Proposed Amendments To High Cost Home Loan Regulations

April 16, 2002

To the Chief Executive Officer:

Enclosed for you information and review is a copy of the Division of Banks' (Division) proposed amendments to its high cost home loan regulations. This redlined version of the regulations also includes summaries of the proposed changes.

The Division will be holding a public hearing on May 9, 2002. A copy of the public hearing notice under G.L. c. 30A, which contains the time and location, is also enclosed. Both oral and written comments from interested parties are strongly encouraged. The comment period ends May 23, 2002.

On March 22, 2001, the Division's high cost home loan regulations went into effect. The purpose of the regulations was to address certain abuses in the high cost mortgage lending industry. These abusive lending practices are commonly referred to as "predatory" mortgage lending. At the time that the final regulations were promulgated, the Division stated that within 12 to 18 months of their effective date, the Division would review the regulations for their effectiveness. Now that the regulations have been in effect for just over one year, the Division is inviting comments from the public on the overall effectiveness of the regulations in combating abusive or predatory lending practices.

During the hearings and the comment period on the Division's high cost home loan regulations in 2000, the Division heard from industry representatives who stated that the Division's regulations might inadvertently lead to less availability of legitimate subprime mortgage loans. The Division invites comments from the industry on any specific evidence of a limit in the availability of subprime loans in Massachusetts since the regulations went into effect.

In addition, in December 2001, the Board of Governors of the Federal Reserve System (Federal Reserve) issued final changes to the federal Truth in Lending Regulation Z (12 CFR 226.00). Many of the changes to Regulation Z are similar to the Division's High Cost Home Loan amendments. The Division has reviewed the Federal Reserve's changes to Regulation Z and is issuing amendments to 209 CMR 32.00 and 209 CMR 40.00. In some cases, the Division has adopted the changes by the Federal Reserve in order to avoid unnecessary overlap or conflict with the federal provisions. In other cases, the Division has declined to adopt the Federal Reserve changes because the Division believes that its regulations are more protective to the consumer. The Division invites comments on any aspect of the proposed amendments.

Please contact the Division's Legal Unit at (617) 956-1520 if you have any questions about the public hearing process or the proposed regulations.

Very truly yours,

Thomas J. Curry
Commissioner of Banks

Enclosures