Pursuant to our yearly audit of state-specific disclosures, we will be creating four new disclosures, making minor edits to thirteen existing ones, and changing the configurations to eight of them.
New Document: MA Additional Broker Fee Authorization (Cx18932)
Mass. Regs. Code tit. 94,0 § 8.06(4) stipulates the following:
“It is an unfair or deceptive act or practice for a mortgage broker or lender to engage the services of (another) mortgage broker that will charge the borrower an additional fee without obtaining in advance the written permission of the borrower to charge that fee, the amount of which shall be specified in writing.”
To accommodate such situations, we are creating a new “MA Additional Broker Fee Authorization” disclosure (Cx18932), in which the borrower authorizes the client to engage the services of another mortgage broker. The document also discloses the amount of the other mortgage broker’s fee (Field 41974) and that the borrower agrees to pay this fee either at closing or, if closing fails to occur due to the borrower’s fault, then within 90 days of the date of the disclosure.
Since the regulation’s stipulations apply to both brokers and lenders, the text of the document will slightly vary based on whether a client is acting as a broker or as a lender in the transaction. Due to the rarity of the situations where a broker or lender would be initiating the engagement of another broker, this document will be available upon request.
New Document: MA Conflict of Interest Disclosure (Cx18933)
Mass. Regs. Code tit. 940, § 8.06(17) also stipulates the following:
“It is an unfair or deceptive act or practice for a mortgage broker to process, make or arrange a loan that is not in the borrower’s interest. Where the financial interest of a mortgage broker conflicts with the interests of the borrower (for example, where the broker’s compensation will increase directly or indirectly if the borrower obtains a loan with higher interest rates, increased charges or less favorable terms than those for which a borrower would otherwise qualify), the broker shall disclose the conflict and shall not proceed to process, make or arrange the loan so long as such a conflict exists. It is an unfair or deceptive act or practice for a mortgage broker to disclaim the duty established by 940 CMR 8.06(17) in a written contract or to assert in oral representations that a broker does not have such a duty in communications with the borrower.”
We will provide Cx18933 for this requirement, the contents of which simply inform the borrower that the broker has one or more financial interests which conflict with the borrower’s interest. A description of the conflict should be disclosed in Field 40130 (Conflict of Interest Description). This document is available upon request.
New Document: MA Commitment Agreement (Cx18934)
We are providing Cx18934 due to the following requirements under Mass. Gen. Laws Ann. ch. 167F, § 2A(b)(4)(iii):
“In the instance of an application to a bank for an extension of credit to be secured by a mortgage on real estate and in which it is necessary for the applicant to obtain a policy insuring said premiums against loss and designating such bank as loss payee, (i) said bank shall make the initial disclosure of the necessity of such insurance in its letter of commitment to the applicant approving the requested extension of credit; (ii) such bank shall not, in any manner, solicit the applicant to purchase the required insurance from the bank until said commitment has been accepted by the applicant; and (iii) such bank shall not reject any such policy, so long as it satisfies the required insurance, because the policy was issued by a company other than that for which the bank acts as agent in the sale of insurance products.”
Cx18934 matches most of the other commitment agreements we have made over the past year for various states. A distinguishing feature, however, is that the last paragraph informs the borrower that they are required to obtain property insurance, in which the lender is designated as the loss payee. It then informs the borrower that they may obtain such insurance policy through an insurer of their choice, subject to the lender’s requirements (as permitted by law).
Since the disclosure requirements under Ibid. only apply to banks, this document will only be available upon request.
New Document: MA Insurance Disclosure (Credit Unions) (Cx18935)
This document is being provided due to the following provisions:
“A credit union, through its licensed insurance agents or brokers, shall disclose in writing to a member who is a potential insurance purchaser that: (i) the insurance products which are available are not deposits of the credit union, are not protected by the national credit union share insurance fund or any other type of deposit insurance, are not an obligation of or guaranteed by the credit union, and may be subject to risk; (ii) any insurance required as a condition of the extension of credit by the credit union need not be purchased from the credit union but may, without affecting the approval of the application for an extension of credit, be purchased from an agent or insurance company of the member’s choice; and (iii) the member may file any complaints with the office of consumer affairs and business regulations as hereinafter provided. The disclosures required by this section shall be provided in writing, and receipt thereof shall be acknowledged in writing by the member.” (Mass. Gen. Laws Ann. ch. 171, § 75B[b][6])
“(a) Disclosure Contents. A credit union, through its licensed insurance producers, shall disclose in writing to a potential insurance customer that:
1. the insurance products which are available are not deposits of the credit union, are not protected by the national credit union share insurance fund or any other type of deposit insurance, are not an obligation of or guaranteed by the credit union, and may be subject to risk;
2. any insurance required as a condition of the extension of credit by the credit union need not be purchased from the credit union but may, without affecting the approval of the application for an extension of credit, be purchased from an agent or insurance company of the customer’s choice; and
3. the customer may file any complaints with the Office of Consumer Affairs, as provided in 209 CMR 49.06A(10).
(b) Disclosure Form. The disclosures required by 209 CMR 49.06A(7)(a) shall be provided in writing and receipt thereof shall be acknowledged in writing by the customer.” (Mass. Regs. Code tit. 209, § 49.06A[7])
Cx18935 is very similar to Cx16146 (MA Insurance Disclosure), with some exceptions (particularly where the document refers to the National Credit Union Share Insurance Fund, rather than the Federal Deposit Insurance Corporation). Since this document is only required to be provided by credit unions who sell insurance products, this document will be available upon request.
Document Edits
Most of the edits to the following documents are minor in nature, being made to correct grammar, spelling, punctuation, or legal citations, or to make the language of the forms more closely match that of the laws requiring such forms:
- MA Certification and Indemnification Agreement (Cx1024)
- MA High Cost Loan Application Disclosure (Cx3742)
- MA High Cost Loan Insurance Disclosure (Cx3745)
- MA High Cost Loan Payment Disclosure (Cx3746)
- Anti-Coercion Insurance Disclosure (Cx3750; Massachusetts version)
- MA Mortgage Review Board Notice (Cx3852)
- MA Borrower’s Interest Worksheet (Cx5771)
- MA No Doc/Limited Doc Disclosure (Cx13093)
- MA Counseling Disclosure (Cx13391)
- MA Mortgage Loan Rate Lock Commitment (Cx13544)
- MA High Cost Home Loan Disclosure (Cx14937)
- MA Certification of Carbon Monoxide Detector (Cx15578)
- MA Insurance Disclosure (Cx16146)
More substantive edits include the following:
- Changing the first paragraph of Cx3745 by replacing the selections of whether the loan contains certain credit insurances to stating that the loan contains such insurances. This is being done in conjunction with the configuration changes to this document, described below.
- Spacing the four itemized disclosure on Cx14937 and configuring the text to print in 12-point type. An introductory paragraph will also be added to the form.
- Additional text will be added to Cx13544 to clarify that the rate lock commitment fee may or may not be refundable should the loan fail to close by the rate lock expiration date, as well as clarifying that the rate lock terms are effective from the date of the agreement to the rate lock expiration date.
Configuration Changes
The configurations for the following documents will be changed:
- MA Lead Paint Indemnification Agreement (Cx1283)
- Loan Purpose = Purchase
- Under Mass. Gen. Laws Ann. ch. 111, § 197A, lead-based paint notification requirements are applicable to sellers, so this document is only necessary in connection with purchase transactions.
- Loan Purpose = Purchase
- MA addendum to Uniform Residential Loan Application (Cx3573)
- Occupancy = Owner-occupied
- This disclosure is required to be provided in connection with a mortgage loan, which is defined to mean a loan secured by 1-to-4 residential property which is occupied by the borrower (see Ibid. ch. 184, § 17B; Mass. Regs. Code tit. 209, § 42.02)
- Occupancy = Owner-occupied
- MA High Cost Loan Insurance Disclosure (Cx3745)
- Credit Life Insurance = Yes
- Credit Life, Accident and Health and Unemployment Insurance = Yes
- This disclosure is only required where a high cost home loan is “packed” with credit life, accident and health, disability or unemployment insurance products (Mass. Regs. Code tit. 209, § 32.34[2][b])
- MA Loan Origination and Compensation Agreement (Cx5112)
- HELOC = Allow Any
- This document is required to be provided in connection with a “residential mortgage loan,” the definition of which does not exclude HELOCs (see Ibid. § 42.02)
- Lender is a Broker? = Yes
- This document is also only required to be provided by a “mortgage broker” and not by a “mortgage lender” (see Ibid.)
- HELOC = Allow Any
- MA Borrower’s Interest Worksheet (Cx5771)
- HELOC = Allow Any
- Required to be provided in connection with a home loan which refinances another home loan, but there are no exemptions which would exclude HELOCs (see Mass. Gen. Laws Ann. ch. 183, § 28C[a] and Mass. Regs. Code tit. 209, §§ 53.02 & 53.03)
- HELOC = Allow Any
- MA No Doc/Limited Doc Disclosure (Cx13093)
- HELOC = No
- Specifically excluded from the provisions of 940 CMR 8.00 are open-end home equity lines of credit (see Ibid. tit. 940, § 8.02)
- HELOC = No
- MA Counseling Disclosure (Cx13391)
- Document Package = Initial Disclosure or Closing
- Out of necessity, required to be provided “at or before closing” (see Mass. Gen. Laws Ann. tit. 184, § 17B½)
- Occupancy = Owner-occupied
- Requirements only apply to a mortgage on owner-occupied residential property (see Ibid.)
- Document Package = Initial Disclosure or Closing
- MA High Cost Home Loan Disclosure (Cx14937)
- Lender is a Broker? = No
- Specifically excluded from providing this document are brokers (see Mass. Regs. Code tit. 209, § 32.32[2][e] & [3])
- Lender is a Broker? = No
These changes will take effect on October 29, 2014. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
October 21, 2014
DR 129219