209 CMR 53.00: Determination and documentation of Borrower's Interest
(1) Authority. 209 CMR 53.00 is issued pursuant to M.G.L. c. 183, § 28C.
(2) Purpose. A lender is prohibited under M.G.L. c. 183, § 28C from knowingly refinancing a home loan that was consummated within the prior 60 months unless the refinancing is in the borrower's interest. 209 CMR 53.00 is intended to provide such factors, classifications, differentiations or other provisions, or such adjustments and exceptions for classes of transactions necessary to carry out M.G.L. c. 183, § 28C.
(3) Scope. 209 CMR 53.00 applies to any home loan lender.
For the purposes of 209 CMR 53.00, the following definitions apply:
Commissioner, the commissioner of banks.
Borrower, a natural person who seeks or acquires a home loan for personal, family, or household use. Borrower does not include a Cosigner.
(a) A natural person who assumes liability for the obligation of a borrower without receiving goods, services, or money in return for the obligation.
(b) Cosigner includes any natural person whose signature is requested as a condition to granting a home loan to a borrower. The term does not include a spouse whose signature is required in a home loan transaction to perfect a security interest pursuant to state law.
(c) A natural person who meets the definition in 209 CMR 53.02: Cosigner, is a cosigner whether or not the person is designated as such on the credit obligation.
Home loan, a loan, other than a reverse mortgage transaction, in which: (i) the borrower is a natural person; (ii) the debt is incurred by the borrower primarily for personal, family or household purposes; and, (iii) the debt is 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 borrower. Home loan does not include a loan with a maturity of less than one year, if the purpose of the loan is a "bridge" loan connected with the acquisition or construction of a dwelling intended to become the borrower's principal dwelling.
Lender, any association or corporation chartered by the Commonwealth under the provisions of M.G.L. c. 168, 170, 171, or 172 or by similar authority of any state of the United States other than the Commonwealth; a national banking association, savings and loan association or savings bank which exists by authority of the United States; a credit union organized under the provisions of the Federal Credit Union Act; a mortgage lender licensed under G.L. c. 255E, s. 2; or any other mortgagee.
Obligation, an agreement between a borrower and a lender.
Refinancing, making a home loan, the proceeds of which are used to pay off all or part of an existing home loan. The new home loan may also be used to pay off other debts of the borrower.
Pursuant to M.G.L. c. 183, § 28C, a lender shall not knowingly refinance a home loan that was consummated within
the prior60 months , unless the refinancing is in the borrower's interest.
Notwithstanding the provisions of 209 CMR 53.03, a lender shall not need to make a determination that the refinancing of a home loan is in the borrower's interest if:
(a) The new home loan is guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, or other State or federal housing finance agencies;
(b) The annual percentage rate of the new home loan at consummation does not exceed by more than two and one
quarter(2. 25) percentage points for closed-end first-lien home loans, or by more than three and one quarter(3. 25) percentage points for closed-end subordinate-lien home loans, the yield on United States Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the lender; and when calculating the annual percentage rate for adjustable rate loans, the lender shall use the interest rate that would be effective once the introductory rate has expired; or
(c) The new home loan is an open-end home loan and the annual percentage rate under the agreement will not exceed at any time the Prime rate index as published in the Wall Street Journal plus a margin of one percentage point
(2) A refinancing which does not meet the provisions of 209 CMR 53.04(1) shall not be presumed to be a violation of 209 CMR 53.03.
(3) A lender making a home loan which is not exempt under 209 CMR 53.04(1) shall not knowingly refinance the home loan unless the lender shall have determined that the refinancing is in the borrower's interest. Factors to be considered by a lender in determining if the refinancing is in the borrower's interest include, but are not limited to the following:
(a) the borrower's new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees;
(b) there is a change in the amortization period of the new loan ;
(c) the borrower receives cash in excess of the costs and fees of refinancing;
(d) the borrower's note rate of interest is reduced;
(e) there is a change from an adjustable to a fixed rate loan, taking into account costs and fees;
(f) the refinancing is necessary to respond to a bona fide personal need or an order of a court of competent jurisdiction; or
(g) the time it takes to recoup the costs of refinancing, taking into account the costs and fees.
In making a home loan in which a determination under 209 CMR 53.04 that the home loan is in the borrower's interest is required, a lender shall use sound underwriting practices which are reasonable in relation to the home loan requested.
06 : Demonstration and Documentation of Compliance
(1) A lender shall develop policies and procedures to demonstrate compliance with 209 CMR 53.00. Such policies and procedures shall include, at a minimum, a worksheet or other document to be
signed anddated at or before closing by both the borrower andthe lender indicating how the lender determined that the home loan is in the borrower's interest.
(2) A lender shall maintain the documentation required under 209 CMR 53.
06(1) for a period of three years and shall make such documentation available for inspection by the Commissioner.
A lender shall determine the borrower's interest not later than the time such lender issues an approval or a commitment in writing for a home loan, whether conditional or unconditional, after reviewing the borrower's completed mortgage application, credit report and other applicable documents.
If a lender must make a determination that a home loan is in the borrower's interest pursuant to 209 CMR 53.04, such lender may require, by contract, that said borrower not more than thirty days prior to the filing of any action instituted by the borrower alleging that the lender violated subsection (a) of section 28C of chapter 183 of the General Laws, mail or deliver to the lender a written demand for relief, identifying the borrower and reasonably describing the violation of said section 28C and the injury suffered.
The provisions of 209 CMR 53.00 shall apply to all applications for a refinancing taken on or after November 7, 2004.
209 CMR 53.00
. M.G.L. c. 183, § 28C