Bill
SB 1026
Narrow Title 11 licensing to exclude loan purchasers/assignees and certain trusts; exempt passive trusts; create a workgroup to study financial-service licensing.
Chapter 118 (Approved by Governor April 22, 2025) — Emergency Measure
Summary
- Purpose: To clarify and narrow when Maryland licensing law for consumer lenders (Title 11, Financial Institutions Article) applies to purchasers/assignees of loans and to exempt certain trusts that hold loans — thereby preserving secondary-market mortgage securitization activity and reducing unintended licensing burdens created by a 2024 Maryland appellate decision. The bill also creates a temporary workgroup to study licensing for financial-services providers.
Key provisions
- Narrowed application of Title 11:
- Title 11 (licensing/registration for consumer lenders) generally does NOT apply to a person who acquires or is assigned, in whole or in part:
- a mortgage — provided the acquirer “does not otherwise make mortgages”; or
- a “mortgage loan” (as defined in Maryland law) — provided the acquirer “does not otherwise engage in the mortgage lending business”; or
- an installment loan — provided the acquirer relies on another party to service/collect the loan and does not otherwise make installment loans.
- These clarifications do not alter the definition of “student loan servicer” and do not affect specified sale-of-loan-account provisions.
- Trust- and passive-trust exemptions:
- Adds definitions clarifying that “trust” includes trusts formed under any state’s law.
- Establishes a statutory definition of “passive trust” (a trust that acquires or is assigned mortgage loans, does not make mortgage loans, is not a mortgage broker or servicer, and is not engaged in mortgage servicing — excluding the mere act of transmitting or directing payments received by a servicer).
- Exempts from State licensure: (1) trusts established by corporate instrumentalities of the federal government to acquire mortgage loans, and (2) passive trusts as defined above.
- Other statutory updates: Amends related Title 11 provisions and cross‑references to incorporate new definitions and exemptions.
- Maryland Licensing Workgroup:
- Established and staffed by the Office of Financial Regulation (OFR), chaired by the Commissioner of Financial Regulation.
- Membership: OFR commissioner (or designee) plus legislative and executive appointees representing consumers, banks, credit unions, nonbank mortgage businesses, expertise in chartering/licensing/supervision, capital markets/structured finance, consumer financial products/practices, and a public member.
- Charge: Study licensing statutes/regulations for financial-service providers, evaluate need/efficacy of existing licensing and whether to expand licensing to additional persons, and recommend changes.
- Considerations: impacts on residents, lenders/servicers/acquirers, credit availability and cost, and capital markets/secondary-market volume.
- Deadline: Report due to Governor and General Assembly by December 31, 2025; workgroup terminates June 30, 2026.
Who is affected
- Primary: purchasers/assignees of mortgage loans and installment loans (including investors that pool loans and assign them to trusts), passive trusts and federal-contract instrumentality trusts, mortgage servicers, nonbank mortgage businesses, and OFR.
- Secondary: Maryland borrowers/homebuyers (through potential effects on mortgage availability and pricing), capital market participants, and consumer advocates.
Fiscal and policy impacts
- OFR: Potential change in special fund revenues and expenditures depending on licensing activity avoided or required. The fiscal note cites a 2024 appellate decision (Estate of H. Gregory Brown v. Carrie M. Ward) which had exposed passive trusts to licensing, raising the prospect of thousands of new licensees and supervisory costs — and causing some lenders to consider excluding Maryland loans from securitizations. SB 1026 aims to remove that uncertainty and help preserve mortgage secondary‑market activity.
- Workgroup: OFR can staff it with existing resources; member reimbursements expected to be minimal and absorbable.
Timing and status
- Emergency Act; enacted as Chapter 118 and effective on enactment (Governor approved April 22, 2025).
- Workgroup report due December 31, 2025; statutory termination of the workgroup June 30, 2026.
Relevant context
- The bill was advanced in response to market concerns and a court ruling that broadened licensure obligations for entities that merely hold mortgage loans (passive trusts). SB 1026 clarifies statutory exemptions to prevent disruption of mortgage securitization and secondary‑market functioning while commissioning a study on broader licensing policy.
Compiled from official sources — confirm details with the bill’s official record.
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