On July 10, the U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s holding that the fees charged by a mortgage company jointly owned by a national bank and a real estate firm did not violate Maryland’s Finder’s Fee Act. Petry v. Prosperity Mortg. Co., No. 13-1869, 2014 WL 3361828 (4th Cir. Jul. 10, 2014). On behalf of similarly situated borrowers, two borrowers sued the bank, the real estate firm, and the mortgage company, claiming that the mortgage company operated as a broker that helped borrowers obtain mortgage loans from the bank. The borrowers alleged that all the fees that the mortgage company charged at closing were “finder’s fees” within the meaning of the Maryland Finder’s Fee Act, and, as such, the company—aided and abetted by the bank and the real estate firm—violated the Finder’s Fee Act (i) by charging finder’s fees in transactions in which it was both the mortgage broker and the lender and (ii) by charging finder’s fees without a separate written agreement providing for them.
After certifying the class the district court advised the borrowers that the fees did not qualify as finder’s fees under state law unless they had been inflated so that the overcharge could disguise the referral fee. When the borrowers acknowledged they could not prove the fees were inflated, the district court entered judgment for the defendants. On appeal, the court agreed with the district court’s conclusion as to the fees at issue, but held for the defendants on different grounds. The appeals court determined that because the mortgage company was identified as the lender in the documents executed at closing, it was not a “mortgage broker” under Finder’s Fee Act and therefore was not subject to the Act’s provisions. As such, the court further determined it need not decide whether the bank and real estate firm could be liable for the mortgage company’s alleged violations under theories of aiding and abetting.