2019 Maryland Code
Financial Institutions
Title 11 - Consumer Credit
Subtitle 5 - Maryland Mortgage Lender Law
§ 11-508. Surety bonds

    (a)    With the application for a new license, an applicant shall file a surety bond with the Commissioner.

    (b)    (1)    The bond shall run to the Commissioner, as obligee, for the benefit of:

            (i)    The State; and

            (ii)    Any mortgage loan borrower who has been damaged by a violation committed by a licensee of any law or regulation governing the activities of mortgage lenders.

        (2)    The bond shall be:

            (i)    In an amount determined by the Commissioner under subsection (c) of this section;

            (ii)    Issued by a surety company that:

                1.    Is authorized to do business in the State; and

                2.    Holds a certificate of authority issued by the Maryland Insurance Commissioner; and

            (iii)    Conditioned that the licensee shall comply with all Maryland laws regulating the activities of mortgage lenders and mortgage loan lending.

        (3)    The liability of the surety:

            (i)    Shall be continuous;

            (ii)    May not be aggregated or cumulative, whether or not the bond is renewed, continued, replaced, or modified;

            (iii)    May not be determined by adding together the penal sum of the bond, or any part of the penal sum of the bond, in existence at any two or more points in time;

            (iv)    Shall be considered to be one continuous obligation, regardless of increases or decreases in the penal sum of the bond;

            (v)    May not be affected by:

                1.    The insolvency or bankruptcy of the licensee;

                2.    Any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the licensee or an agent of the licensee; or

                3.    The suspension of the licensee’s license;

            (vi)    May not require an administrative enforcement action by the Commissioner as a prerequisite to liability; and

            (vii)    Shall continue for 3 years after the later of the date on which:

                1.    The bond is canceled; or

                2.    The licensee, for any reason, ceases to be licensed.

        (4)    (i)    A bond may be canceled by the surety or the licensee by giving notice of cancellation to the Commissioner.

            (ii)    Notice under subparagraph (i) of this paragraph shall:

                1.    Be in writing; and

                2.    Be sent by certified mail, return receipt requested.

            (iii)    A cancellation of a bond under this paragraph is not effective until 90 days after receipt of a notice of cancellation by the Commissioner.

        (5)    A claim against the bond may be filed with the surety by:

            (i)    A claimant; or

            (ii)    The Commissioner for the benefit of a claimant or the State.

        (6)    If the amount of claims against a bond exceeds the amount of the bond, the surety:

            (i)    Shall pay the amount of the bond to the Commissioner for pro rata distribution to claimants; and

            (ii)    Is relieved of liability under the bond.

        (7)    If the penal amount of a bond is reduced by payment of a claim or judgment, the licensee shall file a new or additional bond with the Commissioner.

        (8)    A penalty imposed against a licensee under § 2–115(b) of this article or § 11–517(c) of this subtitle may be collected and paid from the proceeds of a bond required under this section.

    (c)    (1)    If an applicant has not conducted a mortgage lending business any time during the 36 months prior to the filing of an original application for a license, the applicant shall provide a sworn statement setting forth that fact.

        (2)    If an applicant has conducted a mortgage lending business any time during the 36 months prior to the filing of an original application, the applicant shall provide a sworn statement setting forth the aggregate principal amount of mortgage loans secured or to be secured by property located in Maryland and applied for and accepted or serviced or mortgage loans secured or to be secured by property located in Maryland and applied for, procured, and accepted or serviced by the mortgage lender during the 12 months immediately preceding the month in which the application is filed.

        (3)    If an applicant has conducted a mortgage lending business any time during the 36 months prior to the filing of an original application, but during that time has not acted as a mortgage lender in Maryland, the applicant shall provide with the original application a sworn statement setting forth the aggregate principal amount of loans secured or to be secured by a dwelling or residential real estate located in states other than Maryland and applied for, procured, and accepted or serviced by the mortgage lender during the 12 months preceding the month in which the application is filed.

        (4)    Except as provided in subsection (d) of this section, the applicant shall file with the original application:

            (i)    Where the aggregate principal amount of loans set forth in the sworn statement was $3,000,000 or less, a surety bond in the amount of $50,000;

            (ii)    Where the aggregate principal amount of loans set forth in the sworn statement was more than $3,000,000 but not more than $10,000,000, a surety bond in the amount of $100,000; and

            (iii)    Where the aggregate principal amount of loans set forth in the sworn statement was more than $10,000,000, a surety bond in the amount of $150,000.

    (d)    Notwithstanding any other provisions of this section, and subject to approval by the Commissioner, if an applicant files five or more original or renewal applications at the same time, the applicant may provide a blanket surety bond for all licensed offices in the amount of $750,000.

    (e)    Subject to approval by the Commissioner, an applicant for license who files an application for a new license may satisfy the bonding requirement under this section by establishing a trust account with or obtaining an irrevocable letter of credit from a financial institution insured by the Federal Deposit Insurance Corporation in an amount equal to the bond required under this section.

    (f)    (1)    The Commissioner may adopt regulations reasonably necessary to assure that the proper surety bond amount established by this section is maintained by each licensee throughout each licensing term.

        (2)    The regulations may provide for periodic reporting, recalculation, and enforcement of required bond amounts.

    (g)    If a mortgage servicer is subject to a receivership proceeding, the Commissioner or a receiver appointed under § 7–404.1(b)(2) or § 7–506(b) of the Real Property Article, without regard to any priorities, preferences, or adverse claims, may:

        (1)    Reduce the bond or the deposit in lieu of a bond to cash; and

        (2)    Use the cash to defray the costs associated with the receivership.