Good Funds Law
A synopsis of the "Good Funds Law," in layman's terms, would be as follows:
If a lender lends money in a real estate transaction that involves a mortgage, the mortgage shall not recorded until the lender has forwarded to either the mortgagor, the mortgagor's attorney, or the mortgagee's attorney the proceeds of the loan in the form of a certified check, bank treasurer's check, cashier's check, or wired funds, but the attorneys, once they receive the money, do not have to disburse the funds in that form.
The "Good Funds Law" is contained in G.L.c. 183, §63B. The full text of the statute is as follows:
No mortgagee who makes a loan to be secured by a mortgage or lien on real estate located in the commonwealth in conjunction with which, a mortgage deed evidencing the same is to be recorded in a registry of deeds or registry district in the commonwealth, shall deliver said deed or cause the same to be delivered into the possession of such registry of deeds or registry district for the purpose of the recording thereof unless prior to the time said deed is so delivered for recording, said mortgagee has caused the full amount of the proceeds of such loan due to the mortgagor pursuant to the settlement statement relevant thereto given to said mortgagor or in the instance of any such loan in which the full amount of the proceeds due to the mortgagor pursuant to the terms thereof are not to be advanced prior to said recording, so much thereof as is designated in the loan agreement, to be transferred to the mortgagor, the mortgagor's attorney or the mortgagee's attorney in the form of a certified check, bank treasurer's check, cashier's check or by a transfer of funds between accounts within the same state or federally chartered bank or credit union, or by the funds-transfer system owned and operated by the Federal Reserve Banks, or by a transfer of funds processed by an automated clearinghouse; provided, however, that neither the mortgagor's attorney or the mortgagee's attorney shall be required to make disbursements or deliver said proceeds to the mortgagor in such form; provided, however, that the provisions of this section shall not apply to the commonwealth, its agencies, or political subdivisions.
Note that the Good Funds law is a prohibition again the lender (and supposedly its agent, the closing attorney) from recording a lien before the loan has been funded, and
The purpose of the Good Funds law is to prevent that situation that had occurred on occasion in the past, where the lender had taken collateral against the borrower's property but had failed to fund the transaction, thus preventing the satisfaction of a prior lien that was supposed to have been paid from the loan proceeds.