By the Division of Banks

Mortgage Loan Servicer Practices

When a mortgage lender sells a mortgage loan in the secondary market the ownership interest ceases in the originating lender regardless of whether title in the mortgagee has been changed. Certain mortgage lenders who sell their mortgage loans on the secondary market retain the rights to service such loans. Such entities which intend to collect payments over 30 days past due must also obtain a collection agency license under Mass. Gen. Laws chapter 93 § 24. Under 209 CMR 18.18(2), false communication from a collection agency as to the character, extent or amount of a debt, or as to its status in any legal proceeding constitutes a deceptive act. In addition, no collection agency may institute judicial proceedings on behalf of others pursuant to 209 CMR 18.15(1)(m)(1). Accordingly, it is the position of the Division of Banks that a licensed mortgage lender, who sells mortgage loans but retains the right to service such loans and also holds a collection agency license, cannot indicate to consumers that it has an ownership interest in their mortgage loans or that it will institute foreclosure proceedings in the event of default.