Housing finance and capital markets groups support extending the enforcement deadline for a controversial Maryland mortgage licensing rule and are backing bills to scale back its requirements.
In addition to supporting the enforcement deadline extension to July 6 from April 10, the Mortgage Bankers Association and others are backing bills that would exempt many passive investors other than
MBA said in a report Friday that it will "collaborate with industry partners in achieving swift passage and enactment of the legislation." Groups like the Securities Industry and Financial Markets Association and the American Fintech Council also have sought scaled-back guidance.
There are limits to how far the bills go in reducing mortgage licensing. But they do address a key concern, which is the extension of the requirements to securitization trusts, according to attorney reviews.
"If the bills are enacted as drafted, the Maryland Mortgage Lender Law would not apply to a person, including a passive trust that acquires or takes assignment of a mortgage loan," according to a report by law firm Mayer Brown.
The legislative proposals specifically state that licensing does not apply to assignees unless they are holding MSRs, nondepositories as defined in the state's Consumer Law Act, or actively brokering, originating, funding, servicing mortgages, Mayer Brown attorneys said in their report.
The exclusions are in line with a position the coalition of industry groups took in a letter to the state's Office for Financial Regulation, noting that the expansive guidance "is not supported by Maryland's statutes" licensing some of these other roles.
The new licensing guidance stems from a state appeals-court decision in Estate of Brown v. Ward to dismiss a home-equity line of credit foreclosure because the assignee was not considered property licensed. The OFR released the guidance last month.
The guidance has proved disruptive to the industry, according to the coalition, which also includes Maryland's MBA, the Housing Policy Council and the Structured Finance Association.
"Some sectors of the secondary market have responded by excluding Maryland loans from whole-loan bulk purchases and residential mortgage-backed securities transactions, with some investors declining to purchase securities with any Maryland loans in the collateral pool," it said.
The coalition also showed concern the guidance could also impact the primary mortgage market.
"The situation could begin to impact the availability of credit to Maryland consumers if, as feared, originators cease making certain residential mortgage loans in Maryland because of the lack of available investors," the groups said in their letter.
The private secondary market recently has been a particularly important outlet for loans made to borrowers who don't meet the requirements for typical home loans purchased by large entities that currently operate in government conservatorship.
The Trump administration and Republican-dominated legislature are considered likely to want to remove those entities from the conservatorship they've been in since the Great Financial Crisis, which would increase the private secondary market's importance.
The aggressive deregulatory stance currently taken by the federal government also has prompted some states to beef up their own rules as a counterbalance.
One of the many industry concerns about the Maryland guidance has been that "other states could follow suit," Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said at the group's recent servicing conference in Dallas.
