COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
Docket No. 2006-014
ORDER TO CEASE AND DESIST
In the Matter of
DIAMOND MORTGAGE SERVICES, INC.
Mortgage Broker License No. MB0350, MB3536
Diamond Mortgage Services, Inc. ("Diamond Mortgage" or the "Corporation") with its main business office located at 17 Trescott Street, Taunton, Massachusetts 02780, 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 AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with representatives of the Division of Banks ("Division") dated AUGUST 11, 2006.
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, Diamond Mortgage agrees to the issuance of this ORDER TO CEASE AND DESIST ("ORDER") by the Commissioner of Banks ("Commissioner").
The Commissioner, therefore, accepts the CONSENT AGREEMENT and issues the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED that Diamond Mortgage, its directors, officers, employees, and agents, and their successors and assigns cease and desist from the following unlawful or unfair and deceptive mortgage broker practices in order to ensure compliance with laws and regulations referred to in the Division's Report of Examination/Inspection prepared as of June 20, 2006 (the "Report"):
1. Placing loan applicants into stated income loan products based upon borrower income information that the Corporation knows or should know to be inaccurate or not reasonably reliable.
2. Placing loan applicants into stated income loan products based upon borrower income information that the Corporation knows or should know includes income from persons who are neither listed on the Uniform Residential Loan Application ("1003 Form") nor intended to be obligated under the note.
3. Placing loan applicants into stated income loan products without first verifying the applicant's employment status for each occupation identified by the applicant(s) as a source of income to be considered in the underwriting of the mortgage loan by the mortgage lender or financial institution.
4. Making a payment of any fee or other thing of value to an individual conducting the mortgage broker business on behalf of Diamond Mortgage who is neither employed by Diamond Mortgage nor retained as a properly exempted individual authorized to conduct the business on the Corporation's behalf in accordance with General Laws chapter 255E, section 2 and other published standards set forth by the Division.
IT IS FURTHER ORDERED, that Diamond Mortgage, its officers and directors, and their successors and assigns, take affirmative action as follows:
5. Surrender the Corporation's Massachusetts mortgage broker license, license number MB3536, for the Corporation's mortgage broker business located at 238 Essex Street, 1 st Floor, Lawrence, Massachusetts by returning the original license certificate to the Division at One South Station, 3rd Floor, Boston, Massachusetts 02110 upon execution of this ORDER.
6. Refrain from submitting an application to obtain any additional licenses from the Commissioner, either individually or as an officer, director, owner, partner, member, or equivalent, of the entity seeking the license, for a period of twenty-four (24) months from the effective date of this ORDER, provided, however, that any such application submitted more than twenty four (24) months after the effective date of this ORDER shall not be denied on the basis of this ORDER or the CONSENT AGREEMENT.
7. Diamond Mortgage shall adopt or revise, as applicable, quality control standards contained in policies and procedures that will ensure that loan originators, and other employees and independent contractors operating on behalf of the Corporations are adequately supervised to ensure compliance with all state and federal laws and regulations applicable to those engaged in the business of a mortgage broker in Massachusetts.
(a) Such quality control standards shall provide for a loan review process to assess the compliance of Diamond Mortgage, and those engaged as independent contractors to operate on Diamond Mortgage behalf, with (a) the statutes, regulations, regulatory bulletins, and other relevant provisions of law applicable to those engaged in the business of a mortgage lender and mortgage broker in Massachusetts and (b) the provisions of this ORDER. Such procedures and policies shall be designed to prevent the recurrence of the violations and areas of concern addressed in the Report and this ORDER; and
(b) Within thirty (30) days of the effective date of this ORDER, Diamond 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 policies and procedures implemented pursuant to this ORDER.
8. In consideration of the activities identified by the Division and detailed in the Report and this ORDER, the Corporation agrees to the following:
(a) Diamond Mortgage agrees to submit a payment in the amount of two hundred thousand dollars ($200,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation's alleged failure to comply with certain state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage broker in Massachusetts. The administrative penalty shall be satisfied as follows:
(i) Twenty-five thousand dollars ($25,000.00) shall be due and payable immediately upon execution of this ORDER; and
(ii) A payment of twenty-five thousand dollars ($25,000.00) shall be due and payable upon the last day of each calendar quarter following the effective date of this ORDER, beginning with the calendar quarter ending December 31, 2006, until the administrative penalty set forth in Section 8(a) is satisfied in full.
(b) Diamond Mortgage shall remit payment(s) pursuant to Section 8(a) of this ORDER for the amount then due, payable to the "Commonwealth of Massachusetts," to the Office of the Commissioner of Banks, One South Station, 3 rd Floor, Boston, Massachusetts 02110. The Division shall remit the payment(s) for deposit into the General Fund of the Commonwealth.
9. 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 September 30, 2006, Diamond Mortgage shall furnish written progress reports to the Division, which shall address and include the following:
(a) A description of the form, content, and manner of all actions taken to address each Section of this ORDER and the results thereof;
(b) Written findings, signed by an authorized senior officer of the Corporation, detailing a review of management's and staff person's adherence to the policies and procedures adopted pursuant to this ORDER and to applicable statutes, regulations, and regulatory bulletins, as well as a description of any initiatives implemented during such quarter which are intended to improve Diamond Mortgage's compliance condition in Massachusetts and the results thereof;
(c) Interim financial statements, prepared in accordance with generally accepted accounting principles, for such calendar quarter. The quarterly financial statements shall include a balance sheet and a statement of income and expense which has been signed and dated by an authorized senior officer of Diamond Mortgage; and
(d) The reporting requirements 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.
10. In consideration of the foregoing ORDER, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke the Corporation'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. Nothing in this ORDER shall be construed as permitting Diamond Mortgage to violate any law, rule, regulation, or regulatory bulletin to which the Corporation is subject.
13. This ORDER shall become effective immediately upon the date of its issuance.
14. The provisions of this ORDER shall be binding upon Diamond Mortgage, its officers and directors, and their successors or assigns.
15. 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.
16. This ORDER and the CONSENT AGREEMENT are the complete documents representing the resolution of the matters presented by the Report. There are no other agreements between the Division and Diamond Mortgage.
By ORDER AND direction of the Commissioner of Banks.
Dated at Boston, Massachusetts, this 11th day of August, 2006.
By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts