As attention at the State House focused on Big Dig finances, four banking bills were quietly signed into law by Lt. Gov. Jane Swift. The bills will ease restrictions for banks and mortgage companies doing business in the Bay State.

The Massachusetts Division of Banks filed H. 14, which allows state-chartered banks to enter into agency relationships to share offices, collect deposits or receive loan payments. Banks could use the new powers to close loans or service loans for another bank, whether it is based in Massachusetts or another state.

Although such cooperation among banks may not be common now, Commissioner of Banks Thomas J. Curry wrote the bill to allow state-chartered banks to stay competitive without merging into larger institutions. Bankers have proven that they can work collectively to meet a need, Curry said, citing the formation of the SUM surcharge-free ATM network.

“The theory behind the bill is, where we’re seeing extensive consolidation and some fairly large competitors within the commonwealth, this potentially could expand the reach of local community banks beyond their local service area,” Curry said in an interview with Banker & Tradesman. “It will be up to the industry to see if this will work from an operational and profitability standpoint.”

The law, Chapter 46 of the Acts of 2000, eliminates an old state prohibition on banks sharing office space so that banks can share capital expenses or construction costs for branch networks. Office sharing may make it more economical for banks to operate branches in underserved areas, Curry said.

“The size may be such of a particular institution that they don’t have the capacity to offer a service,” said Massachusetts Bankers Association Executive Vice President Kevin F. Kiley. “This provides latitude for banks to explore other options.”

Banks would need only a contract, not an approval from the Division of Banks, to enter into agency relationships with one another. The new power may enable smaller banks to expand their product offerings and branch locations without merging with another institution.

“We’re very cognizant of the benefits of having a large number of community banks,” Curry said. “If we can make them more effective competitors, I think everyone’s more well off.”

Home Equity Lines
A second bill filed by the Division of Banks and crafted by the Massachusetts Mortgage Association, H. 4478, will make it easier for mortgage brokers and lenders to issue home equity lines of credit. Previously, state regulations required non-bank lenders to obtain a separate small loan license to offer home equity lines.

“Many of the mortgage brokers and lenders did not do equity lines because they didn’t want to go through the time and expense of getting a small loan license,” said Howard Miselman, president of Continental Funding Corp. in Stoughton and MMA chairman. “You’re going to see a lot of mortgage companies and brokers and lenders alike offering home equity lines, which helps consumers.”

The law, Chapter 50 of the Acts of 2000, also clarifies how the Division of Banks will regulate home equity lines of credit. Open-end home equity lines of credit interest rate and late fee provisions will fall under the open-end credit law. However, the rest of the features of the loans will fall under the state’s mortgage lending laws. Before the passage of the law, different statutes regulated home equity lines of credit and mortgage brokers and lenders, making it more difficult for non-bank lenders to offer the products.

“What we’re trying to do is rationalize how we regulate home equity lines of credit … what is the appropriate statute to look for maximum interest rate, usury and licensing for non-bank lenders,” Curry said. “It clarifies what the rules are.”

The MBA pushed for the other two bills signed by Swift. State-chartered banks previously could not accept a primary residence as collateral on a second mortgage when the proceeds of the mortgage were to be used for a business purpose. Rep. Thomas A. Golden Jr. filed H. 2470 on behalf of the MBA. It will be enacted as Chapter 47.

“Under existing practices in the marketplace, on a first mortgage a consumer can get a home equity loan and use the equity for business,” Kiley said.

The new law allows consumers to do the same with second mortgages, as long as the practice does not impede the safety and soundness of the institution.

The final bill, H. 4586, was intended to simplify the administration of small estates by state-chartered banks, Kiley said. State law previously limited to $3,000 the amount of a deposit a bank could pay to the next of kin upon the death of the depositor. The new law, Chapter 48, will raise the limit to $10,000, which can be paid 30 days after the death of the depositor.

Swift signed the bills into law on March 25. They will become effective on June 22.