- When will the new law go into effect?
Chapter 268 goes into effect on November 7, 2004.
- Will the new law govern existing loan applications or those received on or after the effective date?
The provisions of Chapter 268 will apply to all loan applications received on or after November 7, 2004.
- Will the Division issue regulations?
Yes. The Division intends to promulgate regulations for the provisions on "borrower's interest" in section 28C of General Laws chapter 183, as well as regulations to implement the provisions of General Laws chapter 183C, Predatory Home Loan Practices, as added to the General Laws by Chapter 268.
- When will the regulations be issued?
It is the intention of the Division to issue regulations relative to "borrower's interest" and to file them on an emergency basis with the Secretary of State on November 8, 2004. Emergency regulations to implement General Laws chapter 183C will be filed on the same date or as soon thereafter as possible.
- When will I be able to obtain a copy of the Division's regulations?
The implementing regulations which the Division will file on November 8, 2004 will be posted on this website as soon as they are finalized, but no later than Friday, November 5, 2004, at the close of business.
- How long do emergency regulations remain in effect?
Emergency regulations remain in effect for 90 days. During that period, the Division will conduct a public hearing to receive comments on making the emergency regulations permanent or making any amendments thereto. Further information will be provided at a later date on that subsequent hearing. It will be noted on this site as well as through the regulatory procedure.
- When will the public hearing be held to make permanent the regulations, 209 CMR 53.00, initially filed on an emergency basis?
The Division will hold a public hearing at 10:00 A.M. on Wednesday, December 1, 2004 at One South Station, 5 th Floor, Hearing Room A. The purpose of the hearing will be to receive public comments with respect to making permanent 209 CMR 53.00 et seq. The Division will accept written comments until the expiration of the public comment period on December 3, 2004.
- Will the term "home loan" in section 28C of General Laws chapter 183 be defined?
Yes. The emergency regulations will contain a definition of the term "home loan" for the provisions of section 28C of General Laws chapter 183.
- Under the provisions of 209 CMR 53.00 et seq, is a lender required to document all new home loans refinancing a home loan that was consummated within the prior 60 months?
Yes, 209 CMR 53.06 requires that lenders properly document how the lender made its determination that a home loan was in the borrower's interest. This includes a requirement to document that a borrower's interest determination was not required because the loan was properly within the parameters of 209 CMR 53.04(1). The lender must complete the documentation to reflect the date upon which the determination was made, which shall be at or before the closing of the loan, and must maintain such documentation in the lender's records for a period of three years.
- What are the implications of a lender's compliance with the "Borrower's Interest" provisions of section 28C of G.L. chapter 183 and potential conflict with the Equal Credit Opportunity Act ("ECOA"), which provides protections to consumers against discrimination in credit?
How should a lender complete an adverse action notice when an applicant is deemed not suitable for a refinanced loan based on a determination that the loan was not in the borrower's interest?
Under the Federal ECOA, a creditor shall not discriminate against an applicant on a prohibited basis regarding any aspect of a credit transaction. The ECOA also provides that a creditor shall not make any oral or written statement to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application. The ECOA is only implicated if the application is discouraged on a prohibited basis.
The best practice in preparing an adverse action notice is to provide a full explanation in the "Other" category of denial of exactly what the determination was on the application and include specific details on why the loan was determined not to be in the borrower's interest as required under section 28C of Chapter 183 of the Massachusetts General Laws.
- The regulation, by its terms, does not require a lender to make a determination that a refinancing is in the borrower's interest if the refinanced loan falls within certain predetermined annual percentage rate thresholds indexed to the yield on U. S. Treasury securities and the Prime rate as set out in 209 CMR 53.04(1). What will be the Division's response should significant changes in credit market conditions impact these thresholds?
The Division has the ability to file amendments to its regulations on an emergency basis at any time circumstances present sufficient justification. The regulations remain in effect for 90 days during which time the process is completed to make the amendments permanent.
- Chapter 268 of the Acts of 2004 made certain amendments to the Commonwealth's prepayment fee limitation statute, G.L. c. 183, §56 (the "Prepayment Statute"), including extending its applicability to second and subsequent liens. To what extent, if any, does the Prepayment Statute apply to early cancellation or termination fees in connection with open-end home equity lines of credit secured by a mortgage on residential property?
Please refer to the Division's recently issued Industry Advisory Letter on this subject which can be accessed at Industry Advisory Letter
- 05-006 Several Questions Relative to Borrower's Interest Regulation - May 26, 2005