Title: Sweeney v. Savings First Mortgage

State: maryland

Issuer: Maryland Supreme Court

Document:

Linda R. Sweeney v. Savings First Mortgage, L.L.C., No. 148, Sept. Term 2004.  Opinion
by Harrell, J.
PREEMPTION - MARYLAND FINDER’S FEE LAW - FEDERAL DEPOSITORY
INSTITUTIONS DEREGULATION AND MONETARY CONTROL ACT (DIDMCA) -
MORTGAGE BROKERS ARE NOT “CREDITORS” UNDER THE DIDMCA -
MARYLAND FINDER’S FEE LAW NOT PREEMPTED UNDER THE DIDMCA
The Maryland Finder’s Fee Law is not preempted by federal law.  The preemption provision
of 12 U.S.C. § 1735f-7a only operates with respect to state laws seeking to regulate the
creditor involved in a covered loan transaction.  Mortgage brokers do not satisfy the
definition of “creditor” within the meaning of the DIDMCA.  Because the Maryland Finder’s
Fee Law specifically regulates only mortgage brokers, and the fees that they charge, it is not
preempted by the DIDMCA.
Circuit Court for Frederick County
Case # C-04-0471 
IN THE COURT OF APPEALS OF
MARYLAND
No. 148
September Term, 2004
LINDA SWEENEY
v.
SAVINGS FIRST MORTGAGE, LLC
Bell, C.J.
                    Raker
Wilner
Cathell
Harrell
Battaglia
Greene,
JJ.
Opinion by Harrell, J.
Filed:   August 9, 2005
1All citations in this opinion to the Maryland Code will be to this version of the
Commercial Law Article in effect at the time of the operative facts of this case, unless
otherwise specified.
2Section 12-804(c) states:
Mortgage loan obtained more than once on same property. - A
mortgage broker obtaining a mortgage loan with respect to the
same property more than once within a 24-month period may
charge a finder’s fee only on so much of the loan as is in excess
of the initial loan.
3The Depository Institutions Deregulation and Monetary Control Act is codified at
12 U.S.C. § 1735f-7a (2000).
4Md. Code (1975, 2002 Repl. Vol.), § 5-107 of the Courts and Judicial Proceedings
Article provides that “[a] prosecution or suit for a fine, penalty, or forfeiture shall be
instituted within one year after the offense was committed.”
Linda R. Sweeney brought suit against Savings First Mortgage, L.L.C. (Savings First)
in the Circuit Court for Frederick County, alleging a violation of the Maryland Finder’s Fee
Law.  Md. Code (1975, 2000 Repl. Vol.),  §§ 12-801 - 12-809 of the Commercial Law
Article.1  Savings First acted as a mortgage broker for Ms. Sweeney in the procurement of
two mortgage refinance loans within a one-year period.  Ms. Sweeney alleged that the
mortgage broker fee charged by Savings First in connection with the second loan was in
violation of the Maryland statute, specifically § 12-804(c).2
Savings First responded to Ms. Sweeney’s suit by filing a motion to dismiss, or, in
the alternative, for summary judgment.  In support of its motion, Savings First argued that
the Finder’s Fee Law was preempted by § 501(a)(1) of the Federal Depository Institutions
Deregulation and Monetary Control Act,3 and, in the alternative, was barred by the
applicable Maryland one-year statute of limitations.4  The Circuit Court granted the motion,
5In considering an appeal on bypass of the intermediate appellate court, this Court
considers only those issues that would have been properly before the Court of Special
Appeals.  Md. Rule 8-131(b)(2).  See Converge Servs. Group, LLC v. Curran, 383 Md. 462,
467 n.1, 860 A.2d 871, 874 n.1 (2004).
6Mr. Stockman is not a party to this controversy.
2
dismissing Ms. Sweeney’s complaint with prejudice based on its conclusion that § 1735f-7a
of Title 12 of the United States Code preempted the Maryland statute.  Ms. Sweeney noted
an appeal to the Court of Special Appeals.  We granted certiorari, Sweeney v. Savings First
Mortgage, L.L.C., 385 Md. 511, 869 A.2d 864 (2005), on our initiative while the appeal was
pending in the intermediate appellate court, in order to consider the following question of
first impression in this State:5
Is Maryland’s Finder’s Fee Law, and the limits it places on the
fees that mortgage brokers may charge, preempted by the
Depository Institutions Deregulation and Monetary Control Act
of 1980 (DIDMCA)?
Based on our analysis of the federal statute, and an investigation of the legislative
history behind the DIDMCA, we hold that the Maryland Finder’s Fee Law is not preempted
in this case.  Accordingly, we shall reverse the judgment of the Circuit Court for Frederick
County and remand this matter for further proceedings.
I.
A.
On 29 August 2000, Savings First acted as a mortgage broker in obtaining a refinance
loan for Ms. Sweeney and Harry E. Stockman6 secured by a residence at 9204 Oak Tree
7Section 12-807 states:
Any mortgage broker who violates any provision of this subtitle
shall forfeit to the borrower the greater of:
(1) Three times the amount of the finder’s fee collected;
or
(2) The sum of $500.
3
Circle in Frederick, Maryland.  The amount of the loan was $140,250 and the lender for the
transaction was First Union National Bank of Delaware.  As payment for its efforts in
brokering the loan, Savings First received a mortgage broker fee of $8,427.  The following
year, on or about 12 July 2001, Savings First arranged a replacement mortgage refinance
loan for the same residence for Ms. Sweeney and Mr. Stockman in the amount of $158,400.
The lender in this second transaction was Concorde Acceptance Corporation (Concorde).
The mortgage broker fee paid to Savings First in the second transaction was $10,788.  The
mortgage broker fee for each transaction was rolled into the amounts financed.
B.
Ms. Sweeney filed a complaint on 1 March 2004 in the Circuit Court for Frederick
County seeking a judgment in the amount of $30,564 against Savings First.7  Ms. Sweeney
contended that the maximum fee allowed by Maryland law for Savings First’s brokering of
the second loan was $1,452, or 8% of $18,150, the amount of the second loan in excess of
the first loan.  The relevant portions of § 12-804 of the Maryland Finder’s Fee Law state:
Fees mortgage broker permitted to charge.
(a) Maximum amount of finder’s fee. - A mortgage broker may
charge a finder’s fee not in excess of 8 percent of the amount of
the loan or advance.
*
*
*
*
*
8The Circuit Court held that the applicable statute of limitations was not one year, but
did not opine what the correct applicable limitations period was.  Savings First initially filed
a cross-appeal in the Court of Special Appeals, but has not briefed or argued before us the
limitations issue.  Thus, we shall not address the statute of limitations question.  See Ricker
v. Abrams, 263 Md. 509, 516, 283 A.2d 583, 587 (1971) (stating that an issue not raised in
the brief(s) or oral argument is waived); see also Md. Rule 8-504.
4
(c) Mortgage loan obtained more than once on same property. -
A mortgage broker obtaining a mortgage loan with respect to
the same property more than once within a 24-month period
may charge a finder’s fee only on so much of the loan as is in
excess of the initial loan.
Md. Code, § 12-804.
Savings First filed its motion to dismiss for failure to state a claim, or, in the
alternative, for summary judgment, on 14 May 2004.  Savings First argued that Ms.
Sweeney’s complaint stated no basis for relief because her claim was barred by law for either
of two reasons.  The first contention was that § 501(a)(1) of the DIDMCA expressly
preempts application of the Maryland Finder’s Fee Law.  Under this federal statute, a state
is prohibited from “expressly limiting the rate or amount of interest, discount points, finance
charges, or other charges” applying to qualifying mortgages.  12 U.S.C. § 1735f-7a(a)(1)
(2000).  Savings First’s alternate argument was that Ms. Sweeney’s claim was barred by the
one-year statute of limitations applicable to penalties and forfeitures.8  Savings First included
affidavits in support of its motion demonstrating particular facts, beyond those alleged in Ms.
Sweeney’s complaint, that it contended were material and not in genuine dispute.
At the conclusion of the motions hearing on 18 August 2004, the Circuit Court
ostensibly granted the motion to dismiss Ms. Sweeney’s claim, with prejudice, because §
9We note also that although the order entered by the court did not specify whether the
court was granting Savings First’s motion to dismiss or motion for summary judgment, it
was stated at the conclusion of the hearing that summary judgment was being granted.  This
was the proper procedural action under Maryland Rule 2-322(c).  See Dual, Inc. v. Lockheed
Martin Corp., 383 Md. 151, 161, 857 A.2d 1095, 1100 (2004) (stating that, when factual
allegations are presented beyond those alleged in the complaint, and consideration of same
is not excluded expressly by the judge, the facial grant of a motion to dismiss will be treated
for purposes of appellate review as the grant of summary judgment). 
5
1735f-7a preempted the cause of action brought under § 12-804 of the Maryland
Commercial Law Article.  In ruling on the motion, the Circuit Court did not state whether
it had considered the additional facts offered by Savings First in its affidavits.9
II.
Upon a motion by either party for summary judgment, the court “shall enter judgment
in favor of or against the moving party” if there is shown to be “no genuine dispute as to any
material fact.”  Md. Rule 2-501(f).  There appears from the record to be no genuine dispute
of any material fact.  Thus, whether the grant of summary judgment is appropriate is entirely
a question of law.  Johnson v. Mayor of Balt., 387 Md. 1, 5, 874 A.2d 439, 442 (2005).  On
appeal, the matter is reviewed de novo to determine if the trial court was “legally correct”
in its decision.  Id.  Accordingly, the case before us turns on the interpretation of a federal
statute and whether that statute preempts the Maryland law that is the basis of the complaint.
Courts must begin the process of statutory interpretation “with an analysis of the
language of the statute.”  Holland v. Big River Minerals Corp., 181 F.3d 597, 603 (4th Cir.
1999); accord Comptroller v. Phillips, 384 Md. 583, 591, 865 A.2d 590, 594 (2005).  We
must determine if the language “has a plain and unambiguous meaning with regard to the
6
particular dispute in the case.”  Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S. Ct. 843,
846, 136 L. Ed.2d 808, 813 (1997); accord Phillips, 384 Md. at 591, 865 A.2d at 594.  If the
statutory language is found to be ambiguous, it is necessary to look beyond the statute itself
and into the legislative history for guidance as to the intent of Congress in passing the
statute.  Holland, 181 F.3d at 603; accord Phillips, 384 Md. at 591, 865 A.2d at 594.  In
interpreting federal statutory law, a court may look beyond the plain language of a statute
when: 1) Congress has expressed a clear intent contrary to the statutory text; 2) literal
application would frustrate the purpose of the statute; or 3) literal application would
“produce an absurd result.”  Holland, 181 F.3d at 603 n.2.
In addressing a statute enacted to preempt state law, our system of federalism has
caused the Supreme Court to presume “that Congress does not cavalierly pre-empt state-law
causes of action.”  Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S. Ct. 2240, 2250, 135
L. Ed.2d 700, 715 (1996).  This presumption against preemption especially has been true in
areas historically governed by the police power of the states, and has led to narrow
interpretations of such express preemption provisions.  Id. (citing Cippollone v. Liggett
Group, Inc., 505 U.S. 504, 518, 112 S. Ct. 2608, 2618, 120 L. Ed.2d 407, 423 (1992)).  We
adopt the view of the Supreme Court that it is our (the Court of Appeals of Maryland’s)
“reasoned understanding” of the statute’s purpose that helps us to determine the scope of
preemption; we must consider how the statute was meant to “affect business, consumers, and
10Although not present here, even if a state statute is determined to fall outside of the
scope of an express preemption, federal law nonetheless may preempt the state statute.  The
Supreme Court of Indiana summarized this point well in Dow Chemical Company v. Ebling:
Geier held that even though a state law is not within the domain
expressly preempted, the state law may yet be preempted if it
frustrates the purpose of the federal law or makes compliance
with both impossible.
753 N.E.2d 633, 637 (Ind. 2001) (citing Geier v. Am. Honda Motor Co., Inc., 529 U.S. 861,
870, 120 S. Ct. 1913, 1919, 146 L. Ed.2d. 914, 924 (2000)).  In Geier, the U.S. Supreme
Court referred to this as “conflict preemption.”  529 U.S. at 874, 120 S. Ct. at 1922, 146 L.
Ed.2d. at 927.
11A brief filed by the amici curiae in support of Ms. Sweeney raised an additional
argument that Maryland took advantage of an opt out provision in the DIDMCA, which
reads:
At any time after March 31, 1980, any State may adopt a
provision of law placing limitations on discount points or such
other charges on any loan, mortgage, credit sale, or advance
described in subsection (a)(1) of this section.
12 U.S.C. § 1735f-7a (b)(4) (2000).  We agree with Savings First’s response that Maryland
did not exercise its ability to opt out of this provision.  Although the General Assembly did
(continued...)
7
the law.”  Medtronic, 518 U.S. at 486, 116 S. Ct. at 2251, 135 L. Ed.2d at 716.10  We must
examine the Maryland Finder’s Fee Law against the express preemption provision of the
DIDMCA, as well as the possibility that the law is preempted through conflict with federal
law.
III.
Ms. Sweeney raises three arguments in her attempt to demonstrate that the DIDMCA
does not preempt the Finder’s Fee Law.11  Her first contention is that the DIDMCA
11(...continued)
amend the Finder’s Fee Law after 31 March 1980, the subsections relevant to the present
case were left unchanged.  See 1981 Md. Laws, Chap. 153 (amending § 12-804 to add
subsection (e), barring mortgage brokers from charging finder’s fees when they also act as
lender in a transaction); 2000 Md. Laws, Chap. 691 (amending § 12-804 to change the
language of subsections (b) and (e)).  The legislative history of the amending bills contained
information specifically acknowledging the opt out provision of the federal statute, but did
not accept expressly that offer.  Had it been the intent of the General Assembly to take
advantage of the opt out, we believe it would have acted to do so in explicit terms.
8
preemption only covers aspects of covered loans affecting interest, and does not extend to
consumer protection statutes like the Maryland Finder’s Fee Law.  Next, Ms. Sweeney
argues that the DIDMCA only applies to purchase money loans and not to refinance
mortgage loans.  Finally, Ms. Sweeney advances that the DIDMCA only applies to creditors.
Her reasoning continues that, because Savings First is a mortgage broker, not a creditor, the
Finder’s Fee Law is not preempted.  We shall address each of Ms. Sweeney’s arguments in
turn, ultimately reversing the judgment of the Circuit Court solely because the DIDMCA
applies only to creditors and not to mortgage brokers.  Thus, the DIDMCA preemption does
not affect enforcement of the Maryland Finder’s Fee Law.
A.
The first of Ms. Sweeney’s arguments that we will address is that the intended scope
of the DIDMCA preemption is too narrow to cover the Maryland Finder’s Fee Law.  She
advances the argument that the federal statute only covers state limitations on the rate or
amount of interest that a lender may charge.  Additionally, because the Finder’s Fee Law is
12Maryland defines a finder’s fee as “any compensation or commission directly or
indirectly imposed by a broker and paid by or on behalf of the borrower for the broker’s
services in procuring, arranging, or otherwise assisting a borrower in obtaining a loan or
advance of money.”  § 12-801(c).
9
a consumer protection statute, Ms. Sweeney argues that it may not be preempted by the
DIDMCA.
1.  The DIDMCA’s Scope is not Limited to Interest Rates or Amounts.
The plain language of the statute states that the DIDMCA is not limited to rates and
amounts of interest.  The applicable language provides that any state laws “expressly limiting
the rate or amount of interest, discount points, finance charges, or other charges . . . shall
not apply.”  12 U.S.C. § 1735f-7a(a)(1) (2000) (emphasis added).  Thus, the statute  refers
to, in addition to interest, two other specific types of fees or charges that are controlled by
the DIDMCA.  It contains also the catch-all provision of “other charges,” demonstrating
Congress’ intent to broaden, not narrow, the scope of the statute in this regard.  Ultimately,
we must decide whether, all other things being equal, finder’s fees, as defined by Maryland
law,12 would fall under the Federal interpretation of “discount points, finance charges, or
other charges.”  We conclude that they would.
“Finance charge” is defined as “the sum of all charges, payable directly or indirectly
by the person to whom the credit is extended, and imposed directly or indirectly by the
creditor as an incident to the extension of credit.”  15 U.S.C. § 1605(a) (2000).  This
definition also includes finder’s fees and mortgage broker fees as examples of types of
charges that could be included in the determination of the finance charge.  15 U.S.C. §
13Senate Report 96-368 states that:
In exempting mortgage loans from state usury limitations, the
Committee intends to exempt only those limitations that are
included in the annual percentage rate.  The Committee does not
intend to exempt limitations on prepayment charges, attorney
fees, late charges or similar limitations designed to protect
borrowers.
S. Rep. No. 96-368, at 19 (1980); reprinted in 1980 U.S.C.C.A.N. 236, 255.
This guideline was made an official FHLBB/OTS regulation.  See 12 C.F.R. §
590.3(c) (2001).
14The TILA is where Congress has defined “finance charge.”  Pub. L. 104-29 contains
the following language: 
(b) BORROWER-PAID MORTGAGE BROKER FEES.--
(continued...)
10
1605(a)(3), (a)(6).  From this codified definition, it appears as though Congress intended to
include finder’s fees when it enumerated “discount points, finance charges, or other charges”
as items exempted under § 501(a) of the DIDMCA.
The relevant legislative history of the statute supports this conclusion.  Senate Report
96-368 states that Congress intended to exempt from state regulation those items included
in the annual percentage rate (APR).13  The APR is “the actual cost of borrowing money,
expressed as an annualized interest rate.”  BLACK’S LAW DICTIONARY 831 (8th ed. 2004); 15
U.S.C. §1606(a)(1)(A) (2000) (stating that APR is “calculated according to the actuarial
method of allocating payments made on a debt between the amount financed and the amount
of the finance charge”).  Ms. Sweeney points out that mortgage broker fees were not added
to the APR/finance charge definitions until an amendment to the Truth in Lending Act
(TILA) in 1995.14  Her argument is that because the formulation of what was included in
14(...continued)
(1) INCLUSION IN FINANCE CHARGE.--Section 106(a) of the Truth in
Lending Act (15 U.S.C. § 1605(a)) is amended by adding at the end the
following new paragraph:
"(6) Borrower-paid mortgage broker fees, including fees paid directly to the
broker or the lender (for delivery to the broker) whether such fees are paid in
cash or financed."
Truth in Lending Act Amendments of 1995, Pub. L. No. 104-29, § 2, 109 Stat. 271(codified
at 15 U.S.C. § 1605(a)(6) (2000)).
15TILA was amended to provide the consumer with clearer credit information, make
credit compliance easier, limit creditor civil liability, and strengthen administrative
restitution enforcement.  The TILA requires creditors to disclose the true cost of credit as an
APR.  S. Rep. No. 96-368, at 16 (1980); reprinted in 1980 U.S.C.C.A.N. 236, 251-252.
16In addition, as Savings First points out, a finder’s fee was listed as an example of
what was included in the finance charge in 1980.  See Consumer Credit Protection Act, Pub.
(continued...)
11
calculating the APR did not contain borrower-paid mortgage broker fees in 1980 when the
DIDMCA was enacted, Congress could not have intended to exempt those fees when it
expressed its desire to exempt from state regulation fees included in the APR.
Had Congress intended to exempt only those items that were part of the APR in 1980
at the time of the DIDMCA’s enactment, it could have done so by specifically stating what
those items were.  By using APR, a commonly known and defined term, we believe it was
Congress’ intent for the exemption to expand or contract necessarily with changes in the
economic landscape and mortgage lending marketplace.  This seems especially true
considering that an amendment to the TILA was enacted at the time of the DIDMCA’s
passage.15  The Senate specifically exempted the items making up the APR, knowing that
the APR could, and likely would, be altered.16
16(...continued)
L No. 90-321, § 106(a)(3), 82 Stat. 146 (1968).
17Although not controlling, “an administrative agency’s interpretation and application
of [a] statute . . . should ordinarily be given considerable weight by reviewing courts.”  Bd.
of Physician Quality Assurance v. Banks, 354 Md. 59, 69, 729 A.2d 376, 381 (1999) (citing
Lussier v. Md. Racing Comm’n, 343 Md. 681, 696-697, 684 A.2d 804, 811-812 (1996)).
18 See, supra n.13, 1980 U.S.C.C.A.N. 236, 255 (listing prepayment charges, attorney
(continued...)
12
The regulations of the governing federal agency appear to coincide with these
conclusions.17  Congress granted the authority to the Federal Home Loan Bank Board
(FHLBB) (now the Office of Thrift Supervision) to interpret and regulate the DIDMCA.  12
U.S.C. 1735f-7a(f) (2000).  The FHLBB issued a number of regulations to help interpret and
govern this area of regulation.  Finance charges, as defined by the FHLBB, encompass the
“cost of consumer credit as a dollar amount.  It includes any charge payable directly or
indirectly by the consumer . . . .”  12 C.F.R. § 226.4(a) (1996).  The same section states that
mortgage broker fees are finance charges and finder’s fees are an example of finance
charges.  12 C.F.R. § 226.4(a)(3), (b)(3) (1996).  Based on the interpretation of the
authorized federal agency, acting in its area of expertise, finder’s fees indeed would be
embraced within “discount points, finance charges, or other charges.”
2.  The Finder’s Fee Law is not a Consumer Protection Statute Exempted From
Preemption By the Terms of the DIDMCA.
Congress enumerated a narrow list of consumer protection laws to which the
DIDMCA would not be applicable.18  The commonality among the items in this list is that
18(...continued)
fees, late charges or similar limitations designed to protect borrowers as examples of
consumer protection statutes the DIDMCA would not apply to).
19Under the New Hampshire statute, “[i]nterest may be computed either on a 360-day
(continued...)
13
Congress wished to allow the States to regulate or continue regulating those areas not related
directly to the cost of credit.  It is the cost of credit (the APR) that Congress specifically
referenced immediately before stating its intent to allow state regulation of certain fees.  Ms.
Sweeney would prefer an interpretation of the law that would have Congress inhibiting the
State’s ability to regulate items encompassed by the cost of credit, while at the same time
granting them broad powers to create exceptions that allow the States to enforce any kind
of law designed to protect borrowers.  Such an interpretation of the intent of Congress would
be illogical.  Ms. Sweeney relies mainly on the authority of two federal cases in making this
argument.
In Grunbeck v. Dime Sav. Bank of New York, the U.S. Court of Appeals for the First
Circuit held that a New Hampshire statute was not preempted by the DIDMCA.  74 F.3d
331, 344 (1st Cir. 1996).  Ms. Sweeney believes that this decision supports her contention
that the Maryland Finder’s Fee Law, as a “limitation designed to protect borrowers,” should
be exempt from preemption.  In Grunbeck, the terms of the mortgage created a situation
where the lender essentially was charging interest on interest.  Id. at 335.  This practice was
illegal under New Hampshire’s Simple Interest Statute (SIS) requiring that a lender charge
only simple interest19 on a first mortgage.  Id. at 335 n.1.  Although the First Circuit did
19(...continued)
basis with each month containing 30 days, or on a 365-day basis with each month containing
the actual number of calendar days in that particular month.  Unless otherwise provided in
the note, loan payments shall be applied on the scheduled payment date or on the date
received.”  N.H. Rev. Stat. Ann. § 397-A:14(II) (1998).
14
mention that the SIS afforded considerable protection to consumers, its decision was
grounded on the state law not expressly limiting the rate or amount of interest.  Id. at 340,
343-44.  The case before us is distinguishable in that the Maryland Finder’s Fee Law
expressly does limit the rate or amount of the finance charge by capping the finder’s fee at
8%.
The second case relied on by Ms. Sweeney also is not comparable to the case before
us.  That case involved a Pennsylvania consumer protection statute that prohibited the
inclusion of certain non-interest charges in a home improvement loan transaction.  In re
Barber, 266 B.R. 309, 318-19 (Bankr. E.D. Pa. 2001).  According to the bankruptcy court,
because the DIDMCA was intended only to preempt laws that imposed ceilings on interest
rates, the Pennsylvania statute was not preempted because it prohibited non-interest charges.
Id. at 319.  The Barber analysis takes too narrow a view of the federal statute.  As discussed
above, the DIDMCA does not apply only to interest rates, but also to “discount points,
finance charges, or other charges.”  12 U.S.C. § 1735f-7a(a)(1) (2000).  Ms. Sweeney’s case
would be distinguishable in any event.  The charges involved in Barber were non-interest
charges that come within the consumer protection provision of 12 C.F.R. § 590.3; here, the
20This is similar to the Maryland Finder’s Fee Law in that it is a hard percentage cap;
however, it differs considerably in that the Michigan law capped the interest rate chargeable
by a lender; the Maryland law caps the fee chargeable by the mortgage broker.
21“A wraparound mortgage is a junior mortgage which secures a promissory note with
a face amount equal to the sum of the principal balance of an existing mortgage note plus
any additional funds advanced by the wraparound lender.”  Mitchell, 375 N.W.2d at 428.
22As defined by the Maryland Code, a purchase money loan (or “Purchase-money
obligation”) is “an obligation of an obligor incurred as all or part of the price of the collateral
or for value given to enable the debtor to acquire rights in or the use of the collateral if the
(continued...)
15
Finder’s Fee Law limits fees that Congress did not intend to exempt among the enumerated
list of consumer protection laws.
B.
Next, Ms. Sweeney points out that the loans in this case were refinance mortgages,
not purchase money loans, and, as a result, the DIDMCA does not apply to the pertinent
transaction.  In support of this contention, she relies entirely on Mitchell v. Trs. of U. S. Mut.
Real Estate Inv. Trust, 375 N.W.2d 424 (Mich. Ct. App. 1985).  This reliance is misguided
and misinterprets the holding of the Michigan appellate court.
In Mitchell, the court held that the DIDMCA did not preempt the Michigan usury law
as it applied to the loan agreement at issue.  375 N.W.2d at 431.  The state usury law in
Michigan established a hard cap on interest rates at 7%.  Id. at 427.20  Appellants there took
a second, “wraparound”21 mortgage to pay additional debts beyond their original debt for the
purchase of their home.  Id. at 426.  The lender of the wraparound mortgage admitted its loan
was subordinate to the original purchase money loan,22 and not secured by a first lien.  Id.
22(...continued)
value is in fact so used.”  Md. Code § 9-103(a)(2).
23The plainness of the language is determined by “the language itself, the specific
context in which that language is used, and the broader context of the statute as a whole.”
Newport News Shipbuilding and Dry Dock Co. v. Brown, 376 F.3d 245, 248 (4th Cir. 2004)
(quoting Robinson, supra, 519 U.S. at 341).
16
at 429.  Although the Mitchell court stated in dicta that it believed § 501 of the DIDMCA
should be limited to purchase money loans, it held that the state usury statute was not
preempted because the loan at issue did not constitute a first lien.  Id. at 431-32.  This
interpretation coincides with the plain language of the federal statute.23
The pertinent portion of the DIDMCA reads: “. . . the laws of any State expressly
limiting the rate or amount of interest . . . shall not apply to any loan . . . which is - - secured
by a first lien on residential real property . . . .”  12 U.S.C. § 1735f-7a(a)(1)(A) (2000).
Congress did not intend to apply the DIDMCA preemption to every loan; Congress only
preempted state laws regulating loans secured by a first lien.  Although the loan in Ms.
Sweeney’s case was not a purchase money loan, it was secured by a first lien.  Because
Mitchell’s holding is legally and factually distinguishable, Ms. Sweeney’s argument, that the
DIDMCA does not apply in this case because her mortgage was a refinance transaction, is
unavailing.
C.
24A “federally related mortgage loan” is described in § 527(b) of the NHA.  The
portion of that section relevant to this case provides that such a loan:
(D) is made in whole or in part by any “creditor”, as defined in
section 1602(f) of Title 15, who makes or invests in residential
real estate loans aggregating more than $1,000,000 per year.
12 U.S.C. 1735f-5(b)(2) (2000).
The term “creditor,” as defined by the U.S. Code, refers to a person who regularly extends
consumer credit payable in more than four installments, and is the person to whom the debt
is initially payable.  15 U.S.C. 1602(f) (2000).
17
As a final argument, Ms. Sweeney focuses on Savings First’s status as a mortgage
broker, rather than a lender/creditor.  Ms. Sweeney claims that the intent of the statute was
to grant immunity to specific parties to qualified loans from specific types of state laws.
Savings First counters that the only matter of importance under the DIDMCA is that the
mortgage in question meet the qualifications of the statute, thus exempting the entire
transaction from regulation by state law.  The relative validity and persuasiveness of this
argument turns on whether Congress enacted the DIDMCA principally to regulate the actors
or the transactions in the regulated field.
In order to have the DIDMCA apply, the transaction must involve a qualifying
mortgage.   Under § 1735f-7a(a)(1), a loan or mortgage must meet three requirements: be
secured by a first lien on residential real property; be made after 31 March 1980; and be a
“federally related mortgage loan” as defined by the National Housing Act (NHA).24
There is no dispute that Ms. Sweeney’s mortgage with Concorde meets the first two
requirements.  For a loan to qualify as a federally related mortgage it must satisfy some part
18
of the definition found in § 527(b) of the NHA.  Savings First alleged facts indicating that
Concorde was indeed a creditor under the NHA, making loans totaling over $1,000,000
annually.  Ms. Sweeney did not dispute these facts.  The Concorde mortgage at the center
of this controversy qualifies as a “federally related mortgage.”  Having determined that the
DIDMCA may apply to the mortgage because it satisfies this requirement of the statute, we
must determine if it does apply in this case.
Savings First contends that because the transaction in question is a qualified mortgage
under the DIDMCA, the Finder’s Fee Law is preempted.  According to it, once a loan is
found to meet the requirements of the federal statute, the transaction is removed from the
authority of the states to regulate.  In contrast, Ms. Sweeney argues that the DIDMCA
preemption provision operates only with respect to the party acting as the creditor in a
qualifying mortgage transaction.  Ms. Sweeney argues that Savings First, a mortgage broker,
is beyond the narrow scope of the federal law in this regard.  We conclude that either party’s
interpretation is facially plausible from a fair reading of the plain language of 12 U.S.C. §
1735f-7a.
A statute is ambiguous where it can be reasonably read to have either of two
interpretations.  Holland, 181 F.3d at 603 (citing Robinson, 519 U.S. at 342, 117 S. Ct. at
846, 136 L. Ed.2d at 814); accord Phillips, 384 Md. at 591, 865 A.2d at 594.  Accordingly,
we look to the legislative history to glean, if possible, the purpose of § 501(a) of the
DIDMCA.  According to the U.S. Senate Reports published at the time the DIDMCA was
19
enacted, the economic climate of our nation at that time was very different than it is today.
In contrast with today’s near record low interest rates and abundance (some would say
overabundance) of available credit, the late 1970's experienced skyrocketing interest rates
and lenders unwilling or reluctant to lend.  S. Rep. No. 96-368, at 19 (1980); reprinted in
1980 U.S.C.C.A.N. 236, 254.  Congress determined that a lack of available mortgage funds
was in part caused by states restricting interest rates to below market levels:
The Committee finds that where state usury laws require
mortgage rates below market levels of interest, mortgage funds
in those states will not be readily available and those funds will
flow to other states where market yields are available.  This
artificial disruption of funds availability not only is harmful to
potential home-buyers in states with such usury laws, it also
frustrates national housing policies and programs.
Id.  In response, Congress passed the DIDMCA to restrict state usury laws in an effort to
“ease the severity of the mortgage credit crunches of recent years.”  Id. at 18.  “[T]he
overriding objective of the act was to assist both borrowers and lenders by freeing up
additional credit for housing.”  Quiller v. Barclays Am./Credit, Inc., 764 F.2d 1400, 1403
(11th Cir. 1985) (en banc) (per curiam) (J. Hill, dissenting).  Congress, it seems, was focused
then on a national housing policy that would encourage lenders to lend and borrowers to
borrow.  Hindsight informs us today that Congress’ goals in this regard have been exceeded.
There are few other sources to turn to in order to find further clarification as to who
or what was intended to benefit from the preemption provision of the DIDMCA.  Ms.
Sweeney cites three unpublished opinion letters of the federal agency delegated the
25See supra, note 24 (defining “creditor” under the TILA).
20
responsibility to regulate in this area, claiming support for her position that only lenders
qualify as creditors.  Although such commentaries are not binding on this Court, there is
some guidance to be found there.  Two of those letters were a response to specific questions
about a lender, and offer little clarification as to the status of a mortgage broker in relation
to § 501(a).  The third opinion letter, however, responded to a request to interpret the
regulations governing the preemption of state usury laws.  1989 WL 1114192 (O.T.S.)
(Eugene M. Katz, Acting Deputy General Counsel, Office of Thrift Supervision) (1989).
The agency opinion commented that the FHLBB “noted that certain lenders will be eligible
for usury preemption if they are considered creditors” under the Truth in Lending Act
(TILA).  Id. (quotations removed).
One thing is certain, mortgage brokers are not included in the definition of “creditor”
under the TILA.25  A 1982 amendment to the TILA narrowed the definition of “creditor.”
At that time, a “person who regularly arranged for the extension of consumer credit” was
removed from the definition of “creditor.”  Garn-St Germain Depository Institutions Act of
1982, Pub. L. No. 97-320, § 702(a), 96 Stat. 1469, 1538 (1982).  Prior to the 1982
amendment, the definition easily would have been read to include mortgage brokers as
creditors, thus eliminating the question presented in the case before this Court.  By removing
language from the definition of “creditor” that could include mortgage brokers, we find that
Congress intended to eliminate those entities from the definition.
21
Savings First argues that this change in definition was an effort to protect real estate
brokers from any liability as creditors under the TILA.  In so arguing, Savings First cites the
Senate report discussing the purpose of the amendment.  The report indeed does make
specific reference to real estate brokers and the conflict that their inclusion in the definition
of “creditor” creates with Congress’ intent to simplify the TILA.  S. Rep. No. 97-536, at 43
(1982); reprinted in 1982 U.S.C.C.A.N. 3054, 3097.  Savings First seems to imply that,
because of the specific reference to real estate brokers, Congress was not intending
necessarily to limit the definition of “creditor” to remove mortgage brokers from its
coverage.  That does not appear to us to be an accurate reading of the Senate report.  The
report concludes its discussion on the purpose of section 702(a) of Pub. L. 97-320 with the
following statement:
[T]he Committee believes it is essential to clarify this coverage
issue and prevent similar questions from arising in the future by
eliminating “arrangers of credit” from the Act’s coverage and
thereby limiting the law’s application to actual professional
extenders of credit.
Id. (emphasis added).  The issue of whether a mortgage broker should have been covered by
the TILA certainly may be viewed as a “similar question” to that of a real estate broker’s
inclusion within its coverage.  By limiting the law to “actual professional extenders of
credit,” Congress foreclosed the need for that question to be addressed by the courts.
Based on our interpretation and understanding of the legislative history behind the
DIDMCA, and related statutes and regulations, we conclude that Savings First, as a
26Neither is there conflict preemption between federal law and the Maryland Finder’s
Fee Law.  The limitation on finder’s fees does not frustrate the purpose of encouraging the
free flow of credit.  Mortgage brokers are not required normally for consumers to procure
a loan.  Lenders may, and still do, lend without the aid of mortgage brokers.
22
mortgage broker, did not qualify as a creditor regulated by the DIDMCA.  We also believe
the proper interpretation of the DIDMCA’s preemption provision is to offer immunity from
state regulation to lenders in order to promote a national housing policy, not to offer the
same protections to any party to a transaction to which a qualified lender is also party.
Therefore, Maryland’s Finder’s Fee Law is not preempted expressly by federal statute on the
basis that a mortgage broker is a lender or creditor within the meaning of that statute.26
IV.
The Maryland Finder’s Fee Law is very narrow in its scope: it applies only to
mortgage brokers and the fees they charge borrowers.  Congress’s intent in passing the
DIDMCA was to protect lenders from state regulation and promote a national housing policy
encouraging the free flow of money to borrowers.  Mortgage brokers are outside the reach
that Congress intended for the federal statute.  For that reason, we find that the Finder’s Fee
Law is not preempted by the DIDMCA.  We reverse the judgment of the Circuit Court and
remand the case for further proceedings.
JUDGMENT OF THE CIRCUIT COURT FOR
FREDERICK COUNTY REVERSED; CASE
REMANDED TO THAT COURT FOR
FURTHER PROCEEDINGS CONSISTENT
WITH THIS OPINION; COSTS TO BE PAID
BY APPELLEE.