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Opinion Summary of Selected Opinion 00-090

Date: 05/15/2000
Organization: Division of Banks
Docket Number: 00-090

This opinion was issued in the 3rd quarter of 2000.

Table of Contents

Mortgages that are not closed in its own name

An LLC which is an approved Fannie Mae and HUD/FHA lender for first mortgage loans inquires as to whether it is exempt as a mortgage lender in the Commonwealth. Licensed mortgage lenders and mortgage brokers as well as exempt entities submit certain mortgage loan applications to the LLC for consideration for funding. If approved, the LLC would provide funding for the loan or purchase a loan funded by a licensed or exempt lender in the Commonwealth. The LLC would have no contact with the Massachusetts borrower until after a mortgage loan closes and it is assigned to the LLC and it would not maintain an office in this state.

Massachusetts General laws chapter 255E requires that any person or entity which originates five or more mortgage loans on 1-4 family, owner-occupied property in a consecutive 12-month period in the Commonwealth must obtain a mortgage lender license from the Commissioner of Banks. It has been the consistent position of the Division that whether an entity originates a mortgage loan is determined by the closing documents. If a mortgage loan closes in the name of the LLC, the LLC would be required to be licensed as a mortgage lender once it met the numerical threshold established by the said chapter 255E.

Based on the facts, the LLC purchases mortgages that have been closed in the name of another entity or it funds the loan and immediately obtains an assignment. These loans are not closed in the name of the LLC. It is the position of the Division that whether the LLC funds a mortgage loan and receives an assignment of the mortgage immediately after the mortgage has been recorded or subsequently purchases an existing mortgage loan, it would not meet the definition of a mortgage lender under said chapter 255E and would not be required to be licensed in the Commonwealth provided that the mortgage is not closed in its name.

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