MD Law Passed to Confirm Passive Trusts Exempt from Mortgage Licensure

Maryland recently enacted the Secondary Market Stability Act of 2025, which, among other things, excludes passive trusts from Maryland licensing requirements for installment loans and mortgages.  Passive trusts are defined as trusts that, (i) acquire or are assigned mortgage loans, in whole or in part; (ii) do not make mortgage loans; (iii) are not mortgage brokers or servicers; and (iv) do not service mortgage loans, not including transmitting or directing payments received by the mortgage servicer. 

The Appellate Court of Maryland had in 2024 interpreted the installment loan licensing provisions to apply to passive owners, which was not consistent with previous understandings of that law.  Then, in early 2025, Maryland OFR issued guidance extending that decision to the mortgage licensing context.  WBK previously covered updated regulatory guidance related to this issue here.  The Act now effectively undoes the Appellate Court’s interpretation, on a going-forward basis, with respect to passive trusts.

The Act also establishes the Maryland Licensing Workgroup to study and make recommendations on licensing and registration requirements for financial service providers in the state.  The Workgroup is to report its findings and recommendations by December 31, 2025.

The Act became effective when it was signed.