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No Finder’s Fee Refund for Reverse Mortgage Buyer

The purchaser of a loan in a reverse mortgage transaction was not a “mortgage broker” under the Maryland Finder’s Fee Act, and plaintiff borrower cannot recover from the purchaser for allegedly violating the Act by funding the loan under a pre-existing agreement; the 4th Circuit affirms judgment for the lender.

Baltimore resident William Marshall borrowed $252,000 from Savings First Mortgage LLC, in a reverse mortgage transaction. He sued James B. Nutter & Company, which purchased the mortgage from Savings First, alleging that Nutter was liable for conspiring with Savings First to violate the Maryland Finder’s Fee Act. Marshall alleged that Savings First collected $3,666 in fees from him at closing, in violation of Md. Code Ann., Com. Law § 12-804(e), which prohibits a mortgage broker from charging a finder’s fee in any transaction in which the mortgage broker is the lender, and that because Nutter funded the loan pursuant to a preexisting agreement, it was liable as a civil coconspirator.

The district court held that Nutter could not be a violator of § 12-804(e) because that statute regulates only mortgage brokers and Nutter was not a “mortgage broker” in the transaction. The court concluded that because Nutter was not “legally capable” of violating the Act, it could not, under Shenker v. Laureate Education Inc., 983 A.2d 408 (Md. 2009), be held liable for conspiring with Savings First to violate the Act. It granted Nutter’s motion for summary judgment.

We agree and affirm.

The sole question presented is whether, under Maryland law, a non-broker may be held liable for conspiring with a mortgage broker to violate § 12-804(e), which states that a mortgage broker may not charge a finder’s fee in any transaction in which the mortgage broker is the lender.

The Finder’s Fee Act itself does not prohibit conspiracy to collect unlawful finder’s fees, nor does it provide a cause of action to recover for conspiracy to violate the Act’s terms. Thus, plaintiff’s entitlement to relief must stem not from the Finder’s Fee Act itself, but instead from Maryland common law governing civil conspiracy.

We conclude that the district court correctly applied Shenker to Marshall’s civil conspiracy claim against Nutter. Plaintiff sought to hold Nutter liable for conspiring with Savings First and other mortgage brokers to violate § 12-804(e). This provision imposes a duty only on mortgage brokers, and therefore only mortgage brokers are capable of violating it. Since it is uncontested that Nutter was not functioning as a mortgage broker but, as Marshall alleged in his complaint, as the “funding lender,” Nutter was not legally capable of violating § 12-804(e) and therefore, under Shenker, cannot be held liable for conspiring to violate § 12-804(e).

That Nutter was potentially subject to liability for breaching other duties of care is irrelevant to whether it was legally capable of committing the violation alleged by Marshall in this case –  i.e., a violation of § 12-804(e).

We thus affirm the district court’s judgment dismissing Marshall’s claim that Nutter conspired to violate § 12-804(e) of the Finder’s Fee Act.

Marshall v. James B. Nutter & Co. (Niemeyer) No. 13-1940, July 10, 2014; USDC at Baltimore, Md. (Bennett) Martin E. Wolf for appellant; Todd W. Ruskamp for appellee. VLW 014-2-133, 13 pp.

VLW 014-2-133

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