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See also: Consumer Credit Cost Disclosure 95-172
95-073 Out-of-State Trust Company Authority
An out-of-state trust company which has been granted a certificate of authority, pursuant to Mass. Gen. Laws chapter 167 § 43, by the Massachusetts Board of Bank Incorporation to act as a fiduciary in the Commonwealth cannot solicit trust business in the Commonwealth through another entity not named in the certificate issued or without any existing authority in the Commonwealth.
95-125 Acquisitions by Out-of-State Bank Holding Companies
An out-of-state bank holding company may, with the prior written approval of the Board of Bank Incorporation, establish or acquire direct or indirect ownership or control of more than 5% of the voting stock of one or more banking institutions or bank holding companies, under Mass. Gen. Laws chapter 167A § 2. This authority is contingent upon the express authority in the law of the state in which the operations of the holding company's subsidiary banks are principally conducted allowing a similar transaction under conditions no more restrictive than Massachusetts law.
95-135 Corporate Trust Powers
There is no provision in Massachusetts law which expressly authorizes a corporate entity other than a state or federally-chartered bank to exercise trust and fiduciary powers. Such an enabling statute is necessary before an entity may engage in any type of trust or fiduciary activity in the Commonwealth. Therefore, based on the reasons stated herein and as set forth in Opinions 94-059 and 95-009, it would not be permissible for a corporation organized under Mass. Gen. Laws chapter 156B to exercise trust or fiduciary powers. In addition, the definition of an "investment adviser" does not encompass or authorize such activities, under Mass. Gen. Laws chapter 110A § 401. Legislation is expected to be filed during the 1996 Legislative session to establish the authority for a limited purpose trust company to conduct only trust and fiduciary operations in the Commonwealth.
95-145 Foreign Fiduciary Requirements
When an out-of-state banking corporation acts as a security trustee pursuant to a trust indenture in connection with the financing of an out-of-state facility, the parties to the trust indenture and security agreement are located outside the Commonwealth, the trust accounts are maintained out of state, and the collateral for the trust indenture is located out of state, the trustee would not be required to obtain a foreign fiduciary certificate from the Board of Bank Incorporation because the Trustee will not be acting in a fiduciary capacity in Massachusetts, under Mass. Gen. Laws chapter 167 § 43.
95-153 Electronic Branch Location Restrictions
The location of electronic branches in the Commonwealth, including ATM's, is governed by Mass. Gen. Laws chapter 167B § 3. This statute specifically prohibits an electronic branch from being located on premises where legalized gambling occurs, other than a state lottery. Therefore, an electronic branch cannot be installed at a horse track or pari-mutual facility.
95-154 Releasing Bank Account Information
Opening a checking account creates a contractual relationship only between the bank and the depositor which delegates benefits and obligations to each party. There are no unique laws or regulations which require Massachusetts banks to reveal information relating to depositors' accounts to payees on checks drawn on such accounts. Massachusetts has adopted the Uniform Commercial Code ("UCC"), at Mass. Gen. Laws chapter 106, however, and the UCC's provisions may address payees rights to verify payment of out-of-state checks.
95-160 State-Chartered Bank Courier Services
A state-chartered bank cannot operate a courier service to pick up deposits from its business customers without obtaining authority to establish such a branch because the courier service would be considered a branch of the bank. Therefore, a bank must apply for permission to establish a mobile branch office under Mass. Gen. Laws chapter 167C § 6 to conduct such courier services.
95-162 Bank Main Office Relocation
The Division of Banks' written consent is required to relocate a state-chartered bank's main office to a location within the same city or town, under Mass. Gen. Laws chapter 167C § 2. Banks must also obtain the Division's approval to establish branch offices or depots. Additional premises leased by a bank to temporarily house its loan department or back room operations including accounting, loan operations and switchboard, does not constitute the business of a branch or depot. Thus, a bank may occupy such premises without Division approval, under Mass. Gen. Laws chapter 167C § 2. The bank, however, cannot receive deposits, collect moneys due to the bank, or issue withdrawals from such premises. The leasing of such additional premises may also require the Division's approval under Mass. Gen. Laws chapter 167F § 2(9).
95-165 Bank Dividend Anticipation Loans
State-chartered banks should note that dividend anticipation loans are a different loan product than passbook loans. If a state-chartered bank authorized to make dividend anticipation loans ceases to offer such loan products, the bank is not subject to any notice requirement under Mass. Gen. Laws chapter 167E § 8. State-chartered banks which still offer dividend anticipation loans should post a copy of Mass. Gen. Laws chapter 167E § 8 to comply with this statute.
95-168 Bank ATM Location Restrictions
The definition of "financial institution" as set forth in Mass. Gen. Laws chapter 167B § 1, does not cover federally-chartered banking institutions for all transactions. Therefore, such institutions are not required to obtain the Commissioner of Banks' approval to open an electronic branch. If, however, such an institution intends to share an ATM facility with other banks as part of a network, the Division of Banks' approval is required. If such an institution will not be sharing its ATM facility, no filing is necessary for compliance with Mass. Gen. Laws chapter 167B.
95-176 Bank Branch Expansion
Banks seeking to expand or change a branch office may be required to get the Commissioner's approval, under Mass. Gen. Laws chapter 167C § 3.In making such a determination, the Division of Banks considers the totality of all relative surrounding facts. When a bank wants to expand a branch by adding an adjacent drive-up facility located at the same address as the existing branch office, no approval would be required if the bank is currently authorized to have a branch office at the address which the proposed expansion will retain. The lease of additional property may, however, require the Division's approval under Mass. Gen. Laws chapter 167F § 2(9).
95-185 Bank Stock Option Requirements
If a new stock option plan is simply an extension of the existing plan, or is limited to stock options, an independent third party review would not be required to be submitted along with the bank's request for approval under Mass. Gen. Laws chapter 172 § 25. If the proposed new stock option plan contained, however, more material changes, including the addition of different methods of issuing the stock such as stock grants pursuant to Mass. Gen. Laws chapter 172 § 25A, an independent third party review would be required. Accordingly, the requirements necessary for the Division of Banks' approval will vary depending on the type of plan proposed. An independent third party review will be necessary only if the proposed plan is not a traditional stock option plan and is submitted under the authority of Mass. Gen. Laws chapter 172 § 25A.
95-196 Conflicts of Interest in Savings Bank Boards
Trustees on a savings bank's audit committee are prohibited from serving as members of the same bank's board of investment. A savings bank's board of investment must consist of not less than five members who must be trustees, under Mass. Gen. Laws chapter 168 § 12. Only one of the bank's personnel holding the office, or performing the duties of, president, vice-president, treasurer or clerk, shall at the same time be a member of the board of investment. In addition, the general fiduciary duties of a trustee would preclude an attorney who is a trustee from voting on matters before the board of investment that could benefit the attorney by allowing him or her to provide additional legal services to the bank. Such a trustee, however, could recuse himself from any such votes. In addition, the number of members on the board of investment could be increased if necessary to provide a quorum if one or more recusals occurred. Members of the bank's real estate committee are not precluded from serving on the board of investment by statute or general fiduciary duties. Nevertheless, potential conflicts of interest for each trustee must be assessed.
95-056 Credit Union Authority to Offer Interest Bearing Deposit Accounts and "CD's"
State-chartered credit unions are authorized to offer interest-bearing deposit accounts to members under Mass. Gen. Laws chapter 171. The credit union's by-laws must determine the conditions on which shares may be paid in, transferred and withdrawn, and the conditions on which deposits may be received and withdrawn, under Mass. Gen. Laws chapter 171 § 9. In addition, such a credit union's capital shall be unlimited in amount and shall consist of shares and deposits, under Mass. Gen. Laws chapter 171 § 29. Based on a review of the Official Staff Commentary to the Truth-in-Savings Rule promulgated by the National Credit Union Administration, state-chartered credit unions are also authorized by federal law to offer deposit accounts provided that they are authorized under state law to do so, and as long as the accounts are properly disclosed as being interest-bearing deposit accounts. A significant number of state-chartered credit unions presently offer various forms of deposit accounts to their members and commonly utilize the terms "certificate of deposit", and "CD" to describe these accounts. Credit unions are required to properly disclose the nature of accounts offered to its members. A credit union cannot classify and disclose a term-share account as a certificate of deposit or a CD. State-chartered credit unions may establish and maintain, however, both dividend-bearing share accounts and interest-bearing deposit accounts. Such credit unions would be at a competitive disadvantage if prohibited from using the terms certificate of deposit and CD to describe such accounts.
95-132 Credit Union Automobile Loan Limits
Credit union lending statutes do not specifically refer to auto loans. State-chartered credit unions, however, may make auto loans subject to the limits and terms set forth by Mass. Gen. Laws chapter 171§ 59(3). Under this statute, credit unions with more than $100,000 in assets are authorized to make various personal loans, including loans evidenced by a security interest in satisfactory collateral valued at not more than 95% of its market value, in amounts not exceeding $15,000 or one percent of assets, whichever is greater, with a maximum limit of $40,000. Such loans must also be payable within 60 months from the date of the note.
95-140 Credit Union Out-of-State Services
A state-chartered credit unions may establish and maintain branch offices or depots in its home county or on a site within twenty-five miles of its main office in a city or town in another county, under Mass. Gen. Laws chapter 171 § 8. Credit unions may provide members who live in another state with assistance in completing membership applications and witnessing loan documentation, and may also distribute loan proceeds in that other state. No deposit or withdrawal activity, however, is permissible at the out-of-state site. Thus, such a credit union cannot accept qualifying shares or other deposits, nor may it collect withdrawal slips or distribute checks representing withdrawals, at this site. Deposits, however, from members working out-of-state may be made through payroll deductions directly to the credit union in Massachusetts. Additionally, all deposit and withdrawal activities could be conducted directly by mail between a member and the credit union in Massachusetts, as well as through an electronic branch, "ATM," under Mass. Gen. Laws chapter 167B. This possibility, however, may be impacted by the other state's laws on ATM's.
95-188 Credit Union Investment Loss Reserve Requirements
The Commissioner of Banks may prescribe the manner and form of keeping the books and accounts of a credit union. The financial statements of a credit union must be calculated according to generally accepted accounting principles ("GAAP"). Under the Division's regulations at 209 CMR 43.00 et seq., audits of state-chartered credit unions are to be conducted using GAAP procedures. Accordingly, state-chartered credit unions should comply with the NCUA's Accounting Bulletin 94-1 by adopting the Statement of Financial Accounting Standard No. 115 ("FAS 115") entitled, "Accounting for Certain Investments in Debt and Equity Securities," for reporting purposes. Under FAS 115, credit unions are required to assign such securities to three categories: trading, held-to-maturity, or available for sale. All investments, other than those "held to maturity", are required to be reported on a credit union's financial statement at their fair value. This fair value requirement eliminates the need for an additional investment reserve since any changes in fair value are accounted for in the credit union's financial statements through either income and expense, or a valuation reserve. Therefore, a state-chartered credit union should not provide for additional reserves beyond the requirements of FAS 115 in its investment portfolio if such securities are categorized as trading, held-to-maturity, or available for sale. For some categories of investments the requirements of FAS 115 are more substantial than those set forth under Mass. Gen. Laws chapter 171 § 70. Therefore, the Division's position does not weaken the statutory provisions of Mass. Gen. Laws chapter 171 § 70. The FAS 115 provisions governing securities available for sale, in particular, require more than the 5% reserve required under Mass. Gen. Laws chapter 171 § 70, either under existing law or as amended by section 29 of Chapter 266 of the Acts of 1995. Accordingly, a state-chartered credit union in compliance with FAS 115 will not be cited by the Division's examination personnel for not maintaining reserves relative to marketable securities as set out in Mass. Gen. Laws chapter 171 § 70.
95-191 State-Chartered Credit Union Authority to Provide Services to Members Out-of-State
The Division does not object to a credit union providing certain limited services at its corporate sponsor's out-of-state offices. In providing services, however, the state-chartered credit union cannot conduct full branch banking business under current state law. No deposits, withdrawals or account transfers may be initiated at the corporate sponsor's out-of-state offices, except for electronic fund transfers authorized under Mass. Gen. Laws chapter 167B and the laws of the host state. Payroll checks may be cashed but only in full, and sales transactions such as travelers checks and money orders must also be paid for without activating any accounts. Account inquiries may be conducted, and new account and loan requests may be initiated, but personnel in the out-of-state office may not accept monies which represent the member's qualifying share in the credit union. Deposits and withdrawals may be conducted directly by mail between a member and the credit union's main office in Massachusetts.
See also: Consumer Credit Cost Disclosure 95-172
95-025 (-026) Mortgage Broker Licensing Exemption
A person associated with and working under the direction of a licensed mortgage broker or lender is eligible for an exemption from the mortgage broker license requirements under Mass. Gen. Laws chapter 255E, only if the regulated licensee completes a Statement of Accountability prepared by the Division of Banks wherein the licensee agrees to take responsibility for its associates' activities authorized under Mass. Gen. Laws chapter 255E and its implementing regulation, 209 CMR 42.00 et seq. An exemption will only be issued to an individual who has an exclusive relationship with a licensee and will cover only the activities engaged in pursuant to Mass. Gen. Laws chapter 255E on behalf of the named licensee on the Statement of Accountability. An individual who originates mortgage loans, or engages in other activities subject to regulation under Mass. Gen. Laws chapter 255E, on behalf of another licensee or entity, or in any other capacity, will be required to obtain an independent mortgage broker's license.
95-027 Mortgage Broker License Requirements for Non-Profit Educational Institutions
Any non-profit, public or independent post-secondary educational institution within the Commonwealth authorized by law to grant degrees by the Commonwealth, or by any agency or instrumentality thereof, is exempt from the mortgage lender and broker licensing requirements pursuant to Mass. Gen. Laws chapter 255E § 2, for mortgage loans made by any such educational institution to its faculty or staff.
95-057 Mortgage Broker License Requirements for Real Estate Brokers
Residential mortgage loan referrals made by real estate brokers constitute an activity within the definition of a mortgage broker, if such referrals are made for compensation or gain. Such real estate brokers would thus be required to obtain a mortgage broker's license unless one of the exemptions set forth in Mass. Gen. Laws chapter 255E § 2 apply. The Division of Banks views "compensation or gain" in a broad context and would include a payment to a charity on behalf of a real estate broker as compensation or gain. A real estate broker may be eligible for an exemption from the licensing requirement as a person "associated with and under the direction of" a particular licensee.
Furthermore, contractors are prohibited from acting as a mortgage broker or agent for any mortgage lender or from preparing, offering or negotiating or attempting to or agreeing to prepare, arrange, offer or negotiate a mortgage loan on behalf of a mortgage lender, regardless of the receipt or the expectation of the receipt of compensation or gain from the mortgage lender, under Mass. Gen. Laws chapter 142A § 17. Contractors, however, are permitted to refer consumers to mortgage brokers or lenders as long as they receive no form of compensation or gain for such referrals, under 940 CMR 8.06(5), a regulation promulgated by the Attorney General, under Mass. Gen. Laws chapter 142A. In addition, an independent entity may provide marketing services on behalf of a licensee without obtaining a mortgage broker's license provided that the entity has no contact with consumers and does not perform any activities within the definition of a "mortgage broker" for compensation or gain.
95-065 Mortgage Broker License Requirements for Real Estate Brokers
A real estate broker referring customers to a licensed mortgage broker for direct or indirect "compensation or gain" would require a mortgage broker's license, under Mass. Gen. Laws chapter 255E § 1. Such a broker, however, may be eligible for an exemption under Mass. Gen. Laws chapter 255E § 2 as a person "associated with and under the direction of" a licensed mortgage broker. The payment of rent by such a broker to a mortgage lender or broker, based on a fair market rental rate allocated for occupied space and not based in whole or in part on the volume of business referred, would not constitute "compensation or gain."
95-139 Mortgage Lender & Broker License Requirements for Mortgage Servicers
A mortgage servicer which contracts with a mortgagor to debit the mortgagor's checking account bi-weekly for an amount equal to one-half of the mortgagor's monthly mortgage payment, and regularly transfers a monthly payment to the mortgage lender but also transfers an additional payment every six months, accumulated from the bi-weekly payments, to the lender to be applied to the principal balance of the loan, is not required to be licensed as a mortgage lender or broker under Mass. Gen. Laws chapter 255E. Such services offered to mortgagors, providing them with an alternative method of payment for existing mortgage loans, are optional. These services do not involve the making of mortgage loans or the issuing of commitments for mortgage loans. In addition, an entity providing such services would also not fall within the definition of a mortgage broker under Mass. Gen. Laws chapter 255E. There are no other licensing or registration requirements in Massachusetts applicable to such a mortgage servicing program.
95-144 Mortgage Lender and Broker License Requirement Exemptions
Any nonprofit agency or corporation, incorporated under the laws of the commonwealth for the purpose of assisting low and moderate income households in the purchase or rehabilitation of family residences of four units or less, and holding tax-exempt status granted under the provisions of Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code, is exempt from the mortgage lender and broker licensing requirements under Mass. Gen. Laws chapter 255E § 2. A wholly-owned "for-profit" subsidiary of such a non-profit entity which qualifies as a mortgage lender or broker, however, must meet the licensing requirements of Mass. Gen. Laws chapter 255E § 2.
95-149 Mortgage Broker License Requirements for Insurance Companies & Agents
Insurance companies are exempt from the mortgage broker license requirements of Mass. Gen. Laws chapter 255E. Insurance agents, however, are not so exempt. Such agents must obtain a mortgage broker's license if for compensation or gain, or in the expectation of compensation or gain, such agents directly or indirectly negotiate, place, assist in placement, find or offer to negotiate, place, assist in placement or find mortgage loans on residential property for others, unless otherwise exempt. Some life insurance policies are offered only to consumers who qualify for certain mortgage loans. If in the process of selling such policies, the insurance agent forwards financial information and a release to obtain a credit report to a mortgage lender, and the agent is compensated solely by the insurance carrier issuing the life insurance, the agent receives compensation or gain for assisting in the placement of the mortgage loan. Thus, an agent engaging in such activity must be licensed as a mortgage broker under Mass. Gen. Laws chapter 255E.
95-150 Mortgage Lender Licensing Requirements for Subsidiaries of Licensed Mortgage Lenders
In computing the number of mortgage loans to determine if a lender is exempt from its licensing requirements, Mass. Gen. Laws chapter 255E states that "loans of more than one partnership, association, trust or corporation, the majority interest of which are owned or controlled by the same...corporation" shall be counted. Thus, if a majority-owned subsidiary of an out-of-state bank holding company, which is also an affiliate of a Massachusetts-licensed mortgage lender, makes 5 or more residential mortgage loans in a period of 12 consecutive months, that subsidiary would also be required to obtain a mortgage lender's license under Mass. Gen. Laws chapter 255E.
95-151 Mortgage Lender License Requirements for Insurance Companies & their Affiliates
Though insurance companies are exempt from the mortgage lender licensing requirement, any subsidiary or affiliate of such an entity is not exempt under Mass. Gen. Laws chapter 255E § 2. Such an affiliate which has a mortgage lender's license but does not currently originate mortgage loans in Massachusetts does not fall within the statutory definition of a "mortgage lender". Thus, such an affiliate would require no license. The Division of Banks, however, reserves the right to enforce the requirements of Mass. Gen. Laws chapter 255E and its implementing regulations, 209 CMR 42.00 et seq. through its examination and investigation powers during the time that any matter remains outstanding for which an entity was licensed.
95-161 Mortgage Lender Voice Mail Restrictions
No restriction exists prohibiting the use of a shared voice mail system between a mortgage lender and a real estate firm in both Mass. Gen. Laws chapter 255E and 209 CMR 42.00 et seq. A licensed mortgage lender, however, must take the necessary steps to properly identify to the consumer who he is dealing with in a mortgage transaction. If a real estate firm receives compensation or gain, either directly or indirectly, for referring business to the mortgage lender, the firm may require a license under Mass. Gen. Laws chapter 255E.
95-164 Mortgage Lender License Requirements for Refinancing Loans
Although an entity which purchases existing mortgages is not required to be licensed under Mass. Gen. Laws chapter 255E, refinancing such loans would involve issuing commitments for mortgage loans. Therefore, the refinancing of mortgage loans previously purchased would require the entity doing so to obtain a mortgage lender's license in Massachusetts if the entity will originate or refinance 5 or more mortgage loans within any consecutive 12 month period.
95-167 Commercial or Business Loans, Investments and Usury
Loans made to dealers to purchase airplanes and resell them to interested buyers are classified as commercial or business loans. Entities making such loans are not required to obtain any license under the Division of Banks' jurisdiction under the Massachusetts General Laws. Any loan contract, however, exceeding 20% per annum, constitutes usury as calculated under Mass. Gen. Laws chapter 271 § 49, unless the lender has registered with the Attorney General's office.
An entity which accepts money as an investment for a guaranteed rate of return must comply with certain laws and regulations governing securities. In Massachusetts, investment securities are regulated by the Office of the Secretary of State. Promoting investments by investors by calling such investments, "certificates of deposit", is prohibited because only banks and credit unions are authorized to accept deposits, under Mass. Gen. Laws chapter 167 § 37.
95-170 Mortgage Broker License Requirements of Commercial Real Estate Brokers
Commercial real estate mortgage loans are not governed by the provisions of Mass. Gen. Laws chapter 255E. Thus, commercial real estate brokers are not required to be licensed under Mass. Gen. Laws chapter 255E when acting as lenders or brokers of such loans.
95-175 Foreclosure Impairment Insurance
Whether the cost of foreclosure impairment insurance ("FII") should be treated as a finance charge under Mass. Gen. Laws chapter 140D, depends upon the specific terms and conditions of the applicable FII policy. For purposes of the disclosure requirements of the Truth-in-Lending laws, the portion of the FII cost which protects against title defects would not be includable in the finance charge. If the policy by its terms, however, provides coverage to the lender for funds which the lender does not recover from a foreclosure proceeding, the portion of the cost which relates to this coverage is includable in the finance charge and must be disclosed as such. Additionally, if the lender is unable to break out the costs for components of the coverage, then the entire costs for the FII should be included in the finance charge.
95-180 Mortgage Loan Prepayment Fees
Any mortgage, secured by a first lien on owner-occupied, 1-3 family property in which the note is paid prior to the date fixed for payment, may be subject to certain prepayment penalties under Mass. Gen. Laws chapter 183 § 56. If the loan is paid off within the first 12 months, any prepayment penalty shall be limited to the balance of the first year's interest or 3 months' interest, whichever is less. If the prepayment occurs within 36 months of the date of the note for the purpose of refinancing the mortgage with another institution, an additional payment not in excess of 3 months interest may be required. No statute or regulation prohibits a bank or mortgage lender from charging a fee to obtain a payoff statement on an existing mortgage.
95-181 Securing Commercial Lines of Credit with A Second Mortgage
A bank may make a loan secured by a second mortgage as collateral security for a business or commercial loan under Mass. Gen. Laws chapter 167E § 11(b). The second mortgage, however, cannot be the primary security for such a loan.
95-182 Mortgage Broker License Requirements for Investors of Existing Mortgages
One who assists in finding investors for existing mortgage loans is not required to be licensed as a mortgage broker under Mass. Gen. Laws chapter 255E.
95-183 Mortgage Lender License Requirements for Table Funding Entities
An entity purchasing an existing mortgage loan, even immediately after a closing, does not require a mortgage lender's license under Mass. Gen. Laws chapter 255E. Although an entity may actually be providing funds for a mortgage loan, the entity would not have to be licensed as a mortgage lender unless the commitment for the loan or the closing of the loan was conducted in the entity's name. The entity named in the note is the lender of record and is required to have made all applicable disclosures. Mortgage loans cannot be purchased from mortgage brokers because such loans can only be closed in the name of authorized mortgage lenders. Mortgage brokers cannot make mortgage loans or issue commitments or denials for such loans.
95-186 Mortgage Broker & Lender License Exemptions for Non-Profit Corporations
Any person or entity, who acts as a mortgage lender or broker on residential property in the Commonwealth, five or more times in a consecutive twelve month period, must obtain a license from the Commissioner of Banks, under Mass. Gen. Laws chapter 255E, unless otherwise exempted. Any non-profit agency or corporation incorporated under the laws of the Commonwealth, for the purpose of assisting low to moderate income households in the purchase or rehabilitation of family residences of four units or less, and which holds tax-exempt status granted under the provisions of Section 501(C)(3) or 501(C)(4) of the Internal Revenue Code, is specifically exempt from the mortgage broker and lender license requirements, under Mass. Gen. Laws chapter 255E § 2. Therefore, a corporation incorporated in another state does not qualify as an exempt entity. Additionally, a loan from a non-profit housing corporation to a Massachusetts non-profit housing corporation does not meet the definition of a residential mortgage loan. Thus, such a transaction would not require a license under Mass. Gen. Laws chapter 255E.
95-189 Attorney's Certification of Title Requirements for Mortgage Loans
In any purchase money first mortgage transaction on residential, owner-occupied, 1-4 family property where the mortgagor is required to pay the mortgagee's attorney's fees as part of the transaction, the attorney must render a certification of title to the mortgagor and the mortgagee. This certification must include a statement that the mortgagee holds a good and sufficient first mortgage on the mortgaged premises. On a residential first mortgage loan where the requirements of Mass. Gen. Laws chapter 93 § 70 are met, the attorney's certification of title would be satisfactory evidence of lien status for the purpose of Mass. Gen. Laws chapter 167E, which requires such loans to be evidenced by a note secured by a first mortgage which shall be a first lien on real estate so loaned upon. In a commercial real estate mortgage where Mass. Gen. Laws chapter 93 § 70 does not apply, a state-chartered bank has the discretion to determine lien status through documents other than an attorney's title certification provided that such documents are consistent with safe and sound banking principles. Such documents may include a title insurance policy insuring the first mortgage interest of the lender in the property.
95-192 Mortgage Loan Short Payoffs
A lending institution has complete discretion whether to accept a payoff which is less than the amount called for in the note and mortgage. No law or regulation restricts any fees charged by such an institution to consider such a short payoff. At the request of the mortgagor, mortgagee's are authorized to revise the rate of interest, extend the term of the mortgage or change the amount of the periodic payments of principal and interest, or both of any existing note and mortgage, under Mass. Gen. Laws chapter 183 § 63A. The holder of such a mortgage may charge a fee in connection with a revision of terms in an amount not to exceed one-half of one percent of the outstanding balance of the existing note and mortgage.
95-193 Mortgage Broker & Lender License Exemption for Out-of-State Industrial Loan Companies
An out-of-state industrial loan company, which solicits only business or commercial loans in the Commonwealth through a loan production office, does not fall within the licensing requirements of Mass. Gen. Laws chapter 255E. Only persons or entities who act as a mortgage lender or broker on owner occupied, 1-4 family, residential property in the Commonwealth, must obtain a license, under Mass. Gen. Laws chapter 255E.
95-171 Licensing Requirements for Out-of-StateBanks Financing Commercial Transactions
Entities, engaged in the business of purchasing retail installment sale or revolving credit agreements where the goods or services are purchased "primarily for personal, family or household" purposes, are governed by and must be licensed under, Mass. Gen. Laws chapter 255D. Thus, out-of-state banks purchasing revolving lines of credit used to finance commercial or business purchases of supplies and equipment would not be subject to Mass. Gen. Laws chapter 255D. Also, out-of-state banks purchasing such commercial or business lines of credit originated in Massachusetts would not be subject to the "Small Loan Act", Mass. Gen. Laws chapter 140 §§ 96-100.
95-146 Collection Agency Purchases of Claims
Entities, which collect or receive payments for another of any bill or other indebtedness, or engage in the solicitation of the right to collect or receive payment for another of any account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of any account, bill or other indebtedness, are required to be licensed as collection agencies under Mass. Gen. Laws chapter 93 § 24 . If a collection agency purchases a claim for collection, the agency collects the claim on its own behalf as the creditor, not on behalf of another. Accordingly, 209 CMR 18.14 states, "If a collection agency purchases a claim for collection, it shall not attempt to collect such a claim as a collection agency, directly or indirectly...."
See also: Mortgages 95-175
95-143 Consumer Disclosure Requirements
State law does not require the Division of Banks to approve a regulated licensee's use of a product. The Division's policy is not to review, approve or endorse a licensee's products or business decisions or practices which fall outside the scope of regulated activities. There are certain disclosure requirements for consumer transactions, however, which should be reviewed in connection with certain products, under Mass. Gen. Laws chapter 140D and its implementing regulations, 209 CMR 32.00 et seq. The regulations require any charges payable directly or indirectly by the consumer, and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit, to be included in the finance charge and properly disclosed.
95-172 Miscellaneous Mortgage Requirements
Lending practices relating to the application of principal, interest and other components of a mortgage loan payment are governed by the terms of the contract between the lender and its customer, which would include the note, mortgage and other related documents. If the loan were from a state-chartered bank, certain laws governing such banks' loans require payments to be first applied to interest.
Mortgagees who require the prepayment of real estate taxes to an escrow account are required to submit payment to the city or town for the full amount of taxes due on or before the due date, provided that the mortgagor has paid the amount to the mortgagee, under Mass. Gen. Laws chapter 183 § 62.
An adjustment to the interest rate, with or without corresponding adjustment to the payment, is an event requiring new disclosures to the consumer under Mass. Gen. Laws chapter 140D and more specifically, its implementing regulation 209 CMR 32.20(3). In the case of an interest rate adjustment without an accompanying payment change, certain disclosures must be given at least once each year during which an adjustment is implemented. In the case of a payment change, disclosures must be given at least 25 days, but no more than 120 calendar days before a payment at a new level is due. If the loan is originated by a state-chartered bank, a separate law requires a minimum notice of 30 days on variable rate mortgages. No existing laws or regulations under the Division of Banks' jurisdiction govern a mortgagee's practices or policies regarding settlement checks received from insurance companies.