Massachusetts Regulatory Update

Massachusetts Regulatory Update

The Massachusetts Division of Banks and Loan Agencies (the “Division”) has amended Chapters 41 and 42 of their regulations, which affect mortgage loan originators, and mortgage lenders and brokers.  The regulations were effective August 26, 2016.

 

209 CMR 41.00 MORTGAGE LOAN ORIGINATORS

 

The definition of NMLS now means the Nationwide Multi-State Licensing System & Registry (previously Nationwide Mortgage Licensing System and Registry), a multistate licensing system owned and operated by the State Regulatory Registry LLC (SRR), a wholly owned subsidiary of the Conference of State Bank Supervisors (CSBS), an association of state financial services regulators.

 

The submission of an application for a mortgage loan originator license currently requires evidence of a surety bond in form and amount as determined by the Massachusetts Commissioner of Banks (“Commissioner”).  The surety bond of the employing entity may now be used to satisfy the mortgage loan originator applicant’s surety bond requirement.

 

The written examination that is required for an applicant no longer must include a national component and a Massachusetts component.  If an applicant fails 3 consecutive attempts at the written examination, he/she will not be eligible to take another written examination for a least 6 months.

 

When an employing entity terminates the relationship with a mortgage loan originator, it is now required to notify the Division within 5 days by submitting a statement of reasons for the termination through the NMLS.  The amendment allows the employing entity to submit the statement in writing directly to the Division if it is unable to submit through the NMLS.

 

A mortgage loan originator license that has been in an inactive status for over 1 year shall be cancelled.

 

Prohibited acts and practices now includes failure of a mortgage loan originator to maintain accurate and up-to-date information in his/her NMLS license record.

 

209 CMR 42.00 MORTGAGE LENDERS AND BROKERS

 

The definition of NMLS now means the Nationwide Multi-State Licensing System & Registry (previously Nationwide Mortgage Licensing System and Registry), a multistate licensing system owned and operated by the SRR, a wholly owned subsidiary of the CSBS, an association of state financial services regulators.

 

Non-bank Affiliate means an affiliate that is not a savings bank, a co-operative bank, a trust company, a federal bank, an out-of-state bank, or an out-of-state federal bank.   Non-bank Subsidiary means a subsidiary that is not one of the foregoing listed entities.

 

The application for a license as a mortgage lender and a license as a mortgage broker each must be submitted through the NMLS (previously in written form).  An applicant must submit financial statements, which, in addition to those already listed in the regulation, include a Statement of Changes in Stockholders’ Equity.  If the applicant’s audited or reviewed financial statements are consolidated, the applicant must include supplemental statements for each of the consolidated entities.

 

A non-bank subsidiary or non-bank affiliate of a bank, trust company, savings bank, savings and loan association, credit union or insurance company are subject to the mortgage broker and mortgage lender licensing requirements.

 

Each licensee must keep its books records and accounts in a manner which allows the Commissioner to determine compliance with state and federal laws and regulations.   Each mortgage lender required to be licensed must retain for a minimum of 3 years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever occurs first, copies of the following:

  • Mortgage loan application(s);
  • All required mortgage disclosures;
  • Note;
  • Closing documents;
  • Rate lock commitment(s);
  • Results of any automated underwriting submissions;
  • Correspondences, including electronic communications;
  • Papers or records relating to the loan; and
  • Such other documents as the Commissioner may require.

 

Each mortgage broker required to be licensed must retain for a minimum of 3 years after a mortgage loan is made copies of the following:

  • Mortgage loan application(s);
  • All required mortgage disclosures whether provided by the broker or the lender;
  • Note;
  • Closing documents;
  • Rate lock commitment(s);
  • Results of any automated underwriting submissions;
  • Correspondence including electronic communications;
  • Accounts of fees received in connection with the loan;
  • Paper or records relating to the loan; and
  • Such other documents as the Commissioner may require.

 

For each mortgage loan application taken by a licensee that does not result in a closed loan (including, but not limited to, denied, withdrawn and abandoned applications), the licensee shall retain all applicable books and records (as set forth above) for a minimum of 3 years after the date the loan application is taken or the date that the licensee makes a credit decision, whichever is later.

 

Annual reports are due to the Commissioner on or before a date determined by the Commissioner (previously by March 31 of each year).

 

All fees paid by clients or residential mortgage loan applicants to a licensee must be deposited in one or more client funds accounts (previously, trust accounts) maintained at a federally insured bank.  Each client funds account must be titled as follows:

  • Trust account;
  • Client funds account;
  • Clients’ trust account;
  • Escrow account; or
  • Other similar name that evidences the fiduciary nature of the account.

 

For each client funds account opened, the licensee must provide a written notice to the bank explaining the fiduciary nature of the account and that the account is for the purpose of holding client funds.  The licensee must obtain written acknowledgment of receipt of the notice from a duly authorized representative of the bank.  The licensee must reconcile the client funds account records at least once per month.

 

A licensee must notify the Commissioner immediately in writing within 1 business day of the occurrence of certain listed significant developments; in addition to those already listed, the licensee must send notification if the licensee, its owner(s), officer(s), director(s) or employee(s) are being charged with a criminal offense that is in any way related to the mortgage lender or broker activities of a licensee.

 

The loan origination and compensation agreement that includes signatures and dates by both the consumer and the mortgage broker is no longer required.

 

A licensee who intends to carry on its business at any location in addition to the address on its original license must file for a branch license through the NMLS at least 30 days prior to the opening of the branch location.  Licensees must provide the notice through the NMLS regarding relocations and closings of a Massachusetts location.   Previously, these notices were provided to the Commissioner.

 

The requirement to post licenses in the place of business has been deleted.  Also, temporary licenses are no longer offered by the Commissioner.