Applicability of Debt Collection Licensing Requirements To Mortgage Lender/Servicer Which Retains A Portion Of The Loan - Q1 1999By the Division of Banks
An out-of-state nonbank lender licensed to make mortgage loans in Massachusetts pursuant to General Laws chapter 255E and making loans to borrowers in the Commonwealth sells the note to an investor. The lender retains servicing rights and an interest in a minor portion of the amounts payable by the borrower. The loan goes into default and the investor directs the lender to commence collection efforts. The lender is obligated to make payments due under the note to the investor until foreclosure. The lender asks whether it is required to be licensed as a debt collection agency under the provisions of General Laws chapter 93, section 24 and 209 CMR 18.00 et seq.
The borrower's nonpayment results in a debt as defined in 209 CMR 18.03. The lender seeks to collect on the debt which is ultimately owed to the investor. Therefore, the licensing provisions of 209 CMR 18.00 et seq. are triggered and the lender must be licensed as a debt collection agency under the facts presented.