By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
Docket No. 2006-026

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST


In the Matter of

MIDDLESEX FINANCIAL ASSOCIATES LLC
D/B/A/ MIDDLESEX MORTGAGE CO.
Moultonboro, New Hampshire


Mortgage Broker License No. MB2720, MB3789 and MB3860


The Commissioner of Banks ("Commissioner") having determined that MIDDLESEX FINANCIAL ASSOCIATES LLC D/B/A/ MIDDLESEX MORTGAGE CO. ("Middlesex Financial" or the "Company"), with its main business office located at 91 Wyman Trail, Moultonboro, New Hampshire has engaged in, or is engaged in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255E, and applicable regulations found at 209 CMR 42.00 et seq., hereby issues the following FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST ("TEMPORARY ORDER") pursuant to General Laws chapter 255E, section 7(b).

FINDINGS OF FACT

  1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a mortgage broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. Middlesex Financial is, and at all relevant times, has been a company doing business in the Commonwealth of Massachusetts. Middlesex Financial is licensed by the Commissioner as a mortgage broker as required by Massachusetts General Laws chapter 255E, section 2.
  3. According to records maintained on file with the Division, the Commissioner issued Middlesex Financial's license number MB2720 to engage in the business of a mortgage broker at 91 Wyman Trail, Moultonboro, New Hampshire on June 10, 2001; license number MB3789 to engage in the business of a mortgage broker at 1160 Ocean Street, Unit 6, Marshfield, Massachusetts on February 7, 2005; and license number MB3860 to engage in the business of a mortgage broker at 62B Summer Street, Somerville, Massachusetts on March 23, 2005. The Company had previously surrendered seven licenses to engage in the business of a mortgage broker: MB1525, 18 Whittlemore Road, Newton, Massachusetts, which was surrendered in 2001; MB1799, 160 Old Derby Road, Room 223, Hingham, Massachusetts, which was surrendered in 2001; MB1845, 1758 Centre Street, West Roxbury, Massachusetts, which was surrendered in 2001; MB3751, 195 Concord Avenue, Framingham, Massachusetts, which was surrendered on August 29, 2006; MB4288, 123 Commercial Street, Lynn, Massachusetts, which was surrendered on August 29, 2006; MB2952, 1017 Turnpike Street, Suite 23, Canton, Massachusetts on September 20, 2006; and MB3788, 33 Riverside Drive, Suite 108, Pembroke, Massachusetts on September 20, 2006.
  4. The Division received information suggesting that an office location of Middlesex Financial was maintained and operated by Kimthy Sin at an office location in Lowell, Massachusetts.
  5. As of August 25, 2006, the Division's records did not reflect that Middlesex Financial had applied for, nor been approved by the Commissioner to conduct the mortgage broker business at the Lowell office location.
  6. Two representatives of the Division conducted a visitation on August 25, 2006 of the unlicensed office in Lowell, Massachusetts and observed that mortgage broker activities were being conducted on the premises. Documents subsequently reviewed by the Division reflect that mortgage loan applications were being taken and processed in this unlicensed office. The Division's representative, through a discussion with Mr. Sin, confirmed that the latter was employed by Middlesex Financial. The General Manager of Middlesex Financial informed the Division that this individual was terminated by the Company on September 1, 2006.
  7. On August 30, 2006, the Division conducted an on-site inspection of Middlesex Financial's licensed office location in Moultonboro, New Hampshire , where all files are maintained (the "on-site inspection"). On the next day, and during the following week, representatives of the Division also revisited the unlicensed office in Lowell.
  8. In two mortgage transactions, applications taken on the same date and also subsequently closed on the same date by the same originator at the Framingham branch office, the Company misrepresented the number of units of the property to be mortgaged, misrepresented that the properties were to be the primary residence of the same individual, and failed to accurately represent that the same gross income would be applied to make payments on two separate loans on two separate properties. In a third mortgage transaction, applications taken one week apart and also subsequently closed 12 days apart by the same originator at the unlicensed Lowell office, the Company also misrepresented the number of units of the property to be mortgaged, misrepresented that the properties were to be the primary residence of the same individual, and failed to accurately represent that the same gross income would be applied to make payments on two separate loans on two separate properties. Examples include, but are not limited to the following documents, as summarized below:

    (a) Loan #161948777 and Loan #921000316405: Borrower purchased two separate condominium units for $311,000.00 per unit. Both properties were listed as being purchased as the primary residence of the borrower on the loan applications. The loan applications were placed by Middlesex Financial with separate lenders. The applications were taken by the same originator on the same date, and were subsequently closed the following month on the same date. Each application placed by Middlesex Financial lists the number of units of the property to be mortgaged as three, but each property is a single unit. Each application uses the same amount of stated income and omits any reference or disclosure of the other mortgage loan application and/or liability. Enclosed as Exhibit A.

    (b) Loan #3089966772 and Loan #189030: Borrower purchased two separate condominium units for $222,000.00 per unit. Both properties were listed as being purchased as the primary residence of the borrower on the loan applications. The loan applications were placed by Middlesex Financial with separate lenders. The applications were taken by the same originator on the same date, and were subsequently closed the following month on the same date. Each application placed by Middlesex Financial lists the number of units of the property to be mortgaged as three, but each property is a single unit. Each application uses the same amount of stated income and omits any reference or disclosure of the other mortgage loan application and/or liability. Enclosed as Exhibit B.

    (c) Loan #928000086473 and Loan #0096559158: Borrower purchased a two family home for $300,000.00 and a single family home for $300,000.00. Both properties were listed as being purchased as the primary residence of the borrower on the loan applications. The loan applications were placed by Middlesex Financial with separate lenders. The applications were taken by the same originator on April 13, 2006 and April 20, 2006, and were subsequently closed April 21, 2006 and May 3, 2006, respectively. Each application uses the same amount of stated income and omits any reference or disclosure of the other mortgage loan application and/or liability. Enclosed as Exhibit C.

  9. The loan applications referenced in Paragraph 8(a) and Paragraph 8(b) of this TEMPORARY ORDER were accepted and processed through Middlesex Financial's licensed office location in Framingham, Massachusetts, for which its license was subsequently surrendered. The loan applications referenced in Paragraph 8(c) of this TEMPORARY ORDER were accepted and processed through Middlesex Financial's unlicensed office location in Lowell, Massachusetts.

  10. Middlesex Financial completed the loan applications referenced in Paragraph 8(a), Paragraph 8(b) and Paragraph 8(c) of this TEMPORARY ORDER, which contained false or misleading information relative to the number of units being purchased in the mortgaged properties, the number of units in each of the mortgaged properties, the designation as a primary residence of the mortgaged properties, and on the use of the same gross income to make payments on two separate loans on two separate properties.

  11. Middlesex Financial knew or should have known that the property information reported, specifically the number of units being purchased, the number of units in each property, the mortgage liabilities of the applicant, and a designation as a primary residence would be relied upon in underwriting the mortgage loan by the mortgage lender or financial institution to which the mortgage loan applications were brokered by the Company.
  12. Middlesex Financial knew or should have known that its participation in a pattern or practice of assisting in obtaining mortgage loans by submitting to the mortgage lender or financial institution misleading information relative to the conditioned and/or actual mortgage liability information of the applicant, as well as false information concerning the number of units being purchased, the number of units in each property, and the designation as a primary residence in mortgaged properties would be detrimental to the public interest.

    CONCLUSIONS OF LAW

  13. Based on information contained in Paragraphs 1-12, Middlesex Financial was operating the business of a mortgage broker in Lowell, Massachusetts without a license, within the meaning of General Laws chapter 255E, section 5. Pursuant to Massachusetts General Laws chapter 255E, section 11, whenever the Commissioner finds that a licensee has violated any provisions of chapter 255E or any rule or regulation adopted thereunder, the Commissioner may impose a penalty which shall not exceed $5,000.00 for each violation.
  14. Based on the information contained in Paragraphs 1 through 12, Middlesex Financial has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage broker business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255E, section 4 and the Divisions regulation 209 CMR 42.06(2)(c).
  15. Based on the information contained in Paragraph 1 through 12, the Commissioner has determined that:

    (a) Middlesex Financial has engaged, or is about to engage in, acts or practices which warrant the belief that it is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a mortgage broker including, but not limited to, the provisions of Massachusetts General Laws chapter 255E, section 4 and the Division's regulations at 209 CMR 42.00 et seq.; and

    (b) The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Middlesex Financial.

    ORDER TO CEASE AND DESIST

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

  16. ORDERED that Middlesex Financial, and any and all employees, independent contractors, or agents operating on behalf of the Company, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage broker, as defined under Massachusetts General Laws chapter 255E, section 1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this TEMPORARY ORDER. Therefore, Middlesex Financial is ordered to immediately cease soliciting or accepting, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in Massachusetts.
  17. IT IS FURTHER ORDERED that Middlesex Financial shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan applications in a separate escrow account maintained at a federally insured bank.
  18. IT IS FURTHER ORDERED that Middlesex Financial shall place all of its pending residential mortgage loan applications with a qualified broker or lender, as appropriate based on the status of the application, with no loss to applicants. The open application list shall include all transactions in which Middlesex Financial was performing in the capacity of a mortgage broker. Middlesex Financial shall obtain the prior approval of the Commissioner before placing such applications with a qualified broker or lender. Any such placement shall be accompanied by a copy of this Order.
  19. IT IS FURTHER ORDERED that Middlesex Financial shall submit to the Commissioner a detailed record of all of its 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 TEMPORARY ORDER and shall include all information on file, regarding Middlesex Financial's pending applications, including but not necessarily limited to, the following:

    The names of all individuals from whom Middlesex Financial has accepted an application for a residential mortgage loan on property located in Massachusetts; 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, cleared to close, etc.); the mortgage lender or financial institution to which the application was placed, and scheduled closing dates. The latter list should include telephone numbers of contact persons familiar with Middlesex Financial's submitted loans.

  20. IT IS FURTHER ORDERED that Middlesex Financial shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage broker or lender pursuant to Paragraph 18 of this TEMPORARY ORDER, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Middlesex Financial's books and records and shall be available to the Commissioner, in their entirety, upon request.
  21. IT IS FURTHER ORDERED that this TEMPORARY 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 Massachusetts General Laws chapter 30A.
  22. IT IS FURTHER ORDERED that Middlesex Financial shall submit a payment in the amount of $5,000.00 in satisfaction of the statutory penalty at Massachusetts General Laws chapter 255E, section 11, for conducting the business of a mortgage broker at its unlicensed location in Lowell, Massachusetts, plus the costs of investigation. Middlesex Financial is hereby ordered to submit a payment in the amount of $5,000.00 in satisfaction of the statutory penalty within five (5) days of the effective date of this TEMPORARY ORDER.
  23. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such TEMPORARY ORDER shall become permanent and final only upon receipt of a written request for such a hearing from Middlesex Financial within twenty (20) days of the effective date of this TEMPORARY ORDER. If no hearing is requested within this twenty (20) day period, this TEMPORARY ORDER shall become permanent and final until it is modified or vacated by the Commissioner.

By ORDER AND direction of the Commissioner of Banks.

Dated at Boston, Massachusetts, this 2nd day of October, 2006.

Steven L. Antonakes
Commissioner of Banks