[ Text of section effective until April 5, 2009. For text effective April 5, 2009, see below.]
Section 65. A credit union may make or acquire mortgage loans of the several classes specified in this section on real estate subject, in each instance, to the limitations hereinafter contained in this chapter. In making loans on real estate, as specified, a credit union shall also be subject to the condition that each loan shall be on real estate situated within the commonwealth or within a radius of one hundred miles of the main office of the credit union without regard to geographical location.
A credit union having assets of not more than seventy-five thousand dollars may invest not more than fifty percent of its assets in real estate mortgages. A credit union having assets of more than seventy-five thousand dollars may invest not more than seventy percent of its assets in real estate mortgages. A credit union having assets of five hundred thousand dollars or more may invest not more than eighty percent of its assets in real estate mortgages.
Except as may be otherwise specified in this section, a credit union having assets of not more than four million dollars may loan, upon any one parcel of real estate, an amount not exceeding seventy-five thousand dollars and the total liabilities of any one member as borrower upon loans so secured shall not exceed one hundred and twenty thousand dollars.
Except as may be otherwise specified in this section, a credit union having assets of four million dollars or more, may loan, upon any one parcel of real estate, an amount not exceeding two hundred thousand dollars and the total liability of any one member as borrower upon loans so secured shall not exceed three hundred and twenty-five thousand dollars.
A credit union having assets of more than four million dollars may grant a first mortgage upon any one parcel of real estate, in an amount which is acceptable for purchase by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation; provided, however, that either the said association or the said corporation has agreed to purchase any such mortgage.
A credit union may make or acquire mortgage loans of the several classes or types specified in this section evidenced by a note which provides for variation in the rate of interest over the term of the note; provided, however, that such a loan made to finance or refinance the purchase of and secured by a first lien on a dwelling house of four or fewer separate households occupied in whole or in part by the mortgagor shall be subject to, but not limited to, the following conditions and restrictions imposed by the commissioner:
(1) the method by which the rate of interest may be adjusted;
(2) the frequency with which the rate of interest may be adjusted; provided, however, that successive rate adjustments shall be no less than six months apart;
(3) the maximum increase in the rate of interest allowed for any such adjustment;
(4) provisions for decreases in the rate of interest as may be warranted by market conditions;
(5) requirements for advance notification and explanation of adjustments in the rate of interest; provided, however, that such notification and explanation shall occur no less than thirty days prior to such adjustments; and
(6) methods of disclosure to the mortgagor of the terms and conditions of the loan as required under the provisions of chapter one hundred and forty D. Notwithstanding any provision of law to the contrary, the commissioner may, by further conditions and restrictions, provide that the rate of amortization may be varied, including utilizing a period of negative amortization, in order to adjust the rate of interest.
A credit union may make or acquire mortgage loans of the several classes or types specified in this section evidenced by a note which provides for installment payments of principal or interest, or both, that will not amortize the outstanding principal amount in full by the maturity of such note; provided, however, that the term of mortgage securing the note shall be for a period not less than the original or anticipated amortization period; and, provided further, that such loans secured by a first lien on a dwelling house of four or fewer separate households occupied or to be occupied in whole or in part by the mortgagor shall be subject to the conditions and restrictions imposed under the provisions of section sixty of chapter one hundred and eighty-three.
1. A mortgage loan on unimproved and unproductive real estate, not exceeding eighty percent of the value of the real estate, payable not more than ten years from the date of the note. The aggregate balance of principal of such loans outstanding at any one time shall not exceed two percent of the assets of a credit union.
2. A mortgage loan not exceeding sixty percent of the value of the real estate, payable on demand or not more than three years from the date of the note. The aggregate balance of principal of such loans outstanding at any one time shall not exceed one percent of the assets of a credit union.
3. A mortgage loan not exceeding eighty percent of the value of the real estate, payable not more than twenty-five years from the date of the note; provided, however, that the terms of the note or mortgage require monthly payments in such amounts that the aggregate principal reduction at any time during the term of the loan shall not be less than that which would be required in the case of a note of like amount and interest rate providing for complete amortization by equal monthly payments over a period of twenty-five years, which payments shall be first applied to interest and the balance thereafter remaining applied to principal. Interest upon each such loan shall be computed monthly on the unpaid balance. Notwithstanding the limitations contained herein, a credit union whose shares and deposits aggregate more than two million dollars may make a mortgage loan for a period of not more than thirty years from the date of the note.
4. A credit union whose shares and deposits aggregate more than four million dollars may make a mortgage loan not exceeding ninety percent of the value of the real estate, payable not more than thirty-five years from the date of the note; provided, however, that such loan shall not exceed one hundred and seventy-five thousand dollars and shall be secured by a first mortgage on a single or two family residence occupied or to be occupied by the mortgagor in whole or in part; and, provided further that the mortgagor has certified in writing that he does not require junior financing; that the credit committee has submitted an opinion in writing that the building has a useful life beyond the term said loan has to run and that the building will be completed prior to the making of any disbursement on the loan; and that the terms of the note or mortgage require monthly payments in such amounts that the aggregate principal reduction at any time during the term of the loan shall not be less than that which would be required in the case of a note of like amount and interest rate providing for complete amortization by equal monthly payments over a period of thirty-five years; and provided, further, that the portion of the loan exceeding one hundred thousand dollars shall be guaranteed or insured by a mortgage insurance company which has been determined to be a "qualified private insurer'' under the provisions of the Federal Home Loan Mortgage Corporation Act (P.L. 91-351), or has been approved by the commissioner as qualified to insure loans of this class; and which is authorized to transact business in the commonwealth. Each such monthly payment shall be applied first to interest and the balance to principal. Interest upon each such loan shall be computed monthly on the unpaid balance. The aggregate balance of principal outstanding at any one time shall not exceed fifteen percent of the assets of a credit union.
5. A credit union whose shares and deposits aggregate more than four million dollars may make a mortgage loan not exceeding ninety percent of the value of the real estate, payable not more than thirty-five years from the date of the note; provided, however, that the loan shall be secured by a mortgage on real estate improved with a dwelling designed to be occupied by not more than four families and occupied or to be occupied in whole or in part by the mortgagor; and, provided further, that the term of the note or mortgage shall require monthly principal and interest payments which increase not more than seven and one-half percent annually for a graduation period of five or fewer years; or not more than three percent annually for a graduation period of ten or fewer years; and subsequently in such amounts that the aggregate principal reduction at any time during the remaining term of the loan shall not be less than that which would be required in the case of a note of like amount and interest rate providing for complete amortization by equal monthly payments over the remaining period of the loan; and, provided further, that construction of the dwelling on the mortgaged property shall be completed prior to the making of any disbursement on the loan in excess of eighty percent of the value of the real estate, that the mortgagor shall furnish to the board of investment an affidavit that the mortgagor does not require junior financing, that the credit committee shall certify in writing that the dwelling has a useful life beyond the term said loan has to run; and, provided further, that that portion of the unpaid balance of the loan which exceeds eighty percent of the value of the acceptable collateral shall be guaranteed or insured by the Federal Housing Administration, the Veterans Administration or a mortgage insurance company which has been determined to be a "qualified private insurer'' by the Federal Home Loan Mortgage Corporation, or has been approved by the commissioner as qualified to insure loans of this class and which is authorized to transact business in the commonwealth. Interest upon such loan shall be computed monthly on the unpaid balance. No loan of this class shall be made or acquired for a sum in excess of one hundred and seventy-five thousand dollars. No loan of this class shall allow the payment amount to be changed more than once a year and any such change shall not occur less than one year after the first regular loan payment.
The interest capitalization resulting from any negative amortization of any such loan shall be considered to have been contracted for at the time such loan was made.
The mortgagor shall have the right to convert, at a time chosen by him, to a conventional mortgage as defined by the commissioner, provided that said mortgagor is eligible for such a mortgage.
Each prospective mortgagor offered a graduated payment mortgage shall also be offered a conventional mortgage as defined by the commissioner and shall receive in writing an explanation in simple terms the nature and conditions of the graduated payment mortgage. Such writing shall include; (1) a side-by-side comparison of differing interest rates and other terms; (2) payment schedules to the extent they are known for both types of mortgages; (3) a description of the conversion option; and (4) a statement, prominently displayed, that an applicant has the option to elect a more conventional mortgage.
5A. A credit union may make a reverse mortgage loan, pursuant to the provisions of any program for reverse mortgage loans which has been submitted to and approved by the commissioner, to the owner of such real estate improved with a dwelling designed to be occupied by not more than four families; provided, however, that each such owner shall be at least 60 years of age, and shall occupy the mortgaged real estate in whole or in part; and provided further, that a person shall be deemed to be the owner of real estate notwithstanding that legal title thereto is held in the name of a trust if said person is the beneficiary of such trust.
A reverse mortgage loan, for the purpose of this paragraph, shall not be considered a residential mortgage transaction, as defined in section 1 of chapter 140D or any other transaction specified in subsection (e) of section 10 of said chapter 140D. The notices and rights contained herein shall be in addition to the disclosure and rights provided for in said chapter 140D, including the right of rescission set forth in said section 10 of said chapter 140D.
The proceeds from a reverse mortgage loan shall be disbursed to the borrower, pursuant to the provisions of such program, and together with unpaid interest, if any, shall become due and payable: (i) at the end of a fixed term, if any; (ii) upon the death of the borrower; (iii) upon the conveyance of title to the mortgaged real estate; (iv) upon such borrower ceasing to occupy said real estate as a principal dwelling; or (v) upon default by the borrower in the performance of its obligations under the loan agreement.
The aggregate balance of such loans made or acquired by a credit union shall not exceed 10 per cent of its deposits; provided, however, that such balance shall not include any such loans sold into the secondary mortgage market.
The commissioner shall not approve any program for a reverse mortgage loan which does not include the following:
(1) the type of loan, whether open-end or closed and whether a recourse or non-recourse loan;
(2) an applicant for any such loan shall not be bound for seven days after his acceptance, in writing, of the lender's written commitment to make the loan;
(3) the credit union shall obtain a written statement signed by the borrower acknowledging receipt of disclosure of all contractual contingencies which could force a sale of the mortgaged real estate;
(4) a provision permitting prepayment of the loan without penalty at any time prior to such loan becoming due and payable;
(5) the interest rate, which may be fixed or variable, and the method of calculation thereof shall be established at loan origination; and, at the option of the borrower, may be contingent on the value of the mortgaged real estate at closing or at maturity or on changes in said value during the period between closing and maturity;
(6) the method of disbursement of the proceeds of the loan to the borrower; provided, however, that at the request of the borrower, disbursement may be made to a third party pursuant to the terms of the loan agreement;
(7) a copy of the form of the note and mortgage deed that will be utilized for such loan;
(8) a detailed description of how the plan will function; and
(9) such other information as the commissioner may require.
Prior to making any such loan, a bank shall provide a prospective borrower with written materials explaining in plain language, the type of mortgage being offered and its specific terms, including but not limited to:
(a) a schedule, if applicable, and explanation of payments to the borrower pursuant to the terms of the mortgage agreement and whether or not property taxes and insurance premiums are to be deducted;
(b) a schedule of outstanding debt over time, if applicable;
(c) repayment date, if a fixed term loan, and other provisions which cause the loan to become due and payable;
(d) method of repayment and schedule, if any;
(e) all contractual contingencies, including lack of home maintenance and other default provisions which may result in a forced sale of the mortgaged property;
(f) interest rate and annual percentage rate, and for a reverse mortgage loan for a specified term, total interest payable thereon;
(g) loan fees and charges;
(h) description of prepayment and, if applicable, refinancing features; and
(i) inclusion of a statement that any such mortgage has tax and estate planning consequences and may affect levels of, or eligibility for, certain government benefits, grants or pensions, and that applicants are advised to explore such matters with appropriate authorities.
A credit union shall not make a reverse mortgage loan as provided for in this section until it has received notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the executive office of elder affairs and which shall include instruction on reverse mortgage loans. Any such program shall include, but is not limited to, the subject matter of subparagraphs (1) to (9), inclusive, of this section with respect to all reverse mortgage loan programs approved by the commissioner pursuant to this section. For the purpose of providing such counseling, said executive office of elder affairs shall establish and maintain a list of counseling programs approved by it and shall make such list available to all credit unions and to the public.
A reverse mortgage loan shall constitute a lien against the property securing the loan to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on said advances, and the lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.
The commissioner may promulgate such regulations necessary to carry out the provisions of this paragraph.
For the purposes of this paragraph, the term "non-recourse reverse mortgage loan'' shall mean a reverse mortgage loan which limits the lender's recovery solely to the value of the property at the time the loan becomes due and payable.
The provisions of sections 96 to 114A, inclusive, of chapter 140 shall not apply to a reverse mortgage loan.
6. A credit union may, subject to such regulations as the commissioner deems advisable, make and acquire or participate with any other credit union in making and acquiring loans secured by first mortgages on a unit of a condominium as defined in section one of chapter one hundred and eighty-three A. The aggregate balance of principal of such loans outstanding at any one time shall not exceed fifteen percent of the assets of a credit union.
Subject to the provisions of the first paragraph, a credit union having assets of not more than four million dollars may loan, upon any one such unit of real estate, an amount not exceeding seventy-five thousand dollars, and the total liabilities of any one member as borrower upon loans so secured shall not exceed one hundred and twenty thousand dollars. A credit union having assets of four million dollars or more may loan, upon any one such unit of real estate, an amount not exceeding one hundred and seventy-five thousand dollars, and the total liabilities of any one member as borrower upon loans so secured shall not exceed three hundred thousand dollars.
7. A credit union may make construction mortgage loans with respect to any of the types of mortgage loans authorized by this section; provided, however, that any payments required on account of principal shall commence not later than twelve months from the date of the mortgage note.
8. A credit union whose shares and deposits aggregate more than four million dollars may make mortgage loans on single or two family residential property in participation with other banking institutions or associations. The participating parties shall enter into a written agreement for themselves, their successors and assigns, which shall include provisions for the custody of the note and mortgage and for the servicing and foreclosure thereof. The amount which any such participating credit union may invest in a participation loan shall not exceed one percent of its assets or fifty thousand dollars, whichever is greater, and the aggregate balance of principal of such participation loans outstanding at any one time shall not exceed ten percent of the assets of a credit union.
9. Subject to such regulations as the commissioner of banks deems necessary or desirable, any credit union is authorized: (a) to make such loans and advances of credit and purchase of obligations representing such loans and advances of credit, as are insured by the federal housing administrator or commissioner or by the secretary of agriculture under Title I of the Bankhead-Jones Farm Tenant Act, and to obtain such insurance; (b) to make and acquire such loans secured by mortgages on real property in the commonwealth held in fee simple as the federal housing administrator or commissioner or the secretary of agriculture under Title I of the Bankhead-Jones Farm Tenant Act, insures or gives commitments to insure, and to obtain such insurance and, in addition thereto, a credit union having assets in excess of twenty-five million dollars, may make, acquire, service or participate in, with one or more domestic insurance companies authorized to do so, loans secured by mortgages of leasehold interest in real property located in the commonwealth; provided, however, that (1) such leasehold is held from the federal government or the commonwealth or a political subdivision thereof, or any agency of the federal government or the commonwealth, (2) the term of such lease is for not less than fifty years from the date of the execution of the mortgage and note, (3) such loan will, by its terms, be paid in full before the termination of the lease, (4) the federal housing administrator insures or gives commitments to insure such loan under the provisions of the National Housing Act and such insurance is obtained, (5) the aggregate balance of amounts invested in all such loans outstanding at any one time from any such credit union shall not exceed twenty-five percent of its shares and deposits, and (6) the balance of amounts invested in any such loan outstanding at any one time from any such credit union secured by a mortgage of a single leasehold interest shall not exceed two percent of its shares and deposits; and (c), to collect and apply payments due upon and to otherwise service any mortgage loan insured by the federal housing administrator or commissioner or by the secretary of agriculture under Title I of the Bankhead-Jones Farm Tenant Act and, with respect to such mortgage loan, to make agreements with any mortgages approved by the federal housing administrator or commissioner or by the secretary of agriculture under Title I of the Bankhead-Jones Farm Tenant Act to collect and apply payments due upon and otherwise to service any such mortgage loan. A credit union may, in participation with one or more credit unions, banks or domestic insurance companies authorized to transact life insurance, national banking associations or savings and loan associations if such associations are so authorized, make or acquire any of the loans referred to in clause (b) which are secured by mortgages on real property held in fee simple. With respect to the obligation of any mortgage contract entered into under any provision of this paragraph, for the life of said obligation, no provision of law limiting the ratio of a mortgage loan to the value of the property or the term of the mortgage, or limiting the power of any credit union to make loans other than those secured by mortgages upon real estate shall apply to loans made pursuant to this paragraph and subject to regulations referred to herein, and no provision of law limiting the power of any credit union to make loans shall apply to home improvement loans insured pursuant to the provisions of subsection (h) of section two hundred and twenty or subsection (k) of section two hundred and three of the National Housing Act and subject to such regulations, but no more than twenty percent of the total shares and deposits of any credit union shall be invested at any one time in loans insured pursuant to the provision of said subsection (h) of said section two hundred and twenty or said subsection (k) of said section two hundred and three. Nothing contained herein shall be deemed to abridge any power or authority conferred upon the commissioner of banks by any other provision of law.
Any credit union may sell or assign mortgages to the Federal National Mortgage Association, created under the Federal Housing Act of 1954, and purchase stock of such association, service mortgages therefor and do any and all acts which, under the laws and regulations applicable to such sales or assignments, may be required to enable them to be affected.
10. A credit union may make or acquire loans secured by a second mortgage on residential real estate for noncommercial or nonbusiness purposes to an amount which, when added to the balance due on the first mortgage, does not exceed eighty percent of the value of the real estate as determined by the credit committee; provided, however, that such a mortgage loan shall not exceed the amount any such credit union is authorized to make to the member on the first mortgage loan. Such loan shall be repaid within a period of not more than twenty-five years from the date of the note. The aggregate balance of principal of such loans outstanding at any one time shall not exceed twenty-five percent of the assets of a credit union.
11. A credit union may make or acquire open-end mortgage loans not exceeding, in the aggregate, eighty percent of the value of the real estate, pursuant to an agreement to make loans to the mortgagor from time to time. The aggregate outstanding loans of this class pursuant to a single such agreement shall not exceed one and one-quarter percent of the deposits of such corporation or fifty thousand dollars, whichever is greater. An agreement pursuant to this paragraph shall be deemed a note for purposes of this section. The aggregate balance of principal of such loans outstanding at any one time shall not exceed twenty-five percent of the assets of a credit union. The interest rate on any such loan and any delinquency charge thereon on any payment not paid in full within 15 days of its due date shall be governed by section 114B of chapter 140.
12. Notwithstanding any other provision of law to the contrary, any credit union holding a first mortgage on real estate may take, in substitution therefor, from a person deemed by such credit union to be a bona fide purchaser of such real estate, a first mortgage thereon plus the accumulated interest, taxes, municipal liens and other proper charges due thereon.
Chapter 171: Section 65. Definitions for Secs. 65 to 65E
[ Text of section as recodified by 2008, 454, Sec. 1 effective April 5, 2009. For text effective until April 5, 2009, see above.]
Section 65. As used in sections 65 to 65E, inclusive, the following words shall, unless the context otherwise requires, have the following meanings:--
"Commissioner'', the commissioner of banks.
"Loan'', a loan or line of credit, whether secured by collateral or security of any nature or unsecured, for consumer or other purposes other than a real estate loan.
"Real estate'', land or property, including improved land with a dwelling, owner occupied or unoccupied dwellings, unimproved land, farmland, a unit of a condominium, shares of stock issued by a co-operative housing corporation, leasehold interests under a lease which does not expire for at least 5 years beyond the maturity date of the loan, leasehold interests created in air rights over land, and any other interest in land.
"Mortgage loan'', a loan, line of credit, or borrowing secured primarily by a lien on an interest in real estate, with the exception of a loan described in subsection (c) of section 65A.
"Non-recourse reverse mortgage loan'', a reverse mortgage loan which limits the lender's recovery solely to the value of the property at the time the loan becomes due and payable.