Massachusetts MLO key terms

The state agency that licenses and examines mortgage loan originators, mortgage brokers, and mortgage lenders operating in Massachusetts. It enforces the state's consumer protection statutes and may suspend or revoke licenses for violations.

The single national record, maintained through the Nationwide Multistate Licensing System, where an originator's employment history, testing, education, criminal background, and license status are tracked. Massachusetts requires state licensing through this system before origination.

Federal standards for state-licensed mortgage loan originators: minimum age of 18, pre-licensing education, a passing national test score, a criminal background check, and ongoing annual continuing education. States may add stricter requirements on top of these minimums.

Coursework an applicant must complete before taking the licensing test, covering federal and state law, ethics, and loan origination practice. Massachusetts applicants must complete the required hours through an approved provider and document them in the licensing system.

Annual coursework a licensed originator must complete to renew, including required hours on federal law, ethics, and non-traditional lending. Massachusetts adds state-specific hours, and credit cannot be claimed twice for the same course in the same year.

The permanent number assigned to each licensed originator in the national licensing system. It must appear on loan documents and advertisements where required, allowing consumers and regulators to identify the individual who originated the loan.

The authorization a company needs to fund residential mortgage loans in Massachusetts. Lenders must maintain a physical office, meet net worth and surety requirements, and submit to examination by the Division of Banks.

State authorization to negotiate loan terms on behalf of borrowers for a fee without funding the loan from the broker's own funds. Brokers owe the borrower a duty of loyalty and must disclose compensation from both borrowers and lenders.

An individual who takes a residential mortgage loan application and offers or negotiates terms for compensation, and who holds an active Massachusetts license sponsored by a licensed lender or broker. Unlicensed origination is prohibited.

A federal rule barring originator pay from being based on loan terms such as interest rate or fees, and barring dual compensation from both the borrower and a lender on the same transaction. It also limits steering and requires written policies.

A written statement telling the borrower whether the originator is paid by the lender, the borrower, or both, and in what amount. Massachusetts and federal rules require the disclosure early enough for the borrower to compare options.

Directing a borrower toward a loan that is less favorable than one the borrower qualifies for, usually to increase the originator's compensation. It is prohibited when driven by the originator's financial interest rather than the borrower's benefit.

The duty to present loan options that are suitable for the borrower's stated goals and circumstances, not simply the most profitable product. It requires documenting the borrower's needs, comparing options, and retaining records of the recommendation.

A judgment that a loan's terms, payment structure, and costs fit the borrower's income, assets, and stated objectives. Originators gather documented information about the borrower's finances to support this judgment before recommending a product.

A federal requirement that lenders make a reasonable, good-faith determination that a borrower can repay a mortgage based on verified income, assets, debts, and other factors. It also defines qualified mortgages that receive legal protection.

A loan meeting defined federal standards, such as limits on points and fees, no risky features like negative amortization, and documented income. QM status gives the lender protection against certain borrower claims.

A calculation comparing certain loan charges, such as origination fees and discount points, with a percentage threshold of the loan amount. Crossing the threshold affects qualified mortgage status and triggers higher-priced mortgage protections.

A loan whose rate exceeds the average prime offer rate by a set margin. It triggers extra protections such as escrow requirements, appraisal rules, and a waiting period before closing.

An obligation to collect taxes and insurance with each payment and hold them in a separate account. Federal rules require escrow for certain higher-priced loans unless an exemption applies, and borrowers receive an initial escrow statement.

A three-page federal disclosure delivered within three business days after a completed application. It shows the loan terms, projected payments, closing costs, and cash to close, and it restricts fee increases before closing.

A federal form the borrower receives at least three business days before closing, listing final terms, costs, and the cash needed. It replaces the prior settlement statement and must match the Loan Estimate within allowed tolerances.

The permitted amount by which a disclosed closing cost may increase before the lender must refund the difference. Categories range from zero tolerance to unlimited, and a changed circumstance may justify a revised disclosure.

An event such as new information about the borrower, a change in loan terms requested by the borrower, or a changed settlement charge that permits revised disclosures. The lender must document it and issue a corrected estimate promptly.

A request for a mortgage that includes at least six pieces of information: borrower name, income, social security number, property address, estimated value, and loan amount. Receipt starts disclosure timing obligations.

The federal Real Estate Settlement Procedures Act, which requires disclosures about settlement costs, limits escrow account practices, and prohibits paying or receiving fees for referrals of settlement business.

The RESPA rule barring giving or accepting anything of value in exchange for referring settlement service business, or for splitting charges not for services actually performed. Penalties include fines and imprisonment.

A relationship in which a lender or broker refers a borrower to a settlement provider it owns or controls. The referral is allowed only with a written disclosure of the ownership and an estimate of the charge.

The federal rule combining mortgage disclosures into the Loan Estimate and Closing Disclosure, with timing and accuracy standards. It governs when estimates may be revised and when a new waiting period is required.

A federal law prohibiting discrimination in credit decisions based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Lenders must give notice of adverse action and keep records.

A written statement telling an applicant that credit was denied or changed unfavorably, the reasons for the decision, and the right to a statement of reasons. It must be sent within the time limits set by federal rules.

The principle that credit decisions rest on legitimate financial factors, not protected characteristics or proxies for them. Examiners review pricing, underwriting, and marketing for disparate treatment and disparate impact.

Refusing or limiting credit in a neighborhood based on its racial or ethnic composition rather than on the creditworthiness of applicants. It violates fair lending law and can be proven with lending data and map comparisons.

A federal law requiring lenders to collect and report data on applications, approvals, denials, and pricing by census tract and borrower characteristics. The data supports fair lending enforcement and community investment analysis.

A state statute prohibiting unfair or deceptive acts or practices in trade or commerce, including mortgage lending. It allows consumers to recover damages and attorney's fees and is frequently cited in mortgage servicing disputes.

Originating loans with abusive terms or practices, such as excessive fees, packed products, or loans made without regard to repayment ability. Massachusetts law restricts high-cost home loans and prohibits certain practices.

A Massachusetts loan classification based on rate and fee thresholds that triggers added protections, such as limits on prepayment penalties and restrictions on balloon payments. Originators must recognize when a loan crosses these triggers.

A borrower's right to cancel certain refinances of a principal residence within three business days after closing. The lender must provide notice and cannot disburse funds until the period ends.

The federal Truth in Lending Act, which requires disclosure of credit costs as an annual percentage rate and regulates advertising, rescission, and high-cost loans. It works alongside RESPA disclosures in mortgage transactions.

A measure of credit cost expressed as a yearly rate that includes interest plus certain finance charges. It allows borrowers to compare loan offers but does not capture every cost, such as some closing fees.

Requirements that mortgage advertising be accurate, include required disclosures such as the unique identifier, and avoid misleading claims about rates, approval, or government affiliation. Records of advertisements must be kept.

The share of a borrower's gross monthly income consumed by total monthly debt payments, including the proposed mortgage. It is a central underwriting measure and a factor in qualified mortgage eligibility.