MBA State Relations Committee Update State Highlights

MBA Leads Support for Legislation to Address Maryland Trust Licensing Issue; MAA Launches Call to Action: Last week, MBA was joined by the Maryland Mortgage Bankers Association (MMBBA) and the Metro Washington DC MBA on a support letter to sponsors of companion bills (HB-1516/SB-1026). The bills have been endorsed by the Maryland Office of Financial Regulation (OFR) and would address its January 10, 2025, guidance and emergency regulations to facilitate compliance with the state Appellate Court’s ruling in the case of the Estate of Brown v. Ward. Also this week, MBA’s Mortgage Action Alliance (MAA) launched a call to action to provide MAA members living in Maryland a way to help advocate for speedy consideration, passage, and enactment of this important legislation. OFR’s policy has raised urgent issues for entities involved in the secondary mortgage market because its interpretation significantly (and unnecessarily) expanded on the Court’s opinion to include mortgage trusts. OFR has delayed implementation of the bills until July 6, 2025, which is the result of work done by an MBA-led coalition. Initially, OFR had delayed enforcement of trust licensing until April 10, 2025, but following introduction of these bills, it further extended that implementation date to provide greater opportunity for the Legislature to resolve the issue. The new date is 90 days following the end of this year’s legislation session. As stated in its guidance, OFR’s expressed hope is “to ensure the continued availability of mortgage loans for Maryland consumers.” The legislation would create the necessary licensing exemptions to state law and also create a one-year study commission to review the issue and make recommendations to the Legislature.  The industry coalition submitted a comment letter to OFR in January that strongly encouraged it to rescind its guidance and regulations. MBA and MMBBA are working to get the bills considered in committee as quickly as possible.

MBA, State Associations Respond to California Proposed Rules to Regulate Auto Decision Tech & Cybersecurity: On Wednesday, February 19, MBA, along with the California MBA and California Bankers Association, submitted joint comments to the California Privacy Protection Agency (CPPA) on its proposed rule regarding cybersecurity audits, risk assessments, and automated decision-making technology (ADMT). The letter asked the CPPA to clarify that the proposed rule does not apply to decisions made or facilitated involving data that is subject to the Gramm-Leach-Bliley Act (GLBA) or the Fair Credit Reporting Act (FCRA) exemption under the California Privacy Rights Act. Data subject to these laws are exempt from regulation by the CPPA and should similarly not be regulated under the proposed rule. Additionally, the associations asked the CPPA to state that compliance with existing federal and state statutes and regulations constitutes “reasonable security procedures and practices appropriate to the nature of the information to protection the information” for purposes of the data breach private right of action. The mortgage industry relies on decades-old algorithmic-based technology developed or authorized by the federal government, including automated underwriting systems and credit scoring models, that could be covered by the CPPA regulations. However, the mortgage industry is already highly regulated and subject to requirements that ensure safety and fairness in lending. Regulating these core systems and allowing consumers to opt-out of their use will make it difficult to manually underwrite loans and may ultimately increase the cost of credit. This year, many states introduced legislation aimed at regulating artificial intelligence (AI). Last year, Colorado became the first state to enact an AI law with SB 24-205, Consumer Protections for Artificial Intelligence. MBA continues to work with its state partners on AI legislation. MBA will assist California Mortgage Bankers Association with the CPPA proposed rules and any further regulation.