There were positive developments last week in connection with the recently announced licensing requirements for assignees of residential mortgage loans and installment loans in Maryland — a proposed legislative fix, an extended enforcement deadline, and a clarifying exception from the requirement.
As we discussed in our Legal Update last month, the Maryland Office of Financial Regulation (OFR) asserted that assignees of residential mortgage loans — including certain “passive trusts” that acquire or obtain assignments of residential mortgage loans in Maryland — must become licensed in Maryland prior to April 10, 2025, unless the assignee is expressly exempt under Maryland law. The guidance reflected the OFR’s understanding of an April 2024 decision by the Appellate Court of Maryland in Estate of Brown v. Ward that any assignee of any residential mortgage loan is required to obtain a Mortgage Lender license, and an Installment Loan license is required if the mortgage loans are made subject to the Credit Grantor provisions, regardless of whether the loans are open- or closed-end extensions of credit.
That guidance has caused significant turmoil in the Maryland residential mortgage markets, with significant practical concerns about requiring passive trusts to obtain a license and with certain industry participants suspending the purchase of Maryland mortgage loans.
To address these concerns, the OFR worked with industry participants to develop proposed legislation, the Maryland Secondary Market Stability Act of 2025 — two identical bills, Senate Bill 1026 and House Bill 1516, introduced on February 17, 2025.
If the bills are enacted as drafted, the Maryland Mortgage Lender Law would generally not apply to a person, including a passive trust, that acquires or takes assignment of a mortgage loan, so long as the person does not otherwise originate, broker, make, or fund mortgage loans, or service them for others, including by holding mortgage servicing rights to loans owned by another.
Similarly, the Installment Loan Act would not apply to a person that acquires or takes assignment of an installment loan, as long as the person does not make such loans and relies on another person to service or collect them on their own behalf.
The bills, as drafted, would take effect immediately on the date of enactment.
Additionally, the OFR issued an alert on February 18, 2025, in which it extended the enforcement deadline of the previously announced licensing guidance from April 10, 2025, until July 6, 2025, which is 90 days after the end of the Maryland General Assembly’s 2025 session. According to the alert, the “OFR believes that affected entities should be granted the opportunity to ascertain the outcome of the legislative action before engaging in the licensing process and incurring potential associated costs.”
The OFR also clarified that commercial lenders making loans exclusively for business purposes under Maryland’s installment loan statutes are not subject to the OFR’s licensing requirements under mortgage lending and installment loan licensing provisions.
Read more about the latest developments in Maryland in Mayer Brown’s Legal Update.