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Matthew Hanaghan, a member of the firm’s Banking and Financial Services practice group, published “Additional Guidance Needed on Borrower's Interest Rule” in Banker & Tradesman on January 7. The article discusses the additional regulations State Attorney General Martha Coakley put into place on January 2, which supplement existing regulations addressing predatory lending practices under the Massachusetts Consumer Protection Act.

The biggest change for brokers is the “borrower’s interest” rule, which prohibits a broker from arranging a loan that is not in the borrower’s best interest. The attorney general issued guidance clarifying that, for an adjustable-rate mortgage, the lender or broker may consider factors such as the length of the initial fixed interest rate and the magnitude of the rate increase. Any criteria used to determine a borrower’s ability to repay should be clearly described in the lender’s written loan policy. In general, the regulations now place greater responsibility on lenders and brokers for determining whether a loan product is suitable for a particular borrower.