Entities seeking to collect defaulted mortgage loans in Maryland need not be licensed by state, Maryland’s top court ruled Thursday.
In its 5-2 decision, the Court of Appeals said the 1977 Maryland Collection Agency Licensing Act does not apply to mortgages. The court added that an expansion of the law in 2007 did not add mortgages and the General Assembly has shown no intent to include these home loan collectors in the state’s licensure requirement for collection agencies.
The high court’s decision overturned lower-court rulings that had invalidated home foreclosures because the entities seeking collection or foreclosure, through substitute trustees, were unlicensed by the Maryland Department of Labor, Licensing and Regulation. The high court, in contrast to the intermediate Court of Special Appeals, said licensure was not required under the MCALA.
The original law expressly excluded from its definition of collection agencies subject to licensure any “bank, trust company, savings and loan association, or building and loan association or mortgage banker.” The 2007 amendments, proposed at DLLR’s request, expanded the definition to include entities that engage “indirectly in the business of … collecting a consumer debt the (entity) owns, if the claim was in default when the (entity) acquired it.”
The legislature neither erased the mortgage banker exclusion nor showed any intent to have done so in the debates resulting in the amendments, the high court’s majority held.
“The plain language of the original legislation provides this court with evidence the General Assembly exempted all those parties with a similar consideration relating to the mortgage industry,” Judge Joseph M. Getty wrote.
The 2007 change also “does not unambiguously indicate whether DLLR requested the bill to expand the scope of MCALA to industries beyond the ordinary understanding of collection agencies,” Getty wrote.
The department likely sought the amendment “to close a loophole within the collection agency industry rather than to broaden the scope of MCALA to other industries, such as the mortgage industry,” he added.
Getty was joined in the opinion by Judges Clayton Greene Jr., Shirley M. Watts, Michele D. Hotten and Glenn T. Harrell Jr., a retired jurist sitting by special assignment in place of Chief Judge Mary Ellen Barbera who had recused herself for reasons not publicly disclosed.
In dissent, Judge Robert N. McDonald wrote the trusts established to collect defaulted mortgage loans are neither mortgage bankers nor members of the mortgage industry but are the debt-collection agencies that the “plain language” of the statute requires to be licensed.
“The majority labors over 64 pages to justify its conclusion that the statute does not mean what it says,” McDonald wrote in the dissenting opinion Judge Sally D. Adkins joined. “The terms ‘collection agency industry,’ ‘mortgage industry,’ or ‘actors’ in those industries do not appear in the statute. It is not necessary to wrestle with those concepts when the actual statutory language can be applied in a straightforward manner.”
The entities seeking to collect the mortgage loans are “’in the business of’ buying or attempting to collect defaulted consumer debt that was already in default when they acquired it,” McDonald added. “They must obtain a collection agency license.”
The Court of Appeals rendered its decision in four consolidated cases: Kyle Blackstone v. Dinesh Sharma and Terrance Shanahan v. Seyed Marvastian, No. 40; Laura O’Sullivan v. Jeffrey Altenburg, No. 45; and Martin S. Goldberg v. Martha Lynn Neviaser, No. 47, September Term 2017.