Massachusetts Clarifies 'Borrower's Interest'

The Massachusetts Division of Banks has issued final regulations to clarify the implementation of the controversial "borrower's interest" standard, according to the Massachusetts Mortgage Bankers Association.The final regulations revise emergency regulations issued on Nov. 8, 2004. "The final regulations, in our opinion, look good," said Kevin Cuff, president of the MMBA. "They address most questions people had with regard to how to oversee or manage them." The regulations clarify that the prohibition on refinancing a home loan applies to loans consummated within 60 months prior to the lender's receipt of an application for a new home loan. Safe harbors on determining borrower's interest are revised by increasing the APR threshold from 2.25% to 2.5% for first-lien closed-end loans and from 3.25% to 3.5% for subordinate-lien closed-end loans. A new safe harbor is added -- if the borrower is able to recoup the costs of refinancing the home loan within two years, and the interest rate on the new home loan is reduced without increasing the amortization period. Under the regulations, a lender cannot shift the burden to the borrower to demonstrate that the new loan is in the borrower's interest or require a borrower to sign a waiver of future claims from a violation of the borrower's-interest standard.