Maximum Amount That State-Chartered Bank May Charge As A Prepayment Penalty On A Home Equity Line Of Credit Secured By A First Mortgage

By the Division of Banks

Note: This opinion has been negated by the Division's Industry Letter issued November 5, 2004 - Industry Advisory Letter on Mortgage Loan Prepayment Fee Limitations.

A state-chartered bank asks if the prepayment penalty limitations contained in Mass. Gen. Laws chapter 183, section 56 apply to home equity loans secured by a first mortgage on property in the Commonwealth. Said section 56 is applicable to "any mortgage note secured by a first lien on a dwelling house of three or less separate households occupied or to be occupied in whole or in part by the mortgagor." It has been the consistent position of the Division that the lien status is the determinative factor as to whether the limitation on prepayment penalties applies to a particular mortgage loan. These same limitations do not apply to home equity loans secured by second liens. It is the Division's position that said section 56 and the provisions set out therein are the exclusive regulation of prepayment penalties on a first lien on applicable property.