First mortgage real estate loans; classes
Section 3. (a) A bank may make or acquire loans and mortgage loans.
(b) For purposes of this chapter, the term “mortgage loan” shall mean a loan, line of credit, letter of credit or borrowing secured primarily by a lien on an interest in real estate. The following categories of mortgage loans are specifically authorized by this section:
(i) residential mortgage loans secured by a first mortgage lien on a dwelling with 4 or less separate households and occupied or to be occupied by the borrower;
(ii) residential mortgage loans secured by a subordinate mortgage lien on a dwelling with 4 or less separate households and occupied or to be occupied by the borrower including home improvement loans, home equity lines of credit and second mortgage loans;
(iii) mortgage loans secured by a lien on real estate held or used for commercial, investment, governmental, nonprofit or other purposes;
(iv) land loans;
(v) construction loans to improve real estate with improvements, structures, or projects for residential, commercial, investment, governmental or non-profit use and purposes related or incident thereto including infrastructure and development;
(vi) mortgage loans secured by a lien on real estate saleable in the secondary market or underwritten in accordance with mortgage loan programs of public instrumentalities created by the commonwealth of the federal government for the purpose of financing and expanding the supply of residence mortgages or affordable housing.
(c) The following categories of loans shall not be considered mortgage loans for purposes of subsection (b) but shall be treated as loans pursuant to subsection (d).
(1) Loans for which a lien on or interest in real estate is taken as additional collateral through an abundance of caution, including loans pursuant to which the bank takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real estate is low relative to the aggregate value of all collateral.
(2) Loans made to manufacturing, industrial or commercial borrowers with a lien or interest in real estate taken as all or a portion of the collateral to directly or indirectly secure the loans, when a bank looks for repayment out of the operations of the borrower’s business, relying on the borrower’s general credit standing and the borrower’s forecast of operations.
(3) Loans to finance the construction of industrial or commercial buildings and having maturity not exceeding 36 months where there is a valid and binding agreement with a financially responsible lender to advance the full amount of the bank’s loan upon completion of construction, but, a bank shall not invest in or be liable on the loans in an aggregate amount in excess of 100 per cent of its capital.
(d) The term “loan” means any loan, line of credit or letter of credit, whether secured by collateral or security of any nature or unsecured, for consumer, business or other purposes, other than a real estate loan.
(e) Extensions of credit under subsections (a) to (d), inclusive, may contain agreed upon terms and conditions including, but not limited to, those governing the payment of principal and interest, collateral, maximum loan to value ratios, maximum debt to income ratios, amortization, prepayment, loan servicing and the apportionment of taxes, betterment assessments and insurance of any kind applicable to the loan, subject to limitations imposed by this chapter or other law. A bank also may subsequently revise or modify the terms or conditions subject to agreement of the parties.
(f) Notwithstanding subsections (a) to (e), inclusive, reverse mortgage loans and adjustable rate mortgage loans on owner occupied dwellings shall be subject to sections 7 and 8.
(g) The commissioner may by directive, guideline or regulation, carry out the purposes of this section and to further define the terms used in this section to promote safe and sound banking practices.