Maryland Legal Alert for Financial Services
Update: Mortgage Licensing for Assignees in Maryland
As we noted in our March Maryland Legal Alert, the Maryland Commissioner of Financial Regulation previously issued three industry advisories since January of this year concerning a 2024 case involving mortgage lender licensing requirements. 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). The Commissioner’s advisories, issued in January and February of this year, addressed licensing requirements and proposed legislative adjustments to existing Maryland law.
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 also extended the licensing enforcement grace period from April 10, 2025 to July 6, 2025 allowing "non-passive trust" to apply for and obtain Maryland mortgage lender licensing. The new laws were approved as emergency measures and were approved by the Governor on April 22, 2025.
Practice Pointer: Entities that take assignment of Maryland consumer mortgage loans should carefully review the new laws to determine whether licensing is required.
For more information, contact Christopher R. Rahl.