Open-End And Closed-End Second Mortgage Loans - Q4 1998

For the purposes of licensing under Mass. Gen. Laws chapter 255E, regarding mortgage lenders, the statute makes no distinction between first or subsequent mortgage loans. Said chapter 255E and its implementing regulation 209 CMR 42.00 et seq. thus require that an entity making open-end or closed-end, first or subsequent mortgage loans, be licensed as a mortgage lender in the Commonwealth. M.G.L. c. 140D and regulation 209 CMR 32.00 et seq. cover fee disclosure requirements for each type of second mortgage loan. Open-end lines of credit secured by a mortgage are governed further by M.G.L. c. 140 § 114B, which, in general, establishes a maximum interest rate of 18% per annum on any open-end credit plan and authorizes the creditor to charge a late charge of 10% of the outstanding balance or $10, whichever is less, on any payment not made within fifteen days of its due date. M.G.L. c. 183 § 59 establishes a maximum late charge of 3% of the overdue principal and interest on any payment on a closed-end mortgage not made within fifteen days of its due date.

Note that an entity licensed as a mortgage lender may make both closed-end and open-end mortgage loans in the Commonwealth. Lenders offering open-end lines of credit in disbursements or sums less than $6,000.00 require a small loan agency license under M.G.L. c. 140 §§ 96-114A.