Massachusetts Attorney General Promulgates Final Shared-Appreciation Mortgage Regulations Applicable to Nonprofits Offering Foreclosure Relief

The Massachusetts Attorney General promulgated final shared-appreciation mortgage regulations at 940 CMR 39.00. These regulations, effective November 6, 2026, implement Mass. Gen. Laws ch. 244, § 35C(i), but are narrow in scope.

The regulations establish the conditions under which a tax-exempt nonprofit, or an entity it controls, can use a shared-appreciation second mortgage (SAM) in a foreclosure-rescue/reacquisition transaction and receive the statute's limited liability protection. They are not general regulations of commercial home-equity investment or shared-equity products. The eligible borrower generally must be acquiring or reacquiring a Massachusetts residence after receiving a foreclosure notice or being at least 90 days delinquent on the prior mortgage.

The key requirements are:

Extensive Consumer Disclosures and Affirmative Opt-In

The borrower must sign and date an "Initial Notice of Shared Appreciation Mortgage Agreement." It must be supplied to applicants no later than the Loan Estimate (LE) and must use corresponding LE values where applicable. The disclosure regime addresses the shared-appreciation percentage, maximum dollar payment, projected payments using a 6.5% annualized appreciation assumption, applicable rates, and the events that cause the SAM obligation to become payable.

The SAM must have a Defined Maximum Exposure

The rules define a "Maximum SAM payment" as a specific dollar amount, rather than leaving the homeowner's potential obligation open-ended. They also prescribe how the property's starting and appreciated values are determined.

Property Appreciation is Adjusted for Significant Homeowner Improvements

"Appreciated Property Value" generally deducts documented homeowner-funded capital improvements exceeding $5,000 during the SAM's term, subject to specified exclusions. On a qualifying arm's-length sale where the borrower retains no interest, the valuation cannot exceed the sale price.

Federal-style Servicing Protections are Imported into the Transaction

SAM mortgagees and servicers must follow specified federal mortgage servicing, servicing-transfer notification, and loss-mitigation requirements, even where the transaction otherwise would be exempt from TILA or RESPA. Annual statements must provide updated estimated property values and potential SAM payment obligations.

The statutory liability safe harbor is narrow. The limitation on liability applies only to eligible entities and specified participants in the contemporaneous first mortgage, and only with respect to the use or terms of the SAM/SAM note. Importantly, it does not insulate conduct involving advertising, marketing, underwriting, servicing, or collections.

Regulatory Reporting is Substantial

An entity seeking the statutory protection must give the Massachusetts Attorney General 30 days' advance notice before offering the SAM product and must make annual regulatory filings containing transaction-level data and compliance documentation.

Takeaways

While Massachusetts has not enacted legislation more broadly classifying general home-equity investment or shared-equity products offered to consumers as mortgage loans, the Massachusetts Attorney General has taken that position in an ongoing administrative enforcement action. In addition, the recent Massachusetts regulations on shared-appreciation mortgages applicable to nonprofits offering foreclosure relief may reflect the Attorney General's view of how home-equity investments more generally should be regulated in Massachusetts. Further, to date, only four states (Maryland, Connecticut, Illinois, and Maine) have enacted legislation classifying general home-equity investment or shared-equity products offered to consumers as mortgage loans. Several states currently have legislation pending that would classify home-equity investment or shared-equity products offered to consumers are mortgage loans. However, at least half a dozen other states' mortgage regulators have stated informally (either publicly or privately) that home-equity investment or shared-equity products offered to consumers are mortgage loans and that offerors of such products should be licensed as mortgage lenders. 

Thus, the trend appears to be that, over time, home-equity investment agreements will be regulated more like mortgage loans. Nevertheless, good governance dictates recognition that these programs are unique, serve purposes that traditional mortgages may not serve, and deserve separate and special rules of their own.