Maryland Legal Alert for Financial Services

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Must Assignments of Deeds of Trust Now Be Recorded?

CFPB Overdraft Fees Rule Repealed by CRA Resolution

Must Assignments of Deeds of Trust Now Be Recorded?   

As we noted in our March Maryland Legal Alert and our May Maryland Legal Alert, a 2024 case involving mortgage lender licensing requirements for assignees of loans has caused industry concerns. The Maryland Commissioner of Financial Regulation (Commissioner) issued three industry advisories and emergency regulations at the start of 2025 because of the implications of and confusion caused by the case.  The underlying case involved a passive trust formed to hold mortgage loans that were assigned by licensed or exempt lenders.  When the trust foreclosed on a delinquent Maryland mortgage loan, one of the borrower’s defenses was that the trust was not properly licensed as a Maryland mortgage lender (based on language in existing Maryland law that lumps assignees of certain loans into the “credit grantor” definition).  

 During the 2025 Maryland legislative session, Senate Bill 1026 and House Bill 1516 were enacted, exempting “passive trusts” that acquire Maryland mortgage loans by assignment but do not originate, service, or collect these loans on their own behalf from Maryland’s mortgage lending licensing provisions. A “passive trust” is an entity that acquires or is assigned mortgage loans, does not make any mortgage loans, is not a “mortgage lender” or “mortgage servicer” under Maryland law, and is not engaged in the servicing of mortgage loans (the new laws carve out the act of transmitting or directing payments received by a mortgage servicer). The Commissioner recently rescinded the three prior industry advisories on this topic and the related emergency regulations and indicated that updated regulations are forthcoming.   

Another aspect of the underlying case is its holding that a recorded assignment of a deed of trust establishes proof of ownership of the related debt.  The court’s discussion about the need for recording assignments of deeds of trust and the effect of recording such assignments was based on the court’s failure to recognize that mortgages and deeds of trust, while similar in many ways, are not the same.  Lenders typically use deeds of trust to secure Maryland real property, rather than mortgages.  With a mortgage, the identity of the mortgagee of record definitively establishes the person entitled to ownership of the underlying note.  On the other hand, before the case at issue the holder of the promissory note secured by a deed of trust was entitled to the benefit of the security, regardless of what a search of the land records would show.  But this case conflated mortgages and deeds of trust, and it will now be prudent to record assignments of deeds of trust in the land records to establish ownership of transferred notes and loans (see more details in our recent Relating to Real Estate alert). 

For more information, contact Christopher R. Rahl.

Contact Christopher R. Rahl | 410-576-4222

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CFPB Overdraft Fees Rule Repealed by CRA Resolution

On May 9, 2025, President Trump signed a Congressional Review Act (CRA) resolution repealing the Consumer Financial Protection Bureau’s (CFPB) final overdraft fees rule. The rule would have reclassified certain overdraft programs offered by large financial institutions (those with over $10 billion in assets) as credit products, subjecting them to the disclosure requirements of the Truth in Lending Act (TILA) and Regulation Z. 

If implemented, the rule would have capped overdraft fees at $5, unless the financial institution could demonstrate that the fee was reasonably based on actual costs or chose to treat the overdraft as a loan and provide applicable disclosures. With the rule repealed, financial institutions retain broader discretion in structuring overdraft fee programs. However, the repeal does not eliminate all regulatory oversight. Financial institutions remain subject to the CFPB’s authority under the prohibition against unfair, deceptive, or abusive acts or practices (UDAAP), as well as potential state-level regulatory enforcement. 

Practice Pointer: While the CFPB’s direct oversight on this issue has been curtailed, regulatory risk remains. Financial institutions should reassess and strengthen their UDAAP compliance frameworks and monitor for emerging state-level regulations.

For more information, contact Tamia J. Morris.

Contact Tamia J. Morris | 410-576-4021

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