Current through Register 1531, September 27, 2024
(1)
(a) Prior to entering into or issuing
interest rate lock commitments to any mortgage loan applicant or any other
mortgage lender, except as described in 209 CMR 42.11A(2)(a), a mortgage lender
shall have and maintain a net worth, as defined by
209 CMR 42.02 of not
less than $500,000 and shall be approved to sell mortgages directly to the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Government National Mortgage Association or to an
institutional investor as approved by the Commissioner.
(b) A mortgage lender under 209 CMR
42.11A(1)(a), shall maintain a total net worth of at least 2% of the total
dollar amount of pending loans for which it has issued rate lock commitments to
a mortgage loan applicant or another mortgage lender at any one time, and which
are not covered by a binding commitment for the sale of the mortgage loans in
the secondary mortgage market. The portion of pending rate locked loans that
are deemed to be covered are those loans which can be sold under an existing
commitment from a mortgage lender or investor who is authorized to issue
interest rate lock commitments under 209 CMR 42.11A(1)(a).
(c) For the purpose of 209 CMR 42.11A(1), the
term "net worth" shall be defined as in
209 CMR 42.02 and
shall exclude real property and fixed assets and shall require the value of
mortgage loans held for sale and mortgage loan commitments entered into by the
licensee to be adjusted to their fair market value according to generally
accepted accounting principles for mark-to-market valuations.
(2)
(a) Any mortgage lender who fails to meet the
requirements of 209 CMR 42.11A(1) is prohibited from entering into or issuing
an interest rate lock commitment to any mortgage loan applicant or any other
mortgage lender without having in place, in writing, a binding interest rate
guarantee or takeout commitment from an outside investor, bank or a mortgage
lender or investor, who is authorized to issue interest rate lock commitments
under 209 CMR 42.11A(1).
(b) A
mortgage lender, issuing rate lock commitments under 209 CMR 42.11A(2)(a),
shall immediately obtain another binding interest rate guarantee or takeout
commitment from a mortgage lender or investor who is authorized to issue
interest rate lock commitments under 209 CMR 42.11A(1), if said rate guarantee
or commitment expires at no fault of a mortgage loan applicant or his or her
agents.
(c) A mortgage lender
issuing rate lock commitments under 209 CMR 42.11A(2)(a) shall immediately, and
in writing within one business day, notify the Commissioner of the expiration
of a binding interest rate guarantee or takeout commitment under 209 CMR
42.11A(2)(b).
(3) The
provisions of 209 CMR 42.11A(1)(a) and (2)(a) shall not apply to interest rate
lock commitments entered into or issued in connection with mortgage loans which
are to be held for investment purposes only and are not to be sold or held for
less than six months for sale into the secondary mortgage market or to other
investors.
(4)
Required
Disclosures and Notices. Prior to taking of a rate lock commitment
fee or otherwise offering or entering a mortgage loan rate lock commitment with
a consumer, a mortgage lender must provide the consumer, directly or
indirectly, with a mortgage loan rate lock commitment dated by the mortgage
lender which incorporates the following information:
(a) Identification of property, principal
amount and term of loan, locked interest rate, and rate lock commitment
fees.
(b) The length of the lock-in
period, which must be a time period within which the lender can reasonably
expect to close the loan given the prevailing market conditions at time of
lock-in; and the consequence of failing to close the loan within the lock-in
period. This shall not prevent the parties from locking-in a rate that was in
effect before the mortgage loan rate lock commitment was issued by the mortgage
lender, provided that such rate shall not be higher than the rate that would
otherwise be locked-in in the mortgage loan rate lock commitment.
(c) Whether the rate lock commitment fee is
refundable, and the terms and conditions necessary to obtain the
refund.
(5) A violation
of 209 CMR 42.11A shall constitute grounds for the issuance of a cease and
desist order under M.G.L. c. 255E, § 7 and shall constitute grounds for
license suspension or revocation under M.G.L. c. 255E, § 6.
