Under Massachusetts law, the following is proscribed:
“It is an unfair or deceptive act or practice for a mortgage broker or lender to accept any broker fee, application fee or other fee, prior to the borrower’s receipt of any disclosure forms mandated by 940 CMR 8.05(1). Where the applicable state or federal law specifies that the disclosure form must be provided to a consumer prior to the consummation of the mortgage loan. Notwithstanding the foregoing, an appraisal fee may be accepted if the lender or brokers provides oral or written notice, prior to the receipt of such fee, as to whether the fee is refundable.” (Mass. Regs. Code tit. 940, § 8.06)
The “disclosure forms” referenced are “any disclosure, or . . . any document . . . required by . . . any applicable state or federal law, regulation or directive.” (Ibid. § 8.05). Taken altogether, no broker fee, application fee, or “other fee” may be accepted by a lender or broker prior to the borrower’s receipt of “any” Federally- or State- required, pre-consummation disclosures.
There is, however, ambiguity surrounding the interpretation of these provisions. One interpretation is that a broker or lender may not accept any fees until the borrower has received “any” of the pre-consummation disclosures required by law. “Any”, in this context (and under this interpretation), is a pronoun indicating “one” of an undetermined quantity. Thus, so long as the borrower receives any one of such disclosures, the broker or lender may accept broker, application, and any “other” fees. A caveat is provided, as indicated by the preposition “notwithstanding”, which permits a lender or broker to accept an appraisal fee before “any” such disclosures are provided, so long as “oral or written notice” of whether the fee is refundable is provided beforehand.
Under this interpretation, as practical matter, it is not necessary to provide said “oral or written notice” because creditors and lenders are already prohibited from accepting an appraisal fee until the borrower has indicated an intent to proceed with a transaction – which indication may only occur after they have received the “Loan Estimate” or “Good Faith Estimate” (see 12 C.F.R. §§ 1024.7[a] & 1026.19[e][i][A] and 209 Mass. Code Regs. §§ 32.19 & 32.37). Once one of these disclosures is provided, however, the lender or broker has no need to exercise the caveat for the appraisal fee, since the base rule already permits them to collect an appraisal fee (“other fee”), since a Federally-required disclosure (which would disclose the appraisal fee) has already been provided to the borrower.
Another interpretation holds that the preposition “notwithstanding” is used to create a dichotomy, separating the base rule from a special rule used for appraisal fees. Thus, while the base rule regarding providing “any” pre-consummation disclosures required by law applies to broker, application, and “other” fees, an appraisal fee is not considered an “other” fee and it can never be accepted until the “oral or written notice” concerning whether the fee is refundable or not is provided beforehand.
These are just two interpretations and there are more (e.g., the “any” pronoun refers to an indeterminate number of indeterminate laws requiring disclosures, thus it refers to all pre-consummation disclosures; essentially, this means the broker and lender cannot collect any fees until all such disclosures are provided – including the “Closing Disclosure”).
In order to provide clients with a means to provide (if they so choose) a “written” notice of whether an appraisal fees is refundable or not, we will be editing our generic “Advanced Fee/Application Disclosure” (Cx2783) to print for Massachusetts’ loans upon a client’s request. Once requested, the following differences will appear in the document for Massachusetts:
- The title will be “Massachusetts Advanced Fee/Application Disclosure”; and
- The citation “Mass. Regs. Code tit. 940, § 8.06(3)” will appear at the end of the document.
These changes will be in effect immediately. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.