Maryland Legal Alert for Financial Services

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Mortgage Assumptions in Divorce Situations

Fiduciary Institutions: Maryland Enacts "Vulnerable Adult Banking Protection Act"

Mortgage Assumptions in Divorce Situations

As noted in our September 2025 Maryland Legal Alert, Maryland law requires (as of October 1, 2025) certain lenders to permit the assumption of covered loans in connection with the granting of a decree of absolute divorce (where married co-borrowers divorce). The Maryland law applies to non-government-backed mortgage loans that are “conventional home mortgage loans” (loans secured by a residential dwelling).   

The Virginia legislature recently made a similar change. Beginning on July 1, 2026, Virginia loans secured by residential, owner-occupied real property must be assumable in certain divorce situations. The new law applies to “conventional home mortgage loans”, which are loans primarily for personal, family, or household purposes secured by a mortgage or deed of trust on owner-occupied residential real estate that is improved by the construction of any housing of four or fewer dwelling units. Under the new Virginia law, lenders must disclose the right to assume (subject to the assuming borrower qualifying for the loan on their own) within three days of receiving a completed loan application. 

In addition to changes to form promissory notes, lenders will also need to change the assumption language in Loan Estimates and Closing Disclosures to disclose that covered loans “may be assumable under certain circumstances.” 

For more information concerning this topic, please contact Jodie E. Bekman and Christopher R. Rahl. 

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Contact Jodie E. Bekman | 410-576-4082

Contact Christopher R. Rahl | 410-576-4222

Fiduciary Institutions: Maryland Enacts "Vulnerable Adult Banking Protection Act"

Maryland has enacted the Vulnerable Adult Banking Protection Act (SB 753 / HB 1008), a new statutory framework intended to help financial institutions respond to suspected financial exploitation involving vulnerable adults, including senior citizens. The Act defines a vulnerable adult as an individual lacking the physical or mental capacity to provide for the adult’s daily needs.

The Act authorizes a financial institution to delay or deny a disbursement from an account of a vulnerable adult (or an account on which the vulnerable adult is a beneficiary) if the financial institution believes the disbursement may result in financial exploitation of that vulnerable adult. This authority extends even when an agent acting under a Power of Attorney (POA) directs a disbursement. If the financial institution suspects that an agent is engaging in financial exploitation, the institution is not required to follow the agent’s instructions and may take protective measures to safeguard the vulnerable adult’s assets. 

An institution that delays or denies a disbursement from an account under this Act must: (1) send a written notice to all parties authorized to transact business on the account (excluding the individual suspected of financial exploitation) explaining the rationale for the delay or denial; and (2) notify the appropriate adult protective services program. A financial institution acting in good faith and exercising reasonable care shall have immunity from any administrative or civil liability arising from actions taken under this Act. 

Financial institutions should consider taking steps now to implement the Act's permissions and requirements, including:

• Reviewing internal policies governing when disbursements may be delayed or denied in suspected exploitation scenarios;
• Updating procedures for providing financial records to appropriate entities when required; 
• Confirming that core processing systems can support time-sensitive holds, notes, and audit trails consistent with the institution's legal position.

The Act becomes effective October 1, 2026.

Practice Pointer: Financial institutions should also use the time before the effective date to align training, escalation protocols, and documentation standards with the Act’s notice and reporting expectations. This includes establishing clear criteria for identifying suspected exploitation and excluding the suspected exploiter from account communications where appropriate. Establishing a consistent decision-making record can help reduce operational risk and support the institution’s ability to rely on the Act’s good-faith protections. 

For more information concerning this topic, please contact Peri L. Schuster. 

Contact Peri L. Schuster | 410-576-4005

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