As every mortgage broker in Maryland should be aware, Maryland law requires that a mortgage broker issue a written broker agreement that discloses the broker fee within 10 business days of "completed application" (the "10-Day Rule)" While "completed application" has not yet been defined by statute or regulation in the context of broker agreements, the Commissioner of Financial Regulation regularly takes the position that the date a mortgage credit report is obtained is the date of completed application for the purpose of determining compliance with the 10-Day Rule. Therefore, field examiners from the Commissioner's office generally expect loan files to include a fully executed broker agreement dated within 10 business days of the date of the credit report. Otherwise, examiners routinely conclude that the mortgage broker violated the 10-Day Rule, and full refunds of the broker's fee are suggested.
On the other hand, if you are doing business as a mortgage broker, you are probably familiar with the scenario that occurs when a potential loan applicant contacts the broker to discuss loan options and permits the loan officer to obtain a credit report. The potential applicant does not request a loan application at that time and is then missing in action for a period of time which can be days, weeks or longer because the consumer is shopping around, or there maybe some other reason for the delay that is out of the mortgage broker's control . By the time the potential applicant contacts the mortgage broker to complete a written loan application and request a loan, it is too late to issue a broker agreement that complies with the 10-Day Rule based on the Commissioner's interpretation.
The solution to this problem is, according to staff from the Commissioner' s office, prior to obtaining the consumer's credit report, to have the borrower sign a disclosure similar to the attached Notice of Mortgage Loan Prequalification Inquiry, which we have developed and submitted for review by the Commissioner' s office. The Notice discloses to the borrower that the mortgage broker is evaluating the borrower's credit solely in order to provide basic information about various loan programs that may be available but is
NOT processing a loan application for the consumer at that time. Using this Notice should ensure that the trigger date for compliance with the 10-Day Rule is the date the borrower completes a written loan application. However, a document complies with the law
ONLY if it is properly filled and used in appropriate circumstances.
For additional guidance on any of these laws and issues, please contact any of the undersigned.
