location;

(4)

Maintains work space, telephone service, or internet service at the location in the name of the mortgage loan originator or the mortgage loan originator's employer for the purpose of conducting mortgage lending business;

(5)

Receives mail relating to the mortgage lending business at the location; or

(6)

Stores books or records relating to the mortgage lending business at the location.

Regulation .08 Loan Origination Under Expired License.Link Copy Citation

A person may not take or receive a mortgage loan application or offer or negotiate the terms of a mortgage loan without a license.

Notwithstanding §A of this regulation, a mortgage loan originator operating under an expired license resulting from a failure to timely renew may offer or negotiate the terms of a mortgage loan if:

(1)

The application for the mortgage loan was taken or received before the deadline for renewal of the license; and

(2)

The licensee’s employer does not employ any other mortgage loan originator licensed by the Commissioner.

Regulation .09 Advertising and Solicitation.Link Copy Citation

A mortgage loan originator may not publish, or cause to be published, any advertisement, or make or cause to be made any representation, that:

(1)

Contains any false, misleading, or deceptive statements regarding the making, brokering, or servicing of mortgage loans; or

(2)

Misrepresents terms, availability, rates, or charges incident to a mortgage loan.

Licensee Name and Address.

(1)

A mortgage loan originator may not advertise under any name or address other than the name and address which appear on its license.

(2)

Notwithstanding §B(1) of this regulation:

(a)

An advertisement need not disclose any address of the advertiser; and

(b)

A mortgage loan originator may advertise under any name:

(i)

By which the mortgage loan originator is commonly known; and

(ii)

Which is shown in the mortgage loan originator’s NMLSR record.

(3)

In any advertisement, a mortgage loan originator must disclose:

(a)

The name or approved trade name of the mortgage loan originator’s employer; and

(b)

The mortgage loan originator’s NMLSR Unique Identifier.

(4)

Notwithstanding §B(3) of this regulation, a mortgage loan originator who utilizes social media for advertising purposes need not disclose the name of the mortgage loan originator’s employer or the NMLSR Unique Identifier of the mortgage loan originator in each statement published through a social media platform, provided that such information is disclosed prominently on the mortgage loan originator’s home page within that social media platform.

Chapter 10. Credit and Other Regulation

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

Balloon Payment.

(a)

“Balloon payment” means any scheduled payment on a mortgage loan that is more than two times the average of all other payments scheduled to repay the mortgage loan.

(b)

“Balloon payment” does not include a down payment.

(2)

“Commissioner” means the Commissioner of Financial Regulation in the Maryland Department of Labor.

(3)

“Fraud” means any act that:

(a)

Constitutes a criminal violation of any article of the Annotated Code of Maryland and is part of an attempt or scheme to defraud any person; or

(b)

Whether or not a criminal offense, is an intentional misrepresentation of any material fact or is conduct that is intended to prevent the discovery of a material fact, and is part of an attempt or scheme to defraud any person.

(4)

“Initial application” has the meaning stated in COMAR 09.03.06.02B(14).

(5)

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

(6)

“Regulated person” means an individual, corporation, business trust, financial institution, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity that is subject to the regulatory authority of the Commissioner pursuant to Financial Institutions Article, or Commercial Law Article, Annotated Code of Maryland.

(7)

“Residential real estate” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(8)

“Settlement” means the disbursement of the proceeds of a mortgage loan by the person conducting the settlement to the borrower or to third parties as required by the lender's instructions.

Regulation .02 Reporting Fraud, Other Violations of Law, and Convictions.Link Copy Citation

Duty to Report.

(1)

Except as provided in §E of this regulation, a regulated person shall submit a report to the Commissioner within 30 business days after the person discovers that an act, or has reason to believe that an act, of fraud, theft, or forgery has been committed by a regulated person, including the person, or any owner, director, officer, member, partner, employee, or agent of a regulated person.

(2)

Except as provided in §E of this regulation, a regulated person that is, or that has an owner, director, officer, member, partner, employee, or agent that is, convicted of any felony, or of a misdemeanor involving fraud, theft, or forgery, shall submit a report to the Commissioner informing the Commissioner of the conviction within 5 business days from the date on which the regulated person receives knowledge of the conviction.

Contents of Report.

(1)

A regulated person submitting a report pursuant to this regulation shall utilize the reporting form prescribed by the Commissioner.

(2)

If it is determined after the submission of a report that information contained in the report is false or otherwise inaccurate, the regulated person that submitted the report shall be considered to be in compliance with the reporting requirements of this regulation if the regulated person reasonably believed that the information was true and accurate at the time the report was submitted and the regulated person took reasonable steps to verify its truth and accuracy.

Nondisclosure of Report. A regulated person submitting a report to the Commissioner pursuant to this regulation may not disclose to any person that is a subject of the report the existence of the report or that the report has been submitted to the Commissioner.

Reports to Law Enforcement Authorities. Except as provided in §E of this regulation, a regulated person that discovers that an act, or suspected act, of fraud, theft, or forgery required to be reported pursuant to this regulation has been committed, the regulated person shall report the details of the incident to the appropriate law enforcement authorities.

Exceptions. The provisions of this regulation do not apply to a bank, savings bank, trust company, or credit union having a branch that accepts deposits in this State.

Regulation .03 Disclosures for Certain Mortgage Loans.Link Copy Citation

Mortgage Loan Provisions Requiring Disclosure. A regulated person that offers to make or procure a mortgage loan secured by residential real estate shall provide to the borrower the disclosures set forth in §B of this regulation if the terms of the mortgage loan:

(1)

Include a balloon payment;

(2)

Do not provide for the establishment of an escrow account for the payment of taxes and insurance; or

(3)

Include mandatory binding arbitration.

Content and Form of Disclosures.

(1)

If the terms of a mortgage loan of the type described in §A of this regulation contain a balloon payment feature, a disclosure containing the following information, as applicable, and in substantially similar form, shall be provided to the borrower:

(2)

If the terms of a mortgage loan of the type described in §A of this regulation, which is secured by a first-position lien on residential real estate, do not provide for the establishment of an escrow account from which property tax and homeowner's insurance payments are made, a disclosure containing the following information, as applicable, and in substantially similar form shall be provided to the borrower:

(3)

If the terms of a mortgage loan of the type described in §A of this regulation contain a provision requiring the borrower to engage in binding arbitration to resolve disputes, a disclosure containing the following information, as applicable, and in substantially similar form shall be provided to the borrower:

(4)

The disclosures required by this regulation shall be written clearly and conspicuously and shall appear in at least a 10-point type font. The applicable disclosures shall appear together on a sheet or sheets of paper that contain no information other than the disclosures. All of the disclosures may be printed on a sheet or sheets of paper that include check boxes that may be marked to indicate which disclosures apply.

BALLOON PAYMENT: This mortgage loan contains a balloon payment provision. A balloon payment is a scheduled lump sum usually due at the end of the mortgage loan term that is significantly larger than the other regularly scheduled periodic payments. If you cannot pay the balloon payment when due, you may have to obtain a new loan to make the balloon payment or you may lose your property through foreclosure. Before deciding to take this loan, consider your ability to pay the balloon payment when it comes due. The balloon payment on the mortgage loan you have applied for is due (insert number of months) from the date your mortgage loan begins.

Timing.

(1)

A regulated person shall deliver to a borrower the disclosures required by this regulation within 10 business days after the application for the mortgage loan is completed, and not less than 72 hours before the time of settlement agreed to by the parties.

(2)

An application for a mortgage loan is completed at the time of initial application.

(3)

If any change to the terms of a mortgage loan requires additional or modified disclosures pursuant to this regulation, the regulated person shall deliver to the borrower a final set of disclosures at least 72 hours before the time of settlement agreed to by the parties.

Regulation .04 Consumer Loans.Link Copy Citation

The term loan account in Financial Institutions Article, §11-219, Annotated Code of Maryland:

Means any loan or advance of money or credit subject to Commercial Law Article, Title 12, Subtitle 3, Annotated Code of Maryland, the Maryland Consumer Loan Law — Credit Provisions, regardless of whether the loan or advance of money or credit is or purports to be made under Commercial Law Article, Title 12, Subtitle 3, Annotated Code of Maryland; and

Does not include an installment loan as defined in Financial Institutions Article, §11-302, Annotated Code of Maryland.

Regulation .05 Mobile Home Retail Sales Financing Information Disclosure Statement.Link Copy Citation

The written statement required in Commercial Law Article, §14–4202(b)(3), Annotated Code of Maryland, shall be in a form substantially similar to the following:

Form on following page.

Chapter 11. Recordation of Security Instruments for Residential Property

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Mortgage lender licensee” means a person licensed under Financial Institutions Article, §§11-501—11-524, Annotated Code of Maryland.

(2)

“Mortgage loan” means any loan or extension of credit secured by residential property.

(3)

“Mortgage loan originator licensee” means an individual licensed under Financial Institutions Article, §§11-601—11-618, Annotated Code of Maryland.

(4)

“Nationwide Mortgage Licensing System and Registry (NMLSR)” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.

(5)

“Residential property” has the meaning stated in Real Property Article, §3-104.1, Annotated Code of Maryland.

(6)

“Security instrument” means a mortgage, deed of trust, or any other instrument securing a mortgage loan.

(7)

Single Family Dwelling Unit.

(a)

“Single family dwelling unit” means a structure principally designed for the residential habitation of one family.

(b)

“Single family dwelling unit” includes an individual residential condominium unit within a larger structure or complex, regardless of the total number of individual units in that structure or complex.

(c)

“Single family dwelling unit” does not include a structure that:

(i)

Is not intended, and has never been used, for human habitation; or

(ii)

Is intended for human habitation, has never been occupied, but for which a use and occupancy permit, if required, has never been issued.

(8)

“Unique identifier” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

Regulation .02 Information in Recorded Security Instrument.Link Copy Citation

Licensee Information or Affidavit in Lieu of Licensee Information.

(1)

If a mortgage lender licensee is named in the promissory note or agreement evidencing a mortgage loan on a residential property that is secured by a security instrument to be recorded under Real Property Article, §3-104.1, Annotated Code of Maryland, the following information shall be filed with the security instrument:

(a)

The name of the mortgage lender licensee; and

(b)

The Maryland mortgage lender license number of the mortgage lender licensee or the NMLSR unique identifier of the mortgage lender licensee.

(2)

If a mortgage loan originator licensee originated the mortgage loan on residential property that is secured by a security instrument to be recorded under Real Property Article, §3-104.1, Annotated Code of Maryland, the following information shall be filed with the security instrument:

(a)

The name of the mortgage loan originator licensee; and

(b)

The Maryland mortgage loan originator license number of the mortgage loan originator licensee or the NMLSR unique identifier of the mortgage loan originator licensee.

(3)

A person exempt or excepted from the requirement to be licensed as a Maryland mortgage lender shall file an affidavit with the security instrument to be recorded in lieu of mortgage lender licensee information.

(4)

A person exempt or excepted from the requirement to be licensed as a Maryland mortgage loan originator, or that person's employer, shall file an affidavit with the security instrument to be recorded in lieu of mortgage loan originator licensee information.

Information/Affidavit Form.

(1)

Persons filing licensee information or an affidavit in lieu of licensee information under this regulation shall use a form that is substantially the same as the following:

(2)

The affidavit recorded with a security instrument may be a duplicate of the original affidavit.

(3)

The person who employs the individual who originated a mortgage loan to be secured by the security instrument to be recorded may provide the affidavit recorded with the security instrument under this regulation on behalf of that employee.

Licensee Information or Affidavit Filed in Accordance with Real Property Article, §3-104.1, Annotated Code of Maryland

Location and Subsequent Filings.

(1)

Location. Except as provided in §C(2) of this regulation, the licensee information or affidavit shall be contained in a separate sheet to be attached to and recorded after the last page of the security instrument and immediately preceding the intake sheet.

(2)

Subsequent Filing.

(a)

If the licensee information or affidavit required by this regulation is not attached to the security instrument at the time the security instrument is recorded, the licensee information or affidavit may be recorded separately as a supplemental instrument, after the date the security instrument is recorded, by the deed of trust note holder, mortgagee, mortgage assignee, deed of trust beneficiary, or agent of any of the foregoing.

(b)

An amendment adding or correcting any information contained in the document filing required by this regulation may be recorded separately as a supplemental instrument, after the date the security instrument is recorded, by the deed of trust note holder, mortgagee, mortgage assignee, deed of trust beneficiary, or agent of any of the foregoing.

(c)

A subsequently filed document recorded under this subsection shall contain:

(i)

The date of the security instrument securing the mortgage loan;

(ii)

The address of the property subject to the security instrument securing the mortgage loan;

(iii)

The name of the parties to the security instrument securing the mortgage loan;

(iv)

The liber/book and folio/page number for the security instrument securing the mortgage loan; and

(v)

The original principal amount of the mortgage loan secured by the security instrument.

(d)

A subsequently filed document recorded under this subsection shall be acknowledged before a notary public.

(e)

The subsequent filing shall be indexed in the Grantor Index in the land records as to the grantor or mortgagor.

Chapter 12. Foreclosure Procedures for Residential Property

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Addressed envelope” means:

(a)

An envelope that is preprinted with the address where it should be delivered;

(b)

An envelope that contains a label with a preprinted address where it should be delivered; or

(c)

An envelope with a window that will accommodate a visible preprinted cover page that contains an address where the envelope should be delivered with instructions on how to use the cover page to display the address.

(2)

“Administrative law judge” has the meaning stated in COMAR 28.02.01.02(B)(1).

(3)

“Borrower” means:

(a)

A mortgagor; or

(b)

A grantor of a deed of trust.

(4)

“Commissioner” means the Commissioner of Financial Regulation in the Maryland Department of Labor.

(5)

“Date of default” means the first calendar day after the borrower has failed to meet the borrower's obligations under the terms of the debt instrument where the debt instrument characterizes that failure as a default.

(6)

“Debt instrument” means an agreement, promissory note, or other evidence of a mortgage loan.

(7)

“Federally related mortgage loan” has the meaning stated at 12 C.F.R. 1024.2.

(8)

“Final loss mitigation affidavit” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(9)

“Foreclosure mediation” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(10)

“Housing counseling services” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(11)

Inspection.

(a)

“Inspection” means a limited nonintrusive examination to determine occupancy status of a property.

(b)

“Inspection” may include, but is not limited to:

(i)

Physical survey of the property; or

(ii)

Review of loan documents, recorded instruments, court orders, public records, photos taken upon physical survey of the property, or other documents identifying loan type or ownership.

(12)

“Loss mitigation analysis” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(13)

“Loss mitigation program” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(14)

“Mediator” means the administrative law judge within the Office of Administrative Hearings who will serve as the neutral third party in a foreclosure mediation.

(15)

“Mortgage lender licensee” means a person licensed under Financial Institutions Article, §§11-501—11-524, Annotated Code of Maryland.

(16)

“Mortgage loan” means any loan or extension of credit secured by residential property.

(17)

“Mortgage loan originator licensee” means an individual licensed under Financial Institutions Article, §§11-601—11-618, Annotated Code of Maryland.

(18)

“Nationwide Mortgage Licensing System and Registry (NMLS)” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(19)

Owner-Occupied Residential Property.

(a)

“Owner-occupied residential property” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(b)

“Owner-occupied residential property” does not include property secured by mortgage loans or other debt instruments if the borrower is:

(i)

One or more persons who have made a written statement in connection with the original loan application that the loan is for business or investment purposes;

(ii)

A corporation;

(iii)

A limited liability company;

(iv)

A joint venture; or

(v)

A partnership or a limited partnership.

(20)

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

(21)

“Postfile mediation” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(22)

“Prefile mediation” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(23)

“Preliminary loss mitigation affidavit” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(24)

“Record owner” has the meaning stated in Maryland Rule 14-202(n).

(25)

Representative of the Secured Party.

(a)

“Representative of the secured party” means a person who has representative authority to perform the duties and responsibilities of the secured party.

(b)

“Representative of the secured party” does not include an attorney acting solely as legal counsel on behalf of the secured party or on behalf of the representative of the secured party, unless specifically authorized to perform the duties and responsibilities of the secured party.

(c)

“Representative of the secured party” includes an attorney acting as trustee under a deed of trust.

(26)

“Residential property” has the meaning stated in Real Property Article, §7-105.1(a), Annotated Code of Maryland.

(27)

“Secured party” has the meaning stated in Maryland Rule 14-202(q).

(28)

Single Family Dwelling Unit.

(a)

“Single family dwelling unit” means a structure principally designed for the residential habitation of one family.

(b)

(c)

“Single family dwelling unit” does not include a structure that:

(i)

Is not intended, and has never been used, for human habitation; or

(ii)

Is intended for human habitation and has never been occupied and for which a use and occupancy permit, if required, has never been issued.

(29)

“Unique identifier” has the meaning stated in Financial Institutions Article, §11-601, Annotated Code of Maryland.

(30)

“Vacant and abandoned” means a finding by the appropriate circuit court that a residential property is vacant and abandoned pursuant to Real Property Article, §7-105.18(c), Annotated Code of Maryland.

Regulation .02 Notice of Intent to Foreclose.Link Copy Citation

Subject to §§F, G, and H of this regulation, a person required to send a notice of intent to foreclose under Real Property Article, §7-105.1, Annotated Code of Maryland, shall send a notice of intent to foreclose, which shall fully conform with §B, C, or D of this regulation.

Owner-Occupied Residential Property.

(1)

Subject to §C of this regulation, a notice of intent to foreclose on owner-occupied residential property shall be in a form substantially similar to that in:

(a)

Appendix A of this regulation if the loan is not a federally related mortgage loan;

(b)

Appendix A-f of this regulation if the loan is a federally related mortgage loan; or

(c)

With respect to a notice of intent to foreclose from a secured party offering prefile mediation for a loan that is not a federally related mortgage loan, Appendix A-1 of this regulation, as follows:

(i)

Appendix A-1 shall be accompanied in the same envelope or package by the packets of documents and forms substantially similar to Schedule 1 (Prefile Mediation Packet) and Schedule 2 (Loss Mitigation Packet) of Appendix A-1 of this regulation.

(ii)

Each of the documents and forms constituting Appendix A-1, Schedule 1, and Schedule 2 as required under subparagraph (i) of this paragraph shall be in the sequence of documents and forms presented in Appendix A-1, Schedule 1, and Schedule 2, respectively of this regulation. Appendix A-1 shall be the first in the sequence. Schedule 1 shall be the second in the sequence and shall be directly behind Appendix A-1. Schedule 2 shall be the third in the sequence and shall be directly behind Schedule 1. Appendix A-1, Schedule 1, and Schedule 2 shall be separated from each other by any reasonable method that ensures that the borrower can identify the forms and documents constituting each of Appendix A-1, Schedule 1, and Schedule 2.

(iii)

The Loss Mitigation Application and Instruction required in Schedule 2 of Appendix A-1 may be in the form authorized under Regulation .03 of this chapter.

(d)

With respect to a notice of intent to foreclose from a secured party offering prefile mediation for a loan that is a federally related mortgage loan, Appendix A-1(f) of this regulation, as follows:

(i)

Appendix A-1(f) shall be accompanied in the same envelope or package by the packets of documents and forms substantially similar to Schedule 1 (Prefile Mediation Packet) and Schedule 2 (Loss Mitigation Packet) of Appendix A-1(f) of this regulation.

(ii)

Each of the documents and forms constituting Appendix A-1(f), Schedule 1, and Schedule 2 as required under subparagraph (i) of this paragraph shall be in the sequence of documents and forms presented in Appendix A-1(f), Schedule 1, and Schedule 2, respectively. Appendix A-1(f) shall be the first in the sequence. Schedule 1 shall be the second in the sequence and shall be directly behind Appendix A-1(f), Schedule 2 shall be the third in the sequence and shall be directly behind Schedule 1. Appendix A-1(f), Schedule 1, and Schedule 2 shall be separated from each other by any reasonable method that ensures that the borrower can identify the forms and documents constituting each of Appendix A-1(f), Schedule 1, and Schedule 2.

(iii)

The Loss Mitigation Application and Instruction required in Schedule 2(f) of Appendix A-1(f) may be in the form authorized under Regulation .03 of this chapter.

(2)

For purposes of the notice set forth in §B(1) of this regulation, the names and license numbers of mortgage lender licensees and mortgage loan originator licensees are required to be included in the notice only if this information is included on or recorded with the security instrument securing the mortgage loan related to the notice, or is otherwise known to the person sending the notice. The person sending the notice set forth in §B(1) of this regulation may satisfy the requirement to include the license number of the mortgage lender licensee and mortgage loan originator licensee by including the NMLS unique identifier. If the mortgage lender was exempt from licensure under Financial Institutions Article, §11-501 et seq., Annotated Code of Maryland, at the time the mortgage loan was made, then a mortgage lender license number is not required under this section. If the mortgage loan originator was exempt from licensure under Financial Institutions Article, §11-601 et seq., Annotated Code of Maryland, at the time the mortgage loan was originated, then a mortgage lender license number is not required under this section.

(3)

The notice of intent to foreclose shall be accompanied in the same envelope or package by:

(a)

A loss mitigation application for loss mitigation programs that are applicable to the loan secured by the mortgage or deed of trust that is the subject of the notice. If the secured party does not have its own loss mitigation application, the secured party shall use the form of loss mitigation application set forth in Regulation .03 of this chapter;

(b)

Instructions for completing the loss mitigation application with a telephone number to call to confirm receipt by the secured party, or representative of the secured party, of the completed application;

(c)

A description of the eligibility requirements for the loss mitigation programs offered by the secured party that may be applicable to the loan secured by the mortgage or deed of trust that is the subject of the notice. If the mortgage loan is owned, securitized, insured, or guaranteed by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Federal Housing Administration, providing documentation to the borrower as required by those programs satisfies the requirement to provide a description of the eligibility requirement for the applicable loss mitigation program; and

(d)

An addressed envelope in conformity with Regulation .10 of this chapter addressed to the person (an individual, a group of individuals, or a department such a “loss mitigation department”) responsible for conducting the loss mitigation analysis on behalf of the secured party for the mortgage loan.

If the basis for the authority to foreclose on the owner-occupied residential property is a homeowners’ association lien, condominium association lien, mechanic’s lien, a similar statutory or contractual lien, or a basis other than a mortgage loan default, a notice of intent to foreclose shall be in a form substantially similar to that in Appendix B of this regulation.

Not an Owner-Occupied Residential Property.

(1)

A notice of intent to foreclose on residential property that is not an owner-occupied residential property shall be in a form substantially similar to that in Appendix C of this chapter if the loan is not a federally related mortgage loan.

(2)

A notice of intent to foreclose on residential property that is not an owner-occupied residential property shall be in a form substantially similar to that in Appendix C(f) of this chapter if the loan is a federally related mortgage loan.

(3)

A notice of intent to foreclose under §D(1) or (2) of this regulation shall be sent to the borrower and record owner only if the secured party, or representative of the secured party, has a reasonable belief that the residential property is not owner-occupied residential property.

(4)

If the borrower or record owner contests the determination that the residential property is not owner-occupied residential property, and it is determined that the residential property is owner-occupied residential property, the secured party shall send the appropriate notice of intent to foreclose in compliance with Real Property Article, §7-105.1, Annotated Code of Maryland, and this regulation.

Any notice of intent to foreclose under this regulation may include a separate addendum, sequenced at the end of the notice of intent to foreclose, with any additional information, notice, or advice required as a prerequisite to commencing foreclosure by the terms of the deed of trust or mortgage that is the subject of the notice, government regulatory guidelines applicable to such deed of trust or mortgage or by the servicer, investor, or insurer of such deed of trust or mortgage, provided the additional information, notice, or advice does not contradict any information required to be contained in the notice of intent to foreclose.

Filing Electronically. A person required to send the Commissioner a copy of a notice of intent to foreclose under Real Property Article, §7-105.1, Annotated Code of Maryland, shall meet that requirement by making an electronic submission within 5 business days of mailing a notice of intent to foreclose through the Maryland Foreclosure Registration System (the “System”). A link to the System is available on the Commissioner’s website at http://www.labor.maryland.gov/finance.

The secured party, or representative of the secured party, shall include all information required in a form provided for under §B, C, or D of this regulation in the spaces indicated by brackets and blank lines.

A notice of intent to foreclose that is sent in compliance with Real Property Article, §7-105.1, Annotated Code of Maryland, and is otherwise valid under the law, shall expire and will not be effective:

(1)

If, after 1 year from the date on which it is sent to the borrower, an action to foreclose the mortgage or deed of trust pursuant to such notice of intent to foreclose has not been filed;

(2)

If an action to foreclose the mortgage or deed of trust filed pursuant to such notice of intent to foreclose is dismissed by the appropriate adjudicative body;

(3)

If the borrower cures the default described in the notice of intent to foreclose and becomes current on payment, whether pursuant to the terms of the mortgage or deed of trust or a loss mitigation agreement entered into by the parties;

(4)

As provided for in Real Property Article, §7-105.1(d)(18), Annotated Code of Maryland; or

(5)

As provided for in §D(4) of this regulation.

If a notice of intent to foreclosure expires and becomes ineffective as provided for in §H(1) of this regulation, the secured party shall send a new notice of intent to foreclose in compliance with Real Property Article, §7-105.1, Annotated Code of Maryland, and this regulation prior to filing an action to foreclose a mortgage or deed of trust on residential property.

The Commissioner shall retain an electronic copy of all submissions made on the System for at least 6 months.

Regulation .03 Loss Mitigation Application and Instructions.Link Copy Citation

A secured party, or representative of the secured party, that does not have its own loss mitigation application shall use a loss mitigation application in a form substantially similar to that in Appendix G of this chapter.

APPENDIX G IS AT THE END OF CHAPTER.

Regulation .04 Prefile Mediation Process.Link Copy Citation

A borrower who elects to accept a secured party's offer to participate in prefile mediation in accordance with Real Property Article §7-105.1, Annotated Code of Maryland, shall send to the secured party or the identified representative of the secured party the completed and signed application for prefile mediation included in Schedule 1 to Appendix A-1 within 25 days after the date on which the notice of intent to foreclose was mailed by the secured party. The instructions for the prefile mediation application shall include a telephone number to confirm receipt by the secured party or the secured party's representative of the application.

Within 5 business days after the date on which the secured party or the identified representative of the secured party receives an application for prefile mediation from a borrower, the secured party or the representative of the secured party shall notify the Office of Administrative Hearings that the borrower has submitted an application for prefile mediation. The notification shall be in a form substantially similar to that in Appendix I of this regulation.

The obligation of the Office of Administrative Hearings to schedule a mediation session arises upon the receipt of notice from the secured party required under §B of this regulation.

The Office of Administrative Hearings shall conduct the mediation session within 60 days after the receipt of the notice required under §B of this regulation from the secured party unless a postponement, requested in accordance with Appendix OAH-2 of this chapter, is granted.

The total fee for prefile mediation is $1. In accordance with instructions from the Department of Housing and Community Development, the secured party shall pay the full amount of the prefile mediation fee to the Housing Counseling and Foreclosure Mediation Fund established under Housing and Community Development Article, §4-507, Annotated Code of Maryland. The secured party may elect to pay the prefile mediation fee on behalf of the homeowner or collect all or any portion of the fee as part of the resolution of the mortgage loan through prefile mediation or foreclosure, as applicable.

Good Faith and Fair Dealing. The secured party, or any representative of the secured party, has a duty of good faith and fair dealing in its participation at a prefile foreclosure mediation, including, but not limited to:

(1)

Providing the borrower with an accurate accounting of the debt owed;

(2)

Making the borrower aware of all loss mitigation options and services offered by the secured party; and

(3)

Pursuing loss mitigation when reasonably possible.

Regulation .05 Preliminary Loss Mitigation Affidavit.Link Copy Citation

Subject to §B of this regulation, a preliminary loss mitigation affidavit required by Real Property Article, §7-105.1(h)(3), Annotated Code of Maryland, and this chapter shall be in a form substantially similar to that in Appendix D of this regulation.

The secured party, or representative of the secured party, shall include all information required in the form provided for under §A of this regulation in the spaces indicated by blank lines.

Regulation .06 Final Loss Mitigation Affidavit.Link Copy Citation

Subject to §B of this regulation, a final loss mitigation affidavit required by Real Property Article, §7-105.1(h)(4), Annotated Code of Maryland, and this chapter shall be in a form substantially similar to that in Appendix E of this regulation.

The secured party, or representative of the secured party, shall include all information required in the form provided for under §A of this regulation in the spaces indicated by blank lines.

Regulation .07 Notice of Foreclosure Action.Link Copy Citation

Notice of Foreclosure Action to Accompany a Preliminary Loss Mitigation Affidavit.

(1)

A form substantially similar to that in Appendix H-1 of this regulation shall be used to comply with the notice of filing requirement when accompanying a preliminary loss mitigation affidavit, as well as an order to docket or complaint to foreclose, as required by Real Property Article, §7-105.1, Annotated Code of Maryland.

(2)

The form used under this regulation to comply with the notice of filing requirement to accompany a preliminary loss mitigation affidavit shall be the first in the sequence of papers and documents in the packet sent to the borrower.

(3)

The preliminary loss mitigation affidavit shall be the second in the sequence of papers and documents in the packet sent to the borrower and shall be directly behind the form used under this section.

(4)

The remainder of the papers and documents in the packet sent to the borrower may be in any other sequence.

(5)

The sequence requirements of §A(2) and (3) of this regulation apply only to the papers and documents sent to the borrower.

Notice of Foreclosure Action to Accompany a Final Loss Mitigation Affidavit.

(1)

A form substantially similar to that in Appendix H-2 of this regulation shall be used to comply with the notice of filing requirement when accompanying a final loss mitigation affidavit and the form used under this chapter to request postfile mediation, as well as an order to docket or complaint to foreclose, as required by Real Property Article, §7-105.1, Annotated Code of Maryland.

(2)

The form used under this section to comply with the notice of filing requirement to accompany a final loss mitigation affidavit shall be the first in the sequence of papers and documents in the packet sent to the borrower, and shall be on yellow paper.

(3)

The form used under this chapter to request postfile mediation shall be the second in the sequence of papers and documents in the packet sent to the borrower and shall be directly behind the form used under this section.

(4)

The final loss mitigation affidavit shall be the third in the sequence of papers and documents in the packet sent to the borrower and shall be directly behind the form used under this chapter to request postfile mediation.

(5)

The remainder of the papers and documents in the packet sent to the borrower may be in any other sequence.

(6)

The sequence requirements of §B(2), (3), and (4) of this regulation apply only to the papers and documents sent to the borrower.

Notice of Foreclosure Action with Respect to Borrowers Who Have Participated in Prefile Mediation.

(1)

A form substantially similar to that in Appendix H-3 of this regulation shall be used to comply with the notice of filing requirement when accompanying an order to docket or complaint to foreclose for owner-occupied residential property with respect to which the borrower has participated in prefile mediation that has not resulted in a prefile mediation agreement, as required by Real Property Article, §7-105.1, Annotated Code of Maryland.

(2)

A form substantially similar to that in Appendix H-4 of this regulation shall be used to comply with the notice of filing requirement when accompanying an order to docket or complaint to foreclose for owner-occupied residential property with respect to which the borrower has participated in prefile mediation that has resulted in a prefile mediation agreement, as required by Real Property Article, §7-105.1, Annotated Code of Maryland.

Notice of Foreclosure Action for Non Owner-Occupied Properties. A form substantially similar to that in Appendix H-5 of this regulation shall be used to comply with the notice of foreclosure action requirement when accompanying an order to docket or complaint to foreclose with respect to a property that is not an owner-occupied residential property, as required by Real Property Article, §7-105.1, Annotated Code of Maryland.

Notice of Foreclosure Action Based on a Certificate of Vacancy or a Certificate of Property Unfit for Human Habitation.

(1)

A form substantially similar to that in Appendix H-6 of this regulation shall be used to comply with the notice of filing requirement when accompanying an order to docket or complaint to foreclose based on a certificate of vacancy or a certificate of property unfit for human habitation pursuant to Real Property Article, §7-105.13, Annotated Code of Maryland.

(2)

The form used under this section to comply with the notice of filing requirement based on a certificate of vacancy or a certificate of property unfit for human habitation shall be the first in the sequence of papers and documents in the packet sent to the borrower, and shall be on yellow paper.

(3)

The form used under this chapter to describe the procedure to challenge a certificate of vacancy or certificate of property unfit for human habitation shall be the second in the sequence of papers and documents in the packet sent to the borrower and shall be directly behind the form used under this section.

(4)

The form used under this chapter to make a challenge to a certificate of vacancy or certificate of property unfit for human habitation shall be the third in the sequence of papers and documents in the packet sent to the borrower and shall be directly behind the form used to describe the procedure to challenge a certificate of vacancy or certificate of property unfit for human habitation.

(5)

The remainder of the papers and documents in the packet sent to the borrower may be in any other sequence.

(6)

The sequence requirements of §E(2), (3), and (4) of this regulation apply only to the papers and documents sent to the borrower.

Notice of Foreclosure Action with Respect to Properties Found to Be Vacant and Abandoned. A form substantially similar to that in Appendix H-7 of this regulation shall be used to comply with the notice of filing requirement when accompanying an order to docket or complaint to foreclose with respect to a property that is vacant and abandoned.

Regulation .08 Postfile Foreclosure Mediation.Link Copy Citation

Subject to §B of this regulation, a request for postfile mediation required by Real Property Article, §7-105.1(h)(4), Annotated Code of Maryland, and this chapter shall be in a form substantially similar to that in Appendix F of this regulation.

The secured party, or representative of the secured party, shall include all information required in the form provided for under §A of this regulation in the spaces indicated by blank lines.

Good Faith and Fair Dealing. The secured party, or any representative of the secured party, has a duty of good faith and fair dealing in its participation at a postfile foreclosure mediation, including, but not limited to:

(1)

Providing the borrower with an accurate accounting of the debt owed;

(2)

Making the borrower aware of all loss mitigation options and services offered by the secured party; and

(3)

Pursuing loss mitigation when reasonably possible.

Regulation .09 Office of Administrative Hearings.Link Copy Citation

Borrower Information Worksheet and Instructions.

(1)

With respect to a scheduled prefile mediation session, the Office of Administrative Hearings shall provide the Borrower(s) Information Worksheet and the instructions regarding the documents and information that must be provided by each party to the other and to the Office of Administrative Hearings in a form substantially similar to that in Appendix OAH-1 of this regulation.

(2)

With respect to a scheduled postfile mediation session, the Office of Administrative Hearings shall provide the Borrower(s) Information Worksheet and the instructions regarding the documents and information that must be provided by each party to the other and to the Office of Administrative Hearings in a form substantially similar to that in Appendix OAH-2 of this regulation.

Housing Counseling.

(1)

The certification of housing counseling shall be in the form, and shall be delivered to the Office of Administrative Hearings at the time, required by COMAR 05.19.02.02.

(2)

At the option of the secured party, a borrower who fails to deliver the housing counseling certification may sign a borrower certification of housing counseling in a form substantially similar to that in Appendix OAH-5 of this regulation.

(3)

At the option of the secured party, the secured party may waive the housing counseling certification at the prefile mediation session by signing the waiver of housing counseling in a form substantially similar to that in Appendix OAH-6 of this regulation.

(4)

Housing counseling services provided in accordance with Real Property Article, §7-105.1(d)(10), Annotated Code of Maryland, shall comply with the National Industry Standards for Foreclosure Counseling created by the Advisory Council for the National Industry Standards for Homeownership Education and Counseling.

Mediation Checklist.

(1)

The mediation checklist required by Real Property Article, §7-105.1(d)(10), Annotated Code of Maryland, to be used in a prefile mediation shall be in a form substantially similar to that in Appendix OAH-3 of this regulation and may, as applicable, include Appendix OAH-5 or Appendix OAH-6 of this regulation.

(2)

The mediation checklist required by Real Property Article, §7-105.1(l), Annotated Code of Maryland, to be used in a postfile mediation shall be in a form substantially similar to that in Appendix OAH-4 of this regulation.

Designee Language. Each mediation agreement resulting from prefile mediation shall include the following statements in 14 point, bold type:

Appearance.

(1)

At a scheduled foreclosure mediation, the secured party, or a representative of the secured party, shall be present in person or by telephonic means for the entirety of the foreclosure mediation in accordance with COMAR 28.02.01.20B.

(2)

If the secured party, or a representative of the secured party, fails to appear for the entirety of the foreclosure mediation, then the secured party shall be deemed to have failed to appear pursuant to COMAR 28.02.01.23.

(3)

In the case of postfile mediation, if the mediator determines that a party fails to appear at a scheduled foreclosure mediation, then the mediator shall file a notice with the appropriate circuit court stating such a finding.

(4)

If the secured party, itself or through a representative of the secured party, is found by the mediator to have failed to appear at a scheduled foreclosure mediation, then the secured party may not schedule a foreclosure sale until:

(a)

The secured party, or a representative of the secured party, appears and participates in a foreclosure mediation;

(b)

The borrower withdraws the borrowers’ request to participate in the foreclosure mediation; or

(c)

The foreclosure action has been dismissed and a new foreclosure action is filed in full compliance with State law and this chapter.

Mediation Documents and Information.

(1)

The Commissioner may allow the submission of information and documents required for the foreclosure mediation under this regulation by an electronic method.

(2)

Documents and information provided by one party to another and to the Office of Administrative Hearing as provided for in this regulation, shall be furnished timely and in an accessible and legible format.

Postfile Mediation Agreement Terms. If the postfile mediation results in an agreement, including a conditional agreement, the Office of Administrative Hearings shall draft the postfile mediation agreement term sheet during the mediation session, and, at the conclusion of a postfile mediation session, the mediator and each party shall sign the term sheet.

Mediation Outcome.

(1)

Pursuant to the time frame provided for in Real Property Article, §7-105.1(l)(4), Annotated Code of Maryland, the Office of Administrative Hearings shall file a report with the court that states the outcome of the request for foreclosure mediation that will include:

(a)

A statement as to whether the postfile mediation was held and, if not, the reasons why it was not held;

(b)

If applicable, a copy of the mediation checklist as provided for in this regulation; and

(c)

If applicable, the documented postfile mediation agreement term sheet provided for in §G of this regulation.

(2)

The Office of Administrative Hearings shall furnish a copy of the report provided for in Real Property Article, §7-105.1(l)(4), Annotated Code of Maryland, as described in this section, to each party that appears at the mediation.

(3)

The contents of the report filed by the Office of Administrative Hearings pursuant to Real Property Article, §7-105.1(l)(4), Annotated Code of Maryland, shall be privileged.

Regulation .10 Addressed Envelope.Link Copy Citation

The following addressed envelopes are required by this chapter and shall be in the form and include the information set forth in this regulation.

Required Addressed Envelopes.

(1)

An addressed envelope accompanying the Notice of Intent to Foreclose shall be directed to the person responsible for conducting loss mitigation analysis on behalf of the secured party (the person may be an individual, a group of individuals, or a department such as a “loss mitigation department”).

(2)

An addressed envelope accompanying the Preliminary Loss Mitigation Affidavit (if applicable) shall be directed to the foreclosure attorney handling the foreclosure on behalf of the secured party.

(3)

The two addressed envelopes accompanying the Final Loss Mitigation Affidavit shall include:

(a)

In the case of the addressed envelope to be mailed to the clerk of the court with a request for postfile mediation:

(i)

The address of the Clerk of the Court; and

(ii)

The words “Request for Foreclosure Mediation” on the face of the addressed envelope in at least 14-point bold type; and

(b)

For the addressed envelope to be mailed to the foreclosure attorney in connection with a request for postfile mediation, the address of the foreclosure attorney handling the foreclosure on behalf of the secured party.

A copy of any addressed envelope described in this regulation need not be filed with the Clerk of the Court.

A secured party or representative of a secured party may include with Appendix A-1 addressed envelopes for any necessary notices or mailings by the borrower.

Regulation .11 Time.Link Copy Citation

In computing any period of time prescribed by this chapter, Maryland Rule 1-203 shall apply.

Regulation .12 Filing of Duplicate Forms.Link Copy Citation

Any affidavit, application, or other form submitted to a circuit court as required by this chapter may be a duplicate of the original affidavit, application, or other form.

Regulation .13 Challenges to Certificates of Vacancy or Certificates of Unfitness for Human Habitation.Link Copy Citation

A form substantially similar to that in Appendix J of this regulation shall be used to comply with the requirement to provide a description of the procedure to challenge a certificate of vacancy or certificate of property unfit for human habitation when accompanying an order to docket or complaint to foreclose based on a certificate of vacancy or a certificate of property unfit for human habitation pursuant to Real Property Article, §7-105.13, Annotated Code of Maryland.

A form substantially similar to that in Appendix K of this regulation shall be used to comply with the requirement to provide the form to be used to make a challenge to a certificate of vacancy or certificate of property unfit for human habitation when accompanying an order to docket or complaint to foreclose based on a certificate of vacancy or a certificate of property unfit for human habitation pursuant to Real Property Article, §7-105.13, Annotated Code of Maryland.

Regulation .14 Enforcement.Link Copy Citation

The Commissioner may enforce the provisions of this chapter by exercising any of the powers provided under Financial Institutions Article, §§2-114—2-116, Annotated Code of Maryland.

Chapter 13. State Collection Agency Licensing Board — Fees

Regulation .01 Purpose.Link Copy Citation

This chapter is intended to carry out the provisions of Business Regulation Article, §§7-302 and 7-302.1, Annotated Code of Maryland. In particular, it is intended to set license-related fees to cover the actual documented direct and indirect costs of regulating collection agencies in accordance with the provisions of Business Regulation Article, Title 7, Annotated Code of Maryland.

Regulation .02 Fees.Link Copy Citation

Initial License Fee. The initial license fee required by Business Regulation Article, §§7-302(a) and 7-302.1, Annotated Code of Maryland, is $350 for a 1-year license term.

Renewal Fee. The renewal fee required by Business Regulation Article, §7-306(b)(2), Annotated Code of Maryland, is $350 for a 1-year renewal term.

Chapter 14. Money Transmitters

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Acting in concert” means persons knowingly acting together with a common goal of jointly acquiring control of a licensee whether or not pursuant to an express agreement.

(2)

“Authorized delegate” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(3)

“Bank Secrecy Act” means the Bank Secrecy Act, 31 U.S.C. §5311, et seq. and its implementing regulations, as amended and recodified from time to time.

(4)

“Closed loop stored value” means stored value that is redeemable by the issuer only for goods or services provided by the issuer or its affiliate or franchisees of the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value.

(5)

“Control” means:

(a)

The power to vote, directly or indirectly, at least 25 percent of the outstanding voting shares or voting interests of a licensee or person in control of a licensee;

(b)

The power to elect or appoint a majority of key individuals or executive officers, managers, directors, trustees, or other persons exercising managerial authority of a person in control of a licensee; or

(c)

The power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or person in control of a licensee.

(6)

(7)

“Eligible rating” means a credit rating of any of the three highest rating categories provided by an eligible rating service, whereby each category may include rating category modifiers such as “plus” or “minus” for S&P, or the equivalent for any other eligible rating service.

(8)

“Eligible rating service” means any Nationally Recognized Statistical Rating Organization (NRSRO) as defined by the U.S. Securities and Exchange Commission, and any other organization designated by the Commissioner.

(9)

(10)

“Federally insured depository financial institution” means a bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company organized under the laws of the United States or any state of the United States, if that bank, credit union, savings and loan association, trust company, savings association, savings bank, industrial bank, or industrial loan company has federally insured deposits.

(11)

“In this State” means:

(a)

For a transaction requested in person, at a physical location within Maryland; and

(b)

For a transaction requested electronically or by phone, the provider of money transmission may determine if the person requesting the transaction is “in this State” by relying on other information provided by the person regarding the location of the individual’s residential address or a business entity’s principal place of business or other physical address location, and any records associated with the person that the provider of money transmission may have that indicate that location, including but not limited to an address associated with an account.

(12)

“Individual” means a natural person.

(13)

(14)

“Key individual” means any individual ultimately responsible for establishing or directing policies and procedures of the licensee, such as an executive officer, manager, director, or trustee.

(15)

“Licensee” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(16)

“Maryland Money Transmission Act” means Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland.

(17)

“Material litigation” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(18)

“Monetary value” means a medium of exchange, whether or not redeemable in money.

(19)

Money Transmission.

(a)

“Money transmission” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(b)

“Money transmission” includes a payroll processing service.

(20)

“MSB accredited state” means a state agency that is accredited by the Conference of State Bank Supervisors and Money Transmitter Regulators Association for money transmission licensing and supervision.

(21)

“Multistate licensing process” means any agreement entered into by and among state regulators relating to coordinated processing of applications for money transmission licenses, applications for the acquisition of control of a licensee, control determinations, or notice and information requirements for a change of key individuals.

(22)

“NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(23)

“Outstanding money transmission obligations” has the meaning assigned to the term “outstanding money transmission” in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(24)

“Passive investor” means a person that:

(a)

Does not have the power to elect a majority of key individuals or executive officers, managers, directors, trustees, or other persons exercising managerial authority of a person in control of a licensee;

(b)

Is not employed by and does not have any managerial duties of the licensee or person in control of a licensee;

(c)

Does not have the power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or person in control of a licensee; and

(d)

Either:

(i)

Attests to §B(24)(a)—(c) of this regulation, in a form and in a medium prescribed by the Commissioner; or

(ii)

Commits to the passivity characteristics of §B(24)(a)—(c) of this regulation in a written document.

(25)

Payment Instrument.

(a)

“Payment instrument” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(b)

“Payment instrument” does not include prepaid access or any instrument that is:

(i)

Redeemable by the issuer only for goods or services provided by the issuer or its affiliate or franchisees of the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value; or

(ii)

Not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.

(26)

Payroll Processing Services.

(a)

“Payroll processing services” means receiving money for transmission pursuant to a contract with a person to deliver wages or salaries, make payment of payroll taxes to state and federal agencies, make payments relating to employee benefit plans, or make distributions of other authorized deductions from wages or salaries.

(b)

“Payroll processing services” does not include an employer performing payroll processing services on its own behalf or on behalf of its affiliate.

(27)

“Person” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(28)

Prepaid Access.

(a)

“Prepaid access” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(b)

“Prepaid access” includes, but is not limited to, “prepaid access” as defined by 31 CFR §1010.100, as amended or recodified from time to time.

(c)

Prepaid access does not include a payment instrument or closed loop stored value, or stored value not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.

(29)

“Receiving money for transmission” or “money received for transmission” means receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means.

(30)

“Risk management program” means the policies, procedures, and internal controls designed to identify, measure, monitor and mitigate risk.

(31)

“Tangible net worth” means the aggregate assets of a licensee, excluding all intangible assets, less liabilities, as determined in accordance with United States generally accepted accounting principles.

Regulation .02 Examination Fees.Link Copy Citation

This chapter is intended to set fees to cover the reasonably incurred costs of examinations of a licensee or its authorized delegate pursuant to Financial Institutions Article, §12-424(c), Annotated Code of Maryland.

The Commissioner of Financial Regulation sets the following daily fees for each of the Commissioner's employees engaged in the examination of a licensee or its authorized delegate:

(1)

$300 per day for an employee serving in a position of Financial Regulation Non-Depository Examiner in the Office of the Commissioner; and

(2)

$375 per day for an employee serving in a position of Financial Regulation Non-Depository Examiner Supervisor in the Office of the Commissioner.

A licensee or its authorized delegate shall reimburse each of the Commissioner's employees engaged in on-site examination for travel, meal, lodging, and other related travel expenses using the criteria and at the rates set forth in the Standard State Travel Regulations.

The revenues collected from the fees set pursuant to these regulations shall be deposited in the Money Transmission Fund pursuant to Financial Institutions Article, §12-404, Annotated Code of Maryland.

Regulation .03 Persons Not Engaging in Money Transmission.Link Copy Citation

In accordance with the Maryland Money Transmission Act, the following persons are not engaging in money transmission when engaging in the activities described:

(1)

An operator of a payment system when providing processing, clearing, or settlement services, between or among persons exempted under the Maryland Money Transmission Act or licensees, in connection with wire transfers, credit card transactions, debit card transactions, stored-value transactions, automated clearing house transfers, or similar funds transfers.

(2)

A person appointed as an agent of a payee when collecting and processing a payment from a payor to the payee for goods or services, other than money transmission itself, provided to the payor by the payee, if:

(a)

There exists a written agreement between the payee and the agent directing the agent to collect and process payments from payors on the payee’s behalf;

(b)

The terms of the written agreement required by §A(2)(a) of this regulation are consistent with a principal’s appointment of an agent under Maryland law;

(c)

The payee holds the agent out to the public as accepting payments for goods or services on the payee’s behalf;

(d)

Payment for the goods and services is treated as received by the payee upon receipt by the agent so that the payor’s obligation is extinguished and there is no risk of loss to the payor if the agent fails to remit the funds to the payee;

(e)

The agent is not serving in an escrow capacity in connection with the transaction;

(f)

The agent is not acting as agent to more than one party in the transaction; and

(g)

Payment by the agent to the payee occurs promptly and is not conditioned on the occurrence of any future event or performance by any party to the transaction.

(3)

A person that acts as an intermediary by processing payments between an entity that has directly incurred an outstanding money transmission obligation to a sender, and the sender’s designated recipient, if that the entity:

(a)

Is properly licensed or exempt from licensing requirements under the Maryland Money Transmission Act;

(b)

Provides a receipt, electronic record, or other written confirmation to the sender identifying the entity as the provider of money transmission in the transaction; and

(c)

Bears sole responsibility to satisfy the outstanding money transmission obligation to the sender, including the obligation to make the sender whole in connection with any failure to transmit the funds to the sender’s designated recipient.

(4)

A person expressly appointed as a third-party service provider to or agent of an entity exempt under the Maryland Money Transmission Act solely to the extent that:

(a)

That service provider or agent is acting on behalf of and pursuant to a written agreement with the exempt entity sets forth the specific functions that the service provider or agent is to perform; and

(b)

The exempt entity assumes all risk of loss and all legal responsibility for satisfying the outstanding money transmission obligations owed to purchasers and holders of the outstanding money transmission obligations upon receipt of the purchaser’s or holder’s money or monetary value by the service provider or agent.

The Commissioner may require that any person claiming to be either exempt from licensing pursuant to the Maryland Money Transmission Act or engaging in one or more activities not constituting money transmission pursuant to §A of this regulation provide information and documentation to the Commissioner demonstrating that it qualifies for any claimed exemption or is not engaged in activities constituting money transmission.

Regulation .04 Relationship to Federal Law.Link Copy Citation

If State money transmission jurisdiction is conditioned on a federal law, any inconsistencies between a provision of the Maryland Money Transmission Act and the federal law governing money transmission shall be governed by the applicable federal law to the extent of the inconsistency.

If any inconsistencies exist between the Maryland Money Transmission Act and a federal law that governs pursuant to this regulation, the Commissioner may provide interpretive guidance that:

(1)

Identifies the inconsistency; and

(2)

Identifies the appropriate means of compliance with federal law.

Regulation .05 Application for License.Link Copy Citation

In addition to the requirements set forth in Financial Institutions Article, §12-407, Annotated Code of Maryland, applications for a license shall contain at a minimum and as applicable:

(1)

The legal name and residential and business addresses of the applicant and any fictitious or trade name used by the applicant in conducting its business;

(2)

A list of any criminal convictions of the applicant and any material litigation in which the applicant has been involved in the 10-year period next preceding the submission of the application;

(3)

A description of any money transmission previously provided by the applicant and the money transmission that the applicant seeks to provide in this State;

(4)

A list of the applicant’s proposed authorized delegates and the locations in this State where the applicant and its authorized delegates propose to engage in money transmission;

(5)

A list of other states in which the applicant is licensed to engage in money transmission and any license revocations, suspensions, or other disciplinary action taken against the applicant in another state;

(6)

Information concerning any bankruptcy or receivership proceedings affecting the licensee or a person in control of a licensee;

(7)

A sample form of contract for authorized delegates, if applicable;

(8)

A sample form of payment instrument or stored value, as applicable;

(9)

The name and address of any federally insured depository financial institution through which the applicant plans to conduct money transmission; and

(10)

Any other information the Commissioner reasonably requires with respect to the applicant.

In addition to the requirements set forth in Financial Institutions Article, §12-407, Annotated Code of Maryland, if an applicant is a corporation, limited liability company, partnership, or other legal entity, the applicant shall also provide:

(1)

The date of the applicant’s incorporation or formation and state or country of incorporation or formation;

(2)

If applicable, a certificate of good standing from the state or country in which the applicant is incorporated or formed;

(3)

A brief description of the structure or organization of the applicant, including any parents or subsidiaries of the applicant, and whether any parents or subsidiaries are publicly traded;

(4)

The legal name, any fictitious or trade name, all business and residential addresses, and the employment, as applicable, in the 3-year period next preceding the submission of the application of each key individual and person in control of the applicant;

(5)

A list of any criminal convictions and material litigation in which a person in control of the applicant that is not an individual has been involved in the 3-year period preceding the submission of the application;

(6)

A copy of audited financial statements of the applicant for the most recent fiscal year and for the 2-year period next preceding the submission of the application or, if the audited statements are not available for good cause and the Commissioner determines the Commissioner can make findings necessary to grant or deny the license, certified unaudited financial statements for the most recent fiscal year or other period acceptable to the Commissioner;

(7)

A certified copy of unaudited financial statements of the applicant for the most recent fiscal quarter;

(8)

If the applicant is a publicly traded corporation, a copy of the most recent report filed with the United States Securities and Exchange Commission under §13 of the federal Securities Exchange Act of 1934, 15 U.S.C. §78m, as amended or recodified from time to time;

(9)

If the applicant is a wholly owned subsidiary of:

(a)

A corporation publicly traded in the United States, a copy of audited financial statements for the parent corporation for the most recent fiscal year or a copy of the parent corporation’s most recent report filed under §13 of the U.S. Securities Exchange Act of 1934, 15 U.S.C. §78m, as amended or recodified from time to time; or

(b)

A corporation publicly traded outside the United States, a copy of similar documentation filed with the regulator of the parent corporation’s domicile outside the United States;

(10)

The name and address of the applicant’s registered agent in this State; and

(11)

Any other information the Commissioner reasonably requires with respect to the applicant.

The Commissioner may waive or modify the requirement to produce audited financial statements in Financial Institutions Article, §12-407, Annotated Code of Maryland, if:

(1)

The applicant cannot produce audited financial statements required by Financial Institutions Article, §12-407, Annotated Code of Maryland;

(2)

The Commissioner determines good cause exists for the applicant’s inability to produce audited financial statements required by Financial Institutions Article, §12-407, Annotated Code of Maryland;

(3)

The applicant produces certified unaudited financial statements for the most recent fiscal year or other period required by the Commissioner; and

(4)

The Commissioner determines the Commissioner can make findings necessary to grant or deny the license based on all information presented.

The Commissioner may waive one or more requirements of this regulation or permit an applicant to submit other information in lieu of the required information.

Applications.

(1)

(2)

(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, the Commissioner may stop processing and consider the incomplete application withdrawn, if the Commissioner has previously notified the applicant of the basis for incompleteness in accordance with §E(2) of this regulation, and given the applicant not less than 15 days to correct the incompleteness.

Trade Names.

(1)

Prior to a licensee’s use of a trade name to engage in the business of money transmission in Maryland, the licensee shall:

(a)

(b)

Obtain the approval of the Commissioner for the use of the trade name by:

(i)

Designating on an original license application, a license renewal application, or an amendment to an existing license, through NMLS, any trade name under which the licensee will engage in the business of money transmission in this State; and

(ii)

Specifying on an original license application, a license renewal application, or an amendment to an existing license, through NMLS, which licensed locations will utilize the trade name.

(2)

At all times after 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.

Regulation .06 Information Requirements for Certain Individuals.Link Copy Citation

Any individual in control of a licensee or applicant, any individual that seeks to acquire control of a licensee, and each key individual shall furnish to the Commissioner through NMLS the following items:

(1)

The individual’s fingerprints for submission to the Federal Bureau of Investigation and the Commissioner for purposes of a national criminal history background check unless the person currently resides outside of the United States and has resided outside of the United States for the last 10 years; and

(2)

Personal history and experience in a form and in a medium prescribed by the Commissioner, to obtain the following:

(a)

An independent credit report from a consumer reporting agency unless the individual does not have a Social Security number, in which case, this requirement shall be waived;

(b)

Information related to any criminal convictions or pending charges; and

(c)

Information related to any regulatory or administrative action and any civil litigation involving claims of fraud, misrepresentation, conversion, mismanagement of funds, breach of fiduciary duty, or breach of contract.

If the individual has resided outside of the United States at any time in the last 10 years, the individual shall also provide an investigative background report prepared by an independent search firm that meets the following requirements:

(1)

At a minimum, the search firm:

(a)

Shall demonstrate that it has sufficient knowledge, resources, and employs accepted and reasonable methodologies to conduct the research of the background report; and

(b)

May not be affiliated with or have an interest with the individual it is researching.

(2)

At a minimum, the investigative background report shall be written in the English language and shall contain the following:

(a)

If available in the individual’s current jurisdiction of residency, a comprehensive credit report, or any equivalent information obtained or generated by the independent search firm to accomplish that report, including a search of the court data in the countries, provinces, states, cities, towns, and contiguous areas where the individual resided and worked;

(b)

Criminal records information for the past 10 years, including, but not limited to, felonies, misdemeanors, or similar convictions for violations of law in the countries, provinces, states, cities, towns, and contiguous areas where the individual resided and worked;

(c)

Employment history;

(d)

Media history, including an electronic search of national and local publications, wire services, and business applications; and

(e)

Financial services-related regulatory history, including but not limited to money transmission, securities, banking, insurance, and mortgage-related industries.

Regulation .07 Multistate Licensing Process.Link Copy Citation

If an applicant for licensure under the Maryland Money Transmission Act avails itself or is otherwise subject to a multistate licensing process:

(1)

Subject to §B of this regulation, the Commissioner’s investigation of the applicant under Financial Institutions Article, §12-409, Annotated Code of Maryland, may include the investigation results of a lead investigative state; or

(2)

If Maryland is a lead investigative state, the Commissioner may investigate the applicant pursuant to Financial Institutions Article, §12-409, Annotated Code of Maryland, and the timeframes established by agreement through the multistate licensing process, except that, in no case shall the timeframe be noncompliant with the application period in Financial Institutions Article, §12-409, Annotated Code of Maryland.

The Commissioner’s investigation of the applicant under Financial Institutions Article, §12-409, Annotated Code of Maryland, may include the investigation results of a lead investigative state if:

(1)

The Commissioner reasonably determines that the lead investigative state possesses licensing and supervision authority over money transmission in its state substantially similar to the licensing and supervision authority of the Commissioner over money transmission in Maryland;

(2)

The Commissioner reasonably determines that the investigation of the lead investigative state adequately addresses the applicant’s financial condition and responsibility, financial and business experience, character, and general fitness;

(3)

The Commissioner reasonably determines the lead investigative state has sufficient staffing, expertise, and minimum standards for the purposes of investigating an applicant for a license permitting money transmission; and

(4)

The Commissioner supplements the investigation of the lead investigative state with any information the Commissioner considers relevant.

Regulation .08 Corporate Governance.Link Copy Citation

A licensee shall establish, document, and maintain sufficient corporate governance, as follows:

(1)

Each element of a licensee’s corporate governance shall be commensurate with the size, operational complexity, and overall risk profile of the licensee.

(2)

(3)

A licensee bears the burden of demonstrating to the Commissioner that its corporate governance is sufficient and commensurate with its size, operational complexity, and overall risk profile.

(4)

A licensee’s corporate governance shall, at a minimum, include:

(a)

Clearly defined responsibilities and accountability;

(b)

Internal controls, policies, processes, and practices for monitoring, testing, and ensuring compliance with the corporate governance framework;

(c)

Internal controls, policies, processes, and practices for training of employees on corporate governance requirements; and

(d)

Internal controls, policies, processes, and practices addressing internal audits, external audits, and risk management as set forth in §§B—D of this regulation.

(5)

Each licensee shall, not less than annually, conduct a review of its corporate governance to determine its overall effectiveness, address emerging risks and otherwise assure that the corporate governance remains commensurate with the size, operational complexity, and overall risk profile of the licensee.

(6)

Internal Audit.

(1)

A licensee shall establish internal audit requirements that are appropriate for the size, complexity, and risk profile of the licensee.

(2)

(3)

External Audit.

(1)

If the Commissioner determines, based on the size, operational complexity, and overall risk profile of the licensee, that an external audit is appropriate, the Commissioner may direct a licensee to receive an external audit.

(2)

If the Commissioner directs a licensee to receive an external audit, that external audit shall include:

(a)

(b)

Assessment of the internal control structure;

(c)

Computation of tangible net worth;

(d)

Validation of permissible investments;

(e)

Verification of adequate fidelity and errors and omissions (E&O) insurance;

(f)

Testing of controls related to risk management activities, including compliance and stress testing, if applicable; and

(g)

Any other element the Commissioner considers appropriate.

(3)

Nothing in this regulation is intended to abrogate a requirement of a licensee to receive an external audit under any other law, rule, regulation, or by-law, policy, or procedure of the licensee.

Risk Management.

(1)

(2)

The risk management program shall have appropriate processes and models in place to measure, monitor, and mitigate financial risks and changes to the risk profile of the licensee.

(3)

Evidence of risk management activities throughout the year shall be maintained, including findings of issues and the response to address those findings.

Authority to Address Risk as Necessary. If risk is determined by a formal review of a licensee to be extremely high, the Commissioner may order or direct the licensee to satisfy additional conditions necessary to ensure that the licensee will continue to operate in a safe and sound manner and be able to continue to engage in the business of money transmission in compliance with state and federal law and regulation.

Regulation .09 Maintenance of License.Link Copy Citation

If a licensee does not continue to meet the qualifications or satisfy the requirements that apply to an applicant for a new license, the Commissioner may suspend or revoke the licensee’s license in accordance with the procedures established under the Maryland Money Transmission Act.

An applicant for a license shall demonstrate that it meets or will meet, and a money transmission licensee shall at all times meet, the requirements in Regulation .18 of this chapter.

Regulation .10 Acquisition of Control and Change of Key Individual.Link Copy Citation

Any person, or group of persons acting in concert, seeking to acquire control of a licensee shall comply with Financial Institutions Article, §12-415, Annotated Code of Maryland.

Any person, or group of persons acting in concert, seeking the Commissioner’s approval under Financial Institutions Article, §12-415, Annotated Code of Maryland, to acquire control of a licensee shall, in cooperation with the licensee, submit an application in a form and in a medium prescribed by the Commissioner, together with any information the Commissioner requires or requests.

The application required by this regulation shall include information required by Regulation .06 of this chapter for any new key individuals that have not previously completed the requirements of Regulation .06 of this chapter for a licensee.

When an application for acquisition of control under this regulation appears to include all the items and address all matters that are required, the application shall be considered complete, and the Commissioner shall promptly notify the applicant in a record of the date on which the application was determined to be complete and:

(1)

Except as provided in Financial Institutions Article, §12-415(b)(2) or (3)(ii), Annotated Code of Maryland:

(a)

The Commissioner shall approve or deny the application within 60 days after the completion date; or

(b)

If the application is not approved or denied within 60 days after the completion date:

(i)

The application is approved; and

(ii)

The person, or group of persons acting in concert, are not prohibited from acquiring control.

(2)

The Commissioner may for good cause extend the application period.

A determination by the Commissioner that an application is complete and is accepted for processing means only that the application, on its face, appears to include all the items and address all the matters that are required, and is not an assessment of the substance of the application or of the sufficiency of the information provided.

When an application is filed and considered complete under this regulation, the Commissioner shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the person, or group of persons acting in concert, seeking to acquire control. The Commissioner shall approve an acquisition of control pursuant to this regulation if the Commissioner finds that all of the following conditions have been fulfilled:

(1)

The requirements of §§B and C of this regulation have been met, as applicable;

(2)

Following the change in control, the financial condition and responsibility, financial and business experience, competence, character, and general fitness of the licensee will remain consistent with State licensure requirements; and

(3)

That it is in the interest of the public to permit the person, or group of persons acting in concert, to control the licensee.

Under the following circumstances, the Commissioner may consider the investigation of an applicant by another State:

(1)

If an applicant avails itself or is otherwise subject to a multistate licensing process:

(a)

Subject to §G(2) of this regulation, the Commissioner’s investigation of the applicant under §F of this regulation may include the investigation results of a lead investigative state; or

(b)

If Maryland is a lead investigative state, the Commissioner may investigate the applicant pursuant to §F of this regulation and the timeframes established by agreement through the multistate licensing process, except that, in no case shall the timeframe be noncompliant with the application period in Financial Institutions Article, §12-415, Annotated Code of Maryland.

(2)

The Commissioner’s investigation of the applicant under §F of this regulation may include the investigation results of the lead investigative state under §G(1)(a) of this regulation if:

(a)

(b)

The Commissioner reasonably determines that the lead investigative state adequately addresses the applicant’s anticipated financial condition and responsibility, financial and business experience, character, and general fitness following the proposed change of control;

(c)

The Commissioner reasonably determines the lead investigative state has sufficient staffing, expertise, and minimum standards for the purposes of investigating a change of control application; and

(d)

The Commissioner supplements the investigation of the lead investigative state with any information the Commissioner considers relevant.

The Commissioner shall issue a formal written notice of the denial of an application to acquire control within 30 days of the decision to deny the application. The Commissioner shall set forth in the notice of denial the specific reasons for the denial of the application. A licensee whose application is denied by the Commissioner under this regulation may request a hearing within 30 days after receipt of the written notice of the denial pursuant to State Government Article, §10-207, Annotated Code of Maryland.

The requirements of Financial Institutions Article, §12-415, Annotated Code of Maryland, as applied to a change of control of a licensee and as provided for in §§A and B of this regulation do not apply to any of the following:

(1)

A person that acts as a proxy for the sole purpose of voting at a designated meeting of the shareholders or holders of voting shares or voting interests of a licensee or a person in control of a licensee;

(2)

A person that acquires control of a licensee as a personal representative, custodian, guardian, conservator, or trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law;

(3)

A public offering of securities of a licensee or a person in control of a licensee, except that, if a single person or group of persons acting in concert acquire control of the licensee as a result of the public offering, the licensee shall obtain the Commissioner’s approval under Financial Institutions Article, §12-415, Annotated Code of Maryland, and this regulation; or

(4)

An internal reorganization of a person in control of the licensee if the ultimate person in control of the licensee remains the same.

Persons in §I(2)—(4) of this regulation in cooperation with the licensee shall notify the Commissioner within 15 days after the acquisition of control.

Streamlined Acquisition of Control.

(1)

The requirements of Financial Institutions Article, §12-415, Annotated Code of Maryland, as applied to a change of control of a licensee shall be considered satisfied and no application under §B of this regulation will be required of a person that has complied with and received approval to engage in money transmission under the Maryland Money Transmission Act or was identified as a person in control in a prior application filed with and approved by the Commissioner or by an MSB accredited state pursuant to a multistate licensing process, if:

(a)

The person has not had a license revoked or suspended or controlled a licensee that has had a license revoked or suspended while the person was in control of the licensee in the previous 5 years;

(b)

If the person is a licensee, the person is well managed and has received at least a satisfactory rating for compliance at its most recent examination by an MSB accredited state if that rating was given;

(c)

The licensee to be acquired is projected to meet the qualifications for licensure under the Maryland Money Transmission Act, including the requirements of Regulation .18 of this chapter, after the acquisition of control is completed, and if the person acquiring control is a licensee, that licensee is also projected to meet the qualifications for licensure under the Maryland Money Transmission Act, including the requirements of Regulation .18 of this chapter, after the acquisition of control is completed;

(d)

The licensee to be acquired will not implement any material changes to its business plan as a result of the acquisition of control, and if the person acquiring control is a licensee, that licensee also will not implement any material changes to its business plan as a result of the acquisition of control;

(e)

The person provides notice of the acquisition in cooperation with the licensee and attests to §K(1)(a)—(d) of this regulation in a form and in a medium prescribed by the Commissioner; and

(f)

The person provides the Commissioner with any additional information the Commissioner requests in connection with the notice.

(2)

If the Commissioner requests additional information in connection with a notice, the notice may not be considered complete until that information is provided to the Commissioner.

(3)

If the notice is not disapproved within 30 days after the date on which the notice was determined to be complete, the notice is considered approved.

(4)

A licensee whose notice is disapproved by the Commissioner under this regulation may request a hearing within 30 days after receipt of the written notice of the disapproval pursuant to State Government Article, §10-207, Annotated Code of Maryland.

Before filing an application or notice under §B or K of this regulation, a person or group of persons acting in concert may request in writing a determination from the Commissioner as to whether the person or group of persons acting in concert would be considered a person in control of a licensee upon consummation of a proposed transaction. If the Commissioner determines that the person or group of persons acting in concert would not be a person in control of a licensee, the proposed person or group of persons acting in concert is not subject to the requirements of Financial Institutions Article, §12-415(b), Annotated Code of Maryland, as applied to a change of control of a licensee.

Rebuttable Presumption of Control.

(1)

A person is presumed to exercise a controlling influence if the person holds the power to vote, directly or indirectly, at least 10 percent of the outstanding voting shares or voting interests of a licensee or person in control of a licensee.

(2)

A person presumed to exercise a controlling influence can rebut the presumption of control if the person is a passive investor.

(3)

For purposes of determining the percentage of a person controlled by any other person, the person’s interest shall be aggregated with the interest of any other immediate family member, including the person’s spouse, parents, children, siblings, mothers- and fathers-in law, sons- and daughters-in-law, brothers- and sisters-in-law, and any other person who shares that person’s home.

Regulation .11 Notice and Information Requirements for a Change of Key Individuals.Link Copy Citation

A licensee adding or replacing any key individual shall:

(1)

Provide notice in a manner prescribed by the Commissioner as soon as reasonably practicable, but in no event later than 15 days after the effective date of the key individual’s appointment; and

(2)

Provide information as required by Regulation .06 of this chapter within 30 days of the date on which the notice was provided pursuant to this regulation.

Within 90 days of the date on which the notice provided pursuant to this regulation was determined to be complete, the Commissioner may issue a notice of disapproval of a key individual if the competence, experience, character, or integrity of the individual would not be in the best interests of the public or the customers of the licensee to permit the individual to be a key individual of that licensee.

A notice of disapproval shall contain a statement of the basis for disapproval and shall be sent to the licensee and the disapproved individual. A licensee receiving a notice of disapproval under this regulation may request a hearing within 30 days after receipt of the written notice of the disapproval pursuant to State Government Article, §10-207, Annotated Code of Maryland.

If the notice provided pursuant to this regulation is not disapproved within 90 days after the date on which the notice was determined to be complete, the key individual is considered approved.

Regulation .12 Bank Secrecy Act Reports.Link Copy Citation

A licensee and an authorized delegate shall file all reports required by federal currency reporting, record keeping, and suspicious activity reporting requirements as set forth in the Bank Secrecy Act and other federal and state laws pertaining to money laundering. The timely filing of a complete and accurate report required under this regulation with the appropriate federal agency is considered compliant with the requirements of this regulation.

Regulation .13 Authorized Delegates.Link Copy Citation

For purposes of this regulation, “remit” means to make direct payments of money to a licensee or its representative authorized to receive money or to deposit money in a bank in an account specified by the licensee.

Before a licensee may conduct business through an authorized delegate or allows a person to act as the licensee’s authorized delegate, the licensee shall:

(1)

Adopt, and update as necessary, written policies and procedures reasonably designed to ensure that the licensee’s authorized delegates comply with applicable state and federal law;

(2)

Enter into a written contract pursuant to Financial Institutions Article, §12-413(b), Annotated Code of Maryland; and

(3)

Conduct a reasonable risk-based background investigation sufficient for the licensee to determine whether the authorized delegate has complied and will likely comply with applicable state and federal law.

An authorized delegate shall operate in full compliance with the Maryland Money Transmission Act and any regulations implementing the Maryland Money Transmission Act.

The written contract required by Financial Institutions Article, §12-413(b), Annotated Code of Maryland, shall be signed by the licensee and the authorized delegate and, at a minimum, shall:

(1)

Appoint the person signing the contract as the licensee’s authorized delegate with the authority to conduct money transmission on behalf of the licensee;

(2)

Set forth the nature and scope of the relationship between the licensee and the authorized delegate and the respective rights and responsibilities of the parties;

(3)

Require the authorized delegate to agree to fully comply with all applicable state and federal laws, rules, and regulations pertaining to money transmission, including the Maryland Money Transmission Act and any regulations implementing the Maryland Money Transmission Act, relevant provisions of the Bank Secrecy Act, and the USA PATRIOT ACT;

(4)

Require the authorized delegate to remit and handle money and monetary value in compliance with Financial Institutions Article, §12-418, Annotated Code of Maryland;

(5)

Impose a trust on money and monetary value net of fees received for money transmission for the benefit of the licensee;

(6)

Require the authorized delegate to prepare and maintain records as required by the Maryland Money Transmission Act and any regulations implementing the Maryland Money Transmission Act, or as reasonably requested by the Commissioner;

(7)

Acknowledge that the authorized delegate consents to examination or investigation by the Commissioner;

(8)

State that the licensee is subject to regulation by the Commissioner and that, as part of that regulation, the Commissioner may suspend or revoke an authorized delegate designation or require the licensee to terminate an authorized delegate designation; and

(9)

Acknowledge receipt of the written policies and procedures required under Financial Institutions Article, §12-413(c), Annotated Code of Maryland.

If the licensee’s license is suspended, revoked, surrendered, or expired, the licensee shall, within 5 business days, provide documentation to the Commissioner that the licensee has notified all applicable authorized delegates of the licensee whose names are in a record filed with the Commissioner of the suspension, revocation, surrender, or expiration of a license. Upon suspension, revocation, surrender, or expiration of a license, applicable authorized delegates shall immediately stop providing money transmission as an authorized delegate of the licensee.

An authorized delegate of a licensee holds in trust for the benefit of the licensee all money net of fees received from money transmission. If any authorized delegate commingles any funds received from money transmission with any other funds or property owned or controlled by the authorized delegate, all commingled funds and other property shall be considered held in trust in favor of the licensee in an amount equal to the amount of money net of fees received from money transmission.

An authorized delegate may not use a subdelegate to conduct money transmission on behalf of a licensee without the written consent of the Commissioner.

A person may engage in the business of money transmission as an authorized delegate only on behalf of a person licensed under the Maryland Money Transmission Act.

A person that engages in the business of money transmission on behalf of an unlicensed person shall be considered to be providing money transmission services in violation of the Maryland Money Transmission Act and shall be jointly and severally liable with the unlicensed or nonexempt person.

Regulation .14 Timely Transmission.Link Copy Citation

Every licensee shall forward all money received for transmission in accordance with the terms of the agreement between the licensee and the sender unless the licensee has a reasonable belief or a reasonable basis to believe that the sender may be a victim of fraud or that a crime or violation of law, rule, or regulation has occurred, is occurring, or may occur.

If a licensee fails to forward money received for transmission in accordance with this regulation, the licensee shall respond to inquiries by the sender with the reason for the failure unless providing a response would violate a state or federal law, rule, or regulation.

Regulation .15 Refunds.Link Copy Citation

This regulation does not apply to:

(1)

Money received for transmission subject to the federal Remittance Rule (12 CFR Part 1005, Subpart B), as amended or recodified from time to time; or

(2)

Money received for transmission pursuant to a written agreement between the licensee and payee to process payments for goods or services provided by the payee.

Every licensee shall refund to the sender within 10 days of receipt of the sender’s written request for a refund of any money received for transmission unless any of the following occurs:

(1)

The money has been forwarded within 10 days of the date on which the money was received for transmission and prior to receipt of the request for a refund;

(2)

Instructions have been given committing an equivalent amount of money to the person designated by the sender within 10 days of the date on which the money was received for transmission and prior to receipt of the request for a refund;

(3)

The agreement between the licensee and the sender instructs the licensee to forward the money at a time that is beyond 10 days of the date on which the money was received for transmission. If funds have not yet been forwarded in accordance with the terms of the agreement between the licensee and the sender, the licensee shall issue a refund in accordance with the other provisions of this regulation;

(4)

The refund request does not enable the licensee to:

(a)

Identify the sender’s name and address or telephone number; or

(b)

Identify the particular transaction to be refunded if the sender has multiple transactions outstanding;

(5)

The refund is requested for a transaction that the licensee has not completed based on a reasonable belief or a reasonable basis to believe that a crime or violation of law, rule, or regulation has occurred, is occurring, or may occur; or

(6)

The licensee attempted in good faith to forward the money within 10 days of receipt from the sender and forwarded the money prior to the receipt of the request for a refund.

Regulation .16 Receipts.Link Copy Citation

This regulation does not apply to:

(1)

Money received for transmission subject to the federal Remittance Rule (12 CFR Part 1005, Subpart B), as amended or recodified from time to time;

(2)

Money received for transmission pursuant to a written agreement between the licensee and payee to process payments for goods or services provided by the payee; or

(3)

Payroll processing services.

For purposes of this regulation “receipt” means a paper receipt, electronic record, or other written confirmation. For a transaction conducted in person, the receipt may be provided electronically if the sender requests or agrees to receive an electronic receipt. For a transaction conducted electronically or by phone, a receipt may be provided electronically. All electronic receipts shall be provided in a retainable form.

Contents of Receipt.

(1)

Every licensee or its authorized delegate shall provide the sender a receipt for money received for transmission.

(2)

The receipt shall contain the following information, as applicable:

(a)

The name of the sender;

(b)

The name of the designated recipient;

(c)

The date of the transaction;

(d)

The unique transaction or identification number;

(e)

The name of the licensee, NMLS Unique ID, the licensee’s business address, and the licensee’s customer service telephone number;

(f)

The amount of the transaction in United States dollars;

(g)

Any fee charged by the licensee to the sender for the transaction; and

(h)

Any taxes collected by the licensee from the sender for the transaction.

(3)

The receipt required by this regulation shall be in English and in the language principally used by the licensee or authorized delegate to advertise, solicit, or negotiate, either orally or in writing, for a transaction conducted in person, electronically, or by phone, if other than English.

Regulation .17 Disclosures for Payroll Processing Services.Link Copy Citation

A licensee that provides payroll processing services shall:

(1)

Issue reports to clients detailing client payroll obligations in advance of the payroll funds being deducted from an account; and

(2)

Make available worker paystubs or an equivalent statement to workers.

If the licensee’s client designates the intended recipients to the licensee and is responsible for providing the disclosures required by §A(2) of this regulation, §A of this regulation does not apply to a licensee providing payroll processing services.

Regulation .18 Prudential Standards.Link Copy Citation

Financial Responsibility. In considering the financial responsibility of a licensee, the Commissioner may consider the amount of tangible net worth a licensee maintains in excess of the statutory requirement under Financial Institutions Article, §12-406, Annotated Code of Maryland.

Surety Bonds. A licensee may exceed the maximum required bond amount in Financial Institutions Article, §12-412(d), Annotated Code of Maryland.

Maintenance of Permissible Investments.

(1)

A licensee shall maintain at all times permissible investments in accordance with Financial Institutions Article, §12-418(a), Annotated Code of Maryland.

(2)

Except for permissible investments enumerated in §D(1) of this regulation, the Commissioner, with respect to any licensee, may by order limit the extent to which a specific investment maintained by a licensee within a class of permissible investments may be considered a permissible investment, if the specific investment represents undue risk to customers, not reflected in the market value of investments.

(3)

Permissible investments, even if commingled with other assets of the licensee, are held in trust for the benefit of the purchasers and holders of the licensee’s outstanding money transmission obligations. Permissible investments held in trust for the benefit of the purchasers and holders of the licensee’s outstanding money transmission obligations are considered held in trust for the benefit of those purchasers and holders on a pro rata and equitable basis in accordance with statutes pursuant to which permissible investments are required to be held in Maryland, and other states, as applicable.

(4)

Any trust established under §C(3) of this regulation shall be terminated upon extinguishment of all of the licensee’s outstanding money transmission obligations.

(5)

The Commissioner may allow other types of investments that the Commissioner determines are of sufficient liquidity and quality to be a permissible investment. The Commissioner may participate in efforts with other state regulators to determine that other types of investments are of sufficient liquidity and quality to be a permissible investment.

Types of Permissible Investments.

(1)

The following investments meet the definition of permissible investments pursuant to Financial Institutions Article, §12-401(r), Annotated Code of Maryland:

(a)

Cash (including demand deposits, savings deposits, and funds in those accounts held for the benefit of the licensee’s customers in a federally insured depository financial institution) and cash equivalents including ACH items in transit to the licensee and ACH items or international wires in transit to a payee, cash in transit via armored car, cash in smart safes, cash in licensee-owned locations, debit card or credit card-funded transmission receivables owed by any bank, or money market mutual funds rated “AAA” by S&P, or the equivalent from any eligible rating service;

(b)

Certificates of deposit or senior debt obligations other than a capital note of an insured depository institution, as defined in §3 of the Federal Deposit Insurance Act, 12 U.S.C. §1813, as amended or recodified from time to time, or as defined under the federal Credit Union Act, 12 U.S.C. §1781, as amended or recodified from time to time;

(c)

An obligation of the United States or a commission, agency, or instrumentality of the United States, an obligation that is guaranteed fully as to principal and interest by the United States, or an obligation of a state or a governmental subdivision, agency, or instrumentality of the United States;

(d)

The full drawable amount of an irrevocable standby letter of credit for which the stated beneficiary is the Commissioner that stipulates that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds up to the letter of credit amount within 7 days of presentation of the items required by §D(4) of this regulation; and

(e)

One hundred percent of the surety bond or deposit that exceeds the amount required under Financial Institutions Article, §12-412, Annotated Code of Maryland.

(2)

A letter of credit under §D(1) of this regulation:

(a)

Shall be issued by a federally insured depository financial institution, a foreign bank that is authorized under federal law to maintain a federal agency or federal branch office in a state or states, or a foreign bank that is authorized under state law to maintain a branch in a state that:

(i)

Bears an eligible rating or whose parent company bears an eligible rating; and

(ii)

Is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks, credit unions, and trust companies;

(b)

Shall be irrevocable, unconditional and indicate that it is not subject to any condition or qualification outside of the letter of credit;

(c)

May not contain reference to any other agreements, documents, or entities, or otherwise provide for any security interest in the licensee; and

(d)

Shall contain an issue date and expiration date, and expressly provide for automatic extension, without a written amendment, for an additional period of 1 year from the present or each future expiration date, unless the issuer of the letter of credit notifies the Commissioner in writing by certified or registered mail or courier mail or other receipted means, at least 60 days prior to any expiration date, that the irrevocable letter of credit will not be extended.

(3)

If the issuer of a letter of credit under §D(2) of this regulation issues any notice of expiration or nonextension of that letter of credit, the licensee shall be required to demonstrate to the satisfaction of the Commissioner, 15 days prior to expiration, that the licensee maintains and will maintain permissible investments in accordance with Financial Institutions Article, §12-418(a), Annotated Code of Maryland, upon the expiration of the letter of credit. If the licensee is not able to do so, the Commissioner may draw on the letter of credit in an amount up to the amount necessary to meet the licensee’s requirements to maintain permissible investments in accordance with Financial Institutions Article, §12-418(a), Annotated Code of Maryland. Any draw shall be offset against the licensee’s outstanding money transmission obligations. The drawn funds shall be held in trust by the Commissioner or the Commissioner’s designated agent, to the extent authorized by law, as agent for the benefit of the purchasers and holders of the licensee’s outstanding money transmission obligations.

(4)

A letter of credit under §D(1) of this regulation shall provide that the issuer of the letter of credit will honor, at sight, a presentation made by the beneficiary to the issuer of the following documents on or prior to the expiration date of the letter of credit:

(a)

The original letter of credit (including any amendments); and

(b)

A written statement from the beneficiary stating that any of the following events have occurred:

(i)

The filing of a petition by or against the licensee under the United States Bankruptcy Code, 11 U.S.C. §101-110, as amended or recodified from time to time, for bankruptcy or reorganization;

(ii)

The filing of a petition by or against the licensee for receivership, or the commencement of any other judicial or administrative proceeding for its dissolution or reorganization;

(iii)

The Commissioner has issued an order of restitution pursuant to an enforcement action against the licensee;

(iv)

The Commissioner sought the seizure of assets of a licensee pursuant to a judicial or administrative order; or

(v)

The beneficiary has received notice of expiration or nonextension of a letter of credit and the licensee failed to demonstrate to the satisfaction of the beneficiary that the licensee will maintain permissible investments in accordance with Financial Institutions Article, §12-418(a), Annotated Code of Maryland, upon the expiration or nonextension of the letter of credit.

(5)

The Commissioner may designate an agent to serve on the Commissioner’s behalf as beneficiary to a letter of credit under §D(1) of this regulation if the agent and letter of credit meet requirements established by the Commissioner. The Commissioner’s agent may serve as agent for multiple licensing authorities for a single irrevocable letter of credit if the proceeds of the drawable amount satisfy the purposes of the letter of credit under §D(1) of this regulation and are assigned to the Commissioner.

(6)

The Commissioner may participate in multistate processes designed to facilitate the issuance and administration of letters of credit, including but not limited to services provided by the NMLS and State Regulatory Registry, LLC.

(7)

Unless permitted by the Commissioner by rule or by order to exceed the limit as set forth in this regulation, the following investments are permissible pursuant to Financial Institutions Article, §12-401(r), Annotated Code of Maryland, to the extent specified:

(a)

Receivables that are payable to a licensee from its authorized delegates in the ordinary course of business that have not been held by an authorized delegate in excess of the time permitted under Financial Institutions Article, §12-418(b), Annotated Code of Maryland, up to 50 percent of the aggregate value of the licensee’s total permissible investments.

(b)

Of the receivables permissible under §D(7)(a) of this regulation, receivables that are payable to a licensee from a single authorized delegate in the ordinary course of business may not exceed 10 percent of the aggregate value of the licensee’s total permissible investments.

(c)

The following investments are permissible up to 20 percent per category and combined up to 50 percent of the aggregate value of the licensee’s total permissible investments:

(i)

A short-term (up to 6 months) investment bearing an eligible rating;

(ii)

Commercial paper bearing an eligible rating;

(iii)

A bill, note, bond, or debenture bearing an eligible rating;

(iv)

U.S. tri-party repurchase agreements collateralized at 100 percent or more with U.S. government or agency securities, municipal bonds, or other securities bearing an eligible rating;

(v)

Money market mutual funds rated less than “AAA” and equal to or higher than “A-” by S&P, or the equivalent from any other eligible rating service; and

(vi)

A mutual fund or other investment fund composed solely and exclusively of one or more permissible investments listed in §D(7)(a)—(c) of this regulation.

(d)

Cash (including demand deposits, savings deposits, and funds in those accounts held for the benefit of the licensee’s customers) at foreign depository institutions are permissible up to 10 percent of the aggregate value of the licensee’s total permissible investments if the licensee has received a satisfactory rating in its most recent examination and the foreign depository institution:

(i)

Has an eligible rating;

(ii)

Is registered under the Foreign Account Tax Compliance Act;

(iii)

Is not located in any country subject to sanctions from the Office of Foreign Asset Control; and

(iv)

Is not located in a high-risk or noncooperative jurisdiction as designated by the Financial Action Task Force.

Eligibility Ratings.

(1)

Long-term credit ratings are considered eligible if the rating is equal to A- or higher by S&P, or the equivalent from any other eligible rating service.

(2)

Short-term credit ratings are considered eligible if the rating is equal to or higher than A-2 or SP-2 by S&P, or the equivalent from any other eligible rating service.

(3)

If the ratings differ among eligible rating services, the highest rating shall apply when determining whether a security bears an eligible rating.

Chapter 15. Shared Appreciation Agreements

Regulation .01 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined.

(1)

“Actual change in value” means, with respect to each scenario included on the disclosure form found in Appendix A of this chapter, the average annual change in value for homes in the State of Maryland over the most recent number of years used in that scenario.

(2)

“Annual percentage rate” has the meaning stated in 12 CFR §1026.22(a), as amended from time to time.

(3)

“Annualized cost” means a measure of the cost of credit, expressed as a yearly rate, provided to allow a borrower to compare the cost of a shared appreciation agreement with the cost of other forms of credit.

(4)

“Arms-length sale” means a transaction for the sale of property between two unrelated and unaffiliated parties of equal bargaining power acting independently and in their respective self-interests.

(5)

“Automated valuation model” or “AVM” means a statistically based estimate of a property’s value based on publicly available information such as comparable sales, property characteristics, and price trends.

(6)

“Borrower” means a person who receives funds under a shared appreciation agreement.

(7)

“Broker price opinion” or “BPO” means an estimate, provided by a real estate broker licensed by the State or another qualified professional, of the price for which a property is likely to sell.

(8)

“Commitment” has the meaning stated in Commercial Law Article, §12-922, Annotated Code of Maryland.

(9)

“Estimated fair market value” means:

(a)

An estimate of value determined through either the use of an appraisal from an appraiser licensed by the State or the use of an automated valuation model or broker price opinion; or

(b)

An estimate of value provided by the borrower, if a disclosure is provided before the lender obtains an appraisal, automated valuation model, or broker price opinion.

(10)

“Final payment amount” means the amount a borrower will be required to pay the lender at the termination of the shared appreciation agreement.

(11)

“Final value” means the value of the property at the termination of the shared appreciation agreement as calculated using the estimated fair market value of the property, or, in an arms-length sale, the sale price of the property.

(12)

“Financing agreement” has the meaning stated in Commercial Law Article, §12-922, Annotated Code of Maryland.

(13)

“Lender” means a person who makes a mortgage loan under a shared appreciation agreement.

(14)

“Share based repayment amount” means the lender’s share of the property’s appreciation or value at the termination of the shared appreciation agreement as calculated without regard to any contractual limit on the repayment amount.

(15)

“Shared appreciation agreement” has the meaning stated in Financial Institutions Article, §11-501(r), Annotated Code of Maryland.

(16)

“Starting value” means the estimated fair market value of a property minus any discount applied by the lender.

(17)

“Truth in Lending Act” refers to 15 U.S.C. 1601, et seq., and its implementing regulations under 12 CFR 1026.

Regulation .02 Required Disclosures.Link Copy Citation

Financing Agreements and Commitments.

(1)

In addition to providing any other disclosures required by Commercial Law Article, Title 12, Subtitles 9 and 10, Annotated Code of Maryland, a lender receiving an application for a shared appreciation agreement shall, regardless of lien position, provide a borrower with a financing agreement.

(2)

The lender shall satisfy the requirement to provide a financing agreement for a mortgage loan made under a shared appreciation agreement in the following manner:

(a)

By providing the disclosure form found in Appendix A of this chapter, or a substantially similar form, within 10 business days after the date an application for a shared appreciation agreement is completed; and

(b)

By calculating the annualized cost based on the term in each scenario within the form in Appendix A of this chapter using the method prescribed in 12 CFR Part 1026 Appendix J for calculating an annual percentage rate.

(3)

If the terms of the disclosure provided by the lender under §A(2) of this regulation are subject to change, a lender offering a shared appreciation agreement, regardless of lien position, shall provide a borrower with a commitment.

(4)

The lender shall satisfy the requirement to provide a commitment for a mortgage loan made under a shared appreciation agreement in the following manner:

(a)

By providing the disclosure form found in Appendix A of this chapter, or a substantially similar form, with a statement that the terms therein are not subject to change, at least 72 hours before the settlement time agreed to by both parties; and

(b)

Compliance with Disclosures in Appendix A of this Chapter.

(1)

A form will be considered substantially similar to the one in Appendix A of this chapter if it includes all information provided in Appendix A of this chapter.

(2)

A lender shall disclose the following information regarding the estimated fair market value of the property:

(a)

The method used to calculate the estimated fair market value;

(b)

The amount, if any, by which the lender is discounting the estimated fair market value in establishing the property’s initial value;

(c)

The estimated fair market value of the property and any discount applied to that value in determining the starting value; and

(d)

The potential impact of that discount on their repayment amount.

Compliance with Applicable Law. Compliance with this regulation shall constitute compliance with any requirements under Commercial Law Article, §12-922 or 12-1022, Annotated Code of Maryland, to provide a financing agreement or a commitment.

Regulation .03 Calculation of Property Value.Link Copy Citation

Means of Calculating the Property Value.

(1)

The lender shall use the estimated fair market value to determine the starting value of the property.

(2)

The starting value may represent a discount of the estimated fair market value at the time the shared appreciation agreement is executed.

(3)

Except as provided in §B of this regulation, the lender shall use the same method for calculating the estimated fair market value in connection with determining the starting value and the final value.

(4)

An appraisal, AVM, or BPO used to determine fair market value shall be obtained by the lender from an unaffiliated third-party.

(5)

In complying with the requirements of Regulation .02A(2) of this chapter, a lender may use a value stipulated by the borrower as the estimated fair market value if the lender has not yet obtained an appraisal, BPO, or AVM and the terms of the disclosure provided under Regulation .02 of this chapter are subject to change.

(6)

In complying with the requirements of Regulation .02A(4) of this chapter, a lender shall use an appraisal, BPO, or AVM.

Sale of Property. If a shared appreciation agreement terminates with the sale of the property, the final value may not exceed the sale price if:

(1)

The sale was an arms-length sale;

(2)

The property was not sold as part of a foreclosure; and

(3)

The borrower did not retain an interest in the property, including an interest as a life estate.

Regulation .04 Calculating Values in Appendix A of this Chapter.Link Copy Citation

Actual Appreciation. Actual change in value shall be calculated using the All-Transactions House Price Index as published by the Federal Reserve Bank of St. Louis unless this index becomes unavailable, in which case the Commissioner may designate an alternate index.

Final Payment Amount. The final payment amount shall be the lender’s share of appreciation or equity, plus, if applicable under the terms of the agreement, any other amounts payable by the borrower at termination, minus any amount over any repayment limit to which the lender and the borrower have agreed.

Regulation .05 Ability to Repay.Link Copy Citation

A lender offering a shared appreciation agreement is deemed to have given due regard to a borrower’s ability to repay if disclosures are provided by the lender to the borrower in compliance with Regulation .02 of this chapter, provided that:

The shared appreciation agreement does not require periodic payments prior to termination of the agreement; and

The term of the shared appreciation agreement is no less than 5 years.

Chapter 16. Virtual Currency Kiosks

Regulation .01 Scope.Link Copy Citation

Scope. This chapter governs Kiosks, as such term is defined herein, and the conduct of any person operating a Kiosk in the State.

Regulation .02 Definitions.Link Copy Citation

In this chapter, the following terms have the meanings indicated.

Terms Defined

(1)

“Commissioner” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(2)

“Electronic Notice of Fraud” means any

(a)

Any electronic communication from a User to an Operator expressing a concern that a transaction the User conducted using a Virtual Currency Service provided through the Operator’s Kiosk was a Fraudulent Transaction; and

(b)

Sent to an Operator using either:

(i)

A process established on the Operator’s website for submitting a Notice of Fraud through the website; or

(ii)

An email address the Operator uses for receiving Notices of Fraud.

(3)

“Fee” means any cost, charge, fee, or other expenses, however defined, collected by or on behalf of an Operator and collected from or charged to any User in connection with obtaining:

(a)

A Virtual Currency Service from a Kiosk; or

(b)

Any money transmission involving virtual currency facilitated through a Kiosk.

(4)

“Fixed Location Kiosk” means a Kiosk the Operator intends to operate at a single location for the calendar year in which the Kiosk is registered hereunder.

(5)

“Fraud” means:

(a)

Any common law fraud;

(b)

An intentional act or attempt to obtain something of value from a person through threats, willful misrepresentation, or representations made with a reckless disregard for the truth; or

(c)

Any willful false or reckless representation of a material fact, whether by words or by conduct, by false, reckless, or misleading allegations, or by concealment of that which should have been disclosed, which causes a person to act, or fail to act, to the detriment of the person’s interest.

(6)

“Fraudulent Transaction” means any transaction involving a User who obtains a Virtual Currency Service from a Kiosk in connection with the transaction if the User engaged in the transaction because of Fraud perpetrated by another person.

(7)

Kiosk.

(a)

“Kiosk” means a virtual currency kiosk

(b)

“Kiosk” includes any Fixed Location Kiosk and Mobile Kiosk.

(8)

“Mail” means first class United States mail, postage prepaid.

(9)

“Mobile Kiosk” means a Kiosk the Operator intends to operate at more than one location for the calendar year in which the Kiosk is registered.

(10)

“Money Transmission” has the meaning stated in Financial Institutions Article, §12-401, Annotated Code of Maryland.

(11)

“NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.

(12)

“Non-Electronic Notice of Fraud” means:

(a)

Any verbal or written communication from a User to an Operator which expresses a concern that the transaction the User conducted with a Virtual Currency Service provided through the Operator’s Kiosk was a Fraudulent Transaction; and

(b)

Sent to an Operator in any manner that does not constitute an Electronic Notice of Fraud.

(13)

“Notice of Fraud” means any:

(a)

Electronic Notice of Fraud; and

(b)

Non-electronic Notice of Fraud.

(14)

“Operator” means a Virtual Currency Kiosk Operator.

(15)

User.

(a)

“User” means any person using a Kiosk located in the State to obtain a Virtual Currency Service.

(b)

“User” includes a person who authorizes a third party to obtain a Virtual Currency Service using a Kiosk on behalf of the User.

(16)

“Receipt” means the receipt an Operator must dispense or display to a User under Financial Institutions Article §12-1204, Annotated Code of Maryland.

(17)

“Registration Fee” means any fee imposed by the Commissioner to:

(a)

(b)

(18)

“State” means the state of Maryland.

(19)

“Virtual Currency” has the meaning stated in Financial Institutions Article, §12-1201, Annotated Code of Maryland.

(20)

“Virtual Currency Address” means an alphanumeric identifier representing a destination for a virtual currency transfer that is associated with a virtual currency wallet.

(21)

“Virtual Currency Kiosk” has the meaning stated in Financial Institutions Article, §12-1201, Annotated Code of Maryland.

(22)

“Virtual Currency Kiosk Operator” has the meaning stated in Financial Institutions Article, §12-1201, Annotated Code of Maryland.

(23)

“Virtual Currency Service” has the meaning stated in Financial Institutions Article, §12-1201, Annotated Code of Maryland.

(24)

“Virtual Currency Wallet” means a software application or other mechanism providing a means for holding, storing and transferring virtual currency.

Regulation .03 Registration.Link Copy Citation

Registration of Operator.

(1)

A person may not operate a Kiosk in the State after January 1, 2026, unless registered as an Operator with the Commissioner.

(2)

A person shall register through NMLS with the Commissioner as an Operator:

(a)

On or before January 1, 2026, if operating a Kiosk in the State on or before that date; or

(b)

Prior to operating a Kiosk in the State after January 1, 2026.

(3)

A person registering as an Operator shall pay:

(a)

The Commissioner a non-refundable Registration Fee of $2,000; and

(b)

Any cost or fee required by NMLS.

(4)

A person registering as an Operator shall provide through NMLS:

(a)

The legal name of the Operator and any trade name used by the Operator in accordance with Financial Institutions Article §2-121, Annotated Code of Maryland;

(b)

The address of the operator’s principal executive office;

(c)

The names of any persons directly or indirectly holding an ownership share of 10 percent or more of the operator;

(d)

A flow of funds for all Virtual Currency Services the Operator will offer through its Kiosks; and

(e)

Any other information the Commissioner requests.

Registration of Kiosks.

(1)

An Operator may not operate a Kiosk in the State on or after January 1, 2026, unless the Operator has registered that Kiosk with the Commissioner.

(2)

A person shall register each Kiosk operated in the State through NMLS with the Commissioner:

(a)

On or before January 1, 2026, if operating that Kiosk in the State on or before that date; or

(b)

Prior to operating that Kiosk in the State after January 1, 2026.

(3)

An Operator registering a Kiosk shall pay:

(a)

The Commissioner a non-refundable Registration Fee of $200 for each registered Kiosk; and

(b)

Any fee required by NMLS.

(4)

An Operator registering a Kiosk shall provide through NMLS:

(a)

Unique identifying information for the Kiosk, such as the manufacturer name, model number, serial number, or asset tag;

(b)

If the Kiosk is a Fixed Location Kiosk, the address at which the Kiosk will be operated;

(c)

If the Kiosk is a Mobile Kiosk:

(i)

The address of each location at which the Operator expects to operate the Kiosk for more than 30 calendar days; and

(ii)

The geographic area encompassing the locations at which the Operator expects to operate the Kiosk for 30 calendar days or less;

(d)

A description of all services to be provided by the Kiosk; and

(e)

Any other information the Commissioner requests.

(5)

An Operator shall designate a Kiosk intended for use as a Fixed Location Kiosk as a Fixed Location Kiosk through NMLS in accordance with the process the Commissioner requires.

(6)

An Operator shall designate a Kiosk intended for use as a Mobile Kiosk as a Mobile Kiosk through NMLS in accordance with the process the Commissioner requires.

(7)

An Operator may only operate a Kiosk at the address or, if a Mobile Kiosk, in the geographic area listed for that Kiosk in NMLS.

(8)

An Operator may change the designation of a Kiosk as either a Mobile Kiosk or a Fixed Location Kiosk through NMLS by:

(a)

Changing the designation through the process the Commissioner requires;

(b)

Paying any required fee; and

(c)

Updating the Kiosk’s location information.

(9)

Contemporaneously with changing a Kiosk’s location, an Operator must update information in NMLS to accurately reflect the new location.

Term of Registrations and Renewals.

(1)

The term of any registration under this regulation shall:

(a)

Begin the day the Operator completes the registration in NMLS; and

(b)

Expire on December 31 of the year:

(i)

The Operator completes the registration, if completed before November 1; or

(ii)

Succeeding the year the Operator completes the registration, if completed between November 1 and December 31.

(2)

On or after November 1 of each year, registration as an Operator and for each individual Kiosk under this regulation may be renewed for a 1-year term if the Operator:

(a)

Is otherwise entitled to be registered;

(b)

Completes the renewal process established through NMLS;

(c)

Provides through NMLS any information the Commissioner requests as part of the renewal;

(d)

Submits through NMLS the annual report required by Regulation .08 of this chapter;

(e)

Pays any fees imposed by NMLS;

(f)

Pays the Commissioner a non-refundable Registration Fee of $2,000 to register as an Operator; and

(g)

Pays the Commissioner a non-refundable Registration Fee of $200 for each Kiosk the Operator intends to operate in the State.

A person may not renew registration for a Kiosk unless the person has renewed its registration as an Operator.

All Registration Fees shall be paid to the Commissioner through NMLS.

Money Transmission.

(1)

Registration as an Operator does not exempt a person from licensure under Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland, if one or more Kiosks operated by the Operator facilitate money transmission.

(2)

Possession of a license, or exemption from licensure, under Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland, does not exempt a person from registration under Financial Institutions Article, Title 12, Subtitle 12, Annotated Code of Maryland, if that person operates a Kiosk offering virtual currency services.

(3)

A Kiosk shall be deemed to facilitate money transmission if it is capable of facilitating money transmission, regardless of whether the Operator purports to offer money transmission services through that kiosk, unless the Operator disables this function and prevents such facilitation.

(4)

An Operator offering both Virtual Currency Services and money transmission through a Kiosk shall fully comply with all applicable provisions of:

(a)

Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland, and all regulations issued thereunder; and

(b)

Financial Institutions Article, Title 12, Subtitle 12, Annotated Code of Maryland, and all regulations issued thereunder.

Other Services.

(1)

An Operator may only offer the following services through a Kiosk:

(a)

Virtual Currency Services;

(b)

Money transmission, provided the Operator complies with the licensing provisions of Financial Institutions Article, Title 12, Subtitle 4, Annotated Code of Maryland; and

(c)

Any other service State law expressly authorizes an operator to offer through a Kiosk.

(2)

Any service offered through a Kiosk must comply with all State law relating to that service, including all applicable licensing or registration requirements.

Regulation .04 Fee Refunds for Fraudulent Transactions.Link Copy Citation

Scope.

(1)

This regulation governs the procedure by which a User may request a Fee Refund on a transaction the User alleges is a Fraudulent Transaction.

(2)

A User’s rights under this regulation are in addition to any rights a User may have under any applicable law.

Definitions.

(1)

In this regulation, the following terms have the meanings indicated.

(2)

Terms Defined.

(a)

“Fee Refund” means a refund under this regulation of the Fee charged to that User.

(b)

“Refund Claim” means a User’s claim for a Fee Refund.

(c)

“Refund Denial” means an Operator’s denial of a Refund Claim.

(d)

“Written Confirmation” means a written confirmation of a verbally given Notice of Fraud.

Notice of Fraud by User.

(1)

An Operator shall treat any Notice of Fraud as a Refund Claim.

(2)

A User must provide a Notice of Fraud to an Operator no more than 90 calendar days after the alleged Fraudulent Transaction.

(3)

A Notice of Fraud is sufficient for this regulation if it:

(a)

Includes the User’s name;

(b)

Provides a copy of the Receipt or otherwise provides information sufficient to identify the Virtual Currency Services the User obtained through the Operator’s Kiosk; and

(c)

Contains a brief description of why the User believes the transaction was a Fraudulent Transaction.

(4)

An Operator may not engage in any act or subterfuge to make it difficult for a User to provide a Notice of Fraud.

Place of Notice.

(1)

An Operator must offer a User:

(a)

At least one method to submit an Electronic Notice of Fraud; and

(b)

At least one method to submit a Non-electronic Notice of Fraud.

(2)

The Operator shall conspicuously include information on its website and in any promotional materials explaining how a User may submit:

(a)

An Electronic Notice of Fraud; and

(b)

A Non-electronic Notice of Fraud.

(3)

An Operator may require the User to submit a Non-electronic Notice of Fraud only to a telephone number or address disclosed on the Receipt, provided that the Operator:

(a)

Has reasonable procedures to redirect a User to the specified telephone number or address if the User attempts to provide a Non-electronic Notice of Fraud by other means;

(b)

Has reasonable procedures to route any written Non-electronic Notice of Fraud the Operator receives at any other address to the department or personnel responsible for investigating and resolving a Refund Claim; and

(c)

Conspicuously displays the designated telephone number or address for a User to provide a Non-electronic Notice of Fraud on any website the Operator maintains.

(4)

If a User provides a written Notice of Fraud to an address other than the address designated by the Operator and the Operator receives such Notice of Fraud:

(a)

The Operator must process the Notice of Fraud as a Refund Claim in accordance with this regulation; and

(b)

The time frame for investigating and resolving the Refund Claim shall begin 5 business days after the Operator’s receipt of the Notice of Fraud at the incorrect address.

Written Confirmation.

(1)

An Operator may require a User to provide Written Confirmation of a verbal Non-electronic Notice of Fraud within 30 calendar days of the verbal Non-electronic Notice of Fraud.

(2)

An Operator requiring a Written Confirmation under this Section shall:

(a)

At the time of the verbal Non-electronic Notice of Fraud:

(i)

Inform the User that the Operator must receive a Written Confirmation; and

(ii)

Inform the User that the Operator will mail the User a notice concerning the Written Confirmation; and

(b)

Within 3 business days of the verbal Non-electronic Notice of Fraud, mail the User written notice stating:

(i)

The Operator requires a Written Confirmation;

(ii)

A specific date at least 30 calendar days after the date of the notice by which the User must submit the Written Confirmation;

(iii)

The address to send the Written Confirmation; and

(iv)

The User’s failure to timely provide a Written Confirmation may result in a Refund Denial.

(3)

An Operator may not require the Written Confirmation to include information inconsistent with the definition of a Non-electronic Notice of Fraud.

(4)

A User who verbally provides a Non-electronic Notice of Fraud within the time frame established by §E(2) of this regulation has timely submitted a Notice of Fraud.

(5)

If a User fails to provide the Written Confirmation within 30 calendar days of the Operator’s full compliance with §E(2) of this regulation:

(a)

The Operator may mail written notice to the User:

(i)

Informing the User that the Operator has not received the Written Confirmation;

(ii)

Requiring the User to provide the Written Confirmation within 30 calendar days of the notice; and

(iii)

Informing the User the Operator may deny the Refund Claim if the User fails to provide the Written Confirmation within 30 calendar days of the notice.

(b)

A User’s failure to provide a timely Written Confirmation following the Operator’s compliance with §E(5)(a) of this regulation constitutes grounds to issue a Refund Denial.

Investigation and Resolution.

(1)

Except as otherwise expressly set forth in this regulation, an Operator shall have 30 calendar days from receipt of a Notice of Fraud to investigate and resolve the Refund Claim.

(2)

If the Operator requested a Written Confirmation in compliance with §E of this regulation, the Operator shall have 30 calendar days from receipt of the Written Confirmation to investigate and resolve the Refund Claim.

(3)

In connection with its investigation of a Refund Claim, an Operator may:

(a)

Inquire if the User filed a police report;

(b)

Inquire if the User possesses any documents or communications relating to the alleged Fraudulent Transaction; and

(c)

Request copies of any police report filed or documents possessed by the User and relating to the alleged Fraudulent Transaction.

(4)

In connection with its investigation of a Refund Claim, an Operator may not:

(a)

Require the filing of a police report;

(b)

Require the User to provide copies of a filed police report or documents relating to the alleged Fraudulent Transaction;

(c)

Imply that a failure to file a police report, provide copies of a filed police report, or provide copies of documents relating to the alleged Fraudulent Transaction will impact the Refund Claim;

(d)

Issue a Refund Denial based on a failure to file a police report, failure to provide copies of a filed police report, or failure to provide copies of documents relating to the to the alleged Fraudulent Transaction; or

(e)

Charge any cost, fee, or other amount to investigate and resolve a Refund Claim.

(5)

A User shall reasonably cooperate with the Operator’s investigation of a Refund Claim by answering questions concerning the Fraudulent Transaction.

(6)

Within 3 business days of completing its investigation, an Operator shall resolve a Refund Claim by mailing the User either:

(a)

A Refund Denial; or

(b)

A statement granting the Refund Claim.

(7)

A Refund Denial must:

(a)

Generally describe the Operator’s investigative process;

(b)

List any facts the Operator relied on for the Refund Denial;

(c)

Describe any other factors the Operator relied on for the Refund Denial;

(d)

Inform the User of the right to file a complaint regarding the Refund Denial with the Commissioner; and

(e)

Provide the User with a link or other information needed to reach the Commissioner.

(8)

An Operator may not issue a Refund Denial based on any of the following:

(a)

User’s negligence;

(b)

User’s failure to consider or act upon warnings and disclosures provided by the Operator;

(c)

User’s responses to questions posed by the Operator when the User obtained the Virtual Currency Services; or

(d)

User submission of a Notice of Fraud for a prior transaction.

(9)

A Fee Refund shall be issued promptly in United States currency.

(10)

A User receiving a Refund Denial may file a complaint with the Commissioner.

(11)

A complaint concerning a Refund Denial must be filed with the Commissioner within 3 years of the User’s receipt of the Refund Denial.

Regulation .05 Fraud Prevention.Link Copy Citation

An Operator shall maintain restrictions that prevent more than one User of the Operator from using the same virtual currency wallet.

An Operator shall have the ability to prevent designated virtual currency wallets from being used at any Kiosk of the Operator.

An Operator shall use an established third party that specializes in performing blockchain analyses to preemptively perform such analyses to identify and prevent high risk or sanctioned virtual currency wallets from being used by Users at Kiosks of the Operator.

An Operator shall establish, in the Operator’s policies and procedures, a risk-based method of monitoring Users on a post-transaction basis.

An Operator shall designate and employ a chief compliance officer.

Regulation .06 Communications and Notices.Link Copy Citation

An Operator shall provide all required notices and communications to a User under this chapter using information the Operator collects from the User under Financial Institutions Article, §12-1204 (c), Annotated Code of Maryland.

This regulation does not apply to:

(1)

The Receipt; and

(2)

Any notices or communications this chapter requires the Operator to:

(a)

Physically place on the Kiosk; or

(b)

Display on a Kiosk screen.

An Operator shall provide reasonable procedures for a User to securely change contact information the User previously supplied to the Operator.

An Operator shall provide reasonable procedures for a User to select the User’s preferred method of communication.

The User’s selection of a preferred method of communication shall not relieve an Operator of any duty to provide information in a manner expressly required by this chapter.

Regulation .07 Lighting, Safety, and Signage.Link Copy Citation

Each Kiosk operated in the State by an Operator shall comply with Financial Institutions Article, §§1-402 (b), (c) and 1-402.1, Annotated Code of Maryland for each Kiosk it operates.

For the purposes of this regulation only, the Operator shall treat the Kiosk as an automated teller machine.

The exceptions contained in Financial Institutions Article, §§1-402 (a), Annotated Code of Maryland do not apply to a Kiosk.

An Operator shall evaluate the safety of each Kiosk, regardless of location.

The required safety evaluation need not consider the factors identified in Financial Institutions Article, §§1-402(b)(2), Annotated Code of Maryland, for a Kiosk located in a building meeting the requirements of Financial Institutions Article, §§1-402 (a)(2)(i), Annotated Code of Maryland.

Each Kiosk operated in the State shall conspicuously display signage stating: “This Kiosk offers services relating to virtual currencies. The Maryland Commissioner of Financial Regulation will accept all questions or complaints regarding this Kiosk, operated by (name of Operator and NMLS unique identifier) at (address of Commissioner), phone (toll-free phone number of the Commissioner), or https://labor.maryland.gov/finance/ . You may confirm registration of this Kiosk with the Maryland Commissioner of Financial Regulation at (NMLS consumer access website).”

Regulation .08 Screen Disclosures.Link Copy Citation

All required on-screen notices and disclosures under Financial Institutions Article §12-1201 et. seq., Annotated Code of Maryland, and this chapter shall:

(1)

Remain on the Kiosk screen for a minimum of:

(a)

Four seconds if the notice or disclosure contains 12 or less words; or

(b)

One second for every 3 words, or fractions thereof, contained in the notice or disclosure; and

(2)

Require User action to advance to another screen.

For the purposes of calculating the time period a notice or disclosure must remain on a screen pursuant to Part A of this regulation, the words contained in a notice or disclosure include words that require scrolling to view.

Regulation .09 Receipts.Link Copy Citation

In addition to information required by Financial Institutions Article, §12-1204, Annotated Code of Maryland, a Receipt shall include:

(1)

The name of, and contact information for, the Operator, including, but not limited to, the Operator's business address and a customer service telephone number established by the Operator to answer questions and register complaints;

(2)

The Operator’s NMLS unique identifier;

(3)

The User’s name;

(4)

The date of the transaction reflected in the Receipt;

(5)

The amount of such virtual currency transaction expressed in United States currency;

(6)

The exchange rate for the transaction, if applicable;

(7)

The virtual currency address for that virtual currency transaction;

(8)

The full unique transaction hash or identification number associated with the transaction;

(9)

The public virtual currency address of the User;

(10)

Any fee charged by the Operator;

(11)

Any tax collected by the Operator for such virtual currency transaction;

(12)

If the transaction reflected in the Receipt involves money transmission, the recipient’s name and virtual currency address;

(13)

A statement that the User may request a Fee Refund of any Fee charged in connection with a Fraudulent Transaction by submitting a Notice of Fraud;

(14)

A statement explaining how a User may submit a Notice of Fraud, including any address or phone number the Operator has designated pursuant to Regulation .03 of this chapter for submitting a Notice of Fraud; and

(15)

A statement the Maryland Commissioner of Financial Regulation will accept all questions or complaints regarding the Kiosk, at (address of Commissioner), phone (toll-free phone number of the Commissioner), or https://labor.maryland.gov/finance/.

The Receipt shall be provided in English and in the any other language principally used by the Operator to advertise its services or transact business on the Kiosk.

The Kiosk shall offer the User the ability to elect to receive the Receipt electronically at the time of the transaction;

If the User does not elect electronic delivery of the Receipt, the Receipt shall be delivered to the User in retainable form at the time of the transaction.

An Operator shall maintain all transactional data required for a Receipt for a period of 7 years from the date of the transaction.

A Receipt that satisfies the requirements of this Regulation shall be deemed to satisfy the requirements contained in COMAR 09.03.14.16C for a virtual currency transaction conducted on a Kiosk that involves money transmission.

Compliance with COMAR 09.03.14.16C does not relieve an Operator of any additional requirements imposed by this regulation.

Regulation .10 Annual Report.Link Copy Citation

An Operator shall prepare an annual report listing the following information for each Kiosk it maintains:

(1)

Information sufficient to identify that Kiosk;

(2)

The total number of transactions and the total dollar amount of transactions processed by that Kiosk;

(3)

If the Kiosk was not operating for the full 12 months covered by the annual report, information sufficient to determine the timeframe in which the Operator operated that Kiosk in the State;

(4)

The number of Notices of Fraud received for that Kiosk;

(5)

If the Kiosk is a Mobile Kiosk, the location of the Mobile Kiosk at the time of the transaction described in each Notice of Fraud;

(6)

The number and dollar amount of Refund Denials issued for that Kiosk;

(7)

The number and dollar amount of Fee Refunds issued for that Kiosk; and

(8)

The dollar amount of Fees subject to Notices of Fraud for that Kiosk.

The Annual Report required by this regulation:

(1)

Should include information with respect to each Kiosk for the lesser of:

(a)

The preceding 12 months; or

(b)

The timeframe in which that Kiosk offered Virtual Currency Services in the State; and

(2)

May run for any 12 consecutive monthly period ending no earlier than September 1 of the current calendar year.

The Operator shall submit this annual report to the Commissioner through NMLS:

(1)

At the time the Operator renews its Operator registration in accordance with Regulation .03 of this chapter; or

(2)

On or before December 31st of the current calendar year if the Operator does not intend to renew its Operator registration in accordance with Regulation .03 of this chapter.

Title 09 — Subtitle 03. Commissioner of Financial Regulation

Chapter 01. Credit Unions

Regulation .01—.07 Repealed.LinkCopy Citation

Regulation .08 Real Estate Lending.LinkCopy Citation

Regulation .09 Repealed.LinkCopy Citation

Regulation .10 Investments.LinkCopy Citation

Regulation .11 Accounting Procedures and Records Retention.LinkCopy Citation

Regulation .12 and .13 Repealed.LinkCopy Citation

Regulation .14 Member Business Loans.LinkCopy Citation

Regulation .15 Maximum Loans to a Single Member.LinkCopy Citation

Regulation .16 Reports to the Commissioner of Financial Regulation.LinkCopy Citation

Regulation .17 Boards of Directors — Electronically Conducted Elections.LinkCopy Citation

Chapter 02. General Regulations

Regulation .01 Definitions.LinkCopy Citation

Regulation .02 Repealed.LinkCopy Citation

Regulation .03 Repealed.LinkCopy Citation

Regulation .04 Books and Records of Certain Regulated Persons.LinkCopy Citation

Regulation .05 Unfair and Deceptive Trade Practices.LinkCopy Citation

Regulation .06 Contested Case Hearings Before the Commissioner.LinkCopy Citation

Regulation .07 Contested Case Hearings Delegated to the Office of Administrative Hearings.LinkCopy Citation

Regulation .08 Remote Work for Employees of Licensees.LinkCopy Citation

Regulation .09 Approval for Addition, Deletion, or Change of Location or Trade Name.LinkCopy Citation

Regulation .10 Non-Depository Licensee Assessment.LinkCopy Citation

Regulation .11 Licensees Providing Check Cashing Services.LinkCopy Citation

Regulation .12 Licensees Providing Money Transmission Services.LinkCopy Citation

Regulation .13 Availability of List of Licensed Locations.LinkCopy Citation

Chapter 03. Procedure for Handling Applications

Regulation .01 Scope.LinkCopy Citation

Regulation .02 Definitions.LinkCopy Citation

Regulation .03 Publication.LinkCopy Citation

Regulation .04 Solicitation of Comments.LinkCopy Citation

Regulation .05 Comments and Request for a Hearing.LinkCopy Citation

Regulation .06 Public Information.LinkCopy Citation

Regulation .07 Scheduling of a Hearing.LinkCopy Citation

Regulation .08 Notice of Hearings.LinkCopy Citation

Regulation .09 Hearing Rules.LinkCopy Citation

Regulation .10 Decision.LinkCopy Citation

Regulation .11 Retained Authority.LinkCopy Citation

Chapter 04. Retail Installment Sellers

Regulation .01 Repossession.LinkCopy Citation

Regulation .02 Application of Proceeds of Resale by Holder of Repossessed Goods.LinkCopy Citation

Regulation .03 Insurance.LinkCopy Citation

Chapter 05. Code of Conduct—Mortgage Brokers and Mortgage Bankers

Chapter 06. Mortgage Lenders

Regulation .01 Scope.LinkCopy Citation

Regulation .02 Definitions.LinkCopy Citation

Regulation .03 Delivery and Receipt of Mortgage Disclosures.LinkCopy Citation

Regulation .04 Licensing and Application Requirements.LinkCopy Citation

Regulation .05 Records.LinkCopy Citation

Regulation .06 Advertising and Solicitation.LinkCopy Citation

Regulation .07 Financing Agreements.LinkCopy Citation

Regulation .08 Agreements with the Borrower.LinkCopy Citation

Regulation .09 Loan Processing.LinkCopy Citation

Regulation .10 Fees.LinkCopy Citation

Regulation .11 Closing.LinkCopy Citation

Regulation .12 Brokers.LinkCopy Citation

Regulation .13 Expedition.LinkCopy Citation

Regulation .14 Payoff and Accounting Statements — Releases.LinkCopy Citation

Regulation .15 Waivers.LinkCopy Citation

Regulation .16 Bonds, Letters of Credit, and Trust Accounts.LinkCopy Citation

Regulation .17 Enforcement.LinkCopy Citation

Regulation .18 Continuing Education.LinkCopy Citation

Regulation .19 Ability to Repay.LinkCopy Citation

Regulation .20 Duty of Care.LinkCopy Citation

Regulation .21 Nontraditional and Higher-Priced Mortgage Loans.LinkCopy Citation

Regulation .22 Fees.LinkCopy Citation

Regulation .23 Supervision of Mortgage Loan Originators.LinkCopy Citation

Regulation .24 Data Protection.LinkCopy Citation

Regulation .25 Significant Event Reporting.LinkCopy Citation

Regulation .26 Corporate Governance.LinkCopy Citation

Regulation .27 Enhanced Prudential Standards for Certain Mortgage Servicers.LinkCopy Citation

Regulation .28 Examination of Licensees.LinkCopy Citation

Chapter 07. Credit Reporting Agencies

Regulation .01 Scope.LinkCopy Citation

Regulation .02 Definitions.LinkCopy Citation

Regulation .03 Annual Registration.LinkCopy Citation

Regulation .04 Bond.LinkCopy Citation

Regulation .05 Operational Procedures.LinkCopy Citation

Regulation .06 Permissible Purposes of Consumer Reports.LinkCopy Citation

Regulation .07 Current Listing of Consumer Reporting Agencies.LinkCopy Citation

Regulation .01—.07 Repealed.Link Copy Citation

Regulation .08 Real Estate Lending.Link Copy Citation

Regulation .09 Repealed.Link Copy Citation

Regulation .10 Investments.Link Copy Citation

Regulation .11 Accounting Procedures and Records Retention.Link Copy Citation

Regulation .12 and .13 Repealed.Link Copy Citation

Regulation .14 Member Business Loans.Link Copy Citation

Regulation .15 Maximum Loans to a Single Member.Link Copy Citation

Regulation .16 Reports to the Commissioner of Financial Regulation.Link Copy Citation

Regulation .17 Boards of Directors — Electronically Conducted Elections.Link Copy Citation

Regulation .01 Definitions.Link Copy Citation

Regulation .02 Repealed.Link Copy Citation

Regulation .03 Repealed.Link Copy Citation

Regulation .04 Books and Records of Certain Regulated Persons.Link Copy Citation

Regulation .05 Unfair and Deceptive Trade Practices.Link Copy Citation

Regulation .06 Contested Case Hearings Before the Commissioner.Link Copy Citation

Regulation .07 Contested Case Hearings Delegated to the Office of Administrative Hearings.Link Copy Citation

Regulation .08 Remote Work for Employees of Licensees.Link Copy Citation

Regulation .09 Approval for Addition, Deletion, or Change of Location or Trade Name.Link Copy Citation

Regulation .10 Non-Depository Licensee Assessment.Link Copy Citation

Regulation .11 Licensees Providing Check Cashing Services.Link Copy Citation

Regulation .12 Licensees Providing Money Transmission Services.Link Copy Citation

Regulation .13 Availability of List of Licensed Locations.Link Copy Citation

Regulation .01 Scope.Link Copy Citation

Regulation .02 Definitions.Link Copy Citation

Regulation .03 Publication.Link Copy Citation

Regulation .04 Solicitation of Comments.Link Copy Citation

Regulation .05 Comments and Request for a Hearing.Link Copy Citation

Regulation .06 Public Information.Link Copy Citation

Regulation .07 Scheduling of a Hearing.Link Copy Citation

Regulation .08 Notice of Hearings.Link Copy Citation

Regulation .09 Hearing Rules.Link Copy Citation

Regulation .10 Decision.Link Copy Citation

Regulation .11 Retained Authority.Link Copy Citation

Regulation .01 Repossession.Link Copy Citation

Regulation .02 Application of Proceeds of Resale by Holder of Repossessed Goods.Link Copy Citation

Regulation .03 Insurance.Link Copy Citation

Regulation .01 Scope.Link Copy Citation

Regulation .02 Definitions.Link Copy Citation

Regulation .03 Delivery and Receipt of Mortgage Disclosures.Link Copy Citation

Regulation .04 Licensing and Application Requirements.Link Copy Citation

Regulation .05 Records.Link Copy Citation

Regulation .06 Advertising and Solicitation.Link Copy Citation

Regulation .07 Financing Agreements.Link Copy Citation

Regulation .08 Agreements with the Borrower.Link Copy Citation

Regulation .09 Loan Processing.Link Copy Citation

Regulation .10 Fees.Link Copy Citation

Regulation .11 Closing.Link Copy Citation

Regulation .12 Brokers.Link Copy Citation

Regulation .13 Expedition.Link Copy Citation

Regulation .14 Payoff and Accounting Statements — Releases.Link Copy Citation

Regulation .15 Waivers.Link Copy Citation

Regulation .16 Bonds, Letters of Credit, and Trust Accounts.Link Copy Citation

Regulation .17 Enforcement.Link Copy Citation

Regulation .18 Continuing Education.Link Copy Citation

Regulation .19 Ability to Repay.Link Copy Citation

Regulation .20 Duty of Care.Link Copy Citation

Regulation .21 Nontraditional and Higher-Priced Mortgage Loans.Link Copy Citation

Regulation .22 Fees.Link Copy Citation

Regulation .23 Supervision of Mortgage Loan Originators.Link Copy Citation

Regulation .24 Data Protection.Link Copy Citation

Regulation .25 Significant Event Reporting.Link Copy Citation

Regulation .26 Corporate Governance.Link Copy Citation

Regulation .27 Enhanced Prudential Standards for Certain Mortgage Servicers.Link Copy Citation

Regulation .28 Examination of Licensees.Link Copy Citation

Regulation .01 Scope.Link Copy Citation

Regulation .02 Definitions.Link Copy Citation

Regulation .03 Annual Registration.Link Copy Citation

Regulation .04 Bond.Link Copy Citation

Regulation .05 Operational Procedures.Link Copy Citation

Regulation .06 Permissible Purposes of Consumer Reports.Link Copy Citation

Regulation .07 Current Listing of Consumer Reporting Agencies.Link Copy Citation

Regulation .01 Scope.Link Copy Citation

Regulation .02 Definitions.Link Copy Citation

Regulation .03 Education and Testing Requirements.Link Copy Citation

Regulation .04 Duty of Care.Link Copy Citation

Regulation .05 Applications.Link Copy Citation

Regulation .06 Fees.Link Copy Citation

Regulation .07 Locations.Link Copy Citation

Regulation .08 Loan Origination Under Expired License.Link Copy Citation