Massachusetts Counseling Disclosure

Massachusetts issued Regulatory Bulletin 1.3-104 clarifying recently enacted borrower counseling and opt-in requirements for subprime adjustable rate loans made to first-time homebuyers. The Bulletin sets the parameters for determining when an adjustable rate loan to a first-time homebuyer will be considered a subprime loan* and also requires lenders to obtain written certification of counseling prior to obtaining a homebuyer’s opt-in statement.

MA Counseling Disclosure, Cx 13391, was created to comply with the Regulatory Bulletin and the new section in Massachusetts General Laws Chapter 184, section 17B ½.  It will print in MA Initial Disclosure packages that are ARM or Neg-Am ARM. The buyer will check the document stating either that a) He/she is not a first time buyer; or b) If a first time homebuyer, he/she has received counseling and still opt into the loan.

* According to the Regulatory Bulletin, an adjustable or variable rate of interest made to a first time home loan borrower will be deemed to be a subprime mortgage loan:

1. For a first-lien mortgage loan if
 a.  The loan amount falls within the loan amount limits set forth by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") but fails to meet the federal agencies' underwriting guidelines; or

 b.  The loan amount exceeds the loan limits set forth by FNMA and FHLMC and the annual percentage rate (APR) is greater than two and one-half (2.5) percentage points above the yield on United States Treasury securities having comparable periods of 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 creditor.

2. For loans secured by a simultaneous second lien on residential property, if the APR for the simultaneous second lien is greater than five (5.0) percentage points above the yield on United States Treasury securities having comparable periods of 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 creditor.