Classes of Residential Mortgage Loans Requiring PMI - Q3 1999

By the Division of Banks

Mass. Gen. Laws chapter 167E, section 2, paragraph 6 of subsection B establishes a class of residential mortgage loans not exceeding 90% of the value of the real estate secured for the mortgage loan. Paragraph 7 of said subsection B establishes a separate class of residential mortgage loans not exceeding 95% of the value of the real estate and it contains a provision which mandates that the portion of the unpaid balance of the loan exceeding 80% of the value of the real estate be insured by PMI. Paragraph 6 makes no reference to the portion of the unpaid balance of the loan exceeding 80% of the value of the real estate being insured by PMI. It has been the consistent position of the Division that each class of loans found in said chapter 167E, section 2 are separate and distinct from another class. Therefore, the provision in paragraph 7 requiring PMI on the portion of the unpaid balance exceeding 80% of the value of the real estate is not applicable to those loans written under paragraph 6. Although there is no statutory requirement that the portion of the loan in excess of 80% of the value of the real estate be covered by PMI for loans written under paragraph 6, the lending institution, however, has the authority under paragraph 8 of section 6 of said chapter 167E to so require PMI as a condition of the loan. Please note the above-cited sections are applicable only to state-chartered banks.