Bankers Threads
Click to return to BOL home page

Learn more about

MEMBERS


















Have a Question?
Looking for a
Product or
Service?

Our Vendor
Advisory Board








Topic Options
#276550 - 11/18/04 10:30 AM New Mass law/Prepayment penalties
P*Q Offline

Power Poster

Registered: 05/29/01
Posts: 7339
Loc: By the ocean
I'm thoroughly confused about when we can charge a prepayment penalty and the maximum. For our equity lines or credit, can we still charge a prepayment penalty and how much can we charge. Our notes currently state that any line closed within first 36 months and where we have a 2nd or higher lien position, we will impose a prepay fee of 1% of the credit line. Please help, thanks!

Top
#276551 - 11/18/04 12:27 PM Re: New Mass law/Prepayment penalties
renniks Offline
Diamond Poster

Registered: 09/19/03
Posts: 2111
Loc: New England
Pam, I just read Section 56 of Chapter 183 and I think it is the most confusing thing I have ever read. I was hoping to be able to help interpret it but I don't think I can!! I am so happy to be part of a national bank...these state predatory lending reg's do not apply to us!!! Good luck!

Top
#276552 - 11/18/04 01:58 PM Re: New Mass law/Prepayment penalties
P*Q Offline

Power Poster

Registered: 05/29/01
Posts: 7339
Loc: By the ocean
Are you sure Sue? The reason I say that is while participating in the Mass Bankers teleconference about this new law, it was stated that this new predatory lending law applies to any company doing business in Mass, whether state chartered, national bank, mortgage company, etc. I could've misunderstood but just wanted to tell you what was said.

Top
#276553 - 11/18/04 02:34 PM Re: New Mass law/Prepayment penalties
John Burnett Online
10K Club

Registered: 10/27/00
Posts: 30292
Loc: Cape Cod
Whether or not the state law will apply to a national bank or federal savings association is a matter that will keep the attorneys busy (and billing) for a long time, I think. I'll stay out of that controversy.

As for Pam's initial question, I think the 11/5 "Industry Advisory Letter" at http://mass.gov/dob/mlprepay.htm provides an answer. It's buried in the last two paragraphs, and I read it to say "No worries." It appears that early closing fees are not considered prepayment penalties by the Commissioner.
_________________________
John S Burnett
BankersOnline.com

Top
#276554 - 11/18/04 04:01 PM Re: New Mass law/Prepayment penalties
renniks Offline
Diamond Poster

Registered: 09/19/03
Posts: 2111
Loc: New England
At the EMCN Annual Meeting, a well known attorney (I don't want to use her name here), said that if you were a national bank or federally chartered, you did not have to worry about this law. I do know that the OCC Preemption has stood up to at least two court cases brought by states so far.

Top
#276555 - 11/19/04 09:47 AM Re: New Mass law/Prepayment penalties
KAT Offline
Platinum Poster

Registered: 08/11/04
Posts: 986
Loc: Massachusetts
I also attended the EMCN meeting and agree that OCC banks do not have to follow the law. The attorney giving this information is a well respected attorney in the banking field and I have not known her to be wrong when she makes a statement like this.

Top
#276556 - 11/19/04 11:04 AM Re: New Mass law/Prepayment penalties
P*Q Offline

Power Poster

Registered: 05/29/01
Posts: 7339
Loc: By the ocean
I would look for clarification guys. The info I have from the Mass Bankers seminar and law firm who gave us the info states the definition of a "lender" is "an entity that originated, or acted as an intermediary between originators and borrowers, on 5 or more home mortgage loans within the past 12 month period". It goes on to say that the act applies to "all lenders", doesn't state national banks are exempt. If you're a member of Mass Bankers, I'd suggest contacting Dave Floreen or Tanya Duncan.I hope I'm wrong but I just want to make sure you'll be all set. Although if you're not examined by the state, don't know how they'd find out anyway.


Edited by Pizzaz (11/19/04 11:08 AM)

Top
#276557 - 11/19/04 11:13 AM Re: New Mass law/Prepayment penalties
John Burnett Online
10K Club

Registered: 10/27/00
Posts: 30292
Loc: Cape Cod
I don't disagree that the Act says it applies to all lenders. Many states have laws that say they apply to all lenders. But when push comes to shove, the OCC (or OTS) wins in the turf battle. It's just too bad that people have to keep spending big bucks to argue this issue.
_________________________
John S Burnett
BankersOnline.com

Top
#276558 - 11/19/04 11:15 AM Re: New Mass law/Prepayment penalties
P*Q Offline

Power Poster

Registered: 05/29/01
Posts: 7339
Loc: By the ocean
Well that makes it quite unfair playing ground for us state chartered institutions, wouldn't you say John?

Top
#276559 - 11/19/04 11:52 AM Re: New Mass law/Prepayment penalties
John Burnett Online
10K Club

Registered: 10/27/00
Posts: 30292
Loc: Cape Cod
Yup. And you can add "18/65" freebies and return item chargeback fees and a lot of other pricing (and other) rules to the mix.
_________________________
John S Burnett
BankersOnline.com

Top
#276560 - 11/19/04 11:58 AM Re: New Mass law/Prepayment penalties
KAT Offline
Platinum Poster

Registered: 08/11/04
Posts: 986
Loc: Massachusetts
Even though we are OCC and exempt from a lot, we try to follow the MA regs as much as possible. Some of the regs from MA are better for the customer, timing, 18/65 etc. It does make life easier on these regs.

I have only be OCC for one year and it is more confusing than being state because there are some state regs that are required.

Those are difficult to find. OCC states the state doesn't look at you so don't worry about it. That's great until a customer complains

Top
#276561 - 07/07/05 06:08 PM Re: New Mass law/Prepayment penalties
Anonymous
Unregistered


I am trying to find where it states in the Mass law that their is no pre payment penalties anymore. Can you help me?

Top
#276562 - 07/08/05 03:30 PM Re: New Mass law/Prepayment penalties
John Burnett Online
10K Club

Registered: 10/27/00
Posts: 30292
Loc: Cape Cod
MGL Ch 183, 56. http://www.mass.gov/legis/laws/mgl/183-56.htm

And it does not ban prepayment penalties. It limits them.
_________________________
John S Burnett
BankersOnline.com

Top
#276563 - 07/08/05 04:11 PM Re: New Mass law/Prepayment penalties
P*Q Offline

Power Poster

Registered: 05/29/01
Posts: 7339
Loc: By the ocean
A lot of banks don't call them prepayment penalties anymore, but rather early termination fees for that reason. Make sense? No but what can you do.

Top
#276564 - 07/11/05 09:08 AM Re: New Mass law/Prepayment penalties
John Burnett Online
10K Club

Registered: 10/27/00
Posts: 30292
Loc: Cape Cod
Early termination fees on HELOCs escape the rule in 183/56. Of course, they still have to be properly disclosed. See DOB Opinion on Prepayment Penalties.
_________________________
John S Burnett
BankersOnline.com

Top


Moderator:  John Burnett