By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS

MORTGAGE BROKER LICENSING
Docket No. 2005-002

CONSENT ORDER


In the Matter of
LOANSTAR MORTGAGE, INC.
Brockton, Massachusetts

Mortgage Broker License No. MB2308


WHEREAS, LOANSTAR MORTGAGE, INC., Brockton, Massachusetts ("LoanStar Mortgage" or the "Corporation"), a licensed mortgage broker under Massachusetts General Laws chapter 255E, section 2, has been advised of its right to Notice and Hearing pursuant to General Laws chapter 255E, section 7(a), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER ("CONSENT AGREEMENT") with representatives of the Division of Banks ("Division") dated March 21, 2005, whereby, solely for the purpose of settling this matter, and without admitting any allegations or implications of fact or the existence of any violation of state or federal laws and regulations governing the conduct and operation of a mortgage broker, LoanStar Mortgage agrees to the issuance of this CONSENT ORDER ("ORDER") by the Commissioner of Banks ("Commissioner");

WHEREAS, an examination/inspection of LoanStar Mortgage was conducted pursuant to General Laws chapter 255E, section 8, as of September 22, 2004, to assess the Corporation's level of compliance with applicable Massachusetts statutes and the Division's regulations governing the conduct of those engaged in the business of a mortgage broker in the Commonwealth; and

WHEREAS, the Report of Examination/Inspection (the "Report") issued pursuant to the Division's examination/inspection of LoanStar Mortgage as of September 22, 2004 alleged substantial non-compliance with applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage broker in Massachusetts.

ORDER

NOW COME the parties in the above-captioned matter, the Division and LoanStar Mortgage, and stipulate and agree as follows:

  1. LoanStar Mortgage shall immediately take all necessary steps to review and revise the Corporation's policies and procedures to ensure that any origination fees, mortgage broker fees, processing fees, or similar fees collected as compensation for administrative costs incurred in originating the mortgage loan, are not charged to consumers except to the extent that such fees or points have been properly disclosed to the consumer, in writing, prior to the closing of the mortgage loan.

    1. Within 10 days of the effective date of this ORDER, the Corporation shall cause to be made a review of all Massachusetts residential mortgage loans originated by LoanStar Mortgage since July 19, 2001 and shall identify all mortgage loan transactions in which the amount actually paid by the consumer as an origination fee, mortgage broker fee, processing fee, or similar fee, as recorded on the settlement agreement, exceeded the amount disclosed to the consumer, in writing, for such fees prior to closing;

    2. In each mortgage loan transaction identified pursuant to Section (1)(a) of this ORDER, LoanStar Mortgage shall reimburse the consumer the difference between the actual charge assessed to the individual consumer as an origination fee, mortgage broker fee, processing fee, or similar fee and the amount disclosed in writing for such fees prior to closing;

    3. With the Corporation's first written progress report which is to be submitted to the Commissioner pursuant to Section (7)(a) of this ORDER, LoanStar Mortgage shall submit to the Commissioner a list of all borrowers identified pursuant to the above described review of residential mortgage loan transactions, including those borrowers identified on page 1-2 of the Report, to whom a reimbursement is owed by LoanStar Mortgage in accordance with this Section of the ORDER;

    4. Within thirty (30) days of the effective date of this ORDER, LoanStar Mortgage shall submit evidence of all reimbursements issued to consumers pursuant to Section (1)(b) of this ORDER, including the consumers' names, the dates the loans closed, check numbers, and the amount of the reimbursements; and

    5. LoanStar Mortgage shall ensure that a system of internal controls is established to monitor the Corporation's compliance with the revised practices and procedures established and implemented pursuant to this Section of the ORDER.

  2. LoanStar Mortgage shall refrain from commingling fees collected from any mortgage loan applicant with the Corporation's funds held in any of its operating accounts while the mortgage loan transaction remains pending. Moreover, LoanStar Mortgage shall deposit all application fees, processing fees, and all other prepaid mortgage loan fees, which it may accept, in an escrow trust account to be maintained at a federally insured bank. The Corporation may withdraw funds from the escrow account as individual loans are closed, loan applications are withdrawn, or as otherwise provided in the Division's regulation 209 CMR 42.11.

  3. Within twenty (20) days of the effective date of this ORDER, LoanStar Mortgage shall revise its procedures to ensure that all Good Faith Estimates provided to consumers are completed in accordance with the provisions of the Real Estate Settlement Procedures Act, 24 CFR Part 3500.7 and delivered to consumers within the time period specified therein.

  4. Within twenty (20) days of the effective date of this ORDER, LoanStar Mortgage shall revise its procedures to ensure that all applicable consumers are provided with an Attorney General's Mortgage Broker Disclosure Form, completed in accordance with, and in the form specified, by the provisions of the Office of the Attorney General's regulation 940 CMR 8.05(1). The revisions to be implemented to address this Section of the ORDER shall include, but are not limited to, ensuring that the Attorney General's Mortgage Broker Disclosure Form is completed with as much information as is available at the time the disclosure is provided to the consumer.

  5. Within twenty (20) days of the effective date of this ORDER, LoanStar Mortgage shall revise its procedures to ensure that all residential mortgage loan applicants are provided with a Loan Origination and Compensation Agreement, completed in accordance with, and in the form specified, by the provisions of the Division's regulation 209 CMR 42.16. The revisions to be implemented to address this Section of the ORDER shall include, but are not limited to, ensuring that the Loan Origination and Compensation Agreement is completed with as much information as is available at the time the document is provided to the applicant.

  6. LoanStar Mortgage shall immediately revise its advertising policies and procedures to ensure that in all advertisements, as that term is defined under the Division's regulation 209 CMR 32.02, used by LoanStar Mortgage, the Corporation discloses the type and number of its Massachusetts mortgage broker license in accordance with the Division's regulation 209 CMR 42.15 and the Office of the Attorney General's regulation 940 CMR 8.04(2). The revisions to the Corporation's advertising policies and procedures implemented in response to this Section of the ORDER shall further ensure that, while performing in the capacity of a mortgage broker, LoanStar Mortgage refrains from making any representation that the Corporation is authorized to approve or fund a residential mortgage loan.

  7. The Corporation shall comply with all laws and regulations applicable to its conducting the business of a mortgage broker, including, but not limited to, Massachusetts General Laws chapter 255E, and the Division's regulation 209 CMR 42.00 et seq. Such obligations shall necessarily include the duty to address and correct, within twenty (20) days of receipt of the Report, all violations and areas of concern as specified in such Report issued pursuant to the Division's examination/inspection of LoanStar Mortgage as of September 22, 2004.

    1. Within 20 days of the Corporation's receipt of the Report, LoanStar Mortgage shall submit to the Commissioner a written response that addresses each of the violations specified in the Report. The written response shall describe the revised policies and procedures adopted by LoanStar Mortgage to implement all corrective actions set forth in: (i) the "Examiner's Comments and Conclusions" section of the Report and (ii) the provisions of this ORDER;

    2. Within thirty (30) days from the effective date of this ORDER, LoanStar Mortgage shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Corporation's compliance with: (a) the statutes, rules, regulations, regulatory bulletins, and other relevant provisions of law applicable to those engaged in the business of a mortgage broker in Massachusetts and (b) the provisions of this ORDER. Such quality control standards shall be designed to prevent the recurrence of the violations and areas of concern addressed in the Report; and

    3. LoanStar Mortgage shall establish, implement, and maintain procedures and policies to ensure that all applicable staff receives adequate instruction and ongoing, periodic training to ensure proper implementation and execution of the revised practices and procedures implemented pursuant to this ORDER.

  8. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this ORDER, beginning with the calendar quarter ending March 31, 2005, LoanStar Mortgage shall furnish written progress reports to the Division, which shall address and include the following:

    1. A description of the form, content, and manner of any actions taken to address each Section of this ORDER and the results thereof;

    2. Written findings prepared by the Corporation detailing a review of management's and staff's adherence to the policies, programs, and procedures adopted pursuant to this ORDER and to applicable statutes, regulations, and rules, as well as a description of any operational changes implemented during such quarter which are intended to improve LoanStar Mortgage's compliance condition in Massachusetts and the results thereof; and

    3. The reporting requirement to the Division contained in this Section of the ORDER shall remain in effect and shall not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this ORDER from the Commissioner.

  9. Nothing in this ORDER shall be construed as permitting LoanStar Mortgage to violate any law, rule, regulation, or regulatory bulletin to which LoanStar Mortgage is subject.

  10. In consideration of the foregoing ORDER, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke LoanStar Mortgage's mortgage broker license under General Laws chapter 255E, section 6, while this ORDER is in effect.

  11. Failure to comply with the terms of this ORDER shall constitute grounds for license suspension and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.

  12. This ORDER shall become effective immediately upon the date of its issuance.

  13. The provisions of this ORDER shall be binding upon LoanStar Mortgage and its managers and members, and their successors or assigns.

  14. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.

  15. This ORDER and the CONSENT AGREEMENT are the complete documents representing the resolution of this matter. There are no other agreements between the Division and LoanStar Mortgage.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 21st day of March, 2005.

By: Steven L. Antonakes
Commissioner of Banks