A State-Chartered Bank Originating First Mortgage Loans With A Loan-To-Value Ratio Of 97% Of The Value Of The Real Estate - Q4 1999

By the Division of Banks

It is the position of the Division that Massachusetts General Laws chapter 167E, section 2, subsection C authorizes state-chartered banks to make mortgage loans of 97% of the value of the real estate as well as to make any other type of mortgage loan, other than reverse mortgage loans, on a 1-4 family, owner-occupied residence provided the loan is saleable in the secondary market or is written in accordance with mortgage loan programs of public instrumentalities created by the Commonwealth for the purpose of financing and expanding the supply of residential mortgage or affordable housing.

For guidance, the Division looks to the definition of "secondary market" in Regulation 209 CMR 38.00. The regulation defines the term "secondary market" to mean "investors who purchase residential mortgages originated by lenders." Therefore, the bank could make a residential mortgage loan on 1-4 family, owner-occupied property provided such loan could be sold to an investor in such mortgages.