On February 18, the Maryland Office of Financial Regulation (OFR) issued an alert to address industry concerns regarding its January guidance on licensing requirements for assignees of residential mortgage and installment loans. In response to market pushback, the OFR has proposed new legislation to exempt certain entities from licensing requirements and has extended the enforcement deadline to allow for further regulatory clarity.
Background: Initial Licensing Guidance and Market Response
On January 10, the OFR issued formal guidance (previously discussed guidance (previously discussed here) stating that assignees of residential mortgage loans—including certain passive trusts—must obtain a Maryland Mortgage Lender license before April 10, 2025, unless expressly exempt under Maryland law. The guidance also extended licensing obligations to assignees of installment loans that fall under the Maryland Credit Grantor provisions.
Following this announcement, the market reacted with significant concern. Some industry participants temporarily halted purchasing Maryland mortgage loans, while others questioned the feasibility of requiring passive trusts to obtain state licensing.
OFR's Recent Actions to Address Concerns
On February 17, two identical bills—Senate Bill 1026 and House Bill 1516—were introduced under the Maryland Secondary Market Stability Act of 2025. If enacted as proposed, the legislation would exempt assignees of mortgage loans from Maryland's Mortgage Lender Law, provided they do not engage in loan origination, brokering, funding, or servicing. Similarly, the Installment Loan Act would not apply to assignees of installment loans if they neither originate loans nor engage in loan servicing or collections. These provisions would exclude passive trusts from the licensing requirements, addressing one of the industry's primary concerns.
Extension of Enforcement Deadline and Additional Clarifications
On February 18, the OFR also issued an alert, extending the enforcement deadline for its licensing guidance from April 10, 2025, to July 6, 2025. The extension should allow affected entities to assess the outcome of the legislative efforts before incurring licensing costs.
The OFR also clarified that commercial lenders making loans solely for business purposes under Maryland's installment loan statutes are not subject to the new licensing requirements. This exemption aims to ensure that business lenders are not inadvertently swept into the expanded regulatory framework.
Previous OFR Clarifications Regarding Federal and Governmental Entities
These developments follow an earlier clarification issued by the OFR regarding the application of its guidance to government-sponsored entities. In a January 31 update, the OFR confirmed that the new licensing requirements do not apply to Fannie Mae, Freddie Mac, Ginnie Mae, or other corporate instrumentalities of the federal government. The exemption also extends to trusts engaged in mortgage loan acquisitions under federal, state, or local government programs. This aims to ensure that federally backed secondary market participants remain unaffected by the licensing changes.
Putting It Into Practice: These recent actions highlight the evolving interpretations of Maryland's Mortgage Lender Law and Installment Loan Law as they apply to assignees of covered loans, including passive trusts. Industry participants should remain vigilant in tracking these developments to ensure they are prepared to comply with any legislative changes and licensing requirements enacted by the OFR or other state regulators.
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