Public Hearing on 209 CMR 41.00, 209 CMR 42.00, and 209 CMR 49.00

Pursuant to the provisions of Massachusetts General Laws chapter 167F, s. 2A(e); chapter 171, s. 75B(e); chapter 255E, s. 2; and chapter 255F, sections 2(c) and 19; and in accordance with Massachusetts General Laws chapter 30A, s. 2, a public hearing will be held on Thursday, June 2, 2016 at 1:00 p.m., 1000 Washington Street, Hearing Room 1-E, Boston, Massachusetts, at which the Division of Banks (Division) will receive oral comments relative to the proposed amendments to 209 CMR 41.00: The Licensing of Mortgage Loan Originators; 209 CMR 42.00: The Licensing of Mortgage Lenders and Mortgage Brokers; and 209 CMR 49.00: Insurance Sales by Banks and Credit Unions.

Proposed Amendments to 209 CMR 41.00, The Licensing of Mortgage Loan Originators: 

The purpose of 209 CMR 41.00: The Licensing of Mortgage Loan Originators is to establish procedures and requirements for the licensing and supervision of mortgage loan originators under the provisions of G.L. c. 255F. The proposed amendmments make minor clarifications and reduce some reporting requirements in light of the Nationwide Multi-State Licensing System & Registry (NMLS). There are additional provisions to streamline and clarify regulatory requirements.

Proposed Amendments to 209 CMR 42.00, The Licensing of Mortgage Lenders and Mortgage Brokers: 

The purpose of 209 CMR 42.00: The Licensing of Mortgage Lenders and Mortgage Brokers is to provide the specific procedures and requirements for the licensing and supervision of mortgage lenders and mortgage brokers as set forth in G.L. c. 255E. The proposed amendments primarily make clarifying changes to the regulation, including specifically identifying the NMLS in the regulation. The proposed amendments also clarify the required standards for a licensee's financial statements (reviewed or audited). The proposed amendments also provide clarification on which records a licensee is required to keep and the durational requirements. The proposed amendments provide further clarification regarding trust/escrow account requirements for client funds and specify how a licensee may take corrective action if it does not have the proper trust account. The proposed amendments cross-reference the provisions of 209 CMR 32.00, prohibiting brokers and lenders from making or brokering higher-priced mortgage loans if those loans violate any of the referenced sections of 209 CMR 32.00, creating consistency with new federal standards. Lastly, the proposed amendments eliminate an entire section, 209 CMR 42.16, thereby eliminating the Loan Origination and Compensation Agreement as a requirement for mortgage brokers accepting loan applications.

Proposed Amendments to 209 CMR 49.00: Insurance Sales by Banks and Credit Unions: 

The purpose of 209 CMR 49.00, Insurance Sales by Banks and Credit Unions, is to establish the application and approval procedures for banks, credit unions and lenders to exercise insurance sales agency powers and to ensure that such business is conducted in compliance with the consumer protection laws of the Commonwealth.  Since 2006, the Division of Banks’ regulation at 209 CMR 49.00 has included two separate sections governing consumer protection terms and conditions for banks and credit unions.  The main purpose of the proposed amendments is to combine these two separate sections, 209 CMR 49.06 for banks and 209 CMR 49.06A for credit unions, back into one section.

The proposed amendments to 209 CMR 49.00 would implement the provisions of the Waiver issued by the Commissioner of Banks and the Commissioner of Insurance pursuant to SECTION 9 of c. 423 of the Acts of 2008.  Through the Waiver, which became effective October 30, 2009, the Commissioner of Banks and the Commissioner of Insurance determined it necessary to waive certain provisions of G.L. c. 171, § 75B, specifically the “Referral and Referral Fee Prohibition” [G.L. c. 171, § 75B(b)(2)], the “Separation Restriction” [G.L. c. 171, § 75B(b)(3)] and the “Waiting Period Restrictions” [G.L. c. 171, §§ 75B(b)(4)(B) and 75B(b)(4)(C)], as to Massachusetts chartered credit unions in order to permit such credit unions to engage in the sale, solicitation and negotiation of insurance products in the Commonwealth under similar conditions as those governing federal and state banks, small loan companies, mortgage lenders and mortgage brokers. 

Under the proposed amendments, the definition of “bank” and “federal bank” would again include credit unions, as was the case when 209 CMR 49.00 was amended in 2003 to include credit unions.  Certain technical amendments are proposed for consistency throughout the regulation.  One substantive update is to revise 209 CMR 49.03 and 209 CMR 49.04(3) to include applicable lenders in the provisions governing CRA requirements, known as Mortgage Lender Community Investment (MLCI), pursuant to G.L. c. 255E, § 8, as amended by St. 2007, c. 206.  Another substantive amendment removes references to Savings Bank Life Insurance (SBLI) in 209 CMR 49.02(6) and 209 CMR 49.03 in light of St. 2010, c. 176, which amended the distinction in the law between SBLI and any other domestic insurance agency.  In addition, the title of the regulation is proposed to be changed to “Insurance Sales by Banks, Credit Unions and Lenders”. 

Additional changes may be made based on comments received at the public hearing or during the comment period.

Written comments may be submitted to the Massachusetts Division of Banks, 1000 Washington St., 10^th Floor, Boston, MA 02118-6400 or at dob.comments@state.ma.us until 5:00 p.m. on Thursday, June 9, 2016.  Copies of the proposed amendments are available at www.mass.gov/dob or may be obtained from the Division.