By the Division of Banks

Disclosure Requirements For Brokers' Points

Mass. Gen. Laws chapter 183, section 63 does not set a maximum number of points or fees which mortgagees may charge to borrowers in residential mortgage transactions, but states, rather, that a mortgage lender or a mortgage broker, may not charge any points or fees on a mortgage loan except to the extent that such points and fees have been previously disclosed to the mortgagor in writing. It is the position of the Division that, provided that points and fees to be charged by a mortgage broker are previously disclosed in writing to the borrower, there is no maximum amount of such fees under said section 63. Additionally, certain disclosures required by the Attorney General's mortgage broker regulations may be applicable and should be reviewed for compliance. In particular, terms which significantly deviate from industry standards, or which are otherwise unconscionable, are prohibited under 940 CMR 8.06(6).

There is no statute or regulation in Massachusetts which establishes a maximum interest rate for residential first mortgage loans. However, mortgage broker points are considered to be finance charges under Mass. Gen. Laws chapter 140 (the Truth-In-Lending Act) and its implementing regulation 209 CMR 32.00 et seq. Therefore, such points and fees must be included as part of the finance charge and annual percentage rate on disclosure forms to the borrower. The usury statute, Mass. Gen. Laws chapter 271, section 49, establishes a maximum interest rate on loans of 20%, but it does not apply to lenders under the supervision and control of a state or federal regulatory agency. This includes licensed mortgage lenders and brokers. In addition, both Federal Regulation Z and 209 CMR 32.00 require that mortgage brokers' fees be disclosed as part of the finance charge and annual percentage rates.