Permissibility Of Massachusetts-Chartered Bank To Make Loans Out-Of-State - Q4 1998

By the Division of Banks

Mass. Gen. Laws chapter 167E, section 2, subsection B, paragraph 14 authorizes state-chartered banks in the Commonwealth to "make, acquire by purchase, participate in or service mortgage loans . . . on real estate located outside of its lending area as defined in this subsection which loans are of several classes specified in paragraphs 1-12 inclusive." It is the Division's position that, based on the statutory language of paragraph 14, a state-chartered bank has the authority to make loans in another state without filing an application to establish a de novo branch office in the other state, regardless of where the loans are closed and funded, and despite the bank's requiring the borrower to maintain a deposit account as a part of the loan transaction. A bank seeking to conduct such activity should contact the regulatory agency for the state in which it seeks to do business. Such banks also should review 209 CMR 47.00 regarding Parity with National Banks to ascertain the requirements for establishing a loan production office in another state.