Mortgage Loan Rate Lock Commitments

(1)(a) Prior to entering into or issuing interest rate lock commitments to any mortgage loan applicant or any other mortgage lender, except as described in 209 CMR 42.11A(2)(a), a mortgage lender shall have and maintain a net worth, as defined by 209 CMR 42.02 of not less than $ 500,000 and shall be approved to sell mortgages directly to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association or to an institutional investor as approved by the Commissioner. (b) A mortgage lender under 209 CMR 42.11A(1)(a), shall maintain a total net worth of at least 2% of the total dollar amount of pending loans for which it has issued rate lock commitments to a mortgage loan applicant or another mortgage lender at any one time, and which are not covered by a binding commitment for the sale of the mortgage loans in the secondary mortgage market. The portion of pending rate locked loans that are deemed to be covered are those loans which can be sold under an existing commitment from a mortgage lender or investor who is authorized to issue interest rate lock commitments under 209 CMR 42.11A(1)(a). (c) For the purpose of 209 CMR 42.11A(1), the term "net worth" shall be defined as in 209 CMR 42.02 and shall exclude real property and fixed assets and shall require the value of mortgage loans held for sale and mortgage loan commitments entered into by the licensee to be adjusted to their fair market value according to generally accepted accounting principles for mark-to-market valuations. (2)(a) Any mortgage lender who fails to meet the requirements of 209 CMR 42.11(A)(1) is prohibited from entering into or issuing an interest rate lock commitment to any mortgage loan applicant or any other mortgage lender without having in place, in writing, a binding interest rate guarantee or takeout commitment from an outside investor, bank or a mortgage lender or investor, who is authorized to issue interest rate lock commitments under 209 CMR 42.11A(1). (b) A mortgage lender, issuing rate lock commitments under 209 CMR 42.11A(2)(a), shall immediately obtain another binding interest rate guarantee or takeout commitment from a mortgage lender or investor who is authorized to issue interest rate lock commitments under 209 CMR 42.11A(1), if said rate guarantee or commitment expires at no fault of a mortgage loan applicant or his or her agents. (c) A mortgage lender issuing rate lock commitments under 209 CMR 42.11A(2)(a) shall immediately, and in writing within one business day, notify the Commissioner of the expiration of a binding interest rate guarantee or takeout commitment under 209 CMR 42.11A(2)(b). (3) The provisions of 209 CMR 42.11A(1)(a) and 209 CMR 42.11A(2)(a) shall not apply to interest rate lock commitments entered into or issued in connection with mortgage loans which are to be held for investment purposes only and are not to be sold or held for less than six months for sale into the secondary mortgage market or to other investors. (4) Required Disclosures and Notices. Prior to taking of a rate lock commitment fee or otherwise offering or entering a mortgage loan rate lock commitment with a consumer, a mortgage lender must provide the consumer, directly or indirectly, with a mortgage loan rate lock commitment dated by the mortgage lender which incorporates the following information: (a) Identification of property, principal amount and term of loan, locked interest rate, and rate lock commitment fees. (b) The length of the lock-in period, which must be a time period within which the lender can reasonably expect to close the loan given the prevailing market conditions at time of lock-in; and the consequence of failing to close the loan within the lock-in period. This shall not prevent the parties from locking-in a rate that was in effect before the mortgage loan rate lock commitment was issued by the mortgage lender, provided that such rate shall not be higher than the rate that would otherwise be locked-in in the mortgage loan rate lock commitment. (c) Whether the rate lock commitment fee is refundable, and the terms and conditions necessary to obtain the refund. (5) A violation of 209 CMR 42.11A shall constitute grounds for the issuance of a cease and desist order under M.G.L. c. 255E, § 7 and shall constitute grounds for license suspension or revocation under M.G.L. c. 255E, § 6.