Maryland Governor Martin O’Malley signed into law an act providing relief to commercial borrowers that wish to refinance or modify loans originally secured by indemnity deeds of trust. This new law, effective July 1, 2013, revises a 2012 statute that required borrowers to pay the recordation tax on the entire balance of their new loans when refinancing an existing indemnity deed of trust.
The indemnity deed of trust structure was long used in Maryland to defer Maryland recordation taxes, which would otherwise be due if a borrower entered into a financing arrangement secured by a conventional deed of trust. As of July 1, 2012, however, this structure was no longer available to provide tax relief for loans greater than $1 million. The 2012 law thus closed a long-standing loophole which permitted borrowers that used the indemnity deed of trust structure to avoid the payment of hefty recordation taxes.
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