By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
No. 2005-021

CONSENT ORDER


In the Matter of

INNOVATIVE MORTGAGE SERVICES, LLC
Medford, Massachusetts

Mortgage Broker License No. MB3049


WHEREAS, INNOVATIVE MORTGAGE SERVICES, LLC, Medford, Massachusetts ("Innovative Mortgage" or the "Company"), 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 January 26, 2006, 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, Innovative Mortgage agrees to the issuance of this CONSENT ORDER ("ORDER") by the Commissioner of Banks ("Commissioner");

WHEREAS, an examination/inspection of Innovative Mortgage was conducted pursuant to General Laws chapter 255E, section 8, as of April 27, 2005, to assess the Company'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 Innovative Mortgage as of April 27, 2005 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 Innovative Mortgage, and stipulate and agree as follows:

  1. Innovative Mortgage shall immediately take all necessary steps to review and revise the Company's policies and procedures to ensure that any loan fees, mortgage broker fees, application 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 Company shall cause to be made a review of all Massachusetts residential mortgage loans originated by Innovative Mortgage since April 1, 2003 and shall identify all mortgage loan transactions in which the amount actually paid by the consumer as a loan fee, mortgage broker fee, application 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 Paragraph (1)(a) of this ORDER, Innovative Mortgage shall reimburse the consumer the difference between the actual charge assessed to the individual consumer as a loan fee, mortgage broker fee, processing fee, or similar fee and the amount disclosed in writing for such fees prior to closing;
    3. With the Company's first written progress report which is to be submitted to the Commissioner pursuant to Paragraph (8)(a) of this ORDER, Innovative 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 1-3 of the Report, to whom a reimbursement is owed by Innovative Mortgage in accordance with this Paragraph of the ORDER;
    4. Within thirty (30) days of the effective date of this ORDER, Innovative Mortgage shall submit evidence of all reimbursements issued to consumers pursuant to Paragraph (1)(b) and (1)(c) of this ORDER, including the consumers' names, the dates the loans closed, check numbers, and the amount of the reimbursements; and
    5. Innovative Mortgage shall ensure that a system of internal controls is established to monitor the Company's compliance with the revised practices and procedures established and implemented pursuant to this Paragraph of the ORDER.
  2. Innovative Mortgage shall immediately cease collecting compensation from any consumer in consideration of any representation that the Company is underwriting the mortgage loan and shall issue reimbursements to the consumers identified in the Report from whom Innovative Mortgage collected an underwriting fee. The amount of such reimbursement shall equal the total amount charged by Innovative Mortgage to the individual consumer as an underwriting fee.
    1. Within ten (10) days of the effective date of this ORDER, Innovative Mortgage shall cause to be made a review of all Massachusetts residential mortgage loans originated by the Company since April 1, 2003 and shall identify all mortgage loan transactions in which the consumer was charged an underwriting fee by Innovative Mortgage;
    2. In each mortgage loan transaction identified pursuant to Paragraph (2)(a) of this ORDER, Innovative Mortgage shall reimburse the consumer the total amount charged by Innovative Mortgage to the individual consumer as an underwriting fee;
    3. With the Company's first written progress report which is to be submitted to the Commissioner pursuant to Paragraph (8)(a) of this ORDER, Innovative 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 1-4 of the Report, to whom a reimbursement is owed by Innovative Mortgage in accordance with this Paragraph of the ORDER;
    4. Within thirty (30) days of the effective date of this ORDER, Innovative Mortgage shall submit evidence of all reimbursements issued to consumers pursuant to Paragraphs (2)(b) and (2)(c) of this ORDER, including the consumers' names, the dates the loans closed, check numbers, and the amount of the reimbursements; and
    5. Innovative Mortgage shall ensure that a system of internal controls is established to monitor the Company's compliance with the revised practices and procedures established and implemented pursuant to this Paragraph of the ORDER.
  3. Innovative Mortgage shall immediately cease soliciting or accepting residential mortgage loan applications for residential property located in Massachusetts from any individual or entity engaging in the activity of a mortgage broker, who is not employed by the Company or who otherwise fails to qualify for exemption from licensure under General Laws, chapter 255E, section 2 unless and until the Company and the individual have executed the Statement of Accountability and Exemption Affidavit and submitted the completed documents to the Division.
    1. In any instance in which Innovative Mortgage retains a natural person to engage in the licensed business on the Company's behalf as an independent contractor associated with and under the direction of the Company, Innovative Mortgage shall submit to the Division a completed Statement of Accountability and an Exclusivity Affidavit, signed by the individual sought to be exempted from the applicable license requirement, at least five (5) days before such individual begins engaging in the licensed business on Innovative Mortgage's behalf. The Statement of Accountability and Exclusivity Affidavit doc format of acctxmpt.doc
shall be completed in the form that such documents appear on the Division's website, without alterations or deletions. The provisions of this subsection of the ORDER shall necessarily prohibit any such qualifying independent contractor from employing, or otherwise compensating, any other natural person or legal entity to engage in the licensed business on behalf of either the independent contractor or Innovative Mortgage as such person or entity would be required to separately obtain the relevant license from the Commissioner. However, the provisions of this ORDER shall not prohibit Innovative Mortgage from co-brokering mortgage loans with an unassociated, licensed mortgage broker, provided that the co-brokered transaction is conducted in a manner permitted by applicable federal and state law;
    2. Innovative Mortgage shall refrain from either directly, or indirectly, issuing or accepting any fee, payment, any portion thereof, or any other form of compensation, to or from any entity which is required to be licensed under Massachusetts General Laws chapter 255E, section 2 and which Innovative Mortgage knows, or through reasonable efforts could know, has failed to obtain the relevant license from the Commissioner;
    3. Innovative Mortgage shall adopt or revise, as applicable, quality control standards contained in policies and procedures that will ensure that branch operators, loan originators, and other employees operating on behalf of Innovative Mortgage are adequately supervised to ensure compliance with all state and federal laws and regulations applicable to those engaged in the business of a mortgage lender and mortgage broker in Massachusetts. Such quality control standards shall provide for a loan review process to assess the compliance of Innovative Mortgage, and those engaged as independent contractors to operate on Innovative Mortgage's 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.
  4. Within twenty (20) days of the effective date of this ORDER, Innovative Mortgage shall revise its procedures to ensure that the Company refrains from providing any consumer with any disclosure which, pursuant to the applicable statute, regulation, or regulatory bulletin, is intended to be issued exclusively by the lender or creditor in the residential mortgage loan transaction.
    1. The provisions of this Paragraph of the ORDER shall necessarily prohibit Innovative Mortgage from issuing an approval, denial, or other adverse action relating to an extension of credit in a mortgage loan transaction in Massachusetts when performing in the capacity of a mortgage broker.
  5. Within twenty (20) days of the effective date of this ORDER, Innovative 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).
  6. Within twenty (20) days of the effective date of this ORDER, Innovative Mortgage shall revise its procedures to ensure compliance with the records retention provisions of 209 CMR 42.09 and retain its books and records in a manner which will demonstrate the Company's compliance with timing requirements of applicable disclosures, including the Attorney General's Mortgage Broker disclosure under the Attorney General's regulation 940 CMR 8.05(5), the good faith estimate under the Real Estate Settlement Procedures Act (RESPA) regulation 24 CFR 3500.7(b) and the Loan Origination and Compensation Agreement under the Division's regulation 209 CMR 42.12A(5).
  7. Innovative Mortgage shall immediately revise its advertising materials and procedures to ensure that all advertisements, as that term is defined under the Division's regulation 209 CMR 32.02, used by Innovative Mortgage make no representations that the Company is authorized to approve or fund a residential mortgage loan. The revisions to the Company's advertising materials and procedures implemented in response to this Paragraph of the ORDER shall further ensure that Innovative Mortgage complies with the Division's regulation 209 CMR 32.24 regarding advertisements stating a rate of finance charge and 209 CMR 42.12A(4) regarding the additional disclosures required when the Company's advertisement includes an interest rate or loan term.
  8. The Company 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 addressed in such Report issued pursuant to the Division's examination/inspection of Innovative Mortgage as of April 27, 2005.
    1. Within twenty (20) days of the Company's receipt of the Report, Innovative 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 Innovative 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 twenty (20) days from the effective date of this ORDER, Innovative Mortgage shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Company'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 addressed in the Report; and
    3. Innovative 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.
  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 December 31, 2005, Innovative 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 Paragraph of this ORDER and the results thereof;
    2. Written findings prepared by the Company 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 Innovative Mortgage's compliance condition in Massachusetts and the results thereof; and
    3. The reporting requirement to the Division contained in this Paragraph 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. Nothing in this ORDER shall be construed as permitting Innovative Mortgage to violate any law, rule, regulation, or regulatory bulletin to which Innovative Mortgage is subject.
  11. In consideration of the foregoing ORDER, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Innovative Mortgage's mortgage broker license under General Laws chapter 255E, section 6, while this ORDER is in effect.
  12. 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.
  13. This ORDER shall become effective immediately upon the date of its issuance.
  14. The provisions of this ORDER shall be binding upon Innovative Mortgage and 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 this matter. There are no other agreements between the Division and Innovative Mortgage.

By ORDER AND direction of the Commissioner of Banks.

Dated at Boston, Massachusetts, this 26th day of January 2006.

Steven L. Antonakes
Commissioner of Banks