(a) With the application for a license, an applicant shall file a surety bond with the Commissioner. (b) (1) The bond shall run to the Commissioner, as obligee, for the benefit of: (i) The State; and (ii) Any mortgage loan borrower who has been damaged by a violation committed by a licensee of any law or regulation governing the activities of mortgage lenders. (2) The bond shall be: (i) In an amount determined by the Commissioner under subsection (c) of this section; (ii) Issued by a surety company that: 1. Is authorized to do business in the State; and 2. Holds a certificate of authority issued by the Maryland Insurance Commissioner; and (iii) Conditioned that the licensee shall comply with all Maryland laws regulating the activities of mortgage lenders and mortgage loan lending. (3) The liability of the surety: (i) Shall be continuous; (ii) May not be aggregated or cumulative, whether or not the bond is renewed, continued, replaced, or modified; (iii) May not be determined by adding together the penal sum of the bond, or any part of the penal sum of the bond, in existence at any two or more points in time; (iv) Shall be considered to be one continuous obligation, regardless of increases or decreases in the penal sum of the bond; (v) May not be affected by: 1. The insolvency or bankruptcy of the licensee; 2. Any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the licensee or an agent of the licensee; or 3. The suspension of the licensee's license; (vi) May not require an administrative enforcement action by the Commissioner as a prerequisite to liability; and (vii) Shall continue for 3 years after the later of the date on which: 1. The bond is canceled; or 2. The licensee, for any reason, ceases to be licensed. (4) (i) A bond may be canceled by the surety or the licensee by giving notice of cancellation to the Commissioner. (ii) Notice under subparagraph (i) of this paragraph shall: 1. Be in writing; and 2. Be sent by certified mail, return receipt requested. (iii) A cancellation of a bond under this paragraph is not effective until 90 days after receipt of a notice of cancellation by the Commissioner. (5) A claim against the bond may be filed with the surety by: (i) A claimant; or (ii) The Commissioner for the benefit of a claimant or the State. (6) If the amount of claims against a bond exceeds the amount of the bond, the surety: (i) Shall pay the amount of the bond to the Commissioner for pro rata distribution to claimants; and (ii) Is relieved of liability under the bond. (7) If the penal amount of a bond is reduced by payment of a claim or judgment, the licensee shall file a new or additional bond with the Commissioner. (8) A penalty imposed against a licensee under § 2-115(b) of this article or § 11-517(c) of this subtitle may be collected and paid from the proceeds of a bond required under this section. (c) (1) The amount of the surety bond under subsection (b) of this section shall be in an amount of not less than $50,000 and not more than $750,000, as determined by the Commissioner for each licensee. (2) In setting the amount of the surety bond, the Commissioner may consider: (i) The nature and volume of the business or proposed business of the licensee or applicant; (ii) The financial condition of the licensee or applicant, including: 1. The amount, nature, quality, and liquidity of the assets of the licensee or applicant; 2. The amount and nature of the liabilities, including contingent liabilities, of the licensee or applicant; 3. The history of and prospects for the licensee or applicant to earn and retain income; and 4. The potential harm to consumers if the applicant or licensee becomes financially impaired; (iii) The quality of the operations of the licensee or applicant; (iv) The quality of the management of the licensee or applicant; (v) The nature and quality of the person that has control of the licensee or applicant; and (vi) Any other factor that the Commissioner considers relevant. (d) Subject to approval by the Commissioner, an applicant for license who files an application for a new license may satisfy the bonding requirement under this section by establishing a trust account with or obtaining an irrevocable letter of credit from a financial institution insured by the Federal Deposit Insurance Corporation in an amount equal to the bond required under this section. (e) (1) The Commissioner may adopt regulations reasonably necessary to assure that the proper surety bond amount established by this section is maintained by each licensee throughout each licensing term. (2) The regulations may provide for periodic reporting, recalculation, and enforcement of required bond amounts. (f) If a mortgage servicer is subject to a receivership proceeding, the Commissioner or a receiver appointed under § 7-404.1(b)(2) or § 7-506(b) of the Real Property Article, without regard to any priorities, preferences, or adverse claims, may: (1) Reduce the bond or the deposit in lieu of a bond to cash; and (2) Use the cash to defray the costs associated with the receivership.
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