Magazine article Mortgage Banking

Court Stays Controversial Maryland County Lending Law

Magazine article Mortgage Banking

Court Stays Controversial Maryland County Lending Law

Article excerpt

A Maryland circuit court judge issued a 90-day stay, blocking implementation of a Montgomery County anti-abusive-lending ordinance, even as the Treasury Department's Office of Thrift Supervision (OTS) weighed in that the local law infringes on the federal government's authority.

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As more than two dozen mortgage lenders were poised to suspend or radically curtail operations in the affluent county adjacent to Washington, D.C., Judge Michael Mason granted the American Financial Services Association's (AFSA's) request to delay implementation of the Montgomery County law the day before its March 8 effective date until a July 6 hearing.

The Mortgage Bankers Association (MBA) lauded the judge's action. Erick Gustafson, MBA's vice president of government affairs, noted that Montgomery County's Predatory Lending Ordinance, 36-04, not only fails to add new protections for consumers, but the vaguely defined law adds "significant ambiguity" and compounds the risk for lenders in the market.

"MBA believes that the ordinance must be repealed, and the judge's ruling is an important step toward that goal," said Gustafson. "Lenders comply with the state of Maryland lending law currently in place. It provides strong protections for consumers, and the clarity and certainty that lenders need in order to conduct business."

Unlike other local so-called anti-predatory-lending laws previously enacted (and later amended or repealed) in the District of Columbia, Georgia and New Jersey, the Montgomery County ordinance is different in that it attempts to use a civil-rights exemption within Maryland's state lending law to assert its authority over lenders.

The penalty provisions of the ordinance would grant the Montgomery County Human Rights Commission "broad discretionary authority" to impose a wide variety of monetary damages for violating the ordinance, including an increase in statutory damages from $5,000 to $500,000 per violation. …

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