By the Division of Banks

Availability Of Monies Due At The Time Of Closing And Recording

The Commonwealth's "Good Funds" statute, Mass. Gen. Laws. chapter 183, section 63B requires that, before the mortgage may be recorded, the full amount of the loan proceeds due the mortgagor must be transferred by the mortgagee to the mortgagor, to the mortgagor's attorney, or to the mortgagee's attorney. This transfer may come in the form of a certified check, bank treasurer's check, cashier's check or by a transfer of funds processed by an automated clearinghouse. The purpose of said section 63B is to ensure that loan proceeds are available to the borrower upon consummation of the transaction, in the form of cash or a cash equivalent, and to prevent a mortgagee from funding a transaction with funds which are not immediately available to the borrower. It is the position of the Division that, in the ordinary course of events, the proceeds of the loan due to the mortgagor are to be transferred so as to allow the transaction to be consummated on the day scheduled for closing and/or recording.

In a purchase money mortgage transaction where the loan proceeds are to be disbursed by the closing attorney immediately upon recording the mortgage, "good funds" must be in the attorney's account prior to the recording. In a closed-end mortgage transaction, such as a refinancing, where the right of rescission applies, a borrower not exercising the right of rescission has the right to receive the loan proceeds on the business day following the rescission period's expiration (midnight of the third business day following the closing). In this case, the "good funds" must be in the account of the closing attorney at the beginning of the business day following the expiration of the rescission period, as the borrower is charged interest on the loan for that day.