This may be the season for cobwebs and coffins, but one state legislator is designing a bill that would clean up a plethora of past legislation and slam the lid on mortgage restrictions placed on Bay State banks.

Sen. Andrea Nuciforo Jr., D-Pittsfield, is currently drafting a bill to be submitted by the Dec. 6 deadline for legislation to be filed for the next formal session on Beacon Hill.

“The laws relative to banks and banking are very old. Some have been in place since the 1930s,” said Nuciforo. “We’re trying to change them so they accurately reflect what’s going on,” he said.

One of the main points of his proposed bill will be the elimination of the three types of charters banks may be created under: cooperative, savings or trust. Those distinctions may have been important in the 1940s and 1950s, said Nuciforo, but since then the state’s Brennan Bill I and II has virtually erased the distinctions among what banks with different charters were allowed to offer as far as services, he said.

“So we are introducing the commonwealth bank one-size-fits-all charter,” he said. The bill would only necessarily apply to new banks created in the state after the legislation goes into effect, he said. Existing banks may retain their original charter or opt to change over to the new charter.

“Generally, issues of removing provisions that add to the regulatory burden … are helpful. The whole issue of parity is an ongoing subject we are extremely supportive of,” said Kevin F. Kiley, executive vice president and chief operating officer for the Massachusetts Bankers Association. Kiley said he supported the senator’s efforts but refrained from commenting on some issues included in the bill with which he is not familiar.

“A lot of it is in line with our objective of maintaining a competitive advantage [for banks],” said Kiley of Nuciforo’s bill.

“We have been involved in conversations with the Senate leader, the [state bank] commissioner’s office and others about looking at recodification of various parts of the legislation,” he said.

“I think it will be much less confusing to consumers because I think consumers think there are differences [between a cooperative bank and a savings bank] when functionally they are the same,” said Nuciforo, who is chairman of the Joint Committee on Banks and Banking. “This is a matter of internal consistency within the statutes,” he said.

The bill also would make substantial changes to M.G.L. 167E, which classifies the mortgage loans banks can make. There are 19 different classifications into which a loan made by a bank must fall. Nuciforo contends the list is restrictive, forcing banks to pigeonhole loans into available classes.

His proposal would categorize loans into five groups with a “broad” stroke so that banks may custom-design loans on a case-by-case basis, he said.

“We’re giving people possibility. We’re trying to give our state banks true parity,” he said, referencing the increased competition banks face from non-bank lenders that are not subject to the same regulations.

The current statute does outline a series of specific provisions as to how banks can make mortgage loans in Massachusetts, explained Kiley. “As time has changed, the statutes haven’t been able to keep up with the market changes,” he said. Today, as banks compete against such nonbank entities as brokers and Internet lenders, the rules “arguably create a comparative disadvantage,” against banks, said Kiley.

The change, said Nuciforo, “will allow [banks] to fashion products better to fit customer needs better.”

The third facet of the bill would create a program, funded from the general fund, to prompt banks to make basic accounts available for consumers, said Nuciforo.

“We’re going to be encouraging banks to offer very inexpensive or free accounts,” he said. Currently, many people, especially in urban areas, become customers of check-cashing services that take a portion of the money from the check as a service charge, he said. If a free account from a bank were available, more customers could be generated for the bank and the people would keep more from their paycheck.

“It would be a voluntary program,” said Joshua L. Abrams, legal counsel to the senator. The program would be under the jurisdiction of the commissioner of banks, who would help financial institutions reach out to the community and encourage them to open the free or low-cost accounts, said Abrams.

‘Competitive World’
Another facet of the bill reflects a problem many states are facing, the regulation of Internet banks.

“For CRA purposes, it’s hard to figure out what ‘the community’ is,” said Nuciforo, referring to the Community Reinvestment Act. Generally, CRA measures a bank’s community in geographic relation to its bricks-and-mortar offices. In the case of Internet banks, that may not be possible. Instead, Nuciforo is proposing the establishment of areas, based on information such as income and property, where the Internet bank may choose to fulfill CRA requirements in a variety of ways.

“What we’re trying to do is establish statutorily some guidelines,” said Abrams. There are certain areas that might benefit from Internet banks choosing, for example, to supply a library in the area with computers and Internet access, he said.

“We would add to the list of things that fulfill CRA requirements,” said Nuciforo.

Of course, supplying Internet access would also be an available alternative to bricks-and-mortar banks as long as the commissioner of banks approves the plan, he said.

Lastly, Nuciforo’s bill would, if approved, remove some barriers for where banks can open branches and supply loans, he said.

It would permit Massachusetts’ banks to open a branch in any adjoining state and allow those banks in good CRA standing to make loans in any of those states.

“There’s a restriction on banking and where you can make loans,” he said. “You can make a mortgage loan within 50 miles of the home office,” he said. We’re going to make it easier for banks to make non-Massachusetts loans, he said. A bank in good CRA standing would be allowed to make loans anywhere in any adjoining state.

“It’s a very competitive world out there. There’s been a great proliferation of mortgage lenders,” he said.

The placement of branches and ATMs had to be approved by the commissioner but “we’re giving banks the opportunity to evaluate the market” and make those choices for themselves, he said.

The bill, in draft form now, should be finalized and submitted within the next several weeks, he said.

“The whole point of this is to make it [Massachusetts] more attractive [to banks], rather than less,” said Abrams.

Nuciforo said M.G.L. chapters 162 through 172 all need work. “You’ll see that what we’ve done in the banking committee is tinker around the edges and it’s time to do more. The chapters are outdated and need some work,” he said.

“We have moved so quickly into a technology era that … additional brick-and-mortar banks have to have the latitude to compete … Let’s recognize the market realities and provide for a streamlining and modernization of regulations, so a bank can compete in the changing world,” said Kiley.