COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
Docket No. 2008-022
FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST
In the Matter of
AMERICAN ADVISORS GROUP
Mortgage Broker License No. MB5106
The Commissioner of Banks ("Commissioner") having determined that AMERICAN ADVISORS GROUP ("American Advisors" or the "Corporation"), located at 16811 Hale Avenue, Irvine, California has engaged in, or is engaging 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
- 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.
- American Advisors is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. American Advisors' main office is located at 16811 Hale Avenue, Irvine, California.
- American Advisors 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 a mortgage broker license, license number MB5106 to American Advisors to engage in the business of a mortgage broker on or about May 20, 2008. License number MB5106 authorized American Advisors to conduct its mortgage broker business from the Corporation's main office located at 16811 Hale Avenue, Irvine, California
- On September 11, 2008, the Division was forwarded a copy of a reverse mortgage loan solicitation ("Solicitation") received by a Massachusetts consumer from American Advisors. A copy of the solicitation is attached as Exhibit 1 .
- Massachusetts General Laws chapter 93A, section 2(a) states:
Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.
- The Attorney General's regulation 940 CMR 8.06(1) states, in part:
It is an unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact if the representation or statement is false or misleading or has the tendency or capacity to be misleading.
- The Solicitation, marked as an "URGENT NOTICE," includes several references which collectively create an appearance that the Solicitation was issued by a government agency. Specifically, the Solicitation noted that the mailing was forwarded from "ADMINISTRATIVE OFFICES, and included an Equal Housing Opportunity logo which was located adjacent thereto, as well as a reference to a property identification number. The Solicitation also contained the following heading: "Notice of 2008 Government Benefits." The body of the Solicitation referenced a case number and indicated that the consumer had been "pre-selected" to participate in a government backed program, with consumer funds "available now."
- Language indicating that the offer was not being offered by a government agency was included in the Solicitation, notwithstanding the representations identified above which indicate a government affiliation. However, such language was in a font size that was significantly smaller then that in the body of the Solicitation and was located in a non-prominent location at the bottom of the Solicitation.
- American Advisors is not affiliated with any government agency. Reza Jahangiri is the sole owner and officer of American Advisors.
- The Division's regulation 209 CMR 42.12A(9) states:
It is a prohibited act or practice for a mortgage broker to make false promises to influence, persuade or induce a consumer to sign a mortgage loan application or mortgage loan documents.
- The Solicitation stated a specific monthly disbursement amount, as well as a lump sum draw and credit amounts that the consumer would be entitled to receive. The Solicitation failed to note that the proceeds that were set forth in the Solicitation would be affected by an appraisal of the property as well as ancillary costs associated with obtaining a reverse mortgage including closing costs, mortgage insurance premiums and monthly servicing fees. Moreover, the Solicitation imposed a time-frame in which the consumer was required to respond to the offer which creates the impression that the consumer must take prompt action in order to benefit from the "program."
- The Division's regulation 209 CMR 42.12A(4) states:
It is a prohibited act or practice for a mortgage broker to advertise any interest rate or loan term described in 209 CMR 32.24(3)(a) in any media without the following statement: "We arrange but do not make loans". No advertisement by a mortgage broker in any media shall contain language which indicates or suggests that the mortgage broker will fund or approve a mortgage loan or guarantee any rate.
- The Solicitation indicates that the consumer to whom the Solicitation was mailed could receive monthly disbursements in the amount of $1,789.59 with $249,279.11 available with a credit line growth rate of 5.3%. The maximum lending limit is identified as $362,790.00. The Solicitation does not include the statement, "We arrange but do not make loans" as required pursuant to 209 CMR 42.12A(4).
- The Solicitation further noted that the consumer would have to contact an "authorized lender" by September 12, 2008 in order to receive additional information and identifies American Advisors as the authorized lender above the Corporation's toll free number which is designated as the contact number.
- American Advisors is not licensed by the Commissioner to conduct business as a mortgage lender in Massachusetts under M.G.L. chapter 255E, section 2 and the Division's regulation 209 42.00 et seq.
CONCLUSIONS OF LAW
- Based upon the information contained in Paragraphs 1 through 15, American Advisors 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 Division's regulation 209 CMR 42.06(2)(c).
- Based upon the information contained in Paragraphs 1 through 15, by mailing Massachusetts consumers a Solicitation containing false or misleading language or language that had the tendency to be false or misleading, including language that could lead the reader to believe that the Solicitation was issued by a government agency, American Advisors has violated Massachusetts General Laws chapter 93A, section 2(a), and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
- Based upon the information contained in Paragraphs 1 through 15, by mailing Massachusetts consumers a Solicitation containing language that gave the impression that American Advisors was authorized to operate as a licensed mortgage lender in Massachusetts, the Corporation violated Massachusetts General Laws chapter 255E, section 2 and the Attorney General's regulation 940 CMR 8.06(1).
- Based upon the information contained in Paragraphs 1 through 15, by mailing Massachusetts consumers a Solicitation that made false promises to influence, persuade or induce a consumer to sign a mortgage loan application including references to specific monthly and lump sum payments that do not take into account the appraisal of the property and other ancillary costs associated with obtaining a reverse mortgage loan, and by imposing a time-frame in which consumers were required to respond to the offer, American Advisors violated the Division's regulation 209 CMR 42.12A(9)
- Based upon the information contained in Paragraphs 1 through 15, by mailing Massachusetts consumers a Solicitation referencing loan terms without including the statement, "We arrange but do not make loans," American Advisors has violated the Division's regulation 209 CMR 42.12A(4).
- Based upon the information contained in Paragraphs 1 through 15, the Commissioner has determined that:
- American Advisors has engaged in, 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.
- The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to American Advisors.
- Based upon the information contained in Paragraphs 1 through 15, had the facts and conditions found therein existed at the time of American Advisors original mortgage broker license application, the Commissioner would have been warranted in refusing to issue such license pursuant to Massachusetts General Laws chapter 255E, section 4 and the Division's regulation at 209 CMR 42.07(2)(b). Further, the facts and conditions set forth in Paragraphs 1 through 15, present sufficient grounds for the revocation of American Advisors broker license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulations at 209 CMR 42.07(2)(b) and 209 CMR 42.12A(19).
ORDER TO CEASE AND DESIST
- After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
- ORDERED that American Advisors and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of American Advisors, and their successors or assigns, shall immediately cease engaging in the activities of: (a) a mortgage broker, as those activities are defined under Massachusetts General Laws chapter 255E, section 1, (b) a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this Temporary Order. Therefore, American Advisors 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.
- IT IS FURTHER ORDERED, that American Advisors shall cease distributing or publishing any advertising materials, including the Solicitation, to Massachusetts consumers. In addition, American Advisors shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all Massachusetts consumers to whom the Corporation distributed the Solicitation. 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 the consumers' names and addresses.
- IT IS FURTHER ORDERED, that American Advisors shall immediately place any fees previously collected from Massachusetts consumers, relative to any pending mortgage loan applications accepted at any office location, into a separate escrow account, designated for such purpose and maintained at a federally insured bank. In addition, American Advisors 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.
- IT IS FURTHER ORDERED that American Advisors shall immediately place with one or more qualified broker(s) or lender(s), as appropriate based on the status of the application and with no loss to applicants, all of its pending Massachusetts residential mortgage loan applications. American Advisors shall obtain the prior approval of the Commissioner before placing such applications to the qualified broker(s) or lender(s).
- IT IS FURTHER ORDERED that American Advisors shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Corporation's 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 the Corporation's open application list, including but not necessarily limited to, the following:
All information on file as of the date of submission regarding American Advisors' open application list as a mortgage broker, including but not limited to, the following: The names of all individuals from whom American Advisors 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, cleared to close, etc.); scheduled closing dates; rate lock status; and a list identifying the applicable broker or lender with whom the applicants' application was placed. The latter list should include telephone numbers of contact persons familiar with the Corporation's submitted loans.
- American Advisors shall immediately secure all pending residential mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender(s) and or mortgage broker(s) pursuant to Paragraph 27 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in American Advisors' books and records and shall be available to the Commissioner, in their entirety, upon request.
- 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.
- 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 American Advisors 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 24th day of September, 2008
By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts