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  • Acts
  • 2004
  • Chapter 461 AN ACT RELATIVE TO BANKS AND BANKING.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:


SECTION 1. Chapter 167 of the General Laws is hereby amended by striking out section 1, as appearing in the 2002 Official Edition, and inserting in place thereof the following section:-

Section 1. As used in this chapter, the following words shall, unless the context otherwise requires, have the following meanings:-

"Bank", any association or corporation chartered by the commonwealth under chapter 168, 170, 171 or 172, or an individual, association, partnership or corporation incorporated or doing a banking business in the commonwealth subject to the supervision of the commissioner.

"Commissioner", the commissioner of banks.

"Cooperative bank", an association or corporation chartered pursuant to chapter 170.

"Credit union", an association or corporation chartered pursuant to chapter 171.

"Federal bank", a national banking association, savings and loan association or savings bank that exists by authority of the United States, the main office of which is located in the commonwealth.

"Federal branch", a branch in the commonwealth of any out-of-state federal bank.

"Foreign bank", an association or corporation authorized to do a banking business the main office of which is located outside the commonwealth and which exists by authority of a country other than the United States.

"Internet bank", a bank, federal bank, foreign bank or out-of-state bank that provides its services exclusively or primarily through the internet.

"Limited purpose trust company", an association or corporation chartered pursuant to section 9A of chapter 172.

"Massachusetts bank", a bank, other than an association or corporation chartered pursuant to chapter 171.

"Massachusetts branch", a branch in the commonwealth of an out-of-state bank.

"Out-of-state bank", an association or corporation authorized to do a banking business, the main office of which is located outside the commonwealth and which exists by authority of a state of the United States except the commonwealth.

"Out-of-state branch", a branch of a Massachusetts bank located outside the commonwealth.

"Out-of-state federal bank", a national banking association, savings and loan association or savings bank that exists by authority of the United States, the main office of which is located outside the commonwealth.

"Savings bank", an association or corporation chartered pursuant to chapter 168.

"State", a state, commonwealth or territory of the United States, the District of Columbia, or a foreign country.

"Trust company", an association or corporation chartered pursuant to chapter 172.

SECTION 2. Section 2A of said chapter 167, as so appearing, is hereby amended by striking out, in line 12, the word "herein" and inserting in place thereof the following words:- herein, or any internet bank which is either located in the commonwealth, has its main office located in the commonwealth, or has depositors or borrowers which are located in the commonwealth.

SECTION 3. Section 14 of said chapter 167, as so appearing, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-

To assist in carrying out this section, the commissioner shall promulgate regulations which shall include the regulations promulgated pursuant to federal law; provided, however, that with respect to such assessments of corporations chartered pursuant to chapter 171 and electronic banking activities and the electronic delivery of banking services, including internet banking activities of banks, the commissioner may make such adjustments and exceptions thereto as are deemed required; and provided, further, that the regulations may include, but not be limited to, a consideration of a bank's origination of loans and other efforts to assist existing low and moderate income residents to be able to remain in affordable housing in their neighborhoods, a bank's origination of loans that show an undue concentration and a systematic pattern of lending resulting in the loss of affordable housing units, a bank's participation, including investments in community development and redevelopment programs and small business technical assistance programs, pursuant but not limited to, paragraphs 8, 29 and 30 of section 2 of chapter 167F, and such other requirements as in the judgment of the commissioner reasonably bear upon the extent to which a bank is helping to meet the credit needs of its entire community. Notwithstanding the foregoing, the commissioner shall further take into account the provision of state-of-the art computers and internet access at minimal or no cost to low and moderate income residents as part of the assessment of electronic banking activities and the electronic delivery of banking services, including internet banking activities of banks. Except for emergency regulations adopted pursuant to section 2 of chapter 30A, a regulation, or an amendment or repeal thereof, shall, after compliance with section 5 of chapter 30A, be submitted to the general court.

SECTION 4. Said section 14 of said chapter 167, as so appearing, is hereby further amended by striking out the fourth paragraph and inserting in place thereof the following paragraph:-

In considering an application for the establishment of a domestic branch or other facility with the ability to accept deposits, the relocation of the main office or branch office, or a merger or consolidation with or the acquisition of assets or assumption of liabilities of any Massachusetts bank, federal bank, foreign bank, out-of-state bank or out-of-state federal bank, the commissioner shall consider, but not be limited to, the record of performance of the bank and its holding company, including all subsidiaries thereof, relative to this section. Notwithstanding any other law to the contrary, the commissioner shall establish an alternative community reinvestment examination procedure for supervised banks which, as of the most recent federal or state examination, have been assigned a rating of outstanding record or high satisfactory record of performance in meeting its community credit needs.

SECTION 5. Said section 14 of said chapter 167, as so appearing, is hereby further amended by striking out the eighth paragraph.

SECTION 6. The first paragraph of section 37 of said chapter 167, as so appearing, is hereby further amended by striking out the fourth and fifth sentences.

SECTION 7. Said section 37 of said chapter 167, as so appearing, is hereby further amended by striking out the last paragraph.

SECTION 8. Said chapter 167 is hereby further amended by striking out section 37B, as so appearing, and inserting in place thereof the following section:-

Section 37B. A bank, federal bank, federal credit union or a foreign bank, out-of-state bank and out-of-state federal bank with a branch office in the commonwealth may establish educational bank training programs, student savings deposit programs and school branch office programs. A bank or foreign bank or out-of-state bank with a branch office in the commonwealth shall conduct the program under terms and conditions as the commissioner determines. A federal bank, federal credit union or out-of-state federal bank with a branch office in the commonwealth shall conduct the program in compliance with applicable federal law and regulations.

SECTION 9. Section 46 of said chapter 167, as so appearing, is hereby amended by striking out, in line 2, the word "bank" and inserting in place thereof the following words:- bank, except an internet bank.

SECTION 10. Section 1 of chapter 167A of the General Laws, as so appearing, is hereby amended by striking out, in line 10, the word "herein" and inserting in place thereof the following words:- herein; but the term shall not include a limited purpose trust company, as defined in section 1 of chapter 167, or any other entity which by its charter may engage only in activities substantially equivalent to those authorized for a limited purpose trust company.

SECTION 11. Section 3 of chapter 167B of the General Laws, as so appearing, is hereby amended by striking out the second paragraph.

SECTION 12. Section 4 of said chapter 167B, as so appearing, is hereby amended by striking out the fifth paragraph and inserting in place thereof the following paragraph:-

A bank which intends to terminate the use of an electronic branch, other than an electronic branch located at an office of a financial institution, shall file a written request with the commissioner, which shall include the reasons for the termination; but, if in the opinion of the commissioner an emergency exists, he may waive this requirement. An electronic branch shall not be terminated or use thereof terminated until approved by the commissioner or upon the expiration of 30 days from the date the written request is made, whichever is sooner.

SECTION 13. The General Laws are hereby amended by striking out chapter 167C and inserting in place thereof the following chapter:- CHAPTER 167C. BANK LOCATIONS.

Section 1. As used in this chapter, the following words shall, unless the context otherwise requires, have the following meanings:-

"Bank", an association or corporation chartered by the commonwealth under chapter 168, 170 and 172.

"Commissioner", the commissioner of banks.

"Foreign bank", an association or corporation authorized to do a banking business in the commonwealth, the main office of which is located outside the commonwealth, and which exists by authority of a country other than the United States.

"Governing board", the board of directors, the board of trustees or similar board of a bank.

"Out-of-state bank", an association or corporation authorized to do a banking business in the commonwealth, the main office of which is located outside the commonwealth, and which exists by the authority of a state of the United States except the commonwealth.

"Out-of-state branch", a branch of a bank located outside the commonwealth.

"Out-of-state federal bank", a national banking association, savings and loan association or savings bank that exists by authority of the United States, the main office of which is located outside the commonwealth.

Section 2. The main office of a bank shall be in the town specified in its charter or in its agreement of association, or in such other town to which the office has been lawfully moved or to which it may be moved as provided in this section. The location of the main office of a bank may be changed to a point in the town of its location with the written consent of the commissioner. With the approval of the board of bank incorporation and upon the vote of 2/3 of the corporators or members and the approval of its board of trustees or board of directors present at a meeting called for the purpose, a bank may change the location of its main office to another town within the commonwealth by appropriate amendment of its charter or of its agreement of association, a copy of which amendment shall be filed immediately with the secretary of state.

Section 3. A bank which has received a rating of satisfactory or higher in its most recent examination pursuant to section 14 of chapter 167 and which is adequately capitalized, and has not been notified that it is in troubled condition, may establish and maintain 1 or more branch offices or depots in a city or town within the commonwealth upon at least 60 days written notice in advance thereof to the commissioner; but, if in the opinion of the commissioner, the public would not benefit by the establishment of the additional banking facilities or that competition among banking institutions would be adversely affected thereby, he may disapprove the same in writing within the 60-day period.

A bank, national banking association, federal savings and loan association or federal savings bank located in the commonwealth, the majority of shares of the voting stock of which is owned by a bank holding company pursuant to chapter 167A, 167H, or 12 USC 1841 et seq., if the main office of such company is located in the commonwealth, may transact with a customer business which pertains to the customer's accounts maintained at any other bank located in the commonwealth the majority of the voting shares of which is owned by the same bank holding company in like manner.

With the written consent of the commissioner and under procedures as he may require, a branch office or depot may be closed or its location may be changed; but before approving the closing or relocation, the commissioner shall determine that the area served by the branch office or depot will not be adversely affected thereby. In making that determination, the commissioner shall consider the effects of the closing as it relates to the availability of credit in the area, the convenience and necessity of deposit services therein, and other factors he considers appropriate.

The business transacted by a bank at its main office may be transacted at a branch office. The business at a depot shall be transacted only on the days designated by the governing board thereof, and shall be limited to the receipt of deposits and collection of moneys due or payable to the bank, and the business shall be subject to such other conditions, prescribed by the commissioner.

Section 4. The commissioner may authorize a bank to conduct mobile branch banking subject to this chapter in any county in the commonwealth in which the bank has its main office or a branch office under conditions as he may approve and in accordance with regulations he may establish for the purpose.

Section 5. Every notice or application to change the location of the main office to establish and maintain 1 or more branch offices or depots, or to change the location or close 1 or more branch offices or depots shall be accompanied by payment of an investigation fee, the amount of which shall be determined annually by the commissioner of administration under section 3B of chapter 7 of the General Laws.

Section 6. A bank, upon approval by the commissioner of an application therefor in prescribed manner and form and in accordance with applicable law, may establish and maintain branches through a merger or consolidation with or by the purchase of the whole or any part of the assets or stock of a foreign bank, out-of-state bank or out-of-state federal bank. A request for the approval by the commissioner shall be accompanied by (i) an investigation fee the amount of which shall be determined annually by the commissioner of administration under the provisions of section 3B of chapter 7, (ii) a copy of the terms of any agreement reached by the respective governing boards of the banks involved, and (iii) certified copies of the votes of such boards. Upon approval of the merger or consolidation:

(1) The corporate existence of the acquired bank shall be discontinued and consolidated into that of the acquiring bank. All rights, privileges and franchises of the acquired institution and its right, title and interest to property of whatever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest or asset of conceivable value or benefit then existing shall be considered fully and finally, and without any right of reversion, transferred to or vested in the acquiring bank, without further act or deed, and the acquiring bank shall have and hold the same in its own right.

(2) The rights, obligations and relations of the acquired institution to a shareholder or depositor, creditor, trustee, beneficiary of a trust, or other person, as of the effective date of the merger or consolidation, shall remain unimpaired, and the acquiring bank shall succeed to all of those rights, obligations and relations.

(3) A pending action or other judicial proceeding to which an institution involved in the merger or consolidation is a party shall not be considered to have been abated or discontinued by reason of the merger or consolidation, but may be prosecuted to final judgment, order or decree in the same manner as if the merger or consolidation had not occurred; but, the acquiring bank may be substituted as a party to the action or proceeding, and the judgment, order or decree may be rendered in the name of the acquiring bank.

(4) A foreclosure of a mortgage begun by the acquired institution before the approval of the merger or consolidation may be completed by the acquiring bank, and publication previously made by the acquired institution may be continued in the name of the acquired institution.

The offices of a foreign bank, out-of-state bank or out-of-state federal bank merged or consolidated with or whose assets or stock were purchased pursuant to this section, may be maintained as branch offices of the bank; but, the resulting branch shall be considered to be an out-of-state branch and subject to the supervision of the commissioner and the applicable laws of the jurisdiction in which the out-of-state branch is located.

Section 7. A bank, with the approval of and under conditions imposed by the commissioner, may establish a branch de novo in a state of the United States other than the commonwealth or in a foreign country in accordance with the laws of the state or foreign country, and may exercise the powers at the branch de novo as are permitted to banks existing by the authority of the jurisdiction in which the branch is located, unless the commissioner determines that the exercise of the powers is unsafe or unsound.

Section 8. Notwithstanding any other law to the contrary, the commissioner may enter into a cooperative agreement with bank regulators in jurisdictions other than the commonwealth to facilitate the regulatory supervision of Massachusetts and out-of-state branches including an agreement relative to the coordination of examinations or joint participation in examinations of the branches, and may accept reports of examinations by the regulators pursuant to the agreement. The commissioner may also enter into an agreement providing for enforcement actions against Massachusetts and out-of-state branches. The agreement may include provisions relative to the amount and assessment of fees for an examination or enforcement action. Nothing in this section shall be construed to limit the authority of the commissioner to independently conduct examinations of and enforcement actions against a branch.

Section 9. A bank may receive deposits, renew time deposits, close loans, service loans, and receive payments on loans and other obligations in the commonwealth or in any other state as an agent for another banking institution, whether located within the commonwealth or in another state. The banking institution acting as such agent shall not be considered to be a branch of the principal banking institution. A banking institution acting as such agent shall not conduct an activity which it would be prohibited from conducting as a principal under a state or federal law, or, as a principal, have an agent conduct an activity which the institution would be prohibited from conducting under a state or federal law. The agency relationship shall be consistent with safe and sound banking practices and all applicable regulations of the commissioner. For the purposes of this section, a banking institution shall mean a bank, federal bank, foreign bank, out-of-state bank and an out-of-state federal bank as such terms are defined in section 1 of chapter 167.

SECTION 14. Chapter 167D of the General Laws is hereby amended by striking out section 10, as so appearing.

SECTION 15. The General Laws are hereby amended by striking out chapter 167E and inserting in place thereof the following chapter:- `tuc CHAPTER 167E. MORTGAGES AND LOANS.

Section 1. As used in this chapter, the following words, shall unless the context otherwise requires, have the following meanings:-

"Bank", a savings bank, co-operative bank, or trust company subject to the supervision of the commissioner of banks.

"Capital", (1) the sum of the capital stock, surplus account and undivided profits of a savings bank or a co-operative bank which has converted to a stockholder form of corporation, a subsidiary banking institution of a mutual holding company as defined in chapter 167H or a trust company as defined in section 1 of chapter 172; (2) the sum of the surplus account of a mu form savings bank governed by chapter 168 or a mutual form co-operative bank governed by chapter 170. The commissioner, in his discretion, may further define or permit adjustments to the capital accounts of a bank necessary to effect the purposes of this chapter.

"Commissioner", the commissioner of banks.

"Real estate", land or property, without geographic limitation, including improved land with a dwelling, owner occupied or unoccupied dwellings, unimproved land, farmland, a unit of a condominium, shares of stock issued by a co-operative housing corporation, industrial and commercial property, leasehold interests created in air rights over land, and any other interest in land; but a loan secured by real estate shall include a loan on a leasehold under a lease which does not expire for at least 5 years beyond the maturity date of the loan.

Section 2. Every bank, subject to limitations imposed by this chapter or other General Laws, shall have the following powers and whatever further incidental or complementary powers that may fairly be implied from those expressly conferred and such as are reasonably necessary to enable it to exercise fully those powers according to common customs and usages:

(1) to discount, buy, invest in, hold, assign, transfer, sell and negotiate promissory notes, drafts, bills of exchange, mortgages, trade acceptances, banker's acceptances, bonds, debentures, bonds or notes secured by mortgages, installment obligations, accounts receivable, balances due on conditional sales and other evidences of debt for its own account or for the account of customers;

(2) to advance money or credits on real estate, on improvements thereto or on personal security, on terms to be agreed upon; and

(3) to buy, sell or make loans as participation loans with another bank or with an insurance company and to service loans sold by it.

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.

Section 4. (a) Each bank shall adopt and maintain comprehensive written loan policies that establish appropriate limits and standards for extensions of credit under section 3 that are consistent with safe and sound banking practices and are appropriate to the size, nature and scope of the bank's operations.

(b) The loan policies shall establish prudent loan underwriting standards that clearly and measurably address, at a minimum: (1) maximum loan to value, loan amount, loan maturities, and debt to income requirements; (2) collateral and appraisal requirements; (3) application and loan approval requirements; and (4) loan administration procedures. The written loan policies shall be reviewed and approved annually by the bank's governing board.

(c) The commissioner may by directive, guideline or regulation, establish additional minimum safe and sound lending requirements.

Section 5. (a) A bank shall inspect the real estate securing a loan in the event that a payment of interest or principal upon the loan or on account of real estate taxes upon the parcel mortgaged to secure the same shall be in default, inspection for the purpose aforesaid shall be made within 91 days from the date of the default in payment of interest or principal or within 181 days from the date of the default in payment on account of taxes, as the case may be, and thereafter periodic inspection shall continue in accordance with this subsection until the loan shall no longer be in default.

(b) The commissioner may cause an appraisal of real estate to be made at the expense of the bank whenever the commissioner considers an excessive loan has been made or is about to be made upon real estate.

(c) A bank shall not directly or indirectly, make a loan or discount on the security of the shares of its own capital or on the security of the shares of capital of any company, 50 per cent or more of the assets of which consists of capital of the corporation, unless the security shall be necessary to prevent loss upon a debt previously contracted in good faith. An officer or employee of a bank who knowingly violates this section shall be punished by a fine of not more than $5,000 or by imprisonment for not more than 1 year, or both.

Section 6. (a) The total obligations of 1 borrower to a bank under this chapter and chapter 167F shall not exceed the following limitations.

(1) 20 per cent of the total of the bank's capital;

(2) 25 per cent of the total of the bank's capital, if the amount of the obligations in excess of the limitations in clause (1) is fully secured by obligations of the United States of like value;

(3) 100 per cent of the total of the bank's capital, if the amount of the obligations in excess of the limitations in clause (1) is fully secured by obligations of the United States of like value, due within 3 years of the date of the note of the borrower.

(4) Obligations of a foreign government or a political subdivision thereof shall be limited to 10 per cent of capital.

(5) Obligations of all foreign governments and the political subdivisions thereof shall not exceed a total of 50 per cent of capital.

(b) The limitations of subsection (a) shall not apply to:

(1) Obligations of the United States.

(2) Obligations of the commonwealth and its political subdivisions.

(3) Obligations of a state or a political subdivision thereof in the United States.

(4) Obligations to the extent that they are secured as to principal and interest by the unconditional guarantee, insurance or other like commitment of the United States, an agency of the United States or a federal reserve bank, whether the commitment provides for payment in cash or in obligations of the United States.

(5) Obligations arising out of the discount of:

(i) Drafts or bills of exchange drawn in good faith against actually existing values, and (ii) commercial or business paper actually owned by the person negotiating it.

(6) Obligations to the extent that they are secured as to principal and interest by the guarantee, insurance or other like commitment of the Massachusetts Development Finance Agency pursuant to chapter 23G.

(7) Obligations for funds advanced to facilitate the clearance or settlement of securities transactions in accordance with customary industry practice and applicable rules of a stock exchange or market system; if, (i) the obligations are secured by readily-marketable securities, which may include the securities being purchased, having a market value at the time the advance is made of not less than the principal amount of the advance, and (ii) the obligations so advanced are repaid following the settlement of, and receipt of proceeds from, securities transactions which have been effected for the purpose of repaying the obligations so advanced.

(8) Obligations which are secured by a deposit account in the lending bank which is not subject to withdrawal.

(9) Obligations secured by a mortgage loan secured by a first lien on real estate improved with a dwelling to be occupied by not more than 4 families and occupied or to be occupied in whole or in part by the borrower shall not be calculated against the total obligations of the borrower for the purposes of the limitations under subsection (a).

(10) Obligations to the extent they are secured by securities issued or guaranteed by a United States government-sponsored entity, including the Federal National Mortgage Association and the federal Home Loan Mortgage Corporation.

(11) Obligations to provide securities, incurred in connection with securities loans, which obligations are fully secured by securities convertible at the option of the bank acting as principal or agent into securities of the same issue and class as the securities that are the subject matter of the obligation.

(12) Obligations to the extent they are initially and thereafter secured by collateral consisting of a combination of cash and readily marketable securities with a value of not less than 100 per cent of the obligations.

(c) Notwithstanding subsection (a), liabilities for federal funds and other short-term obligations of any national bank or other bank to a bank may exceed 100 per cent of the capital and no collateral shall be required for the obligations except insofar as the commissioner of banks may by regulation set limits on the obligations and require collateral of any kind.

(d) Obligations to 1 borrower will be attributed to another person and each person will be considered a borrower if the obligation was used for the direct benefit of another person or there was a common enterprise considered to exist between the persons. For the purposes of this section the word "person" shall include an individual, sole proprietorship, partnership, limited liability company, joint venture, association, trust, estate, business trust, corporation, sovereign government or agency, instrumentality or political subdivision thereof and including the liabilities of the members of a firm or any similar entity or organization. The commissioner shall have the authority to determine whether a loan putatively made to 1 person shall for purposes of this section be attributed to another person.

(e) This section shall not apply to mortgages taken in good faith by way of security for debts to the bank previously contracted, or to loans made by the bank to secure the payment of a portion of the purchase price of real estate acquired by the bank by foreclosure, or otherwise.

(f) The commissioner may by directive, guideline or regulation, prescribe additional requirements to administer and carry out this section and to further define the terms used in this section.

Section 7. (a) A bank may make or acquire a reverse mortgage loan, pursuant to a program for reverse mortgage loans which has been submitted to and approved by the commissioner, to the owner of real estate improved with a dwelling designed to be occupied by not more than 4 families; provided, however, that each such owner shall be at least 60 years of age and shall occupy the mortgaged real estate in whole or in part; and provided further, that a person shall be considered to be the owner of real estate notwithstanding that legal title thereto is held in the name of a trust if the person is the beneficiary of such trust.

(b) For the purposes of this section, a reverse mortgage loan shall not be considered a residential mortgage transaction, as defined in section 1 of chapter 140D or any other transaction specified in subsection (e) of section 10 of said chapter 140D. The notices and rights contained herein shall be in addition to the disclosure and rights provided for in said chapter 140D, including the right of rescission set forth in said section 10 of said chapter 140D.

(c) The proceeds from a reverse mortgage loan shall be disbursed to the borrower, pursuant to the program, and together with unpaid interest, if any, shall become due and payable (i) at the end of a fixed term, if any; (ii) upon the death of the borrower; (iii) upon the conveyance of title to the mortgaged real estate; (iv) upon the borrower ceasing to occupy the real estate as a principal dwelling; or (v) upon default by the borrower in the performance of its obligations under the loan agreement.

(d) The commissioner shall not approve a program for reverse mortgage loans which does not include the following:-

(1) the type of loan, whether open-end or closed and whether a recourse or non-recourse loan;

(2) an applicant for the loan shall not be bound for 7 days after his acceptance, in writing, of the lender's written commitment to make the loan;

(3) the bank shall obtain a written statement signed by the borrower acknowledging receipt of disclosure of all contractual contingencies which could force a sale of the mortgaged real estate;

(4) a provision permitting prepayment of the loan without penalty at any time before the loan becomes due and payable;

(5) the interest rate, which may be fixed or variable, and the method of calculation thereof shall be established at loan origination; quote and, at the option of the borrower, may be contingent on the value of the mortgaged real estate at closing or at maturity or on changes in the value during the period between closing and maturity;

(6) the method of disbursement of the proceeds of the loan to the borrower; but, at the request of the borrower, disbursement may be made to a third party pursuant to the terms of the loan agreement;

(7) a copy of the form of the note and mortgage deed that will be utilized for the loans;

(8) a detailed description of how the plan will function; and

(9) other information the commissioner may require.

Before making the loan, a bank shall provide a prospective borrower with written materials explaining in plain language, the type of mortgage being offered and its specific terms, including but not limited to:

(i) a schedule, if applicable, and explanation of payments to the borrower pursuant to the terms of the mortgage agreement and whether or not property taxes and insurance premiums are to be deducted:

(ii) a schedule of outstanding debt over time, if applicable;

(iii) repayment date, if a fixed term loan, and other provisions which cause the loan to become due and payable;

(iv) method of repayment and schedule, if any;

(v) all contractual contingencies, including lack of home maintenance and other default provisions which may result in a forced sale of the mortgaged property;

(vi) interest rate and annual percentage rate, and for a reverse mortgage loan for a specified term, total interest payable thereon;

(vii) loan fees and charges;

(viii) description of prepayment and, if applicable, refinancing features; and

(ix) inclusion of a statement that the mortgage has tax and estate planning consequences and may affect levels of, or eligibility for, certain government benefits, grants or pensions, and that applicants are advised to explore those matters with appropriate authorities.

(e) A bank shall not make a reverse mortgage loan as provided in this section until it has received a notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the executive office of elder affairs and which shall include instruction on reverse mortgage loans. The counseling program shall include, but is not limited to, the subject matter of paragraphs (1) to (9), inclusive, of subsection (d) with respect to all reverse mortgage loan programs approved by the commissioner pursuant to this section. For the purpose of providing the counseling, the executive office of elder affairs shall establish and maintain a list of counseling programs approved by it and shall make such list available to all banks and to the public.

(f) A reverse mortgage loan shall constitute a lien against the property securing the loan to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on the advances, and the lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.

(g) The commissioner may promulgate regulations necessary to carry out this section.

(h) For the purposes of this section, the term "non-recourse reverse mortgage loan" shall mean a reverse mortgage loan which limits the lender's recovery solely to the value of the property at the time the loan becomes due and payable.

(i) Sections 96 to 114A, inclusive, of chapter 140 shall not apply to a reverse mortgage loan.

Section 8. (a) A bank may make or acquire mortgage loans evidenced by a note which provides for variation in the rate of interest over the term of the note; but a loan made to finance or refinance the purchase of and secured by a first lien on a dwelling house of 4 or fewer separate households occupied in whole or in part by the mortgagor shall be subject to but not limited to the following conditions and restrictions imposed by the commissioner:

(1) the method by which the rate of interest may be adjusted;

(2) the frequency with which the rate of interest may be adjusted, but successive rate adjustments shall be no less than 6 months apart;

(3) the maximum increase in the rate of interest allowed for the adjustment;

(4) provisions for decreases in the rate of interest as may be warranted by market conditions;

(5) requirements for advance notification and explanation of adjustments in the rate of interest, but the notification and explanation shall occur no less than 30 days before the adjustment; and

(6) methods of disclosure to the mortgagor of the terms and conditions of the loan as required under chapter 140D.

Notwithstanding any law to the contrary, the commissioner may by further conditions and restrictions provide that the rate of amortization may be varied, including utilizing a period of negative amortization, in order to adjust the rate of interest.

SECTION 16. Chapter 167F of the General Laws is hereby amended by striking out section 1, as appearing in the 2002 Official Edition, and inserting in place thereof the following section:-

Section 1. As used in this chapter, the following words shall, unless the context otherwise requires, have the following meanings:-

"Bank", an association or corporation chartered by the commonwealth under chapter 168, 170 or 172.

"Board", the board of trustees or directors, as the case may be, in a bank.

"Capital stock", the sum of the par value of the preferred and common shares of capital stock of a trust company, issued and outstanding.

"Commissioner", the commissioner of banks.

"Federally chartered bank", a national banking association, federal savings and loan association, federal savings bank or federal credit union authorized to do business in the commonwealth.

"Stock corporation", an association or corporation chartered by the commonwealth under the provisions of chapter 168 or 170, which has converted to a stockholder form of corporation, or a trust company as defined in chapter 172.

"Surplus account", an account so designated on the books of a bank and consisting of amounts required by law.

"Thrift Institution", an association or corporation chartered by the commonwealth under chapter 168 or 170 which is in mutual form.

SECTION 17. Section 2 of said chapter 167F of the General Laws, as so appearing, is hereby amended by striking out the introductory paragraph, and inserting in place thereof the following paragraph:-

Every bank, subject to limitations imposed by this chapter or other general law, shall have the following powers and whatever further incidental or complimentary powers that may fairly be implied from those expressly conferred and those reasonably necessary to enable it to exercise fully those powers according to common customs and usages:.

SECTION 18. Paragraph 31 of said section 2 of said chapter 167F, as so appearing, is hereby amended by striking out the last paragraph and inserting in place thereof the following 2 paragraphs:-

32. To engage in an activity and to acquire and retain the shares of any company engaged in any activity that the commissioner determines to be financial in nature or incidental to the financial activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of the bank, subject to the approval of the commissioner and under limitations or conditions he may impose. In determining whether an activity is financial in nature or incidental or complementary thereto, the commissioner shall consider, but shall not be limited to, those activities considered to be financial in nature or incidental to the financial activity or an activity that is complementary to a financial activity under section 103, section 121 and section 122 of Public Law 106-102, entitled the "Gramm-Leach-Bliley Act of 1999". Notwithstanding any general or special law to the contrary, this chapter does not authorize a bank or a subsidiary or affiliate of a bank to sell title insurance.

33. To participate in the redevelopment access to capital program created under section 60 of chapter 23A and to make the loans and create the reserve and take other actions necessary or appropriate for participating in the program.

SECTION 19. Section 1 of chapter 167G of the General Laws, as so appearing, is hereby amended by striking out the definition of "Bank" or "such bank", and inserting in place thereof the following definition:-

"Bank" or "such bank", a savings bank, cooperative bank, trust company or limited purpose trust company.

SECTION 20. Chapter 171 of the General Laws is hereby amended by striking out section 8, as so appearing, and inserting in place thereof the following section:-

Section 8. With the written consent of the commissioner, the location of the main office of a credit union may be changed.

After notice and hearing as the commissioner may require and with his written permission and under conditions he approves, a credit union may establish and maintain 1 or more branch offices or depots in the county wherein the main office is located or on a site within 50 miles from the premises of the main office in a city or town in another county. The usual business transacted by a credit union at its main office may be transacted at a branch office. The business at a depot shall be transacted only on days designated by the board of directors and shall be limited to the receipt of deposits and the collection of moneys due or payable to the credit union, and the business shall be subject to other conditions prescribed by the commissioner.

With the written consent of the commissioner a branch office or depot may be closed, or its location may be changed.

The offices of a credit union consolidating or merging under section 78 may be maintained as branch offices of the credit union, with the written permission of and under conditions approved by the commissioner.

SECTION 21. Section 11 of said chapter 171, as so appearing, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-

A member shall not have more than 1 vote and, after a credit union has been incorporated for a year, no member shall be entitled to vote or to be a candidate for director until he has been a member for more than 3 months. An organization member or persons who are parties to a joint account may cast 1 vote on the share or deposit account at any of its meetings by a duly delegated agent or a party to the joint account. A minor shall not have the right to vote. A member may vote in person or by mail. Each credit union shall set forth in its by-laws the method of voting to be used. The voting methods shall be subject to conditions and limitations as the commissioner may establish.

SECTION 22. Section 79 of said chapter 171, as so appearing, is hereby amended by striking out the second paragraph.

SECTION 23. Chapter 172 of the General Laws is hereby amended by inserting after section 9 the following section:-

Section 9A. After notice of intent, application and hearing as the commissioner may require and with his written permission and under conditions he may impose, the commissioner may, if he is satisfied that public convenience and advantage will be promoted and that competition among banking institutions will not be unreasonably affected, grant a certificate to establish a limited purpose trust company for the purpose of conducting trust and fiduciary business authorized under chapter 167G and other law applicable to a state-chartered bank; provided, however, that it will have sufficient capital to support its business operations; provided further that any such limited purpose trust company shall not accept deposits, make loans or otherwise carry on a banking business in the commonwealth; and provided, further, that no person, other than an attorney licensed to practice law in the commonwealth, shall conduct such business in the commonwealth without having acquired the certificate.

A person seeking authority to establish a limited purpose trust company under this section shall file a notice and an application for a certificate with the commissioner, together with a fee, the amount of which shall be determined by the commissioner of administration under the provisions of section 3B of chapter 7. The application shall include the following:-

(a) the name under which the corporation will conduct business;

(b) the name, residence and post office address of each officer of the corporation;

(c) the location of the principal office thereof which shall be within the commonwealth;

(d) the purpose for which the corporation is formed and the nature of the business to be transacted;

(e) the amount and classes of its capital stock, and the number of shares into which any class is to be divided; and

(f) such other information as the commissioner considers necessary.

Upon receipt of the certificate from the commissioner, the corporation shall file its articles of organization with the state secretary and shall thereupon become eligible to conduct business; but, the certificate shall be considered to be revoked if the corporation does not commence business within 1 year after the date of issuance thereof by the commissioner.

In the transaction of business, a limited purpose trust company shall be subject to sections 11 to 30, inclusive, and other applicable sections of this chapter, and section 36A of chapter 167.

A limited purpose trust company may establish and maintain a trust office or a representative trust office in any state other than the commonwealth. A company intending to establish a trust office or representative trust office in the other state shall file a notice with the commissioner. The notice shall be in a form prescribed by the commissioner and shall contain the name and address of the limited purpose trust company, the location of the proposed office, and be accompanied by a copy of the resolution of its board of directors authorizing the establishment of the out-of-state office.

The company may commence business at the out-of-state trust office or representative trust office upon the expiration of 30 days from the date the required notice is received by the commissioner; but, the 30 day period may be extended by the commissioner upon notice in writing to the company that additional information is required to be submitted to him. For the purposes of this section, a trust office shall mean the business office of the limited purpose trust company at which its licensed business activities are transacted; and a representative trust office shall mean an office established by the company in order to market and solicit business and provide administrative support but at which, licensed business activities of the company could not be conducted.

A limited purpose trust company, or any similar institution as determined by the commissioner, established under the laws of any other state or the United States may, with the approval of the commissioner, establish and maintain an office in the commonwealth; if the laws of the state in which such company or similar institution was established expressly authorize, under conditions no more restrictive than those imposed by the laws of the commonwealth, as determined by the commissioner, the establishment of an office in said state by a limited purpose trust company chartered in the commonwealth.

The commissioner may establish rules and regulations necessary to carry out this section and to govern the affairs of the company, including an examination thereof by him. The regulations may specify which provisions of chapters 167 through 167G, chapters 183 and 184, and other laws of the commonwealth shall be applicable to any such limited purpose trust company.

SECTION 24. Chapter 172A of the General Laws is hereby repealed.

SECTION 25. Section 114A of chapter 140 of the General Laws, as appearing in the 2002 Official Edition, is hereby amended by inserting after the word "unions", in line 4, the words:- or any subsidiary of the foregoing.

Approved December 30, 2004.