Financial Institutions - Conventional Home Mortgage Loans - Assumption and Required Disclosures
Summary
SB689 requires conventional home mortgage loans in Maryland to include a provision allowing one existing borrower to assume the other borrower’s share of the mortgage when the assumption is connected to a decree of absolute divorce, so long as the assuming borrower qualifies for the loan. The bill applies this requirement to banking institutions, credit unions, and mortgage lenders or mortgage lending businesses, and it also requires those entities to disclose the assumption provision in writing to a loan applicant before the loan application is completed.
The bill defines and cross-references key terms such as “conventional home mortgage loan,” “dwelling,” and “shared appreciation agreement,” and it excludes federally insured or guaranteed loans from the new requirement. It also includes retroactive application language, directing that the new assumption provisions be construed to apply to conventional home mortgage loans entered into before the effective date, including certain preexisting loans that exceed federal lending limits. The Act takes effect October 1, 2025.
Impact
SB689 amends the Maryland Financial Institutions Article by adding new sections and revising existing mortgage-lending provisions to create a statutory right, in specified circumstances, for a divorcing borrower to assume the other borrower’s mortgage interest. It imposes new disclosure duties on banks, credit unions, mortgage lenders, and mortgage lending businesses, and it expands the legal treatment of conventional home mortgage loans by deeming certain preexisting loans to include the required assumption provision. The practical effect is to change mortgage contract terms and lender disclosure practices for covered conventional home loans in Maryland, especially in divorce-related property transfers.
Sentiment
The bill appears to have been broadly supported and noncontroversial in the legislative process. The recorded votes were overwhelmingly favorable, including unanimous Senate passage and strong House passage, with no committee opposition reflected in the provided materials. The absence of committee transcript discussion suggests the measure may have been viewed as a targeted consumer-protection and family-law related mortgage reform rather than a contentious overhaul of lending policy.
Contention
The main policy issue is the retroactive application of the new assumption requirement to loans entered into before the effective date, which can affect existing mortgage contracts and lender expectations. Another potential point of concern is the scope of the mandate across different types of mortgage entities, including banks, credit unions, and mortgage lenders, and whether the required assumption provision could create administrative or underwriting burdens. The bill also limits the requirement to loans not already subject to federal or state assumability rules and excludes federally insured or guaranteed loans, which narrows but does not eliminate possible implementation questions.