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Wet Settlement Procedure Act - Real Estate Commission

The Commissioner of Financial Regulation is becoming aware of a growing trend among mortgage lenders to delay funding of purchase money mortgages beyond the loan closing.

Licensees are reminded that Maryland law requires lenders to disburse the proceeds of purchase money loans on or before the closing date in accordance with the loan documents, to the agent responsible for settlement. This is the basis of a "wet settlement." The practice of requiring a borrower to sign closing documents and actually delay funding the loan is not permitted.

The Annotated Code of Maryland, Real Property Article §7-109(b) specifically states:

"In any consumer loan transaction in which the loan is secured by a purchase money mortgage or deed of trust on real property located in this State, on or before the day of settlement, the lender shall disburse the loan proceeds in accordance with the loan documents to the agent responsible for settlement…"

Loan proceeds must be disbursed in the form of cash, wired funds, certified check, teller's check, cashier's check or a check issued by a political subdivision or on behalf of a governmental entity (refer to the law for permitted forms).

The Office strongly encourages lenders to consult with their legal counsel to confirm that the appropriate departments comply with this law. Any lender failing to comply with the disbursement requirement under the statute may not charge interest on the loan for the first 30 days after the settlement date.