What Happened?
As we previously advised you, in 2024, the Maryland Appellate Court in Estate of H. Gregory Brown v. Carrie M. Ward, et al., No. 1009, (App. Ct. Sept. Term 2023), ruled that a statutory trust that held a defaulted home equity line of credit (a “HELOC”) must be licensed as both an installment lender and a mortgage lender under Maryland law prior to proceeding to foreclosure on the HELOC. The relevant parties did not appeal the decision. Following this ruling, on January 10, 2025, the Maryland Office of Financial Regulation (the “OFR”) issued formal guidance on licensing requirements for mortgage trusts and a notice of emergency regulations to conform to the Brown decision. The guidance mandated that absent an exemption, all assignees of Maryland residential mortgage loans, including trusts, must be licensed as Maryland Installment Lenders or Maryland Mortgage Lenders. While the formal guidance and emergency regulations took effect upon promulgation by the OFR on January 10, 2025, the OFR suspended enforcement of the emergency regulations until April 10, 2025 — later extended to July 6, 2025.
Why Does it Matter?
On April 22, 2025, Maryland Governor Wes Moore signed into law the Maryland Secondary Market Stability Act of 2025 (emergency measures HB 1516 and its companion SB 1026) with an immediate effective date. The legislation expressly excludes passive trusts from Maryland’s mortgage licensing requirements and defines a “passive trust” as a trust that: (1) acquires or is assigned mortgage loans in whole or in part; (2) does not make mortgage loans; (3) is not a mortgage broker or a mortgage servicer; and (4) is not engaged in the servicing of mortgage loans, which does not include the act of transmitting or directing payments received by a mortgage servicer.
On May 29, 2025, in response to the enactment of the Maryland Secondary Market Stability Act of 2025, OFR rescinded its prior guidance issued on January 10, 2025, and all related advisories (issued on January 31, 2025, and February 18, 2025) and enforcement deadlines concerning licensing requirements for trusts holding mortgage loans. The OFR also formally withdrew the previous emergency and proposed regulations relating to the licensing of mortgage trusts.
The OFR also clarified that commercial lenders making loans exclusively for business purposes under Maryland’s installment loan statutes, as defined by Md. Code Ann., Fin. Inst. § 11-301, are not subject to OFR’s licensing requirements under mortgage lending and installment licensing provisions.
What to Do Now
Please be advised that the Maryland Secondary Market Stability Act of 2025 and the OFR’s rescission of its prior guidance and previous emergency and proposed regulations applies only to residential mortgage loans, and does not address other loan categories such as consumer loans not secured by real estate.
Secondary market purchasers of loans that do not use passive trusts to acquire or take assignment of residential mortgage loans in Maryland must become licensed as Maryland mortgage lenders by July 6, 2025. However, there can be no assurance that other states will not pass laws or issue regulations, or courts of law will require licensing, even retrospectively, which may adversely affect the Mortgage Loans.
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