Source: http://www.dllr.maryland.gov/regs/propreg-finreg-comar090306march12019.shtml
Timestamp: 2019-04-21 02:29:29+00:00

Document:
The Commissioner of Financial Regulation proposes to amend existing Regulations .02, .20, and .21, adopt new Regulations .03 and .23—.25, amend and recodify existing Regulations .03—.07, .09, .11, .15, .17, .18, and .23 to be Regulations .04—.08, .10, .12, .16, .18, .19, and .22, respectively, and recodify existing Regulations .08, .10, .12—.14, and .16 to be Regulations .09, .11, .13—.15, and .17, respectively, under COMAR 09.03.06 Mortgage Lenders.
The purpose of this action is to update existing definitions by using terms defined in Regulation .02 of this Chapter, using terms defined in other State laws or federal regulations, remove ambiguous terms, and update and add definitions that have evolved based on the industry’s history and technological advancements; update ability to repay requirements and permit compliance through satisfaction of federal requirements; clarify the qualifications of a principal officer; state the filing time for license renewal applications in order for a licensee to process loans beyond the license expiration; clarify the license posting requirement; describe the required skills of the person designated to resolve complaints; clarify the approval of completed applications and trade names; explain the licensee’s responsibilities for preserving records, advertising, and supervising mortgage loan originators; update document and bond, letter of credit, and trust agreement requirements; clarify continuing education requirements; add mortgage disclosure requirements, data protection standards, certain event reporting requirements; generally remove outdated or invalid terminology and references; and correct typographical errors.
I. Summary of Economic Impact. The proposed action is expected to have a positive impact on licensees. The amendments will provide clarity to licensees regarding their obligations, as well as make it easier for licensees to do business in Maryland. The amended regulations are tailored to the size and complexity of a licensee’s business operations and are expected to impose a minimal burden on licensees. With regard to the proposed change in the examination and investigation reimbursed costs charged to licensees for each day that the Commissioner’s employees are engaged in examinations or investigations, the costs will change from the current fixed $250 per day to the actual cost of the employees’ time incurred in conducting the examination or investigation. It is estimated that the average total reimbursed costs per examination will be $638.80.
A. The proposed regulations will increase revenues by $136,064.40, based on the average cost increase of $638.80 multiplied by 213 closed examinations in fiscal year 2018.
By providing clarity to and simplifying the supervisory process, the proposed action could reduce compliance costs for small business licensees. Some of this reduction is offset by the increase in reimbursed staff costs for examinations and investigations.
Comments may be sent to Jedd Bellman, Assistant Commission for Non-Depository Supervision, Department of Labor, Licensing, and Regulation, 500 N. Calvert Street, Baltimore, MD 21202, or call 410-230-6390, or email to jedd.bellman@maryland.gov, or fax to 410-333-0475. Comments will be accepted through April 1, 2019. A public hearing has not been scheduled.
(2) “Annual percentage rate (APR)”[, under §B(13) of this regulation,] has the meaning stated in 12 CFR Part  1026, as it may be amended from time to time.
(4) “Average prime offer rate” [means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics. The Board of Governors of the Federal Reserve publishes average prime offer rates for a broad range of types of transactions in a table updated at least weekly as well as the methodology the Board uses to derive these rates] has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.
(6) “Breach of the security of a system” has the meaning stated in Commercial Law Article, §14-3501, Annotated Code of Maryland.
(ii) The creditor identified in the loan documents is a different [entity than that] person than the person described in §B(7)(b)(i) of this regulation.
(10) “Customer information” has the meaning stated in 16 CFR Part 314, as it may be amended from time to time.
(a)] “Dwelling” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.
(12) “Electronic record” has the meaning stated in Commercial Law Article, §21-101(h), Annotated Code of Maryland.
[(12)] (15) “Fully indexed rate” [means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate] has the meaning stated in 12 CFR Part 1026, as it may be amended from time to time.
[(13)] (16) [Higher-Priced Mortgage Loan.
(ii) 3.5 or more percentage points for loans secured by a subordinate lien on residential real estate.
(b) Notwithstanding §B(13)(a) of this regulation, the calculation set forth therein for determining whether a loan is a higher-priced mortgage loan shall adjust as may be necessary to be consistent with the final rule codified at 12 CFR §226.35, as it may be amended from time to time.
(iv) Home equity line of credit subject to 12 CFR §226.5b].
(17) “Information security program” has the meaning stated in 16 CFR Part 3, as it may be amended from time to time.
(ii) The person to whom the request was made agrees to begin processing the loan application.
(b) A person may require an applicant to complete a written application before agreeing to begin processing the loan, if that requirement is explained to the applicant].
(24) “Loan modification” means a change to a mortgage loan, excluding any change required due to a filing for bankruptcy, which alters the loan amount or one or more of the terms of repayment set forth in the document creating the debt.
(25) “Loss mitigation option” has the meaning stated in 12 C.F.R. Part 1024, as it may be amended from time to time.
(26) “Maryland loan” as used in this regulation means a mortgage loan secured by real property or a dwelling located in the State.
(e) Conducts or supervises the foreclosure process, except if the person is an attorney representing a mortgagee or its successors and assigns, or acting as a substitute trustee in a foreclosure action under a mortgage or deed of trust.
[(23)] (31) [“NMLSR” means the Nationwide Mortgage Licensing System and Registry established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators] “ NMLS” has the meaning stated in Financial Institutions Article, §1-101, Annotated Code of Maryland.
(35) “Service provider” has the meaning stated in 16 CFR Part 314, as it may be amended from time to time.
(ii) Allows two or more members to communicate directly with one another.
(c) “Social media” does not include an electronic mail account.
(37) “Trade name” means any word or group of words used to identify a business to the public.
.03 Delivery and Receipt of Mortgage Disclosures.
A. A licensee shall be deemed to have complied with a requirement under Commercial Law Article, Title 12, Subtitles 1, 3, 4, 8, 9, or 10, Annotated Code of Maryland, to provide a written disclosure or agreement within a specified time period after the date the loan application is completed if the mortgage disclosure or agreement is provided to an applicant in person, or placed in the mail, before the end of the time period specified in the applicable statute.
(1) Mortgage disclosures required by Commercial Law Article, Title 12, Subtitles 1, 3, 4, 8, 9, 10, 12, or 13, Annotated Code of Maryland, may be provided to an applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. §7001 et seq.) and the Maryland Uniform Electronic Transactions Act (Commercial Law Article, Title 21, Annotated Code of Maryland).
(2) For the purpose described in §A of this regulation, unless otherwise agreed between the licensee and an applicant, the time of sending and receipt of a mortgage disclosure sent as an electronic record shall be governed by Commercial Law Article, §21-114, Annotated Code of Maryland.
[.03] .04 Licensing and Application Requirements.
(d) An individual, regardless of title, who has the power to direct the management or policies of the mortgage lending business.
(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.
(c) In a conspicuous location within the licensed location.
(2) A licensee is not required to post its license if the licensee does not grant access to the licensed location to members of the general public.
(1) A licensee shall designate [an officer, director, or member of senior management] a person as being responsible for, and authorized to make, decisions regarding the resolution of complaints received from the Commissioner.
(b) [License] A license renewal.
(b) Authority to resolve the complaint, or shall report directly to an individual with such authority.
(4) A licensee shall notify the Commissioner through NMLS of any change in the person designated under §H(1) of this regulation within 10 business days of the change.
I. Designation of Mortgage-Related Activity.
(a) A licensee shall notify the Commissioner in writing through NMLS if, after the issuance or the renewal of its license, the licensee begins conducting a new activity that the licensee did not designate under §I(1) of this regulation.
(b) A licensee shall deliver the notification through NMLS to the Commissioner within 10 business days after beginning the new activity.
J. [Transition to Nationwide Mortgage Licensing System and Registry] NMLS.
(b) The Commissioner has developed and implemented procedures to allow the NMLSR to accept fingerprints for submission to the Federal Bureau of Investigation and any other governmental agency or entity authorized to receive this information for a state, national, or international criminal history background check].
(2) [Corporate Office] Principal Executive Office.
(a) A person applying for an initial or a renewal license through [the NMLSR] NMLS shall comply with [NMLSR] NMLS procedures by obtaining a license from the Commissioner for the applicant’s [corporate]principal executive office location by filing [the NMLSR] NMLS form MU-1.
(b) A person holding a license for its [corporate] principal executive office subject to [the NMLSR] NMLS form MU-1 may apply to the Commissioner for one or more licenses for additional locations by filing [the NMLSR] NMLS form MU-3.
(1) The Commissioner shall approve or deny an application for an initial license, a renewal license, or a license amendment within 60 days after the Commissioner receives a completed application, including, if applicable, a surety bond and all required fees.
(2) If the Commissioner notifies an applicant that an application for an initial license, a renewal license, or a license amendment is incomplete, the Commissioner shall itemize the steps that the applicant must take to complete the application.
(3) The application for an initial license, a renewal license, or a license amendment may not be approved until after the applicant completes all steps identified in the Commissioner’s notice.
(4) If an application for an initial license, a renewal license, or license amendment is incomplete when submitted and remains incomplete [for at least 60 days], the Commissioner may cease processing and deem the incomplete application [and return it to the applicant] withdrawn, provided that the Commissioner has previously notified the applicant of the basis for incompleteness in accordance with §K(2) of this regulation, and given the applicant not less than 15 days to correct the incompleteness.
(ii) Specifying on an original license application or license renewal application through NMLS, which licensed locations will utilize the trade name.
(2) At all times subsequent to obtaining the approval of the Commissioner for the use of the trade name, a licensee shall maintain registration of the trade name in accordance with the requirements of Corporations and Associations Article, §1-406, Annotated Code of Maryland, and accompanying regulations.
(3) A licensee shall immediately notify the Commissioner if the licensee amends, cancels, or otherwise fails to renew the registration of a trade name which the Commissioner has approved previously.
(b) Uploads an electronic copy of the attestation to NMLS in accordance with directions provided by the Commissioner.
(e) Be permitted to alter electronic documents in any manner that does not affect the content of the records.
(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.
(a) A lender shall retain records for  37 months after a loan is denied, repayment of the loan is made in full, or the loan is sold, whichever occurs first.
(b) A mortgage servicer shall retain records for  37 months after final payment is made or the [loan is sold] right to service the loan under either a servicing or subservicing agreement is terminated or transferred, whichever occurs first.
(c) If a licensee acts as a broker in a Maryland loan [transaction], records of the [transaction] Maryland loan shall be retained for  37 months after the Maryland loan is made or denied.
(u) Other documents necessary to prove compliance with any State or federal statute or regulation applicable to the mortgage loan.
(f) Any other information that the Commissioner may consider necessary, including geographic information regarding applicable mortgage loans.
(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.
C. Provision of Records to the Commissioner.
(1) A licensee who keeps books and records at a licensed location shall, at the request of the Commissioner, immediately make those books and records available to the Commissioner at the licensed location.
(2) A licensee who keeps books and records at a location other than the licensed location with prior permission by the Commissioner shall, within 5 business days of a request by the Commissioner, make those books and records available to the Commissioner at the licensed location.
(3) A licensee shall ensure that the Commissioner receives any records requested in writing by the Commissioner within 10 business days from the date of the request.
(c) Organized in the manner specified by the Commissioner.
(2) Reasonably should know of any actual or potential loss of records required to be kept by this regulation.
[.05] .06 Advertising and Solicitation.
B. Licensee Name and Address.
(b) Has been approved by the Commissioner pursuant to Regulation .04L of this chapter and is listed as a trade name on the licensee’s NMLS record.
(3) Notwithstanding §B(1) of this regulation, a licensee may use an e-mail address or website address that is different from the name or address that appears on the licensee’s license, provided that the content of any e-mail correspondence, or of the website itself, uses only a name that appears on the licensee’s license or has been approved by the Commissioner pursuant to Regulation .04L of this chapter and is listed as a trade name on the licensee’s NMLS record.
(4) A licensee shall disclose its NMLS unique identifier in every advertisement.
(5) Notwithstanding §B(4) of this regulation, a licensee who utilizes social media for advertising purposes need not disclose the licensee’s NMLS unique identifier in each statement published through a social media platform, provided that the NMLS unique identifier is displayed prominently on the licensee’s profile page within the social media platform.
(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.
(2) Applicant receives a written commitment [that the loan will be made, which contains all material terms of the loan].
[.07] .08 Agreements with the Borrower.
(b) Provided promptly to the borrower following execution by all parties.
(c) Person required to sign a certification or affidavit required by law for recordation.
(3) Compliance with applicable disclosures under the [federal] Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and corresponding regulations and applicable disclosures under the Truth in Lending Act (15 U.S.C. §1601 et seq.) and corresponding regulations shall be deemed compliance with §C(1) and (2) of this regulation.
(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.
D. Cure of Unintentional Violation.
(1) This section applies only to a licensee [which] that engages in both brokering and lending in the regular course of its business.
[.15] .16 Bonds, Letters of Credit, and Trust Accounts.
A. [A] The required amount of a bond, letter of credit, or trust account established to meet the requirements of Financial Institutions Article, §11-508, Annotated Code of Maryland, shall be [structured and maintained so that it is available for and subject to claims for 1 year following the expiration of the period for which it is issued] subject to recalculation at the time a license is renewed.
B. [A separate bond coverage, letter of credit, or trust account shall be obtained for each licensing period] The Commissioner shall use information provided by the licensee as well as the licensee’s last four quarterly call reports filed with NMLS to recalculate the required amount of the bond, letter of credit, or trust account.
[(3)] (4) Notwithstanding §C(1) of this regulation, if the aggregate amount of all pending claims exceeds the amount of the letter of credit or trust account, the Commissioner may require a prorated distribution.
(b) Letter of credit or trust account,with the Commissioner.
(2) [Subject to Financial Institutions Article, §11-511.1, Annotated Code of Maryland, the] The continuing education requirement does not apply to the original application for a license.
(1) Except as provided in §A(2) [and (3)] of this regulation, in order to renew a license, each covered employee of a licensee shall successfully complete in the licensing period immediately preceding the current renewal period at least 8 hours of continuing education in approved courses.
(d) Maryland [mortgage-related laws] law and regulations relating to mortgage lending and origination—1 hour.
D. Reporting, Verification, and Record Keeping.
(2) The Commissioner may [verify] require verification, on a random or other basis, of satisfactory completion of the requirements of this regulation.
[.18] .19 [Special Rules for Covered Loans] Ability to Repay.
(2) This regulation applies to [all covered loans made under the provisions of Commercial Law Article, Title 12, Subtitle 1, 3, 4, or 10, Annotated Code of Maryland] loans subject to Commercial Law Article, §§12-127, 12-311, 12-409.1, and 12-1029, Annotated Code of Maryland.
(1) “Consumer report” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.
(2) “Consumer reporting agency” has the meaning stated in Commercial Law Article, §14-1201, Annotated Code of Maryland.
(3) “Covered loan” means a mortgage loan made under Commercial Law Article, Title 12, Subtitle 1, 3, 4, or 10, Annotated Code of Maryland, that meets the criteria for a loan subject to the Federal Home Ownership Equity Protection Act set forth in 15 U.S.C. §1602(AA, as modified from time to time by Regulation Z, 12 CFR §226, except that the comparison percentages for the mortgage loan shall be 1 percentage point less than those specified in 15 U.S.C. §1602AA, as modified from time to time by Regulation Z, 12 CFR§226.
(4) “Credit grantor” has the meaning stated in Commercial Law Article, §12-1001, Annotated Code of Maryland.
(a) “Lender” has the meanings stated in Commercial Law Article, §§12-101, 12-301, or 12-401, Annotated Code of Maryland, as the context may require.
(b) “Lender” includes a credit grantor under Commercial Law Article, Title 12, Subtitle 10, Annotated Code of Maryland.
(6) “Loan application” has the meaning stated in Commercial Law Article, §12-125(a), Annotated Code of Maryland.
(7) “Mortgage loan” has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.
(b) In the case of loan applications received by a lender by mail, telephone, or other electronic means the requirement that the lender shall provide a written recommendation that the borrower seek home buyer education or housing counseling and a list of approved agencies and organizations is satisfied, if they are mailed or otherwise provided to the borrower at the time of the initial application or within 3 business days after completion of the initial application.
(5) A lender’s consideration of a borrower’s scheduled monthly payment obligations may be limited to information provided directly by the borrower and verified by a consumer report from a consumer reporting agency, unless information provided by the borrower or the consumer reporting agency reasonably leads to further investigation by the lender.
C. Compliance with applicable provisions in 12 CFR Part 1026, as it may be amended from time to time, may be substituted for the obligations required by, and shall be sufficient to meet the requirements of, §B of this regulation.
B. Method to Determine Net Tangible Benefit.
(2) A licensee is considered to have conducted a reasonable inquiry of whether a refinance of a mortgage loan provides a net tangible benefit to a borrower if the mortgage lender has the borrower complete and sign a net tangible benefit worksheet on the form prescribed by the Commissioner, or a form that is substantially similar to the form prescribed by the Commissioner.
.21 Nontraditional and Higher-Priced Mortgage Loans.
C. Risk Management Policies, Procedures, and Control Systems.
(d) A licensee acting as a lender shall establish written [polices] policies and procedures to implement the requirements set forth in this subsection.
(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] NMLS the license application processing fee and any other fees that [NMLSR] NMLS imposes in connection with the application.
(2) In addition to the renewal fee set forth in §C(1) of this regulation, an applicant for a renewal shall pay to [NMLSR] NMLS the renewal application processing fee and any other fees that [NMLSR] NMLS imposes in connection with the application.
D. Examination and Investigation Fee. [The fee] A licensee shall pay all reasonable costs, including the actual cost per day for each of the Commissioner’s employees engaged in examinations or investigations performed by the Commissioner as authorized by Financial Institutions Article, §11-515(c), Annotated Code of Maryland[, is $250 per day].
.23 Supervision of Mortgage Loan Originators.
A. A licensee who is the employer of a mortgage loan originator shall at all times reasonably and adequately supervise those activities of the mortgage loan originator that are conducted within the scope of the mortgage loan originator’s employment.
(c) Dissemination of the policies and procedures specified in §B(1)(b) of this regulation.
C. If the Commissioner determines that the licensee does not provide reasonable and adequate supervision in the areas specified under §B of this regulation, the burden of proof shall be on the licensee to show that the supervision the licensee provides is reasonable and adequate.
A. A licensee that adequately demonstrates compliance with the federal Interagency Guidelines Establishing Information Security Standards, 12 CFR Part 30, Appendix B, as it may be amended from time to time, shall be deemed to be in compliance with §§B—G of this regulation.
B. A licensee shall develop, implement, and maintain a comprehensive information security program that is commensurate with the licensee’s size and complexity, the nature and scope of the licensee’s activities, and the sensitivity of any customer information at issue.
(3) Protecting against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.
D. Governance over Information Technology.
(1) A licensee shall have an established governance process in place to control and monitor information security.
(iii) Reporting to the board of directors, ownership, or most senior level of management, no less than annually, regarding the effectiveness of the information technology policies and procedures.
E. Information Technology Security Risk Assessment.
(1) A licensee shall complete an information technology security risk assessment on a periodic basis, but not less than once every 3 years.
(c) Identification and assessment of threats and vulnerabilities.
F. Information Technology Security Testing and Monitoring.
(1) A licensee shall perform periodic testing and monitoring of information technology security controls as appropriate for the size and complexity of the licensee’s information technology systems.
(d) Developing and implementing additional control frame works for any new or changed threats or risks identified by the licensee.
(2) Requiring service providers by contract to implement and maintain such safeguards.
(1) A licensee shall obtain an annual certification as to the performance and results of the periodic testing required by §E(1) of this regulation and make the annual certification available at the request of the Commissioner.
(2) A licensee shall provide notice of a breach of the security of a system to the Commissioner prior to giving the notice required by Commercial Law Article, §14-3504(b), Annotated Code of Maryland.
A. A licensee shall comply with the duty to report set forth in COMAR 09.03.10.02.
(7) Becoming aware of systemic violations of any provision of Financial Institutions Article, Title 11, Subtitle 5, Annotated Code of Maryland, any regulation adopted thereunder, or any other law regulating mortgage loan lending in the State.
C. The notice required by §B(2) of this regulation shall include, as applicable, a copy of the complaint, settlement agreement, or judgment that is the subject of the notice.

References: §14
 §11
 §21
 §226
 §226
 §1
 §7001
 §21
 §10
 §1
 §11
 §2601
 §1601
 §11
 §11
 §14
 §14
 §1602
 §226
 §1602
 §12
 §12
 §11
 §11
 §14