By the Division of Banks

November 14, 2006

SUBJECT: REGULATORY BULLETIN 5.1-103

GUIDANCE ON NONTRADITIONAL MORTGAGE PRODUCT RISKS

To the Chief Executive of the Licensee Addressed:

The purpose of this letter is to inform you of the Division of Banks' (the "Division") intention to issue Regulatory Bulletin 5.1-103 (the "Bulletin"), applicable to licensed mortgage lenders and mortgage brokers, and to provide licensed entities with a copy of the proposed Bulletin in advance of its issuance by the Division. The proposed Bulletin sets forth the Division's policy relative to Guidance on Nontraditional Mortgage Product Risks.

On October 4, 2006, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration (the "Agencies") issued an interagency guidance relative to nontraditional mortgage product risks. This interagency guidance applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions.

Recognizing that the federal interagency guidance does not cover a majority of loan originations in the Commonwealth, the Division, in cooperation with the Conference of State Bank Supervisors ("CSBS"), has developed parallel guidance for licensed mortgage brokers and mortgage lenders in this state. The Division strongly supports the purpose of the guidance adopted by the Agencies and is committed to promote the uniform application of consumer protections for all borrowers.

This Bulletin is intended to promote consistent regulation in the mortgage market and clarify how licensed mortgage brokers and mortgage lenders (referred to as "providers") can offer nontraditional mortgage products in a way that clearly discloses the risks that borrowers may assume.

In order to maintain regulatory consistency, this guidance substantially mirrors the interagency guidance, except for the deletion of sections not applicable to non-depository institutions.

The Division is pleased to accept comments on the Bulletin from interested parties which should be submitted by December 4, 2006 via email to dob.comments@state.ma.us or by mail addressed to Steven L. Antonakes, Commissioner of Banks, One South Station, Boston, MA 02110.

Very truly yours,

Steven L. Antonakes
Commissioner of Banks