Last month, Ballard Spahr attorneys Gary C. Tepper and Daniel J. Tobin filed an amicus brief for the Mortgage Bankers Association in the U.S. Court of Appeals for the Fourth Circuit in Petry et al. v. Prosperity Mortgage Co., et al., No. 13-1869.
Petry is a multimillion-dollar class action filed against Wells Fargo Bank, N.A., and Prosperity Mortgage Co. involving the scope of the Maryland Finder's Fee Act (MFFA). The MFFA prohibits a mortgage broker from accepting a "finder's fee" in a transaction in which it or an affiliate is also the lender. Ultimately, after allowing the plaintiffs' ample discovery, the district court granted summary judgment to the defense, reasoning that the plaintiffs had failed to uncover any evidence of a finder's fee. Nonetheless, the lower court had earlier refused to dismiss the case outright, allowing a lender that table funds to be treated as a "broker" subject to the MFFA.
Although there was no finder's fee assessed per se, the plaintiffs had alleged that the finder's fees were "disguised" as a part or all of a table-funded lender's customary fees. The district court permitted the case to go forward based in part on a very successful run of decisions the plaintiffs' counsel garnered in state court. The district court's ruling on the broker issue conflicts with the plain words of the MFFA, which make it impossible for a lender that table funds to be subject to the MFFA. Now that the case is before the Fourth Circuit, there is an opportunity for the appeals court to reverse that earlier decision.
The MFFA table-funding issue is probably worth hundreds of millions of dollars, as it likely touches the fees in (and provides statutory damages for) every table-funded loan made in Maryland over the last 12 years. Petry was but the first of a series of federal class actions involving other major lenders. Despite the fact that the district court eventually granted the Petry lenders summary judgment, the earlier opinions still stand and will likely be addressed by the Fourth Circuit.