By the Division of Banks

Limitations On The Revision Of Terms On Existing Mortgage Loans

Under Mass. Gen. Laws chapter 183 § 63A, a mortgagee cannot revise the rate of interest on an existing note and mortgage to an interest rate which is greater than the interest rate being paid by the borrower prior to the revision. However, it is the position of the Division that said section 63A does not apply to an original adjustable rate mortgage loan product which provides the borrower with the option to either choose an index different from that in the original contract or choose to convert the loan to a fixed rate loan. This is not a revision of terms since the change in the index or conversion to a fixed interest rate is an option granted to the borrower in the original loan documents. There is no revision being made to the terms of the original mortgage note, but rather an option in the note is being exercised by the borrower. Additionally, it has been the consistent position of the Division that the revision of terms statute is not limited to cases of default and may be used to provide rate relief to an existing customer during periods of decreasing interest rates in order to, among other things, prevent the customer from refinancing the loan with another bank.