By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
No. 2003-0037

FINDINGS OF FACT AND ORDER TO CEASE AND DESIST


In the Matter of

KN MANAGEMENT, INC.; John Kress Williams
and Nathan Smith, Individually
6 Bartkus Farm Road
Concord, Massachusetts


The Commissioner of Banks ("Commissioner") having determined that KN Management, Inc. ("KN Management"), located at 6 Bartkus Farm Road, Concord, Massachusetts, has engaged, or is engaged in, or is about to engage in, acts or practices constituting violations of General Laws chapter 255E, and applicable regulations found at 209 CMR 42.00 et seq., hereby issues the following FINDINGS OF FACT AND ORDER TO CEASE AND DESIST ("ORDER") pursuant to subsection (b) of General Laws chapter 255E, section 2.

FINDINGS OF FACT

  1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of persons engaged in mortgage broker activities pursuant to General Laws chapter 255E.

  2. On February 27, 2003, the Division received an application from Nathan Smith for a mortgage broker license pursuant to General Laws chapter 255E.

  3. On March 5, 2003, Articles of Organization were filed with the Secretary of the Commonwealth for Approved Discount Mortgage, LLC, 200 Baker Avenue, Concord, Massachusetts with John Kress Williams and Nathan Smith as Managers.

  4. On March 26, 2003, Articles of Organization were filed with the Secretary of the Commonwealth for KN Management, Inc., 6 Bartkus Farm Road, Concord, Massachusetts with John Kress Williams and Nathan Smith as officers.

  5. On or about April 19, 2003, KN Management commenced accepting mortgage loan applications. Mortgage loan leads were taken from primarily the Internet through a site called TheLoanPage.com of Baltimore, Maryland. Leads and subsequent applications were from various states including Massachusetts. Loan applications identified the Loan Interviewer's employer as Approved Discount Mortgage, LLC, 200 Baker Avenue, Concord, Massachusetts.

  6. The Branch pipeline report provided to the Division by Jack Daly of Platinum Capital Group ("Platinum"), Irvine, California indicates that applications were accepted for credit approval from KN Management as early as April 24, 2003.

  7. On May 1, 2003, numerous loan applications were taken identifying the interviewer's employer as Approved Discount Mortgage LLC or Novastar Home Mortgage, Inc. ("Novastar"). Numerous disclosures identify Novastar of Norwalk, Connecticut as the lender.

  8. On May 12, 2003, the Division received an application from Approved Discount Mortgage, LLC for a mortgage lender and mortgage broker license. The application included a reference letter dated March 19, 2003 signed by Serge Bevil, identified as an owner of Landmark Financial at the same address in Norwalk, Connecticut as Novastar. The Division had previously approved a mortgage broker license for Novastar, 607 Main Street, Norwalk, Connecticut naming Serve Bevil as the manager. The Division has no record that a Landmark Financial branch is located at this address at this time.

  9. On or about June 1, 2003, applications continued to be processed with some disclosures identifying Novastar as the lender and some identifying Platinum Capital Group as the lender.

  10. On June 3, 2003, a loan to Carol and Paul Brown was closed. Numerous fees were paid to KN Management as indicated on the settlement statement.

  11. On June 6, 2003, Jack Daly said Platinum gave their approval to open a branch office in Concord, Massachusetts at 200 Baker Avenue, Concord, Massachusetts.

  12. On June 11, 2003, the Division denied the application of Nathan Smith for a mortgage broker license for failing to pay the investigation fee and failing to respond to two requests for additional information.

  13. On or about June 27, 2003, an application for a branch location for Platinum Mortgage Group at 200 Baker Avenue, Concord, Massachusetts was received by the Division.

  14. KN Management continued processing loan applications though Novastar and Platinum in July 2003. The Branch pipeline report indicates that 23 loans were processed by Platinum prior to approval of a branch license.

  15. On August 6, 2003, the Division approved the branch license for Platinum.

  16. On August 12, 2003, the Division issued a cease and desist letter to Approved Discount Mortgage at 200 Baker Avenue, Concord, Massachusetts.

  17. Massachusetts General Laws chapter 255E, section 2 states, in part, that:

    No person shall act as a mortgage broker...with respect to residential property unless first obtaining a license from the commissioner...

CONCLUSIONS OF LAW

  1. Based upon the information contained in paragraphs 2 through 17, KN Management is operating the business of a mortgage broker without a license, within the meaning of General Laws chapter 255E.

  2. Based upon the information contained in paragraphs 2 through 17, KN Management has unlawfully engaged in the business of a mortgage broker pursuant to General Laws chapter 255E.

ORDER TO CEASE AND DESIST

  1. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

  2. ORDERED that KN Management, John Kress Williams and Nathan Smith shall immediately cease engaging in the activity of a mortgage broker on residential property in Massachusetts, not otherwise permitted by the terms of this ORDER. Therefore, KN Management, John Kress Williams, and Nathan Smith are ordered to immediately cease soliciting or accepting residential mortgage loan applications from consumers for residential property located in Massachusetts.

  3. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan application in a separate escrow account maintained at a federally insured bank.

  4. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall place their entire open application list to a qualified lender with no loss to applicants. KN Mortgage, John Kress Williams and Nathan Smith shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender.

  5. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall immediately secure all pending mortgage loan application files and shall make such files, in their entirety, available to the Commissioner upon request.

  6. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall be liable to any additional costs incurred by Massachusetts consumers as a result of its failure to place the consumers' applications with a qualified lender.

    1. Within thirty (30) days of the effective date of this ORDER, KN Management shall submit to the Commissioner evidence of any payments issued to lenders on the consumers' behalf pursuant to this Section of the ORDER. Such evidence shall include the lender's name and contact information, the consumers' names the dates of the loans closed, check numbers, and the amount of the payments;

    2. Upon the expiration of 30 days from the effective date of this ORDER KN Management shall submit a complete report to the Commissioner of any mortgage loan application(s) which remains pending as of such date, indicating the applicants' name, the lender with which such loan may be scheduled to close, the terms under which such loan is to close, and the date upon which such loan is scheduled to close.

  7. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall submit to the Commissioner a detailed record of all of the Company's pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall be submitted to the Commissioner within five (5) days of the effective date of this ORDER and shall include all information on file, regarding KN Management's open application list, including but not necessarily limited to, the following:

    The names of all individuals from whom KN Management, John Kress Williams and Nathan Smith has either solicited or accepted an application for a residential mortgage loan; the applicants' addresses and telephone numbers; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; application status (i.e., filed, submitted to lenders); and scheduled closing dates.

  8. IT IS FURTHER ORDERED that KN Management, John Kress Williams and Nathan Smith shall submit to the Commissioner a detailed record of all mortgage lenders and financial institutions to whom KN Management has placed mortgage loan applications which are currently pending as of the effective date of this ORDER.

  9. IT IS FURTHER ORDERED that this ORDER shall become effective immediately and shall remain in effect unless set aside, limited, or suspended by the Commissioner or upon court order after review under General Laws chapter 30A.

By ORDER AND direction of the Commissioner of Banks.

Dated at Boston, Massachusetts, this 31st day of October, 2003.

By: Thomas J. Curry
Commissioner of Banks
Commonwealth of Massachusetts