- The Washington Times - Friday, February 29, 2008

ANNAPOLIS — Key supporters of Gov. Martin O’Malley — including the state’s largest labor union — have split with him on his support of a banking bill they are calling anti-consumer.

The Maryland State and D.C. AFL-CIO, the state’s largest labor union and a strong O’Malley supporter, has come out against the bill, which would allow state banks to charge fees if a borrower pays off a mortgage loan early. Progressive Maryland, a liberal advocacy group, is expected to announce its opposition next week.

“This ‘Emergency Bill’ would be retroactive and strip the citizens of Maryland of any right to seek redress,” wrote Fred D. Mason Jr., president of the Maryland State and D.C. AFL-CIO, in a Feb. 21 letter to lawmakers. “The legislation would permit Maryland banks to force charges on the consumer — charges the court has already ruled illegal.”

The Senate Finance Committee is expected to vote today on the measure, which would allow state banks to recapture closing costs they had previously waived if a consumer refinances with another bank or pays off their loan early.

The bill also would bar anyone who paid the fee from seeking damages against the banks that charged them.

Supporters of the bill say they are worried that unless state consumer-protection laws are changed Maryland banks will move to other states where they are allowed to recapture closing costs if a borrower pays off a loan early.

Mr. O’Malley, a Democrat, has been lobbying lawmakers this session in favor of the bill, which has the support of some Democratic leaders in the legislature and the state’s banking industry.

“Enactment of this legislation is extremely important in order to allow Maryland consumers to obtain mortgage loans with reasonable terms, at the lowest possible cost from our very own Maryland chartered banks and credit unions,” Mr. O’Malley wrote in a Feb. 19 letter to lawmakers.

The Maryland State and D.C. AFL-CIO, which says it represents more than 350,000 workers, and Progressive Maryland endorsed Mr. O’Malley in 2006 and campaigned on his behalf and have since worked closely with him in passing his top legislative priorities, including the state’s living wage law.

The Court of Appeals in December ruled that recapturing closing costs amounted to a prepayment fee and was illegal under Maryland’s consumer-protection law, which bars fines on anyone who pays off a loan early.

Nationwide consumer-interest groups have mobilized against prepayment penalties, often used by subprime mortgage lenders to keep borrowers from refinancing with other institutions. But Maryland banks say the closing-cost recapture proposal is not a prepayment penalty.

Supporters of the proposal — including the leaders of the House and Senate finance committees — say it is necessary to put state banks on equal footing with their national counterparts.

“The Maryland banks aren’t the bad guys,” said Sen. Thomas M. “Mac” Middleton, Senate Finance Committee chairman.

The current consumer protection law “has the potential of crippling them,” said Mr. Middleton, Southern Maryland Democrat.

The proposal also revived a long-standing battle between Mr. O’Malley and Baltimore Orioles owner Peter Angelos.

Mr. Angelos is lobbying against the bill on the grounds that it would also block borrowers from seeking punitive damages against banks — potentially a large windfall for Mr. Angelos and other trial lawyers.

Mr. Angelos was a frequent critic of Mr. O’Malley when Mr. O’Malley was mayor of Baltimore. Mr. Angelos held fundraisers for Mr. O’Malley’s opponent, former Gov. Robert L. Ehrlich Jr., a Republican.

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