By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
Docket No. 2006-005

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST


In the Matter of

QUOTEMEARATE.COM, INC.
Houston, Texas

Mortgage Broker License No. MB3208, et al.


The Commissioner of Banks ("Commissioner") having determined that QUOTEMEARATE.COM, INC. ("Quotemearate" or the "Corporation"), with its main business office located at 10333 Harwin Drive, Suite 425, Houston, Texas, has engaged, 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. Quotemearate is, and at all relevant times has been, a corporation organized under the laws of the State of Texas. Quotemearate's main office is located at 10333 Harwin Drive, Suite 425, Houston, Texas.
  3. Quotemearate is licensed by the Commissioner as a mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner initially issued mortgage broker license number MB 3208 to Quotemearate to engage in the business of a mortgage broker at 10333 Harwin Drive, Suite 425, Houston, Texas on September 30, 2003.
  4. Quotemearate maintains additional office locations from which the Corporation conducts the mortgage broker business. According to records maintained on file with the Division, Quotemearate currently possesses thirty-four (34) additional mortgage broker licenses from the Commissioner for locations operated both in Massachusetts as well as outside the Commonwealth.
  5. Mortgage brokers in Massachusetts are licensed and regulated under Massachusetts General Laws chapter 255E, which is administered and enforced by the Commissioner. Pursuant to Massachusetts General Laws chapter 255E, section 8, the Division is authorized to inspect the books, accounts, papers, records, and files of mortgage brokers transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E or any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a mortgage broker.
  6. On October 12, 2005, pursuant to the authority granted under Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination/inspection of the books, accounts, papers, records, and files maintained by Quotemearate to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage broker business in Massachusetts (the "2005 examination/inspection").

    A. Undisclosed Points and Fees

  7. Books and records reviewed by the Division's examiners during the 2005 examination/inspection indicate that the Corporation engaged in a pattern or practice of understatements or omissions regarding the fees charged to consumers by Quotemearate.
  8. The Corporation's books and records indicate that origination fees, broker fees, processing fees, and application fees (collectively, "broker fees") were collected at the loan closing in amounts which were not previously disclosed to consumers, in writing, to the extent charged at closing, if at all.
  9. The omitted or understated portion of the broker fees collected from consumers at the loan closing varied in the loan files reviewed by the Division's examiners, but in some cases amounted to several thousand dollars.

    B. Commingling Consumer Funds in the Operating Accounts Maintained for the Corporation

  10. Books and records reviewed by the Division's examiners during the 2005 examination/inspection indicate that the Corporation failed to deposit funds received from consumers prior to loan closing into a designated trust account at certain unlicensed locations. The consumers' deposits were commingled with the Corporation's funds in Quotemearate's business operation accounts.

    C. Engaging in the Mortgage Broker Business in Massachusetts from a Network of Unlicensed Locations

  11. According to records maintained on file at the Division, Quotemearate submitted license applications to the Division at various times during 2005 to obtain licenses from the Commissioner to conduct the mortgage broker business at the seventeen (17) additional locations identified in Exhibit 1, as attached hereto, and incorporated by reference.
  12. As of the date of this TEMPORARY ORDER, the Commissioner has not approved Quotemearate's license applications to engage in the business of a mortgage broker at any of the office locations referenced in Paragraph 11.
  13. Books and records reviewed by the Division's examiners during the 2005 examination/inspection indicate that Quotemearate conducted the mortgage broker business at twelve (12) of the unlicensed office locations listed in Paragraph 11, beginning on a specific date that is unknown to the Division, but continuing at least until the date of the 2005 examination/inspection. See Exhibit 1.
  14. In addition to the seventeen (17) additional locations referenced in Paragraph 11, the records provided by the Corporation during the 2005 examination/inspection indicated that Quotemearate conducted the mortgage broker business, during the relevant times, from at least thirty (30) additional unlicensed office locations, for which Quotemearate failed to provide notice to the Commissioner, submit a license application, or receive approval from the Commissioner to engage in the mortgage broker business from such locations. See Exhibit 2.
  15. During the 2005 examination/inspection, Quotemearate's management indicated that individuals performing in the capacity of branch managers of the unlicensed office locations were authorized by Quotemearate to conduct business in the Commonwealth of Massachusetts using mortgage broker license MB3208 which, as indicated above, had been issued for the Houston, Texas office location.
  16. Documents included in the Division's records indicate that Quotemearate's Branch Licensing Coordinator specifically authorized branch managers of unlicensed office locations to conduct business in Massachusetts without first obtaining additional licenses from the Commissioner to engage in the mortgage broker business at those locations. See Exhibit 3.
  17. Books and records reviewed by the Division's examiners during the 2005 examination/inspection indicate that the Corporation further failed to notify the Division of the relocation of various branch offices.

    D. Engaging in the Mortgage Broker Business in Massachusetts Under the Direction of a Network of Unapproved Branch Managers

  18. Information routinely requested by the Division, in advance, from an individual seeking to perform in the capacity of a branch manager is sought so that the Division can determine whether the individual, as a principal employee, possesses the responsibility, character, reputation, integrity and general fitness which would allow the Division to find that the licensed business will be operated honestly, fairly, soundly and efficiently in the public interest.
  19. Documents included in the Division's records indicate that the Division had neither reviewed nor approved the branch managers responsible for operating the additional office locations listed in Paragraph 11.
  20. Documents included in the Division's records indicate that the Division had neither reviewed nor approved the branch managers who were responsible for operating the additional office locations listed in Paragraph 14, as the Division had not received written notice or a license application from the Corporation indicating that Quotemearate intended to carry on the licensed business from the applicable locations.

    E. Engaging Unauthorized Individuals to Originate Mortgage Loans in Massachusetts

  21. Books and records reviewed by the Division's examiners during the 2005 examination/inspection indicated that Quotemearate, at all relevant times, retained several individuals in the capacity of independent contractors to conduct the mortgage broker business.
  22. By prior published opinions, the Division has set forth the standards which an individual must satisfy, in advance, when seeking to operate in the capacity of an independent contractor associated with a licensed mortgage broker or mortgage lender under General Laws chapter 255E, section 2. The Division's published opinions have consistently held that the exemption from licensure referenced herein is available exclusively to individuals engaging in the licensed business in the name of the licensee and is not available to an independent corporation, partnership, association, or other legal entity that is separate and distinct from the legal entity in whose name the license was issued.
  23. The Corporation's books and records failed to include any information that would illustrate that the independent contractors referenced in Paragraph 21 were either exempt from licensure under Massachusetts General Laws chapter 255E or that the individuals and Quotemearate had previously satisfied the qualifying standards for independent contractors set forth by the relevant opinions published by the Division.

    F. Failure to Notify the Commissioner of the closing of Massachusetts office locations

  24. The Division has obtained information indicating that the Corporation is in the process of suspending or terminating all business operations. See Exhibit 4. A representative of the Texas Savings and Loan Department (the "Department") indicated that the Department has reason to believe that Quotemearate has suspended all operations as of March 24, 2006.
  25. The Corporation failed to provide the Division with prior written notice of the Corporation's intent to close its office locations.

    CONCLUSIONS OF LAW

  26. Based upon the information contained in Paragraphs 1 through 25, Quotemearate is not an entity otherwise exempted from the licensing requirements of Massachusetts General Laws chapter 255E, section 2 for those engaged in the business of a mortgage broker in Massachusetts.
  27. Based upon the information contained in Paragraphs 1 through 25, Quotemearate has unlawfully engaged in the business of a mortgage broker through a network of locations and individuals operating without a license from the Commissioner in violation of Massachusetts General Laws chapter 255E, §2 and the Division's regulation 209 CMR 42.00 et seq.
  28. Based upon the information contained in Paragraphs 1 through 25, Quotemearate has solicited or accepted residential mortgage loan applications for property located in Massachusetts from individuals engaging in the activity of a mortgage broker who were not employed by the Corporation and who otherwise failed to qualify for an exemption from licensure under the provisions of General Laws chapter 255E, section 2 as set forth by the Division by prior published opinions, including without limitation Opinions 96-221, 97-061, and 97-222.
  29. Based upon the information contained in Paragraphs 1 through 25, Quotemearate has commingled money deposited by consumers with the Corporation's own funds in violation of the Division's regulation 209 CMR 42.11.
  30. Based upon the information contained in Paragraphs 1 through 25, Quotemearate has charged loan fees, points, or similar fees in a mortgage transaction involving residential property located in the Commonwealth, of four or less units and occupied in whole or in part by the mortgagor, without previously disclosing such fees or points to the mortgagor in writing in violation of Massachusetts General Laws chapter 183, section 63.
  31. Based upon the information contained in Paragraphs 1 through 25, by accepting points and fees which were not disclosed in accordance with Massachusetts General Laws chapter 183, section 63, Quotemearate engaged in the unfair and deceptive acts and practices in violation of the Office of the Attorney General's regulation 940 CMR 8.06(12).
  32. Based upon the information contained in Paragraphs 1 through 25, Quotemearate carried on its business in locations other than the address on its original license without first notifying the Commissioner, in writing, at least thirty days prior to the opening of the branch location in violation of the Division's regulation 209 CMR 42.13(1).
  33. Based upon the information contained in Paragraphs 1 through 25, Quotemearate suspended business operations in Massachusetts locations without first notifying the Commissioner, in writing, at least thirty days prior to the closing of the Massachusetts locations in violation of the Division's regulation 209 CMR 42.13(2).
  34. Based upon the information contained in Paragraphs 1 through 25, the Commissioner has determined that:
    1. Quotemearate has engaged, or is about to engage in, acts or practices which warrant the belief that the Corporation 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 the Division's regulations at 209 CMR 42.00 et seq.
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Quotemearate.

    ORDER TO CEASE AND DESIST

  35. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  36. ORDERED that Quotemearate, its officers, directors, employees, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage broker, as defined under Massachusetts General Laws chapter 255E, §1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this TEMPORARY ORDER.
  37. ORDERED that Quotemearate, its officers, directors, employees, and their successors or assigns, shall immediately cease engaging in business relationships or affiliations with individuals retained as independent contractors to originate residential mortgage loans on behalf of the Corporation unless (a) such individuals are exempt from licensure under Massachusetts General Laws chapter 255E, section 2 by primarily engaging in the licensed business under the direction of the Corporation and (b) the Corporation and the individual have previously executed the Exemption Affidavit and Statement of Accountability and submitted such completed documents to the Division in accordance with the provisions previously set forth by the Division by published opinion. Any such independent contractor shall engage in the licensed activity exclusively in the name of Quotemearate.

    IT IS FURTHER ORDERED, that Quotemearate, its officers, directors, employees, and their successors or assigns, take the following affirmative actions:

  38. Quotemearate shall immediately place any fees previously collected from Massachusetts consumers, relative to any pending mortgage loan applications accepted at any office location ordered to cease activity under the provisions of this TEMPORARY ORDER, into a separate escrow account, designated for such purpose and maintained at a federally insured bank. In addition, Quotemearate shall adopt or revise, as applicable, policies and procedures to ensure adherence to all regulations concerning the maintenance of such escrow account under 209 CMR 42.11.
  39. Quotemearate shall transfer its entire open application list of all pending applications relating to Massachusetts residential property to a qualified lender with no loss to the applicants.
    1. Quotemearate shall submit to the Commissioner a detailed record of all of the Corporation's pending residential mortgage loan applications transferred pursuant to this Paragraph of the TEMPORARY ORDER. The records to be produced shall be submitted to the Commissioner within ten (10) days of the effective date of this TEMPORARY ORDER and shall include all information on file, including but not necessarily limited to, the following:
      1. All information on file as of the date of submission regarding the Corporation's open application pipeline, including but not limited to the following: The names of all individuals from whom Quotemearate has 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); scheduled closing dates; and a list of applicable wholesale lenders. The latter list should include telephone numbers of contact persons familiar with Quotemearate's submitted loans.
  40. Quotemearate shall immediately secure all pending residential mortgage loan application files and shall make such files, in their entirety, available to the Commissioner upon request.
  41. The Corporation shall immediately take all necessary steps to review and revise the Corporation'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 sixty (60) days of the effective date of this TEMPORARY ORDER, the Corporation shall cause to be made a review of all Massachusetts residential mortgage loans originated by Quotemearate since September 30, 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 41(a), Quotemearate 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. Within sixty (60) days of the effective date of this TEMPORARY ORDER, Quotemearate shall submit to the Commissioner a list of all borrowers identified pursuant to the above described review of residential mortgage loan transactions to whom a reimbursement is owed by the Corporation in accordance with this Paragraph of the TEMPORARY ORDER;
    4. Within ninety (90) days of the effective date of this TEMPORARY ORDER, Quotemearate shall submit evidence of all reimbursements issued to consumers pursuant to this Paragraph of the TEMPORARY ORDER, including the consumers' names, the dates the loans closed, check numbers, and the amount of the reimbursements; and
    5. Quotemearate 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 Paragraph of the TEMPORARY ORDER.
  42. Quotemearate shall refrain from engaging or retaining any separate corporation, partnership, limited liability company or other similar legal entity that conducts business as a mortgage lender or mortgage broker as an additional licensed location of the Corporation or allowing such entity to originate or broker residential mortgage loans under a license obtained from the Commissioner by the Corporation in the name of Quotemearate.
  43. Quotemearate is directed to adopt or revise, as applicable, procedures and policies to ensure timely written notification to the Division of licensed branch relocations, closings, or of any event designated under the provisions of General Laws chapter 255E and the Division's regulation 209 CMR 42.13.
  44. Within ten (10) days from the effective date of this TEMPORARY ORDER, the Corporation shall submit a written report to the Commissioner which shall address and include a description of the form, content, and manner of all actions taken to address each Paragraph of this TEMPORARY ORDER and the results thereof. The written report shall be signed under the pains and penalties of perjury by a duly authorized senior officer of the Corporation.
  45. 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 General Laws chapter 30A.
  46. IT IS FURTHER ORDERED that this TEMPORARY ORDER shall not be construed as approving any act, practice, or conduct not specifically set forth herein which was, is, or may be in violation of relevant state or federal laws and regulations. The findings, conclusions, and required action set forth in this TEMPORARY ORDER are in addition to, and not in lieu of, any findings, conclusions, and corrective action which may be set forth in the Report of Examination/Inspection, prepared by the Division of Banks as of October 12, 2005, and issued after the effective date of this TEMPORARY ORDER.
  47. 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 Quotemearate 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 27th day of March, 2006.

By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts

Exhibits 1 through 4 pdf format of quotemearateexhibits.pdf