Lenders operating in Maryland can expect more changes regarding mortgage licensing laws, following the latest emergency regulations and guidance issued by the Maryland Office of Financial Regulation (OFR). The new guidance was released on January 10, 2025, effective immediately, stemming from the Maryland Appellate Court’s ruling in Estate of Brown v. Ward in April 2024.
The emergency regulations and guidance clarify that under the Maryland Mortgage Lender Law, licensing requirements now extend to mortgage trusts, including passive trusts, and assignees. Although this change was effective immediately, the OFR has stated that enforcement actions will not take place until April 10, 2025, giving lenders and assignees time to apply for necessary licenses.
How Will This Impact My Business?
A key consideration for lenders navigating Maryland’s mortgage licensing laws framework is whether they fall within the scope of the latest requirements or remain exempt. As of now, the guidance is broad in its interpretation but holds notable distinctions that could potentially impact business purpose loan originators.
For instance, a lender could be subject to the new mortgage licensing requirements if they opt into compliance under the Maryland Secondary Mortgage Loan Law or the Maryland Credit Grantor Closed-End Provisions of the Maryland Installment Loans Law. If a lender were to opt in to either law, it could trigger the following compliance obligations:
Under the Maryland Secondary Mortgage Loan Law: A business purpose loan would require compliance if it is (i) made to a natural person or entity other than a corporation, (ii) for $75,000 or less, and (iii) secured by a junior lien on a 1-4 family property.
Under the Maryland Credit Grantor Closed-End Provisions: Compliance would be necessary if:
- The loan is (i) made to a natural person or entity other than a corporation, (ii) for $75,000 or less, and (iii) secured by an owner-occupied 1-4 family property, or
- The loan is (i) made to a natural person or entity other than a corporation, (ii) for $15,000 or less, and (iii) not secured by an owner-occupied 1-4 family property.
These scenarios, while possible, are far less likely to occur for lenders (and secondary market participants) who focus primarily on originating business purpose loans.
Where Can I Learn More About Mortgage Licensing Laws?
Although the new guidance from the OFR provides more context on Maryland’s mortgage licensing laws, it does not specify cases where business purpose lenders may remain exempt. Lenders and assignees already outside the scope of these laws would most likely not be impacted by the new licensing obligations. However, lenders should consider carefully assessing their standing under the new guidance to ensure they remain compliant before the April 10, 2025 deadline.
If you have questions regarding your licensing obligations or want to ensure your business is compliant, contact our Banking & Finance team today, and subscribe to our newsletter for the latest legislative and industry-specific updates.
