In April 2024, the Appellate Court of Maryland issued a ruling in the Estate of Brown v. Ward, which has sweeping implications for mortgage lenders and their successors in interest. The Estate of Brown, reviews a foreclosure case filed against a HELOC second loan, specifically taken out under the terms of Section 9 of the Maryland Commercial Code. The holder of the loan, and current beneficiary, FirstKey Master Funding, 2021-A Collateral Trust, U.S. Bank Trust National Association as Collateral Trust Trustee, was an unlicensed entity under Maryland Mortgage Lender Licensing law. See The Estate of H. Gregory Brown v. Ward, 261 Md. App. 385 (MD. App. Ct. 2024).

The ruling maintains that neither assignees of a “credit grantor” nor foreign statutory trusts are exempt from the licensing requirements under Maryland Commercial Code § 12-915. Id. When read in conjunction with the Maryland Commissioner of Financial Regulation’s, January 10th, 2025, Guidance on Licensing Requirements for Mortgage Trusts and Notice of Emergency Regulations, all mortgage loans and lending entities, including passive and foreign trusts are subject to proper licensing under the statute.

Based upon the recent advisory opinion, emergency regulations will be suspended until April 10, 2025, to allow for license applications be obtained and approved. The only exceptions are set forth under Title 11 of the Maryland Code in Section 11-502 of the subtitle, which recognize exceptions for banks with branches in the state, FHLMC, FNMA, GNMA among other limited exceptions.