Win for Mortgage Industry: license requirement inapplicable to the mortgage industry and trusts
The Maryland Court of Appeals issued a long-awaited decision today in the consolidated cases of Blackstone v. Sharma, Shanahan v. Marvastian, O’Sullivan v. Altenburg, and Goldberg v. Neviaser, Case No. 040, September Term 2017 argued November 30, 2017. In a 64-page opinion with two dissents, the Court overruled the decision below, held that the legislative intent and history of the statute did not intend to force registration on foreign statutory trusts and remanded the case to the Circuit Courts to be reinstated and handled there consistent with the holding of the Court of Appeals.
The Court analyzed the plain meaning of the statutes and the ordinary and dictionary definitions of “doing business” as well as the legislative history and intent and certain studies and reports from Maryland regulatory agencies to reach its conclusion. The Court found that there was never an intent to apply the licensing requirement to the mortgage industry. The legislation was specifically targeted at about 40 debt collection agencies whose primary business was buying defaulted consumer debt and being compensated on a percentage of the recovery. “The legislative history persuades this Court that the General Assembly did not intend to regulate or license the mortgage industry actors, including foreign statutory trusts serving as a repository for mortgage loans, as collection agencies due to the specific exemptions and the limited scope of MCALA.”
The decision clarified the significance and impact of the Maryland Collection Agency Licensing Act (MCALA) codified generally at Md. BUSINESS REGULATION Code Ann. § 7-101 et seq. (2017). Lower courts held that judgments and foreclosure decrees obtained against consumers in violation of MCALA were void and unenforceable and stated that Maryland foreclosures conducted by unlicensed investors were covered by the statute whether the debt servicers were licensed or not. This had the effect of imposing licensing requirements not only on loan servicers who were generally already licensed but upon investors and trusts holding Notes and secured obligations, who were generally not individually licensed prior to the decisions.
Pending cases should now be reviewed to determine whether they should resume or be reinstated in compliance with the statute. As a reminder, the statute still contains a number of exceptions to the licensing requirement which may include non-resident borrowers, debt which was not in default at the time of acquisition, property for which relief from stay was obtained in a bankruptcy proceeding, certain deceased borrowers, and vacant or abandoned properties. Such situations should be reviewed by a licensed Maryland attorney familiar with both real property and debt collection requirements before proceeding.
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If you would like to discuss these potential changes, As always, Stern & Eisenberg will keep you updated on any developments or changes as we learn them. If you have questions, please contact Kevin Hildebeidel, Esq., Regional Managing Attorney - Non-Juidicial and Quasi-Judicial States, at firstname.lastname@example.org or by calling (215) 572-8111. Stern & Eisenberg will be hosting a webinar on this issue on August 8, 2018, at 3:00 P.M. Eastern. For webinar registration, click the link above to complete your complimentary registration.
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