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Linda R. Sweeney v. Savings First Mortgage, L.L.C., No. 148, Sept. Term 2004. Opinion by Harrell, J.

PREEMPTION - MARYLAND FINDER’S FEE LAW - FEDERAL DEPOSITORY INSTITUTIONS DEREGULATION AND MONETARY CONTROL ACT (DIDMCA) - MORTGAGE BROKERS ARE NOT “CREDITORS” UNDER THE DIDMCA - MARYLAND FINDER’S FEE LAWNOT PREEMPTED UNDER THE DIDMCA

The Maryland Finder’s Fee Law is not preempted by federal law. The preemption provision of 12 U.S.C. § 1735f-7a only operates with respect to state laws seeking to regulate the creditor involved in a covered loan transaction. Mortgage brokers do not satisfy the definition of “creditor” within the meaning of the DIDMCA. Because the Maryland Finder’s Fee Law specifically regulates only mortgage brokers, and the fees that they charge, it is not preempted by the DIDMCA.

PREEMPTION – MARYLAND FINDER’S FEE LAW

Facts: This case involves the asserted express preemption of the Maryland Finder's Fee Law, Md. Code (1975, 2000 Repl. Vol.), §§ 12-801 - 12-809 of the Commercial Law Article, by 12 U.S.C. § 1735f-7a, the Federal Depository Institutions Deregulation and Monetary Control Act. Sweeney alleged in the Circuit Court for Frederick County that her mortgage broker, Savings First, extracted a $10,788 mortgage broker's fee for the second of two mortgage loans made within a twenty-four month period, in contravention of the eight percent statutory limitation provided by § 12-804 (b) of the Commercial Law Article. The $10,788 mortgage broker's fee was calculated using the total amount of the second refinance loan ($158,400), rather than on the difference between the earlier loan amount and the second loan amount ($18,150). § 12-804 (c).

Savings First moved for dismissal or summary judgment because § 1735f-7a (a)(1) of the United States Code expressly preempted any state from “expressly limiting the rate or amount of interest, discount points, finance charges, or other charges” on qualifying mortgages. The Circuit Court granted the motion for summary judgment.

Sweeney appealed to the Court of Special Appeals. The Court of Appeals granted a writ of certiorari before the intermediate appellate court could decide the case. Held: Judgment reversed. The express preemption provision of § 1735f-7a(a)(1) applies expressly to a loan or mortgage that meets three requirements: 1) be secured by a first lien on residential real property; 2) be made after 31 March 1980; 3) and be a “federally related mortgage loan” as defined by the National Housing Act (NHA).

The express preemption provision of DIDMCA is ambiguous as to whether the preemption applies to all of the parties involved in an otherwise covered mortgage transaction or merely the mortgage itself (and by logical extension, the creditor only). The legislative history of DIDMCA provides that state interest rate-cap laws, which could force a home mortgage creditor to loan money to homebuyers below the market levels, had contributed to a "severe" mortgage credit crunch. S. Rep. No. 96-368, at 18 (1980); reprinted in 1980 U.S.C.C.A.N. 236, 254. At the time of enactment of DIDMCA, it was clear that a mortgage creditor's ability to provide credit was severely restricted by state interest rate-cap laws.

Furthermore, a 1982 amendment to the Truth in Lending Act, which is used to define a "federally related mortgage" under the National Housing Act, expressly removed persons who arranged credit (mortgage brokers) from the definition of creditor and limited its provisions solely to professional lenders of credit. S. Rep. No. 97-536, at 43 (1982); reprinted in 1982 U.S.C.C.A.N. 3054, 3097.
 
Linda R. Sweeney v. Savings First Mortgage, L.L.C., No. 148, September Term, 2004, filed 9 August 2005. Opinion by Harrell, J.
***TORTS - NEGLIGENCE - PREMISES LIABILITY - DUTY