Over the past month, Document Systems, Inc., has received a number of calls from customers inquiring into the prepayment penalty component of the "Points and Fees Test" for Massachusetts' State High Cost Analysis in DocMagic.

"Points and fees" is defined under Massachusetts General Laws Annotated 183C § 2, and includes "...(iii) the maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents; (iv) all prepayment fees of penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same lender;..." To comply with this statutory definition, DocMagic works in the background and performs a number of complicated calculations to determine what the maximum prepayment fees and penalties would be under the loan terms given by the DocMagic user. The result of these calculations is automatically inserted into the "Maximum Prepayment Fees Permitted" field in the State High Cost Analysis window of DocMagic.

In addition, note that if the loan is refinancing a previous loan made by the same lender, the DocMagic user must insert the amount of that penalty into the "Prior Prepay Amt" field in the "Miscellaneous" section of DocMagic's "Terms/ARM" window. This amount must be factored into the "Points and Fees Test" for Massachusetts' State High Cost Analysis.

If you have any questions concerning Massachusetts' State High Cost Analysis, please contact the Compliance Department at (800) 649-1362.

Melanie A. Feliciano is Assistant General Counsel of Document Systems, Inc. and a member of its Compliance Department.