Source: http://updates.mwbllp.com/2014_08_24_archive.html
Timestamp: 2017-06-28 00:14:47
Document Index: 576514594

Matched Legal Cases: ['§ 17200', '§ 338', '§2', '§7', '§ 12', '§ 12', '§ 12', '§ 12', '§ 11', '§ 12', '§ 12']

Financial Services Law Developments: 8/24/14 - 8/31/14
The California Court of Appeal, First District, recently held that a mortgage loan investor may be liable for the fraudulent omission by the originating lender under an aider and abettor theory. Additionally, the Appellate Court held that a servicer which undertakes review of a loan modification has a duty not to mishandle the application or make material misrepresentation about the status of the loan modification. A copy of the opinion is available at: http://www.courts.ca.gov/opinions/documents/A138443.PDF In October 2005 and January 2006, the borrowers (“Borrowers”) refinanced their homes by obtaining loans with negative amortization and prepayment penalties. The loans were subsequently sold, and the Borrowers sued the mortgage loan investor’s successor (“Investor”) for fraud and violations of the Unfair Competition Law (“UCL”) (Bus. & Prof. Code, § 17200 et seq.), alleging that they were induced to obtain loans by misrepresentations and concealment of material facts. The Borrowers also alleged that the loan servicer (“Servicer”) failed to exercise reasonable care in processing their applications for loan modifications. On appeal, the First District began by analyzing whether the loan documents concealed the terms of the Borrowers’ loans. The Borrowers’ complaint alleged that the loans were designed to cause negative amortization, and the monthly payment amounts listed in the loan documents for the first two to five years were based entirely upon a low “teaser” interest rate which existed for only a single month, and which was substantially lower than the actual interest rate that would be charged. The Borrowers alleged that payments following the contractual payment schedule in the loan documents inevitably caused negative amortization, allegedly resulting in significant loss of equity and supposedly making it much more difficult to refinance the loan when coupled with the prepayment penalty. Relying on Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, the Appellate Court held that reliance can be proved in a fraudulent omission case by establishing that the originating lender “had the omitted information been disclosed [the plaintiff] would have been aware of it and behaved differently.” Because the Borrowers alleged facts to show that they would have acted different had they been aware of the material loan terms, the First District concluded that the Borrowers sufficiently alleged a cause of action for fraud. Next, the First District turned to whether the Investor could be held liable for alleged conduct by the originating lender. The Court answered in the affirmative. The Complaint alleged that the Investor was directly liable for the fraud as an aider and abettor because it dictated use of the supposedly deceptive loan documents by the loan originator, and it allegedly directly engaged in deceptive marketing of the option ARM loans at issue. More specifically, Borrowers alleged that the originating lender would originate mortgage loans according to the terms set in place by the Investor. The Investor allegedly engaged in deceptive marketing of its pay option ARM by aggressively promoting the teaser rate, including television commercials emphasizing that the payment rate could be as low as 1%. The Investor also supposedly instructed its own loan officers to sell refinance loans by holding themselves out as experienced mortgage lending professionals specializing in helping people improve their financial situation. As you may recall, “California has adopted the common law rule that liability may be imposed on one who aids and abets the commission of an intentional tort if the person knows the other’s conduct constitutes a breach of a duty and gives substantial assistance or encouragement to the other to so act.” See, e.g., Peel v. BrooksAmerica Mortg. Corp. 788 F.Supp.2d 1149, 1161 (C.D. Cal. 2011). The First District found that the Borrowers sufficiently alleged liability for fraud based on a theory of aiding and abetting because the Investor actively participated in the creating, designing and formulating of the loan documents and/or dictated the terms of the option ARMS loans sold to the Borrowers. The Investor unsuccessfully attempted to argue, for the first time on appeal, that it could not be liable for the fraud committed by its predecessor because it did not assume the predecessor’s liabilities when it merged with its predecessor. However, the general rule of successor nonliability does not apply if the transaction amounts to a consolidation or merger of the two corporations. See, e.g., Fisher v. Allis-Chalmers Corp. Product Liability Trust (2002) 95 Cal. App.4th 1182, 1188. Because the Borrowers alleged that the Investor merged with its predecessor, the allegations are sufficient to defeat a challenge on the pleadings as to Investor’s successor liability. The Lender also raised a statute of limitations defense, arguing that actions for damages based on fraud must generally be filed within three years after actual or constructive discovery of the fraud. Cal. Code Civ. P. § 338(d). However, the First District was not willing to hold as a matter of law that the Borrowers would have discovered the purported fraud earlier through reasonable diligence (e.g., in October 2005 and January 2006 when the loans were originated). Because the complaint alleged that the fraud was discovered in December of 2008, and because the original complaint was filed in August of 2011, the Appellate Court held that this claim was not barred by the statute of limitation. Therefore, the First District concluded that the Borrowers sufficiently pled a cause of action for fraud against the Investor. The First District then turned to whether the Borrowers alleged a cause of action under the UCL. Having concluded that the Complaint alleged a cause of action for fraud, the same allegations were sufficient to state a cause of action under the UCL based on the defendants’ fraudulent conduct. Finally, the First District examined the Borrowers’ cause of action for negligence in the servicing of their loans. The Borrowers alleged that the Servicer breached a duty of reasonable care owed to Borrowers by: (1) failing to review their loan modifications in a timely manner, (2) foreclosing on their properties while they were under consideration for a HAMP modification, and (3) mishandling their applications by relying on incorrect information. Specifically, one of the Borrowers alleged that an employee of the Servicer told him that his loan modification application was rejected because his monthly gross income was inadequate. However, his paystubs showed his monthly gross income was more than twice the amount incorrectly described by the employee. Additionally, the Servicer allegedly made other miscalculations to the Borrowers’ income and falsely advised that no documents had been submitted for review when in fact documents were sent and received. The First District reached its conclusion by analyzing the balancing factors recognized in Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095-96. As you may recall, Nymark is commonly cited for the proposition that as a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. However, the First District held that Nymark does not support the sweeping conclusion that a lender or servicer never owes a duty of care to a borrower. Rather, the Appellate Court opined, Nymark requires the balancing of five factors: (1) the extent which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant’s conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing future harm. Nymark, 231 Cal.App.3d at 1098. In applying the balancing factors, the First District followed the court in Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, and held that while a lender or servicer does not have a duty to offer or approve a loan modification, “a lender does owe a duty to a borrower to not make material misrepresentations about the status of an application for a loan modification or about the date, time, or status of a foreclosure sale.” Luceras, 221 Cal.App.4th at 68. Furthermore, according to the Appellate Court, the mishandling of the documents deprived the Borrowers of obtaining the requested relief. The Court noted that the injury to Borrowers is present under the allegations at issue in that the Borrowers lost the opportunity to obtain a loan modification, and there allegedly was a close connection between the Servicer’s conduct, and under the allegations at issue there was actual supposedly suffered because to the extent Borrowers otherwise qualified and would have been granted a loan modification. Thus, the Court held that, under the allegations at issue, Servicer’s conduct in mishandling the application papers would have directly precluded Borrowers’ loan modification application from being timely processed. Moreover, the Court held there is public policy of preventing future harm to home loan borrowers as shown by the recent actions taken by both the state and federal government to help homeowners caught in the foreclosure crisis. Notably, the First District did not attach moral blame to the Servicer’s alleged conduct because the facts are not clear at this stage of the proceeding. However, in light of the other factors weighing in favor of finding a duty of care, the Court noted that the uncertainty regarding this factor was insufficient to tip the balance away from finding a duty of care. Therefore, because Servicer allegedly agreed to consider modification of the Borrowers’ loans, the Court held that the Borrowers had alleged sufficient facts to demonstrate that the Servicer would have breached a duty of care by allegedly mishandling the Borrowers’ loan modification applications. Accordingly, the First District reversed the judgment of dismissal as to Borrowers’ fraud, UCL and negligence causes of action. The matter was remanded to the trial court for further proceedings. Ralph T. Wutscher McGinnis Wutscher Beiramee LLP The Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320 Fax: (312) 284-4751 Mobile: (312) 493-0874 Email: RWutscher@mwbllp.com Admitted to practice law in Illinois McGinnis Wutscher Beiramee LLP CALIFORNIA | FLORIDA | ILLINOIS | INDIANA | WASHINGTON, D. C. www.mwbllp.com NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates are available on the internet, in searchable format, at: http://updates.mwbllp.com Posted by
The U.S. Court of Appeals for the Ninth Circuit recently held that a TILA rescission claim that does not allege an ability to tender or an attempt the tender the non-rescindable balance due will survive a motion to dismiss, and that equitable tolling applies to the one year statute of limitations under Section 8 of RESPA, contrary to precedent from other courts. A copy of the opinion is available at: http://cdn.ca9.uscourts.gov/datastore/opinions/2014/07/16/09-17678.pdf Two mortgagors sued their mortgagee to rescind their mortgage loan, claiming that they were supposedly not provided with their TILA disclosures until three years after closing. Upon receipt of the TILA disclosures, mortgagors sued to rescind the mortgage under TILA. The mortgagors also alleged that the seller from whom the mortgagors purchased the home allegedly falsely represented himself as a real estate agent, and also that there was an allegedly fraudulently inflated appraisal. The mortgagors argued that the allegedly inflated appraisal was a “thing of value” provided to the lender in exchange for more referrals of appraisal business from the lender to the appraiser, in alleged violation of Section 8 of RESPA. The district court dismissed the TILA claim because mortgagors did not tender the value of their home equity loan before filing the lawsuit for rescission, and did not allege an ability to tender. The lower court dismissed the mortgagors RESPA claim because it was not filed within one year of the closing. There is no discussion in the opinion of the fact that the mortgage loan apparently was a purchase money loan. The Ninth Circuit recognized that under established Ninth Circuit case law (e.g., Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003)), a trial court may require an obligor to tender or provide evidence of an ability to tender at the summary judgment stage. However, rejecting the opinions of a number of other courts, the Ninth Circuit also held that it is not necessary for a mortgagee to allege an attempt to tender or the ability to tender the non-rescindable balance due under TILA, in order to survive a motion to dismiss. The Court stated that a mortgagee “can state a claim for rescission under TILA without pleading that they have tendered, or that they have the ability to tender, the value of their loan.” The Court noted that dismissal is different than summary judgment because at the dismissal stage of a lawsuit, the lower court is without evidentiary development, whereas they have such evidence at the summary judgment stage. Thus, at the dismissal stage, the lower court is unable to determine if tender is necessary. The Ninth Circuit reversed the lower court’s dismissal of the mortgagors’ TILA rescission claim and remanded for further proceedings. The Ninth Circuit further held that RESPA allows for equitable tolling, which acts to suspend the one year limitations period until the mortgagor discovers or had a reasonable opportunity to discover the violation. The court noted that equitable tolling is to be decided on a “case-by-case” basis. Accordingly, the Court reversed and remanded on this issue as well. The issue of equitable tolling was one of first impression for the Ninth Circuit and this decision conflicts with other courts’ opinions, including the D.C. Circuit Court of Appeals in Hardin v. City Title & Escrow Co., 797 F.2d 1037 (D.C. Cir. 1986). In addressing the RESPA allegations, the Ninth Circuit also expressly declined to rule on the issue of whether or not markups for settlement services provided by a third party are actionable under Section 8 of RESPA, as the issue was not first addressed in the lower court. In addition, the Ninth Circuit also expressly declined to rule on the issue of whether an inflated appraisal would qualify as a “thing of value” under Section 8 of RESPA. Ralph T. Wutscher McGinnis Wutscher Beiramee LLP The Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320 Fax: (312) 284-4751 Mobile: (312) 493-0874 Email: RWutscher@mwbllp.com Admitted to practice law in Illinois McGinnis Wutscher Beiramee LLP CALIFORNIA | FLORIDA | ILLINOIS | INDIANA | WASHINGTON, D. C. www.mwbllp.com NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates are available on the internet, in searchable format, at: http://updates.mwbllp.com Posted by
The California Court of Appeal, Second District, recently reversed a judgment which subordinated a senior lienholder to a mechanic’s lien where the senior lienholder completed its foreclosure after it had accepted a deed-in-lieu of foreclosure from the former owner. The mechanic’s lienholder argued that the doctrine of merger subordinated the senior lienholder when it accepted the mechanic’s lien. However, the Court held that “[u]nder well-established California law, the senior beneficiary’s lien and title ordinarily do not merge when a deed in lieu of foreclosure is given if there are junior lienholders of record.” A copy of this opinion is available at: http://www.courts.ca.gov/opinions/documents/B248491.PDF As you may recall, “[t]itle conveyed by a trustee’s deed [i.e., in a foreclosure sale] relates back in time to the date on which the deed of trust was executed. The trustee’s deed therefore passes the title held by the trustor as of that earlier time plus any after-acquired title, rather than the title that the trustor held on the date of the foreclosure sale. Liens that attached to the property after execution of the foreclosed deed of trust are therefore eliminated or ‘sold out,’ and the purchaser at the trustee sale takes title to the property free of those junior liens.” 1 Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2014) §2.99, pp. 2-111 to 2-112 (internal citations omitted.) In contrast, “[a] conveyance by a trustor through a deed in lieu of foreclosure (as opposed to a foreclosure deed) passes title to the transferee subject to all existing liens … If the grantee is the beneficiary under [a] senior deed of trust, under traditional merger concepts, its lien would normally merge into its title and be destroyed, but this would have the effect of making its title subject to the (former) junior deed of trust, which is clearly not the result that [] parties intend.” Id. at §7.17, p. 7-23. In 2008, Borrower purchased property with the proceeds of a purchase money loan from Lender. The loan was secured by a first-position deed of trust. Later in 2008, Borrower hired Contractor to make improvements to the property. In 2009, Contractor recorded a mechanic’s lien against the property and filed suit for breach of contract and quiet title. Later, in September 2009, Lender recorded a notice of default and election to sell under its deed of trust, stating that Borrower was in default on the loan. In November 2009, Borrower transferred the property to Lender by grant deed in lieu of foreclosure (the “deed-in-lieu”). The deed-in-lieu expressly provided that “[t]he Indebtedness shall remain in full force and effect after the date hereof. The interest of Grantee in the Property upon effectuation of the transfers, assignments or conveyances as provided in this Grant Deed shall not merge with the interest of Lender pursuant to the Loan Documents, but shall be and remain at all times separate and distinct, and the Loan Documents shall be and remain at all times valid and continuous liens on the Property.” In December 2009, the trustee recorded a notice of trustee’s sale. In January 2010, Lender recorded a trustee’s deed upon sale, stating that Lender (i.e., the owner of the Property under the deed in lieu of foreclosure) was the foreclosing beneficiary under the deed of trust and purchased the Property at the foreclosure sale. At trial, Contractor argued that Lender’s interest in the property merged with Borrower’s interest in the property when it accepted the deed-in-lieu. According to Contractor, due to the merger, Contractor’s lien on the property became senior to Lender’s lien on property. The trial court agreed, and held that “the mechanics lien has priority and was not extinguished by the sale of the property to [Lender].” The California Appellate Court reversed the trial court’s judgment. The Appellate Court noted that “[u]nder well-established California law, the senior beneficiary’s lien and title ordinarily do not merge when a deed in lieu of foreclosure is given if there are junior lienholders of record.” The Court relied upon the California Supreme Court’s decision in Davis v. Randall: “‘Merger is always a question of intent when the question is as to whether a mortgage lien is merged in the fee, upon both being united in the same person. Equity will keep the legal title and the mortgagee’s interest separate, although held by the same person, whenever necessary for the full protection of the person’s just rights. If there is an intervening mortgage the acquirement of the title will not operate as a merger.” Davis v. Randall (1897) 117 Cal. 12 (internal citations omitted). The Appellate Court held that there was no evidence that Lender intended to subordinate its lien to Contractor’s lien. Accordingly, the Appellate Court reversed the trial court’s ruling, and held that “the foreclosure after acceptance of the deed was therefore valid and eliminated all junior liens, including plaintiff’s mechanic’s lien.” Ralph T. Wutscher McGinnis Wutscher Beiramee LLP The Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320 Fax: (312) 284-4751 Mobile: (312) 493-0874 Email: RWutscher@mwbllp.com Admitted to practice law in Illinois McGinnis Wutscher Beiramee LLP CALIFORNIA | FLORIDA | ILLINOIS | INDIANA | WASHINGTON, D. C. www.mwbllp.com NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates are available on the internet, in searchable format, at: http://updates.mwbllp.com Posted by
FYI: Ill App Ct Allows Mortgagee to Appoint Receiver and Collect Rents Despite HOA's Order of Possession for Unpaid Assessments
The Illinois Appellate Court, First District, recently held that a mortgagee was entitled to be placed in possession of the mortgaged property through a receiver and to collect rents, even though a condominium association had previously obtained an order of possession in a forcible detainer action for unpaid assessments. A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/1stDistrict/1133556.pdf. A mortgagee filed a foreclosure action following a default, naming the borrowers and condominium association ("HOA") as defendants, among others. The HOA then filed a forcible detainer action against the borrowers, claiming unpaid assessments. The HOA obtained an order for possession, and began collecting rent from the borrowers' tenants. Following the entry of the order for possession in the forcible detainer action, the mortgagee filed a motion for appointment of a receiver in the foreclosure action. The HOA appeared for the hearing on that motion, and argued that because it obtained an order for possession in the forcible detainer action, the mortgagor had no possessory right to the property, and therefore the mortgagee was precluded from exercising its right to possession of the property through the appointment of a receiver. The lower court disagreed, and granted the mortgagee's motion for appointment of a receiver. The HOA was further directed to turn over the rents it received from the tenants. The HOA appealed. The Appellate Court began its analysis by observing that the mortgage here was recorded several years prior to the date the assessments went unpaid. Accordingly, the Court determined that the mortgagee's lien was superior to the HOA's lien. In addition, the Court noted that the mortgagee recorded an assignment of rents in connection with the original loan, which was binding on the borrowers' successors and assigns. Accordingly, the Court found that "because the rents collected from the tenants had already been assigned to the lender, an order entered more than eight years later allowing the association to collect rents could not possibly prevent the lender...from enforcing the prior assignment." The Court further observed that because the lender was entitled to enforce the assignment "simply by giving notice to the tenant" - and therefore did not require the appointment of a receiver to enforce same - the HOA's arguments as to the impact of the forcible action are "beside the point." Even if that were not so, the Court found in favor of the mortgagee for another reason: it determined that because the Illinois Mortgage Foreclosure Law supersedes any other inconsistent statutory provisions with respect to the right to possess mortgaged real estate during foreclosure, the HOA's effort to displace the IMFL through its forcible action "must fail." See 735 ILCS 5/15-1701(f). Accordingly, the Court ruled in favor of the mortgagee, and affirmed the decision of the lower court. Ralph T. Wutscher McGinnis Wutscher Beiramee LLP The Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320 Fax: (312) 284-4751 Mobile: (312) 493-0874 Email: RWutscher@mwbllp.com Admitted to practice law in Illinois McGinnis Wutscher Beiramee LLP CALIFORNIA | FLORIDA | ILLINOIS | INDIANA | WASHINGTON, D. C. www.mwbllp.com NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates are available on the internet, in searchable format, at: http://updates.mwbllp.com Posted by
FYI: 4th Cir Rules in Favor of Lender and its Owners in Putative Class Action Under Maryland's Finder's Fee Act
The U.S. Court of Appeals for the Fourth Circuit recently held that the Maryland Finder’s Fee Act is only actionable against mortgage brokers, and that an entity named as the lender in the operative loan documents is categorically excluded from the definition of “mortgage broker,” and therefore cannot be held liable for the borrowers’ alleged violation of the Finder’s Fee Act. A copy of the opinion is available at: http://www.ca4.uscourts.gov/Opinions/Published/131869.P.pdf The plaintiffs (“Borrowers”) obtained a mortgage loan in connection with the purchase of a house in Baltimore, Maryland. For its services, their lender (“Lender”) charged typical lending fees in the amount of $1,290 at closing. This amount included an application fee of $410 (most of which for the cost of an appraisal and a credit report), a processing fee of $490, and an underwriting fee of $390. Borrowers had been introduced to the Lender by an employee of a national real estate agency (“Real Estate Agency”). To fund the loan, Lender opened a line of credit with a bank (“Bank”). Four days after closing, Lender sold the loan to Bank. Lender was owned in equal shares by two companies affiliated with Real Estate Agency and Bank, respectively. As part of its business plan, Lender would operate as a residential mortgage lending business principally with customers of Real Estate Agency, and would use funds obtained through a line of credit from Bank. Within days of closing a loan, Lender would sell most (but not all) of its loans to Bank. In their class action lawsuit, Borrowers claimed that the fees imposed by Lender at closing were “finder’s fees” and violated the Maryland Finder’s Fee Act. Specifically, the alleged violations included (1) charging finder’s fees in transactions in which Lender was both the mortgage broker and the lender; and (2) charging finder’s fees without a separate written agreement providing for them. Also, Borrowers named Real Estate Agency and Bank in the lawsuit as supposed aiders and abettors, and as supposed coconspirators. Dismissing the claims against Real Estate Agency and Bank, the district court denied Defendants’ motion to dismiss Borrowers’ core claim that Lender was a mortgage broker that illegally collected a finder’s fee while also acting as the lender. Shortly before trial, the district court sent a letter to the parties indicating that the fees charged for work actually performed by Lender in providing processing, underwriting, and application services were not finder’s fees. The trial court indicated that the scheme could only make sense if Borrowers had paid “some excessive or redundant fee” to Bank (in the guise of Lender) for finding Bank as lender. Slip. Op. at p. 5. When Borrowers admitted that they could not meet that burden, the trial court entered final judgment in Defendants’ favor. This appeal followed. As you may recall, the Maryland Finder’s Fee Act, Md. Code, Comm. Law (“CL”) § 12-801, et seq., prohibits a “mortgage broker” from charging a “finder’s fee in a transaction in which the mortgage broker…is the lender…” Md. Code, CL § 12-804(e). “Finder’s fees” are defined as those fees “imposed by a broker . . . for the broker’s services in procuring, arranging, or otherwise assisting a borrower in obtaining a loan or advance of money,” Md. Code, CL § 12-801(d). Thus, the Maryland Finder’s Fee Act “applies only to mortgage brokers and the fees they charge borrowers.” Sweeney v. Sav. First Mortg., LLC, 879 A.2d 1037, 1048-49 (Md. 2005). On appeal, the U.S. Circuit Court for the Fourth Circuit affirmed the trial court’s judgment but under a different rationale. According to the Fourth Circuit, because Lender was the “lender named in the loan documents,” it was not a mortgage broker under the Maryland Finder’s Fee Act. See Md. Code, CL § 12-801(f). Indeed, Maryland law defines a “mortgage broker” as “a person who: (1) [f]or a fee or other valuable consideration, whether received directly or indirectly, aids or assists a borrower in obtaining a mortgage loan; and (2) [i]s not named as a lender in the agreement, note, deed of trust, or other evidence of the indebtedness.” Md. Code, Fin. Inst. § 11-501(i) (emphasis added). Therefore, the Court held that “an entity that is named as the lender in the operative loan documents is categorically excluded from the definition of ‘mortgage broker,’ as that term is used in the Finder’s Fee Act.” Slip. Op. at p. 15. Borrowers’ primary argument arose from their challenge to the rationality of the statutory definition. Specifically, they argued that the exclusion of the named lender from the definition of “mortgage broker” is “irreconcilable” with § 12-804(e), a provision of the Finder’s Fee Act that states that “[a] mortgage broker may not charge a finder’s fee in any transaction in which the mortgage broker . . . is the lender.” Md. Code Ann., Com. Law § 12-804(e). However, the Fourth Circuit disagreed, holding that these provisions are not irreconcilable. Rather, “such a situation could occur if a broker were to accept a finder’s fee to help a borrower obtain a loan from an entity that merely put its name on the loan documents while the broker secretly ‘table funded’ the loan…” Slip. Op. at p. 17. According to the Fourth Circuit, in such a scenario, the broker would be charging a finder’s fee in a transaction where it was both broker and lender but not named as the lender on the loan documents. Therefore, “[Section] 12-804(e) comfortably coexists with the statute’s definition of ‘mortgage broker.’” Id. These circumstances were not at issue in this case. Accordingly, the Fourth Circuit affirmed the judgment of the district court, denied the Borrowers’ motion to certify certain questions to the Maryland Court of Appeals, and denied as moot Borrowers’ motion to dismiss Defendants’ cross-appeal. Ralph T. Wutscher McGinnis Wutscher Beiramee LLP The Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320 Fax: (312) 284-4751 Mobile: (312) 493-0874 Email: RWutscher@mwbllp.com Admitted to practice law in Illinois McGinnis Wutscher Beiramee LLP CALIFORNIA | FLORIDA | ILLINOIS | INDIANA | WASHINGTON, D. C. www.mwbllp.com NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates are available on the internet, in searchable format, at: http://updates.mwbllp.com Posted by