Maryland Legal Alert for Financial Services

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Virginia’s General Assembly Passes SB 1252, Potentially Reshaping Application of Usury Laws

Mortgage Licensing for Assignees in Maryland?

Virginia’s General Assembly Passes SB 1252, Potentially Reshaping Application of Usury Laws

Virginia’s Senate Bill 1252, recently passed by the House and Senate, introduces changes to the state’s usury laws, particularly expanding the anti-evasion provisions to uphold the 12% annual interest rate cap. The Bill seeks to further prohibit deceptive lending practices. This includes disguising loans as sale-leaseback transactions, misrepresenting loan proceeds as cash rebates, and facilitating high-interest loans through any medium—whether by mail, telephone, internet, or electronic means—regardless of the lender’s location. 

SB 1252 also broadens the definition of loans and introduces new restrictions on earned wage access services, categorizing certain cash advances as loans when repayment is made automatically. While the legislation seeks to enhance transparency and mitigate predatory lending practices, it raises concerns regarding potential restrictions on credit access for high-risk borrowers by banks and fintech companies. Consequently, consumers may encounter a reduction in lending options and an increase in borrowing costs as financial institutions adjust to these more stringent regulations. The overall impact of the Bill (if it becomes effective), however, remains uncertain as it awaits the Governor's decision to either sign or veto the legislation.  Financial institutions involved in partnerships with fintech providers offering loans in Virginia should carefully consider the reach of the Bill.   

For more information, contact Christopher R. Rahl or Tamia J. Morris.

Contact Christopher R. Rahl | 410-576-4222

Contact Tamia J. Morris | 410-576-4021

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Mortgage Licensing for Assignees in Maryland?

The Maryland Commissioner of Financial Regulation has issued three industry advisories since January of this year concerning a 2024 case involving mortgage lender licensing requirements. The case involved a passive trust formed to hold mortgage loans that were assigned by licensed or exempt lenders.  When the trust foreclosed on a delinquent Maryland mortgage loan, one of the borrower’s defenses was that the trust was not and should have been licensed as a Maryland mortgage lender (based on language in existing Maryland law that lumps assignees of certain loans into the “credit grantor” definition).  The first of the Commissioner’s advisories, issued on January 10, 2025, noted that mortgage assignees did require licensing and that the Commissioner had adopted emergency regulations to ensure that mortgage trusts could obtain appropriate licensing without undue burden.  The initial advisory noted that enforcement of licensing requirements as to assignees would be delayed until April 10, 2025.   

The second of the Commissioner’s advisories, issued on January 31, 2025, clarified that mortgage trusts created by corporate instrumentalities of the federal government (particularly the FHLMC, FNMA, and GNMA) were not subject to Maryland mortgage lender licensing requirements.  

Finally, the third advisory, issued on February 18, 2025, highlighted the Commissioner’s introduction of emergency legislation designed to exempt assignees of mortgage loans from the need for Maryland mortgage lender licensing. The latest guidance from the Commissioner described Senate Bill 1026 and House Bill 1516, which (if enacted) would exempt entities that acquire Maryland mortgage loans by assignment but do not originate, service, or collect these loans on their own behalf from Maryland’s mortgage lending licensing provisions. The Commissioner also extended the licensing enforcement delay to allow time for passage of the Bills (from April 10, 2025 until July 6, 2025).  We are closely monitoring the pending Bills and will provide additional updates in future alerts. 

For more information, contact Christopher R. Rahl.

Contact Christopher R. Rahl | 410-576-4222

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