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NewsResidential Real Estate Update

Did you know … that Maryland’s Wet Settlement Act requires lenders to disburse the proceeds of purchase money loans on or before the closing date?

October 28, 2020

Due to reports of lenders delaying funding of purchase money loans, Maryland’s Commissioner of Financial Regulation has recently issued guidance reminding consumer mortgage lenders that Section §7-109(b) of the Real Property Article of the Maryland Code requires lenders to disburse the proceeds of purchase money loans to the settlement agent on or before the date of closing. Lenders who fail to comply with the Wet Settlement Act are prohibited from charging interest on the loan for the first 30 days following the date of closing.

Anecdotally, we are hearing that funding delays are the result of lenders’ difficulties in verifying borrowers’ employment on the day of closing, a new requirement of many mortgage loan investors as a result of the COVID-19 pandemic. Regardless of the cause, any delays in disbursement risk violating the Wet Settlement Act, and triggering the penalties imposed by the Act. To avoid conflict between investors’ requirements and lenders’ obligations under the Wet Settlement Act, we recommend that lenders communicate with borrowers early in the process regarding the required verification of employment, so that borrowers can help facilitate a timely response from their employers.



For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact the Group Chair at

This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.