Code of Massachusetts Regulations
209 CMR - DIVISION OF BANKS AND LOAN AGENCIES
Title 209 CMR 40.00 - Unfair and deceptive acts and practices in consumer transactions
Section 40.02 - Definitions
For the purposes of 209 CMR 40.00, the following definitions apply:
Affiliate, means any company that controls, is controlled by, or is under common control with another company. Control shall mean ownership of 10% or more of any class of outstanding capital stock of the company or the power to direct or cause the direction of the management and policies of the company.
Annual Percentage Rate, means the annual percentage rate for a loan calculated according to the Federal Truth In Lending Act (15 U.S.C. 1601 et seq.) and 12 CFR 1026, 209 CMR 32.14: Determination of Annual Percentage Rate or 209 CMR 32.22: Determination of Annual Percentage Rate, as applicable.
Bank, means any association or corporation chartered by the Commonwealth under the provisions of M.G.L. c. 168, 170, 171, or 172 or any individuals, association, partnership or corporation incorporated or doing a banking business in the Commonwealth, subject to the supervision of the Commissioner, including any internet bank.
Benchmark Rate, means the interest rate which the borrower can reduce by paying bona fide discount points; this rate shall not exceed the weekly average yield of United States Treasury securities having a maturity of five years, on the 15th day of the month immediately preceding the month in which the loan was made, plus four percentage points.
Bona Fide Error, means an unintentional error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error. A bona fide error includes, but shall not be limited to, clerical, calculation, computer malfunction and programming, and printing errors, except that an error in legal judgment with respect to a person's obligation under M.G.L. c. 183C, 209 CMR 40.00, 209 CMR 32.00: Truth in Lending, or other applicable law shall not be considered a bona fide error.
Bona Fide Loan Discount Points, means loan discount points, which are:
(a) knowingly paid by the borrower;
(b) paid for the express purpose of lowering the benchmark rate; and
(c) in fact reducing the interest rate or time-price differential applicable to the loan from an interest rate which does not exceed the benchmark rate.
Broker, means any person who for compensation directly or indirectly solicits, processes, places or negotiates home mortgage loans for others or who closes home mortgage loans which may be in the person's own name with the funds provided by others and which loans are thereafter assigned to the person providing the funding of the loans; provided, that broker shall not include a person who is an attorney providing legal services in association with the closing of a home mortgage loan who is not also funding the home loan and is not an affiliate of the lender.
Commissioner, means the commissioner of banks.
Consumer, means a natural person who seeks or acquires goods, services, or money for personal, family, or household use other than for the purchase of real property.
Consumer Transaction, means a transaction between a lender and a consumer, in which the money, property or services are primarily for personal, family or household purposes.
Conventional Mortgage Rate, means the most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, as published in statistical release H.15 or any publication that may supersede it, as of the applicable time set forth in 209 CMR 40.02: High Cost Home Loan (a)1.
Conventional Prepayment Penalty, means any prepayment penalty or fee that may be collected or charged in a home loan, and that is authorized by law provided the home loan:
(a) does not have an annual percentage rate that exceeds the conventional mortgage rate by more than two percentage points, and
(b) does not permit any prepayment fees or penalties that exceed 2% of the amount prepaid.
Cosigner, means:
(a) a natural person who assumes liability for the obligation of a consumer without receiving goods, services, or money in return for the obligation, or, in the case of an open-end credit obligation, without receiving the contractual right to obtain extensions of credit under the account.
(b) Cosigner includes any person whose signature is requested as a condition to granting credit to a consumer, or as a condition for forbearance on collection of a consumer's obligation that is in default. The term does not include a spouse whose signature is required on a credit obligation to perfect a security interest pursuant to state law.
(c) A person who meets the definition in 209 CMR 40.02: Cosigner, is a Cosigner whether or not the person is designated as such on the credit obligation.
Earnings, means compensation paid or payable to an individual or for the individual's account for personal services rendered or to be rendered by the individual, whether denominated as wages, salary, commission, bonus, or otherwise, including periodic payments pursuant to a pension, retirement, or disability program.
Federal Bank, means a national banking association, savings and loan association or savings bank which exists by authority of the United States.
Federal Branch, means a branch in the Commonwealth of any out-of-state federal bank.
Federal Credit Union, means a credit union organized under the provisions of the Federal Credit Union Act.
Financial Institution, means a bank, a federal bank, a Massachusetts branch, a federal branch, an out-of-state branch, or a federal credit union.
High Cost Home Loan or High Cost Mortgage, means:
(a) a consumer credit transaction that is secured by the consumer's principal dwelling, and in which:
1. a. The annual percentage rate at consummation will exceed by more than eight percentage points for first-lien loans, or by more than nine percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the lender;
b. When calculating the annual percentage rate for adjustable rate loans, the lender shall use the interest rate that would be effective once the introductory rate has expired;
2. Excluding either a conventional prepayment penalty or up to two bona fide discount points, the total points and fees payable by the consumer at or before loan closing will exceed the greater of 5% of the total loan amount or $400; the $400 figure shall be adjusted annually by the Commissioner on January 1st by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1st; or
3. The annual percentage rate, points and fees, and or penalties exceed the limitations as described pursuant to 12 CFR 1026.32(a)(1).
(b) a High Cost Home Loan does not include the following:
1. a reverse-mortgage transaction subject to 209 CMR 32.33: Requirements for Reverse Mortgages or 12 CFR 1026.33.
2. an unsecured open-end credit plan subject to 209 CMR 32.00: Truth in Lending or Subpart B of 12 CFR 1026.00.
Lender, means a person that originated five or more home mortgage loans within the past 12 month period or acted as an intermediary between originators and borrowers on five or more home mortgage loans within the past 12 month period, provided that lender shall not include a person who is an attorney providing legal services in association with the closing of a home loan who is not also funding the home loan and is not an affiliate of the lender. For purposes of 209 CMR 40.00, lender shall include broker and financial institution.
Massachusetts Bank, means any bank, other than an association or corporation chartered pursuant to M.G.L. c. 171.
Massachusetts Branch, means a branch in the Commonwealth of any out-of-state bank.
Obligation, means an agreement between a consumer and a lender.
Obligor, means a borrower, co-borrower, cosigner, or guarantor obligated to repay a home mortgage loan.
Out-of-state Bank, means any association or corporation authorized to do a banking business the main office of which is located outside the Commonwealth and which exists by authority of any state of the United States other than the Commonwealth.
Out-of-state Branch, means a branch of any Massachusetts bank located outside the Commonwealth.
Out-of-state Federal Bank, means a national banking association, savings and loan association or savings bank which exists by authority of the United States the main office of which is located outside the Commonwealth.
Person, means an individual, corporation, or other business organization.
Points and Fees, means:
(a) For closed end loans:
1. all items required to be disclosed under 12 CFR 1026.4(a) and 1026.4(b) or 209 CMR 32.04, except interest or the time-price differential;
2. charges for items listed under 12 CFR 1026.4(c)(7) or 209 CMR 32.04: Finance Charges (other than amounts held for future payment of taxes) unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor;
3. the maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents;
4. all prepayment fees or penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same lender;
5. all compensation paid directly or indirectly to a mortgage broker, not otherwise included in 209 CMR 40.02: Points and Fees (a)1. and 2.;
6. the cost of all premiums financed by the lender, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the lender directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the lender; and
7. Points and fees shall not include the following:
a. taxes, filing fees, recording and other charges and fees paid to or to be paid to a public official for determining the existence of or for perfecting, releasing or satisfying a security interest; and b. fees paid to a person other than a lender or to the mortgage broker for the following: fees for flood certification; fees for pest infestation; fees for flood determination; appraisal fees; fees for inspections performed before closing; credit reports; surveys; notary fees; escrow charges so long as not otherwise included under 209 CMR 40.02: Points and Fees (a)1.; title insurance premiums; and fire insurance and flood insurance premiums, including homeowner insurance premiums, if the conditions in 12 CFR 1026.4(d)(2) or 209 CMR 32.04: Finance Charges are met.
(b) For open-end loans, the points and fees shall be calculated by adding the total points and fees included within 209 CMR 40.02: Points and Fees (a)1., plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.
Total Loan Amount, means the total amount the consumer will borrow, as reflected by the face amount of the note.
