Licensing Exemption In Light Of The Recent Passage of Chapter 50 Of The Acts Of 2000 - Q2 2000

By the Division of Banks

A wholly-owned subsidiary of a federally chartered institution, seeks exemption from licensing as a small loan company, mortgage lender and mortgage broker in light of the recent passage of Chapter 50 of the Acts of 2000.

The institution offers mortgage loans on residential property and home equity lines of credit with initial advances of $6,000 or less. The institution does not offer consumer loans of $6,000 or less with an interest rate and expenses that exceed, in the aggregate, 12% which are not secured by residential property.

Mass.Gen. Laws chapter 255E, section 2 states, in part, that a person who acts as a mortgage broker or mortgage lender five or more times in a consecutive twelve month period for owner-occupied, one-to-four family residential property located in the Commonwealth must obtain a license from the Commissioner from Banks. Section 2 contains exemptions from licensing for certain entities one of which is a subsidiary of a national banking association. Accordingly, a subsidiary for a national association does not require a mortgage lender or a mortgage broker license to offer mortgage loans on residential property in the Commonwealth.

Until recently it was the position of the Division that entities offering home equity lines of credit with advances of $6,000 or less would be required to obtain a small loan license. Chapter 50 of the Acts of 2000, however, eliminates the necessity of a small loan license in order for a mortgage lender to originate open-end lines of credit secured by real-estate. Accordingly, the institution does not need to obtain a small loan license to offer home equity lines of credit with advances of $6,000 or less.