Mortgage brokers and lenders in Massachusetts last week began complying with amended rate-lock and advertising regulations issued by the Division of Banks. The DOB hoped to clarify regulations first issued in 1994 when mortgage interest rates quickly rose and hundreds of consumers were stranded by the promise of faulty rate-lock understandings.

The DOB’s recent action came without a public hearing, which placed both regulated businesses and consumers in the disadvantageous position of having to abide with rules that may not serve their intended purpose. Already, mortgage trade groups have raised several concerns that reflect the nuances of the relationships between brokers, lenders and borrowers. The DOB, continuing to confound, will listen to these issues at a future public hearing. Overall, while the DOB’s action may have been proper, an out-of-sequence process leaves room to wonder.

Emergency rulemaking, the explanation offered by the DOB for issuing regulations sans comment, would be reasonable in the presence of a significant public crisis. In this instance, the DOB reportedly received 281 rate-lock associated complaints in 2003, a minor fraction of the more than 700,000 purchase money and refinance mortgages that closed in Massachusetts the same year. Hardly seems sufficient cause to justify emergency action, unless they expect rates to climb precipitously in the coming months, further exasperating the situation.

Banker & Tradesman does not disagree that rate-lock and advertising regulations required clarification and tightening up to be more consistent with the manner of conducting business. We do take issue with the Division of Banks’ use of emergency rulemaking and denying due process to an entire class of regulated businesses. The question now is how soon public hearings will be held and how quickly legitimate concerns will be addressed by further amendments.