Justia Bankruptcy Opinion Summaries

A debtor in bankruptcy, Scarlett Bowman, challenged the ability of a passive trust, Towd Point Mortgage Trust 2016-4, U.S. Bank National Association, to collect interest and fees on a mortgage loan it held, arguing that Towd was not licensed under the Maryland Mortgage Lender Law. The asset at issue was a residential property subject to a note and deed of trust assigned to Towd, a passive trust that did not originate the loan but simply held it. It was undisputed that Towd was unlicensed, but the parties disputed whether a license was required under the relevant Maryland law.Previously, the United States Bankruptcy Court for the District of Maryland certified questions to the Supreme Court of Maryland, because the issue of whether passive trusts were required to be licensed under the Maryland Mortgage Lender Law had not been settled by any controlling appellate decision. The dispute arose after the Appellate Court of Maryland’s decision in Estate of Brown v. Ward, 261 Md. App. 385 (2024), which held that passive trusts could be required to obtain a license as “credit grantors” under a different statutory scheme (OPEC), but did not address the Mortgage Lender Law itself. Following Brown and regulatory guidance, the state’s financial regulator attempted to require licensure of passive trusts for all mortgage loans. In response, the Maryland General Assembly enacted the Maryland Secondary Market Stability Act of 2025 to clarify that passive trusts were exempt from licensure under the Mortgage Lender Law.The Supreme Court of Maryland held that the Maryland Mortgage Lender Law did not require passive trusts to obtain a mortgage lender license before the effective date of the Secondary Market Stability Act. Brown did not interpret or change the Mortgage Lender Law’s requirements. Because passive trusts were never subject to the law’s licensing requirement, the subsequent legislative exemption was a clarification rather than a restoration or retroactive change. The court answered the certified question in the negative and did not reach the remaining questions. View "In re: Bowman" on Justia Law