Maryland Legal Alert for Financial Services

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Mortgage Assumption Questions Continue 

Federal Court Vacates CFPB Medical Debt Reporting Rule; Implications for Maryland Law

Mortgage Assumption Questions Continue  

Many of our clients have been asking about Maryland law changes involving mortgage assumptions. The Maryland Legislature passed HB 1018 (enacted as Chapter 202) during the 2025 legislative session.  The new law imposes several disclosure requirements (both for new loans on and after the October 1, 2025 effective date and for existing loans that are covered by the new law). The new law applies to non-government-backed mortgage loans that are “conventional home mortgage loans” under Maryland law that are secured by a dwelling. New disclosures are required describing that a covered loan may be assumed under certain circumstances (in connection with the granting of a decree of absolute divorce). Lenders may verify that a divorced spouse borrower qualifies to repay the loan without the ex-spouse as a co-borrower. The Maryland Banking Commissioner released an industry advisory on August 19, 2025 highlighting the new law’s requirements.  

Disclosures that must be given include: (a) a new pre-application disclosure that describes that a loan may be assumable under certain circumstances; and (b) a similar disclosure within the loan terms. For new loans on or after the effective date of the new law, some lenders are addressing the pre-application disclosure by including a short disclosure within the actual loan application (so that the assumption disclosure is given before an applicant signs and submits a loan application). Other lenders are using a stand-alone pre-application disclosure that will be provided just before the loan application is completed. 

For new covered loans on and after the effective date, lenders will also need to change the assumption language in Loan Estimates and Closing Disclosures to disclose that a loan “may be assumable under certain circumstances.” In addition, for existing loans (originated prior to October 1, 2025), the new law requires that any covered loan include a provision disclosing that the loan may be assumable under certain circumstances. Many lenders are preparing to provide a blanket notice to existing borrowers with covered loans that briefly describes the new law and explains that loans may be assumable under the circumstances described in the notice. 

For more information, contact Christopher R. Rahl.

Contact Christopher R. Rahl | 410-576-4222

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Federal Court Vacates CFPB Medical Debt Reporting Rule; Implications for Maryland Law

On July 11, 2025, the U.S. District Court for the Eastern District of Texas vacated the Consumer Financial Protection Bureau’s (CFPB) rule prohibiting the inclusion of medical debt on consumer credit reports. The CFPB’s rule, finalized in January 2025, addressed concerns that medical debt is often inaccurate and not reflective of a consumer’s creditworthiness. The court determined that the rule exceeded the CFPB’s statutory authority under the Fair Credit Reporting Act (FCRA) and violated the Administrative Procedure Act (APA). Significantly, the court also concluded that the FCRA expressly preempts state laws that attempt to impose similar restrictions on medical debt reporting. 

In its decision, the court emphasized that the plain text of the FCRA authorizes consumer reporting agencies to include medical debt information in credit reports, provided the information is properly coded to protect medical privacy. By barring such reporting, the CFPB’s rule directly conflicted with the statute. The court held that an agency cannot prohibit what Congress has explicitly permitted.

This ruling casts doubt on the enforceability of new laws in several states. Although the decision arises from a federal district court in Texas, its reasoning may influence challenges to state laws nationwide.

In 2025, Maryland enacted two statutes directly regulating medical debt reporting: (1) HB 268, prohibiting hospitals from reporting medical debt to consumer reporting agencies, and (2) HB 1020 prohibiting consumer reporting agencies from including medical debt in credit reports.

Both measures now face significant legal risk. Under the Texas court’s reasoning, these provisions attempt to restrict reporting that the FCRA expressly permits, rendering them vulnerable to preemption challenges. While the Texas ruling is not binding on Maryland courts, it provides grounds to challenge Maryland’s new laws.

Intervenors have 60 days from the ruling to appeal, but for now the decision provides a defensible basis for lenders to assess medical debt in credit evaluations.
For more information concerning this topic, please contact Tamia J. Morris.

For more information, contact Tamia J. Morris.

Contact Tamia J. Morris | 410-576-4021

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