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

Current through Register 1525, July 5, 2024
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 Charge
s 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.