By the Division of Banks

March 12, 2008

SUBJECT: Revisions to Regulatory Bulletin 1.3-104 - Counseling and Opt-in Requirements for Subprime Adjustable Rate Mortgage Loans Made to First Time Home Loan Borrowers

To the Chief Executive Officer of the Institution Addressed:

This letter is to inform you that the Division of Banks ("Division") has modified and re-issued Regulatory Bulletin 1.3-104 (the "Bulletin") which took effect on January 30, 2008. The Bulletin sets forth the Division's revised guidance relative to the determination of whether a variable or adjustable rate mortgage loan to a first-time home loan borrower qualifies as "subprime" for the purposes of General Laws chapter 184, section 17B1/2 and to facilitate the implementation of the consumer counseling and affirmative opt-in provisions contained in SECTION 7 of Chapter 206 of the Acts of 2007. The modified Bulletin can be found on the Division's web site at under 'News and Updates' as well as under the link provided for 'Legal Resources.'

As you may recall, on January 30, 2008, the Division published the Bulletin on the Division's web site along with an industry letter announcing the publication of the Bulletin and inviting comment from interested parties. The Division's industry letter indicated that while the Bulletin took effect on January 30, 2008, comments on the Bulletin would be accepted through February 20, 2008. The Division appreciates the time taken by those individuals who submitted comments and proposed revisions to the Bulletin.

Based upon a consideration of the comments received, the Division has implemented several revisions to the Bulletin which include both technical and substantive changes. These revisions included a clarification of the definition of the fully indexed rate and confirmed that the lender shall obtain the borrower's written certification of receiving counseling and an opt-in statement at or before the loan closing. In addition, the Division implemented a substantive change to the rate thresholds for identifying whether a first lien mortgage loan qualifies as subprime by adjusting the interest rate spread to three percentage points above the yield on U.S. Treasury securities with comparable maturities for conforming loan amounts and four percentage points above the yield on U.S. Treasury securities with comparable maturities where the loan amount exceeds the limits set for Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

If you have any questions, please feel free to contact Deputy Commissioner Gregory E. Short of the Compliance and Community Affairs Unit, at (617) 956-1500, extension 547 or via e-mail to

Very truly yours,

Steven L. Antonakes
Commissioner of Banks