Update on Maryland Mortgage Licensing Guidance: Governor Moore Signs Law Exempting Passive Trusts
Shortly after Mayer Brown published an update on legislation introduced to exempt passive trusts and other assignees of certain Maryland loans from licensing, Governor Wes Moore signed the legislation into law. The Maryland Secondary Market Stability Act of 2025 (the “Act”) was enacted on April 22, 2025, and takes effect immediately.
In a February Legal Update, we discussed the introduction of this legislation in the Maryland General Assembly, which aimed to amend Maryland law to address guidance issued by the Maryland Office of Financial Regulation (“OFR”) in January. That guidance asserted that assignees of residential mortgage loans, including certain “passive trusts,” were required to hold a Mortgage Lender license and, in certain circumstances, an Installment Loan license. The legislative “fix” just crossed the finish line, although the enacted legislation is narrower than what was originally introduced in February with the support of the OFR.
On April 22, the Act came into effect when Governor Moore signed House Bill 1516, and its identical companion bill, Senate Bill 1026, into law. The Act addresses the OFR guidance on licensing for secondary market assignees by enacting an exemption from the Maryland Mortgage Lender Law and Maryland Installment Loan Law for a “passive trust.” The Act defines a “passive trust” as a trust that acquires or is assigned a mortgage loan and does not make mortgage loans, act as a mortgage broker or mortgage servicer, or engage in the servicing of mortgage loans (which the legislation clarifies “does not include the act of transmitting or directing payments received by a mortgage servicer”). The Act separately provides that its intent is “to clarify existing exemptions under State law.” While the Act creates an express exemption from licensing under the Mortgage Lender Law and Installment Loan Law for passive trusts that acquire mortgage loans, the enacted legislation is narrower than the original version of the legislation introduced in February; the original draft of the legislation would have exempted any assignee of mortgage loans or installment loans from licensing, including a trust.
Because the legislature has designated the Act as an emergency measure, and the Act has been passed by a three-fifths majority in each house of the legislature, the Act takes effect immediately now that it has been enacted into law. As such, the OFR’s guidance that trusts must obtain a license to acquire and hold installment loans and mortgage loans should be considered abrogated (although the OFR had taken a “no action” position on enforcing the licensing requirement through July 6, 2025). At the time of this writing, the OFR had not issued updated guidance addressing the changes in law made by the Act.
As a result of the Act’s passage, passive trusts and other passive assignees of Maryland installment loans and mortgage loans, as these terms are defined in the Act, will not be required to obtain an Installment Loan license or Mortgage Lender license to acquire loans as long as their activities are sufficiently limited so as to fall under the Act’s exemptions. Note that the Act expressly does not apply to loans made under the Maryland Consumer Loan Law, which explicitly provides that an assignee of a loan made under that law must hold a Consumer Loan license to enforce the loan. Otherwise, secondary market purchasers and securitization participants can breathe a sigh of relief.
