02-030 C.M.R. ch. 550, § 5 - General Provisions

1. A creditor may not knowingly or intentionally engage in the act or practice of "flipping" a residential mortgage loan when making a high-cost mortgage loan or higher-priced mortgage loan.

2. The factors to be considered by a creditor in determining if a borrower receives a reasonable, tangible net benefit must include, but are not limited to, the following:

A. Whether the borrower's new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees as disclosed on the HUD settlement statement, if one is used;

(1) If the new or old residential mortgage loan is not a conventional fixed rate residential mortgage loan, the borrower's monthly payment is the payment that fully amortizes the loan at the fully indexed rate. For open-end credit loans, the new monthly payment must be based on the amount drawn by the borrower at the time the new residential mortgage loan is made;

(2) In determining whether or not the borrower's new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees as disclosed on the HUD settlement statement, if one is used, the time for recouping the costs and fees as disclosed in the HUD settlement statement, if one is used, shall be calculated over a period of three (3) years and this amount shall be added to the borrower's new monthly payment. The costs and fees as disclosed on the HUD settlement statement, if one is used, shall include all costs and fees, whether or not they are incorporated into and financed through the new residential mortgage loan(s);

B. Whether there is a change that is beneficial to the borrower in the amortization period of the new high-cost mortgage loan or higher-priced mortgage loan;

C. Whether the borrower, or a person designated by the borrower, receives a reasonable amount of cash in excess of the costs and fees paid by the borrower as disclosed on the HUD settlement statement, if one is used, as part of the refinancing. The costs and fees paid by the borrower as disclosed on the HUD settlement statement, if one is used, shall include all costs and fees, whether or not they are incorporated into and financed through the new high-cost mortgage loan or higher-priced mortgage loan;

D. Whether the borrower's rate of interest is reduced or, in the event that more than one loan is being refinanced, the weighted average of the rates of interest of the previous loans is reduced;

E. Whether there is a change from an adjustable to a fixed rate loan; and

F. Whether the refinancing is necessary to respond to a bona fide personal need, as reasonably determined by the borrower, or an order of a court of competent jurisdiction.

While all the factors set forth above must be considered, some may not show that the borrower is receiving a reasonable, tangible net benefit. There may be circumstances in which only one factor is sufficient to provide the borrower with a reasonable, tangible net benefit, considering all the circumstances.

3. A creditor shall provide the borrower with a written disclosure conspicuously stating the name, address, and telephone number of the creditor; briefly describing the new high-cost mortgage loan or higher-priced mortgage loan; and identifying the factors considered by the creditor in determining whether the borrower is receiving a reasonable, tangible net benefit from the new high-cost mortgage loan or higher-priced mortgage loan. The form must be signed and dated by both the creditor and the borrower. A disclosure in the same form as found in Attachment "A" complies with this subsection as does a form that otherwise meets the requirements of this subsection.

4. The creditor shall explain its reasonable, tangible net benefit analysis to the borrower, and shall present the reasonable, tangible net benefit form to the borrower for signing, prior to or upon making the new high-cost mortgage loan or higher-priced mortgage loan.

5. Once the reasonable, tangible net benefit form has been duly completed and signed by the creditor and the borrower, the creditor shall immediately provide a copy of the form to the borrower.

6. A duly completed and signed form that reflects a reasonable, tangible net benefit is evidence of compliance with this subsection.

Notes

02-030 C.M.R. ch. 550, § 5