What Happened?
In April 2026, Maryland Governor Wes Moore signed Senate Bill 784 (Chapter 40 of the Laws of 2026), a measure addressing the application of licensing requirements under the Maryland Financial Institutions Article. SB 784 repeals Section 11‑102, a provision addressing whether entities that acquire or are assigned mortgages, mortgage loans, or installment loans are subject to Maryland consumer credit licensing requirements.
The General Assembly expressly characterized SB 784 as a “clarifying corrective measure” intended to repeal a provision of law that was “erroneously enacted” in 2025. The bill takes effect July 1, 2026.
SB 784 follows a period of uncertainty triggered by the Maryland Appellate Court’s 2024 decision in Estate of H. Gregory Brown v. Carrie M. Ward, et al., No. 1009 (App. Ct. Sept. Term 2023), and the Legislature’s subsequent emergency response through the Maryland Secondary Market Stability Act of 2025.
As we previously discussed, in Brown, the court concluded that a statutory trust holding a defaulted HELOC was required to be licensed before proceeding to foreclosure. Following that decision, the Maryland Office of Financial Regulation issued guidance suggesting that assignees of certain Maryland loans—including trusts—could be subject to licensing requirements.
The 2025 Legislative Response
In April 2025, Governor Moore signed the Maryland Secondary Market Stability Act of 2025 (HB 1516 and its companion SB 1026) with an immediate effective date. We covered that legislation and its regulatory impact in detail here.
As enacted, HB 1516 was intended to be the controlling law. It took a targeted approach by:
- Defining and expressly exempting “passive trusts” from Maryland mortgage lender licensing requirements; and
- Making conforming amendments to ensure that securitization and similar trust vehicles that acquire Maryland mortgage loans—but do not originate or service them—would not be required to obtain licenses.
Although similar language appeared in SB 1026 adding new Section 11‑102, market participants and regulators generally treated HB 1516 as reflecting the Legislature’s operative intent. SB 784 confirms that understanding.
What SB 784 Does—and Does Not Do
SB 784 repeals Section 11‑102 and states expressly that the provision was erroneously enacted. Importantly, SB 784 does not disturb the passive trust exemption adopted in 2025. The definition of “passive trust” and the express exemption for such trusts remain part of Maryland law.
In practical terms, SB 784 eliminates a stand‑alone statutory provision that could be read to create a broad exemption for all loan assignees, while preserving the narrower exemption the General Assembly intended to adopt in 2025.
Current State of Maryland Law
Following SB 784:
- Passive trusts—as defined in the Maryland Mortgage Lender Law—remain exempt from Maryland mortgage lender licensing requirements.
- Other entities that acquire or hold loans do not appear to require licensure solely by virtue of assignment, consistent with historical practice and legislative intent, provided they are not otherwise engaged in lending or servicing activity.
- The analysis remains fact‑specific, and licensing exposure will continue to depend on an entity’s role in the credit lifecycle.
Although the Legislature has now clarified its intent, the area remains somewhat unsettled and could be subject to further judicial or regulatory scrutiny, particularly given the reasoning in Brown and the possibility of future challenges.
Why Does It Matter?
SB 784 provides welcome clarity for securitization sponsors, trustees, and other secondary‑market participants holding Maryland loan assets. By confirming that Section 11‑102 was a drafting error, the Legislature has reduced the risk that passive trust structures will again be drawn into licensing disputes based on technical anomalies.
At the same time, SB 784 underscores that Maryland has not adopted a blanket statutory exemption for all assignees. Licensing risk remains tied to actual conduct, not merely loan ownership.
What Do I Need to Do?
Companies that acquire or hold Maryland mortgage or consumer loan assets should:
- Confirm whether their structures qualify as passive trusts under Maryland law;
- Review servicing and operational arrangements to ensure borrower‑facing activity is conducted by appropriately licensed entities;
- Monitor ongoing developments, including any additional guidance from the Office of Financial Regulation or future litigation interpreting Brown in light of the Legislature’s corrective actions; and
- Reassess licensing strategies adopted during the 2024–2025 period of uncertainty.
Alston & Bird’s Consumer Financial Services Team continues to monitor these developments and can assist with licensing analysis, transaction structuring, and risk assessments related to secondary‑market and servicing activity in Maryland.