Maryland Clarifies Licensing Rules for Passive Trusts
Maryland has enacted the Secondary Market Stability Act of 2025, which provides significant regulatory clarification regarding licensing requirements for certain financial entities. Notably, the Act exempts passive trusts from Maryland’s licensing requirements for installment loans and mortgage lending.
Under the Act, a passive trust is defined as a trust that:
Acquires or is assigned mortgage loans (in whole or in part),
Does not originate mortgage loans,
Is not a mortgage broker or servicer, and
Does not service loans—except for directing or transmitting payments to a mortgage servicer.
This legislation effectively overrides a 2024 decision by the Appellate Court of Maryland, which had expanded installment loan licensing obligations to include passive owners—a departure from prior interpretations. In early 2025, Maryland's Office of Financial Regulation (OFR) extended that judicial interpretation to mortgage licensing, prompting industry concern. The new Act reverses that extension with respect to passive trusts, restoring the previously understood regulatory framework.
Additionally, the Act creates the Maryland Licensing Workgroup, tasked with reviewing and recommending updates to the state’s licensing and registration requirements for financial service providers. The Workgroup is expected to deliver its findings by December 31, 2025.
