Change In Interest Rate Option Included In Original Note Not A Revision Of Terms. - Q2 2000

Division of Banks

A mortgage company seeks to introduce a loan product to its customers. Under the provisions of the mortgage loan, the borrower is given the option to reduce the interest rate on an existing note and mortgage without having to incur the cost of refinancing the original loan. The option to reduce interest rates is in the sole discretion of the borrower and the borrower may exercise the option any number of times during the term of the loan upon payment of 2.5 "conversion points" which will be remitted in full to the loan company. It is the position of the Division that Opinions No. 99-139 (See Digest of Selected Opinions 4 th Quarter 1999, pg. 4), establishes the principle that a mortgage loan product which includes in the original loan documents an option on behalf of the borrower to decrease the interest rate on the said loan at any time during the term of the mortgage loan at the complete discretion of the borrower, is not a revision of terms. There is no revision being made to the existing mortgage note; instead, an option of the note is being exercised by the borrower. Since the product is not a revision of terms pursuant to Mass.Gen.Laws chapter 183, section 63A, the restrictions relative to permissible fees and additional money to be loaned contained in said section 63A would not apply to this product.