Licensing Requirement For Servicer And Its Subservicer - Q2 2000

By the Division of Banks

A mortgage servicer intends to act as a wholesale lender in the Commonwealth. The servicer intends to purchase loans and sell such loans with servicing rights retained but will not be the actual party collecting such payments. The servicer has contracted with a third party which would be responsible for "servicing the loan," collecting all current and past due obligations from borrowers. The subservicer is a federal savings bank. The subservicer would remit payments collected from borrowers directly and would not be in receipt of any payments, either current or past due, collected from borrowers.

Mass. Gen. Laws chapter 93, section 24 requires that a person or entity that shall "...directly or indirectly conduct a collection agency, or engage in the Commonwealth in the business of collecting or receiving payment for others of any account, bill or other indebtedness.." shall obtain a license as a collection agency from the Division. The statute's implementing regulation, 209 CMR 18.00 et seq. further defines the range of activities that constitute conducting the business of collection agency. The Division's regulation at 209 CMR 18.02 limits the scope of the collection agency regulations to activities relating to the collection of debts. The Division's regulation at 209 CMR 18.03 defines a "debt " to be "money or its equivalent which is, or is alleged to be, more than 30 days past due and owing, unless a different period is agreed to by the debtor, under a single account as a result of a purchase, lease, or loan of goods services, or real or personal property."

Since the Servicer would not be engaged in the collection of debt for another that is more than 30 days past due, it is the position of the Division that it would not require licensure pursuant to said section 24. However, the subservicer, unless otherwise exempt, would be required to obtain a license.