▸Intro / Preamble
Chapter 167E of the General Laws is hereby amended by adding the following section:-
▸SECTION 17
(a) An entity, its successors or assigns, may originate or act as an intermediary between originators and borrowers on a shared appreciation mortgage loan, pursuant to a program for shared appreciation mortgage loans which has been submitted to and approved by the Commissioner of Banks, to the owner of real estate improved with a dwelling designed to be occupied by not more than 4 families, provided, however, that the owner shall occupy the mortgaged real estate in whole or in part.
(b) Definitions:
i. “shared appreciation mortgage” shall mean a mortgage loan, as defined in section 3 of chapter 167E, containing an agreement between a mortgagor and a mortgagee that provides for the mortgagee, its successors or assigns, to share in any appreciation in value or the option to do so, of the residential property upon the occurrence of a certain event, including but not limited to the transfer of ownership, repayment maturity date, sale of the residential property, or any other event contemplated by such loan agreement.
ii. “shared appreciation payment” shall mean the amount of any appreciation in value that the mortgagor is required to pay to the mortgage holder.
iii. “appreciation in value” shall be measured as the difference, if positive, between the gross sales proceeds of the sale of the residential property or the appraised value of the property at the time payment in full of the loan is due, and the appraised value of the residential property at the time of the original closing of the shared appreciation mortgage loan, minus the actual cost of any improvements made by the mortgagor. The appraised values in this subsection shall be determined by an appraisal by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112.
iv. a shared appreciation mortgage loan is a residential mortgage loan, as defined in 15 U.S.C.§ 1602(dd)(5).
(c) The terms of the shared appreciation mortgage loan:
i. shall state that the shared appreciation payment shall not exceed the lesser of:
a. 15 per cent of the appreciation value; or
b. 15 percent of the value of the property at the time of the consummation of the shared appreciation mortgage loan, as determined by an appraisal of comparable home values by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112.
ii. shall not include a penalty for satisfying or otherwise terminating the mortgage before its scheduled maturity date;
iii. shall not restrict or waive the mortgagor’s substantive or procedural rights or remedies at law;
iv. shall not be prohibited from refinancing at any given time for the duration of the mortgage;
v. shall require the mortgage holder to agree to subordinate the shared appreciation mortgage upon request and if the borrower qualifies to refinance the first lien mortgage;
vi. shall state “Any person who purchases or is otherwise assigned this obligation shall be subject to all claims and defenses that the mortgagor could assert against the original mortgagee;”
vii. shall not include confidentiality provisions regarding the terms of the loan;
viii. shall not include mandatory arbitration clauses; and
ix. shall not become due and owing upon the death of the borrower if the borrower’s heir(s) are living in or intend to live in the property at the time of the borrower’s death. The surviving heir household member(s) shall be able to continue paying on the loan until the loan becomes due and owing in full.
(d) Required pre-consummation housing counseling:
i. a shared appreciation mortgage may not be consummated less than 14 calendar days after the mortgagor obtains counseling from a HUD-certified housing counselor;
ii. the housing counselor shall counsel the mortgagor on the terms of the shared appreciation mortgage loan and alternatives;
iii. the mortgagee shall pay the cost of the housing counseling.
(e) Notice before consummation of the shared appreciation mortgage: At least 21 business days prior to consummating a shared appreciation mortgage, and no less than 3 days before the mortgagor is scheduled to attend housing counseling pursuant to subsection (d) of this section, the mortgage holder shall provide to the mortgagor, in writing, in a form that the mortgagor may keep:
i. all documents to be signed or otherwise provided upon consummation of the shared appreciation mortgage;
ii. a clear and conspicuous disclosure, with the format and content to be determined by the Attorney General, stating:
a. the counseling requirement and telephone number and website established by the Department of Housing and Urban Development for finding a HUD-certified housing counselor setting;
b. the maximum shared appreciation payment the mortgagor will be required to pay at maturity, in a dollar amount, and the manner and date in which it shall be paid; and
c. such other information as the Attorney General may require.
(e1) Additional requirements for foreclosure-related services: If a transaction subject to this section is a foreclosure rescue transaction or foreclosure-related service, as defined by 940 CMR 25.01:
i. The Annual Percentage Rate, as determined pursuant to section 5 of chapter 140D, for a mortgage loan originated in connection with a shared appreciation mortgage loan may not exceed the Average Prime Offer Rate, as defined by 12 CFR 1026.35(a)(2).
ii. A transaction subject to this section that includes reconveying to the mortgagor a property in which the mortgagor currently resides and in which the mortgagor had an ownership interest within the preceding three years, the sale price to be paid by the mortgagor shall not exceed the lesser of:
a. the current market value of the property as determined by an appraisal of comparable home values by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112, or
b. 25 percent in excess of the price the seller paid for the property.
(f) Servicing of the loan
i. The entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall provide periodic statements to the borrower during the life of the loan. The periodic statements requirements shall be the same, and on the same schedule, as those found in the Truth in Lending Act (TILA) requirements for mortgage loans, 12 CFR § 1026.41 even if the entity is not otherwise subject to the federal TILA
ii. The entity that originated a shared appreciation mortgage loan, and its successors or assigns shall provide notification of transfer of servicing and transfer of ownership of the loan to the borrower. Such requirements shall be the same and on the same timing as those found under TILA and the Real Estate Settlement Procures Act (RESPA) 12 U.S.C. 2601 et seq. even if the entity is not otherwise subject to the federal TILA or RESPA.
iii. The entity that originated the shared appreciation mortgage loan, and its successors or assigns, and the servicer of the shared appreciation mortgage loan shall act in good faith toward a borrower in the servicing of a shared appreciation mortgage and in any foreclosure action relating to such an obligation.
(g) Notice before the shared appreciation payment becomes due to the lender
i. Within 5 days of the borrower’s request at any time, and 90 days before the defined maturity date of a shared appreciation mortgage, the entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall provide notification to the borrower that includes:
a. An itemization of the amount of appreciation value that will be due upon the triggering of the right of the entity to receive a shared appreciation payment;
b. The date the shared appreciation payment is due; and
c. The manner in which the shared appreciation payment must be paid
ii. 90 days before the defined maturity date of a shared appreciation mortgage, the entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall send the borrower via first class and certified mail to the property address a questionnaire asking whether the borrower wishes to remain in the home after maturity and providing a list of all home retention options available to the borrower from the entity, if any. If the borrower responds they want to remain in the home, the mortgage holder shall refer the borrower to a HUD-certified housing counselor, at the mortgage holder’s expense, for assistance in determining what options are available to remain in the home before any of the shared appreciation amounts can be disbursed.
(h) Remedies:
i. If any of the provisions of this section are violated, the contract shall be void and the mortgagor shall be entitled to actual damages and reasonable attorneys fees.
ii. Any shared appreciation agreement which violates any of the provisions of this section is declared void, is a per se violation of the Massachusetts chapter 93A, and is grounds for license revocation.
iii. Section 369 of chapter 128 of the Acts of 2024 is hereby repealed
iv. The Attorney General shall promulgate regulations necessary to carry out this section and shall be entitled to enforce these regulations, including by recommending to the Division of Banks that any licensure granted to the entity be revoked and by conducting investigations into compliance with these regulations.
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Chapter 167E of the General Laws is hereby amended by adding the following section:-
Section 17.
(a) An entity, its successors or assigns, may originate or act as an intermediary between originators and borrowers on a shared appreciation mortgage loan, pursuant to a program for shared appreciation mortgage loans which has been submitted to and approved by the Commissioner of Banks, to the owner of real estate improved with a dwelling designed to be occupied by not more than 4 families, provided, however, that the owner shall occupy the mortgaged real estate in whole or in part.
(b) Definitions:
i. “shared appreciation mortgage” shall mean a mortgage loan, as defined in section 3 of chapter 167E, containing an agreement between a mortgagor and a mortgagee that provides for the mortgagee, its successors or assigns, to share in any appreciation in value or the option to do so, of the residential property upon the occurrence of a certain event, including but not limited to the transfer of ownership, repayment maturity date, sale of the residential property, or any other event contemplated by such loan agreement.
ii. “shared appreciation payment” shall mean the amount of any appreciation in value that the mortgagor is required to pay to the mortgage holder.
iii. “appreciation in value” shall be measured as the difference, if positive, between the gross sales proceeds of the sale of the residential property or the appraised value of the property at the time payment in full of the loan is due, and the appraised value of the residential property at the time of the original closing of the shared appreciation mortgage loan, minus the actual cost of any improvements made by the mortgagor. The appraised values in this subsection shall be determined by an appraisal by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112.
iv. a shared appreciation mortgage loan is a residential mortgage loan, as defined in 15 U.S.C.§ 1602(dd)(5).
(c) The terms of the shared appreciation mortgage loan:
i. shall state that the shared appreciation payment shall not exceed the lesser of:
a. 15 per cent of the appreciation value; or
b. 15 percent of the value of the property at the time of the consummation of the shared appreciation mortgage loan, as determined by an appraisal of comparable home values by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112.
ii. shall not include a penalty for satisfying or otherwise terminating the mortgage before its scheduled maturity date;
iii. shall not restrict or waive the mortgagor’s substantive or procedural rights or remedies at law;
iv. shall not be prohibited from refinancing at any given time for the duration of the mortgage;
v. shall require the mortgage holder to agree to subordinate the shared appreciation mortgage upon request and if the borrower qualifies to refinance the first lien mortgage;
vi. shall state “Any person who purchases or is otherwise assigned this obligation shall be subject to all claims and defenses that the mortgagor could assert against the original mortgagee;”
vii. shall not include confidentiality provisions regarding the terms of the loan;
viii. shall not include mandatory arbitration clauses; and
ix. shall not become due and owing upon the death of the borrower if the borrower’s heir(s) are living in or intend to live in the property at the time of the borrower’s death. The surviving heir household member(s) shall be able to continue paying on the loan until the loan becomes due and owing in full.
(d) Required pre-consummation housing counseling:
i. a shared appreciation mortgage may not be consummated less than 14 calendar days after the mortgagor obtains counseling from a HUD-certified housing counselor;
ii. the housing counselor shall counsel the mortgagor on the terms of the shared appreciation mortgage loan and alternatives;
iii. the mortgagee shall pay the cost of the housing counseling.
(e) Notice before consummation of the shared appreciation mortgage: At least 21 business days prior to consummating a shared appreciation mortgage, and no less than 3 days before the mortgagor is scheduled to attend housing counseling pursuant to subsection (d) of this section, the mortgage holder shall provide to the mortgagor, in writing, in a form that the mortgagor may keep:
i. all documents to be signed or otherwise provided upon consummation of the shared appreciation mortgage;
ii. a clear and conspicuous disclosure, with the format and content to be determined by the Attorney General, stating:
a. the counseling requirement and telephone number and website established by the Department of Housing and Urban Development for finding a HUD-certified housing counselor setting;
b. the maximum shared appreciation payment the mortgagor will be required to pay at maturity, in a dollar amount, and the manner and date in which it shall be paid; and
c. such other information as the Attorney General may require.
(e1) Additional requirements for foreclosure-related services: If a transaction subject to this section is a foreclosure rescue transaction or foreclosure-related service, as defined by 940 CMR 25.01:
i. The Annual Percentage Rate, as determined pursuant to section 5 of chapter 140D, for a mortgage loan originated in connection with a shared appreciation mortgage loan may not exceed the Average Prime Offer Rate, as defined by 12 CFR 1026.35(a)(2).
ii. A transaction subject to this section that includes reconveying to the mortgagor a property in which the mortgagor currently resides and in which the mortgagor had an ownership interest within the preceding three years, the sale price to be paid by the mortgagor shall not exceed the lesser of:
a. the current market value of the property as determined by an appraisal of comparable home values by a state-certified general real estate appraiser or a state-certified residential real estate appraiser as defined by section 178 of chapter 112, or
b. 25 percent in excess of the price the seller paid for the property.
(f) Servicing of the loan
i. The entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall provide periodic statements to the borrower during the life of the loan. The periodic statements requirements shall be the same, and on the same schedule, as those found in the Truth in Lending Act (TILA) requirements for mortgage loans, 12 CFR § 1026.41 even if the entity is not otherwise subject to the federal TILA
ii. The entity that originated a shared appreciation mortgage loan, and its successors or assigns shall provide notification of transfer of servicing and transfer of ownership of the loan to the borrower. Such requirements shall be the same and on the same timing as those found under TILA and the Real Estate Settlement Procures Act (RESPA) 12 U.S.C. 2601 et seq. even if the entity is not otherwise subject to the federal TILA or RESPA.
iii. The entity that originated the shared appreciation mortgage loan, and its successors or assigns, and the servicer of the shared appreciation mortgage loan shall act in good faith toward a borrower in the servicing of a shared appreciation mortgage and in any foreclosure action relating to such an obligation.
(g) Notice before the shared appreciation payment becomes due to the lender
i. Within 5 days of the borrower’s request at any time, and 90 days before the defined maturity date of a shared appreciation mortgage, the entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall provide notification to the borrower that includes:
a. An itemization of the amount of appreciation value that will be due upon the triggering of the right of the entity to receive a shared appreciation payment;
b. The date the shared appreciation payment is due; and
c. The manner in which the shared appreciation payment must be paid
ii. 90 days before the defined maturity date of a shared appreciation mortgage, the entity that originated a shared appreciation mortgage loan, and its successors or assigns, shall send the borrower via first class and certified mail to the property address a questionnaire asking whether the borrower wishes to remain in the home after maturity and providing a list of all home retention options available to the borrower from the entity, if any. If the borrower responds they want to remain in the home, the mortgage holder shall refer the borrower to a HUD-certified housing counselor, at the mortgage holder’s expense, for assistance in determining what options are available to remain in the home before any of the shared appreciation amounts can be disbursed.
(h) Remedies:
i. If any of the provisions of this section are violated, the contract shall be void and the mortgagor shall be entitled to actual damages and reasonable attorneys fees.
ii. Any shared appreciation agreement which violates any of the provisions of this section is declared void, is a per se violation of the Massachusetts chapter 93A, and is grounds for license revocation.
iii. Section 369 of chapter 128 of the Acts of 2024 is hereby repealed
iv. The Attorney General shall promulgate regulations necessary to carry out this section and shall be entitled to enforce these regulations, including by recommending to the Division of Banks that any licensure granted to the entity be revoked and by conducting investigations into compliance with these regulations.