By the Division of Banks
  1. APPLICABILITY AND SCOPE

    This bulletin sets forth the Division's enforcement policies relative to unlicensed mortgage lenders and mortgage brokers who are otherwise subject to G.L. c. 255E, the Commonwealth's Mortgage Lender and Broker Licensing Act. The policy statement specifies the regulatory sanctions and procedures the Division will employ to: (a) require unlicensed mortgage lenders and brokers to cease operating; (b) to require the immediate licensing of such unlicensed entities; (c) to publicize the identities of such unlicensed entities to the general public and the mortgage lending industry; (d) to publicize the identities of those formerly licensed mortgage lenders and brokers whose licenses are not renewed at the annual renewal date for any reason; and, (e) to reiterate the sanctions facing such unlicensed entities as well as licensed entities which do business with an unlicensed mortgage lender or broker.

    The purpose of this policy statement is to protect the Commonwealth's consumers by eliminating or restricting the ability of unlicensed mortgage lenders and mortgage brokers to conduct business in violation of G.L. c. 255E and its implementing regulations 209 CMR 42.00 et seq., as well as other applicable laws. G.L. c. 255E clearly is designed to prohibit unlicensed persons or entities, unless otherwise specifically exempt, from acting as mortgage lenders and/or brokers in residential mortgage loan transactions. The statute permits the granting of licenses to only those individuals or entities that possess the requisite financial responsibility, character, reputation and fitness.

    These licensing standards are intended to ensure that licensed mortgage lenders and brokers will operate their businesses honestly, fairly, soundly and in the public interest. The Division's implementing regulations, 209 CMR 42.00 et seq., further protect consumers by safeguarding prepaid mortgage loan related fees, and ensuring compliance with all applicable state and federal consumer protection laws and regulations through the licensing and the on-site inspection/examination process. The failure or unwillingness of any person or entity to comply with the Act's licensing and substantive provisions exposes consumers to unnecessary risk of financial loss and potentially abusive mortgage lending practices. The Division, therefore, issues the following policy to ensure that Massachusetts consumers receive the benefits of licensing and other safeguards.

  2. POLICY
    1. Unlicensed Mortgage Lenders and Brokers
      1. It is unlawful for any person or entity to act as a mortgage lender and/or broker without a valid license issued by the Division, unless such person or entity is expressly exempt from such licensing by G.L. c. 255E, s. 2. ( See also 209 CMR 42.05 and 42.08.)
      2. Any person or entity who, based upon information from whatever source deemed reliable, is suspected by the Division of engaging in, or advertising, unlicensed mortgage lender or broker activities shall be ordered in writing to immediately cease engaging in such activity until such person or entity:
        1. Demonstrates to the Division's satisfaction their exempt status; or
        2. Applies for and obtains a license(s) from the Division under G.L. c. 255E and 209 CMR 42.00.
      3. Any person or entity who fails to comply with the requirements of the preceding paragraph, within the time periods specified by the Division, shall be subject to any and all of the following remedial actions:
        1. Such person's or entity's name address and other pertinent information regarding their unlicensed status shall be published in a periodic public advisory issued by the Division to the general media, mortgage and banking industry trade groups and individual licensed mortgage lenders and brokers;
        2. The Division shall refer the matter to the Attorney General for enforcement and the imposition of civil or criminal penalties pursuant to G.L. c. 255E, ss. 9-10; and
        3. Any pending application for a mortgage lender or a broker license may be denied under G.L. c. 255E, s. 4, as such non-compliance constitutes evidence or grounds for determining that the applicant lacks the requisite character, reputation and fitness to be licensed under the Act.
      4. Any person or entity whose mortgage lender or broker license is not renewed at the annual renewal date for any reason shall have their name, address and other pertinent information published as specified above in Section II(A)(3)(a) and shall be subject to the remedial measures specified in Section II(A)(3)(b)-(c) of this bulletin.
    2. Mortgage Lenders and Brokers Doing Business with Unlicensed Entities
      1. It is unlawful for any licensed mortgage lender and/or broker to conduct business with a person or entity which should be licensed under G.L. c. 255E and which it knows or should know is an unlicensed mortgage lender or broker. Such activity constitutes an unfair or deceptive act for a mortgage broker or mortgage lender under 940 CMR 8.06(9), an expressly prohibited practice under the Office of the Attorney General's Mortgage Brokers and Mortgage Lenders Regulations, issued pursuant to G.L. c. 93A, the Commonwealth's Consumer Protection Act. A licensee is deemed to have knowledge of the unlicensed status of a mortgage lender and/or broker if an advisory is issued by the Division under Section II(A)(3)(a) and Section II(A)(4) of this bulletin.
      2. Pursuant to 209 CMR 42.09(1), all licensed mortgage lenders and brokers are required to maintain records and internal controls and policies that verify the licensing or exempt status of all mortgage lenders or brokers with whom they do business. Failure to do so, shall constitute an unsound practice and shall constitute a violation of 209 CMR 42.04(2)(b) or 209 CMR 42.07(2)(b), as applicable.
      3. Any licensed mortgage lender or broker who fails to comply with the requirements of the preceding two (2) paragraphs shall be subject to any and all of the following remedial actions:
        1. License suspension or revocation under G.L. c. 255E, s. 6;
        2. The issuance of a cease and desist order under G.L. c. 255E, s. 7; and
        3. Referral of the matter to the Attorney General for enforcement and the imposition of civil or criminal penalties and fines pursuant to G.L. c. 255E, ss. 9-10.
  3. HISTORICAL NOTES

    This bulletin was first issued on November 13, 1997 as Administrative Bulletin 37-1.

  4. AUTHORITY

    G.L. c. 255E, ss. 2, 6, 7, 9 and 10; 940 CMR 8.00.