By the Division of Banks

Internet Mortgage Lender Activity

Taking mortgage loan applications and making mortgage loans over the internet raises various compliance issues. A discussion of some of these issues follows.

General disclosure requirements for creditors offering open and closed-end credit are set forth under 209 CMR 32.00 et seq. Creditors must make disclosures "in writing, in a form that the consumer may keep" pursuant to 209 CMR 32.05(1)(a) and 32.17(1)(a). Therefore, a general on-screen description of the required disclosures with a "mouse-click" acknowledgment of receipt would violate this regulation. Additionally, disclosures cannot be provided through on-line "dialogue boxes," as they must be in written form. However, the provisions of 209 CMR 32.05(1)(a) and 32.17(1)(a) could be satisfied by mailing a written copy of the required description directly to consumers. There are additional requirements to the mortgage application and approval process set out in 209 CMR 38.00 et seq.

Record retention requirements for mortgage lenders are set forth in 209 CMR 42.09. Pursuant to 209 CMR 42.09(1) such licensees are required to "keep and use within the Commonwealth . . . books, records and accounts in a manner which will allow the Commissioner to determine whether the Licensee is complying with the provisions of the M.G.L. c. 255E and applicable state and federal laws and regulations." Therefore, such licensees must keep there records in hard copy form within the Commonwealth or designate a resident agent within the Commonwealth to keep such records for them to comply with the regulations. However, new regulations are anticipated which will conditionally allow certain licensees to keep and use business records at a location outside of Massachusetts. These regulations may address the electronic record retention, but until these regulations are promulgated records must be kept in hard copy or in microfiche form.