By the Division of Banks

Licensing Requirements To Make Construction Loans & Rehab Property Loans

It is the position of the Division of Banks that the making of construction loans does not require a license pursuant to Mass. Gen. Laws chapter 255E § 2 because even if the loan is secured by a mortgage on the property, the property being constructed does not meet the definition of "residential property" found in the statute. A license may be required, however, if such loans are written so as to be converted into permanent financing where the lender providing the interim construction financing also provides the permanent construction loan. With respect to loans provided for "rehab properties", a mortgage lender license would be required if the loans are secured by a mortgage on property which meets the above referenced definition of "residential property" which includes the component that the dwelling is occupied or is expected to be occupied by the obligor on the mortgage debt. Additionally, the construction loans and loans provided for rehab properties are subject to the requirements of Mass. Gen. Laws chapter 140D and 209 CMR 32.00 et seq., the Commonwealth's Truth-in-Lending Law.