209 CMR, § 42.11 - Client Funds Account

(1) All fees paid by clients or residential mortgage loan applicants, to a licensed mortgage lender or mortgage broker, shall be deposited in one or more client funds accounts maintained at a federally insured bank. Said fees shall include, but not be limited to, application fees, rate-lock commitment fees, prepaid commissions or broker fees, prepaid attorney charges, and all other prepaid fees related to the mortgage loan transaction. Said account(s) shall contain only those funds collected from such clients or residential mortgage loan applicants.

(2) Each client funds account shall be titled "trust account", "client funds account", "clients' trust account", "escrow account", or other similar name that will evidence the fiduciary nature of the account.

(3) For each client funds account opened, the Licensee must provide a written notice to the bank explaining the fiduciary nature of the account and that the account is for the purpose of holding client funds. The Licensee shall obtain written acknowledgment of receipt of the notice from a duly authorized representative of the bank.

(4) Such Licensee may offset funds in the client funds account(s) against commissions to which it is entitled for services actually performed or for reimbursement for authorized fees paid directly to third parties. A Licensee is deemed to have performed when:

(a) a residential mortgage loan has closed;

(b) the client or mortgage loan applicant has withdrawn the loan application in writing; or

(c) a loan has been denied.

All offsets shall be accounted for through written documentation evidencing the amount of offset.

(5) The Licensee shall maintain complete and accurate client funds account records. The Licensee shall produce, upon request, all documents pertaining to client funds account activity including, but not limited to: bank statements, check stubs, cancelled, voided or unused checks, deposit tickets, and reconciliations or other comparable account records.

(6) The Licensee shall reconcile the client funds account records at least once per month.

(7) No person licensed as a mortgage lender or mortgage broker shall commingle money collected for fees from clients with its own funds or use any part of a client's money in the conduct of the Licensee's business.

(8) A Licensee shall notify the Commissioner immediately of any shortage or improper or unauthorized offset to a client funds account.

(9) A violation of 209 CMR 42.11 shall constitute grounds for license suspension or revocation under M.G.L. c. 255E, § 6.

Notes

209 CMR, § 42.11

Amended by Mass Register Issue 1320, eff. 8/26/2016. Amended by Mass Register Issue 1470, eff. 5/27/2022.