Maryland Amends Net Worth Rules for Certain Mortgage Lending, Brokering, and Servicing Activities, Among Other Significant License-Related Amendments

Maryland recently signed into law House Bill 61 (HB 61), which, among other things, identifies minimum net worth requirements for mortgage loan servicers, clarifies and expands available methods to meet minimum net worth requirements for mortgage lenders, mortgage brokers, and mortgage loan servicers under the Maryland Mortgage Lender Law, and amends license duration for mortgage loan originator licensees.

Certain significant provisions in HB 61 include the following:

• Establishment of minimum tangible net worth requirements for mortgage loan servicers:
  • For those who operate as an approved servicer for a government-sponsored enterprise (GSE), the minimum is in the largest amount required by GSE standards; and
  • For those who do not operate as an approved servicer for a GSE, the minimum is determined based on the unpaid principal balance of the entire servicing portfolio (with the net worth requirement ranging from $100,000 to $1,000,000, depending on the portfolio balance);
• Clarification that mortgage lenders and mortgage brokers, but not mortgage servicers, may use a working capital line of credit to meet minimum net worth requirements;
• Authorization for mortgage lenders, mortgage brokers, and mortgage loan servicers to use an irrevocable letter of credit to satisfy minimum net worth requirements;
• Removal of the provision cancelling a license under the Maryland Mortgage Lender Law if the licensee fails to timely notify about a change in place of business;
• With regard to the exception from the requirement for a Maryland Mortgage Lender Law licensee to keep certain books and records at its place of business, extension of the time period related to such exception from 25 months in a storage facility to 61 months in a storage facility;
• Potential reduction in the exam frequency of Maryland Mortgage Lender Law licensees by changing the timeframe of required examination frequency from at least once during any 36-month period to at least once during any 60-month period; and
• Amendment to the licensing scheme for mortgage loan originators under the Maryland Mortgage Originator Law so that a license issued before November 1 expires on December 31 of the same year, while a license issued on or after November 1 expires on December 31 of the following year.

HB 61 becomes effective on October 1, 2019.