Opinion  Selected Opinion 01-017

Date:	03/09/2001
Organization:	Division of Banks
Docket Number:	01-017

Issues related to high cost mortgage loan regulation

Kevin F. Kiley, Executive Vice President
Massachusetts Bankers Association, Inc.
78 Tremont Street, Suite 306
Boston, Massachusetts 02108-3906

Dear Mr. Kiley:

This letter is in response to your correspondence dated January 25, 2001 to the Division of Banks (the "Division") relative to the recent amendments to 209 CMR 32.32 governing high cost home loans. Included with your cover letter were several questions on the amended regulations which have been raised by member banks of the Massachusetts Bankers Association. The purpose of your letter was to have the responses put on the Division's web site and available to other lenders. As you may be aware, the Division's web site has a location for frequently asked questions about the amended regulations, including some forwarded with your letter.

The first two matters raised by your member banks seek to have the effective date of the regulations delayed and clarification of the applications covered by the amended regulations. As indicated on the Division's web site, the effective date of the amended regulations was delayed from January 22, 2001 to March 22, 2001. The regulations will apply to high cost mortgage loans for which an application is taken on or after March 22, 2001.

The third matter raised concerns the calculation of APR for determining the applicability of the amended regulations. Please be advised that the web site now contains two examples for the calculation of the APR. Those examples are also set out on the sheet included with this response.

The regulations at 209 CMR 32.32(5) require t he creditor to assess the repayment ability of the consumer based on the income of the Metropolitan Statistical Area ("MSA") in which the property is located. For those properties not located in an MSA, the regulations and the web site direct the lender to the income listed under the non-metropolitan median family income for Massachusetts. That table addresses the fourth issue raised with your submission.

Your letter is correct that the regulations establish a presumption that a point is bona fide if it reduces the interest rate by a minimum of thirty-five basis points or three-eighths of a point.

Finally, your letter is also correct that in all situations a loan covered by the amended 209 CMR 32.32 would not be a high cost loan under federal law as referenced in 209 CMR 32.32(5)(c). The Division will correct that reference the next time it formally amends any of its regulations.

Sincerely,

Joseph A. Leonard, Jr.
Deputy Commissioner of Banks and General Counsel