By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2008-003

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST


In the Matter of
MASS LENDING, LLC
Needham, Massachusetts

Mortgage Company License No(s). MC4133 and MC4667


The Commissioner of Banks ("Commissioner") having determined that MASS LENDING, LLC ("Mass Lending" or the "Company"), located at 220 Reservoir Street, Suite 28, Needham, Massachusetts 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

  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 lender and mortgage broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. Mass Lending is, and at all relevant times has been, a Massachusetts limited liability company doing business in the Commonwealth. Mass Lending's main office is located at 220 Reservoir Street, Suite 28, Needham, Massachusetts.
  3. Mass Lending is licensed by the Commissioner as a mortgage lender and 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 company license, license number MC4133, to Mass Lending to engage in the business of a mortgage lender and mortgage broker on or about December 7, 2005. License number MC4133 authorized Mass Lending to conduct the mortgage company business from the Company's main office located at 220 Reservoir Street, Suite 28, Needham, Massachusetts.
  4. Mass Lending maintains an additional licensed office location at 476A Saratoga Street, East Boston, Massachusetts, from which the Company conducts its mortgage lender and mortgage broker business. According to records maintained on file with the Division, the Commissioner issued a mortgage company license, license number MC4667, to Mass Lending for that location on or about January 12, 2007.
  5. Mortgage lenders and 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 lenders and mortgage brokers transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E and any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a mortgage lender or mortgage broker.
  6. On October 24, 2007, 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 Mass Lending to evaluate the Company's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage lender and mortgage broker business in Massachusetts (the "2007 examination/inspection").
  7. The Division's Report of Examination/Inspection (the "Report"), which was issued to Mass Lending on the effective date of this Temporary Order, presented the findings of the 2007 examination/inspection and alleged significant failures to comply with applicable state and federal laws, rules, regulations, and regulatory bulletins governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts.

    A. Unfair or Deceptive Acts and Practices

  8. The Division's regulation 209 CMR 42.12A(8), effective as of September, 8, 2006, states:

    It is a prohibited act or practice for a mortgage broker of mortgage lender to falsify income or asset information on a mortgage loan application or mortgage loan documents.

  9. 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.

  10. 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.

  11. The 2007 examination/inspection revealed that Mass Lending falsified asset and income information on mortgage loan documents relating to loans originated by the Company. Examples include, but are not limited to the following documents, as summarized below:
    1. Loan #1493432. Redacted copies of the documents are attached hereto as Exhibit 1 pdf format of exhibit_1_011108.pdf
and are incorporated by reference.
      1. A stated income loan application, for a loan which closed on November 27, 2006, indicated that the gross monthly base employment income of the applicant, a registered nurse, was $6,600, or $79,200 annually.
      2. A copy of the Request of Verification of Employment (VOE) form contained in the loan file submitted by Mass Lending to the Division's examiners indicated that the Applicant worked an average of 36 hours per week at an hourly rate of $26.57.
      3. The income figures noted above in the VOE form appear to have been obscured by "white-out" tape prior to submitting a copy of the form to the mortgage lender. The income figures on the VOE are legible under the "white-out" tape but would have been obscured in the photocopied VOE that had been submitted to the mortgage lender.
      4. The discrepancy in income reveals an overstatement of the applicant's gross annual income of approximately $29,460.
    2. Loan #1434770. Redacted copies of the documents are attached hereto as Exhibit 2 pdf format of exhibit_2_011108.pdf
and are incorporated by reference.
      1. A stated income loan application for a loan which closed on October 26, 2006 indicated that the gross monthly base employment income of the applicant, a personal care attendant for two individuals, was $6,213, or $74,556 annually.
      2. Copies of two pay checks in the loan file (each check representing separate payment per each one of the individuals cared for) reflect a year to date income of $6,542.00 and $10,953.92, respectively, as of October 14, 2006.
      3. A copy of a form completed as a result of a Mass Health evaluation indicates that the applicant worked approximately 14.25 hours per week for one of the two individuals the applicant cared for.
      4. The income and employment information referenced above were altered prior to submitting the information to the lender. Specifically, the income figures reflected on both checks were altered using "white-out" tape prior to copying and submitting the checks to the mortgage lender. In addition, the copy of the evaluation form submitted by Mass Health was altered by Mass Lending to indicate that that applicant worked approximately 24.25 hours instead of 14.25 hours. The original information on the documents is legible under the "white-out" tape but would have been obscured in the photocopied documents that had been submitted to the mortgage lender.
      5. The discrepancy in income reveals overstatement of the applicant's gross annual income of approximately $52,499.
    3. Loan # 1559441. Redacted copies of the documents are attached hereto as Exhibit 3 pdf format of exhibit_3_011108.pdf
.
      1. A stated income loan application for a loan which closed on January 10, 2007 indicated that the gross monthly income of the applicant was $21,450, or $257,400 annually. In addition, the application indicated that the applicant maintained savings accounts with Ben Franklin Bank and Middlesex Savings Bank with balances of $7,000 and $16,000, respectively.
      2. Verification of Deposit forms contained in the loan file and submitted by Mass Lending to the Division's examiners for review appear to indicate that one individual had completed all forms. Specifically, the forms, purportedly completed by Ben Franklin Bank and Middlesex Bank and "signed" by the respective officers of the banks, appear to have been written using the same ink and in the same handwriting.
      3. After reviewing a copy of the Ben Franklin Bank Verification of Deposit form contained in Mass Lending's loan files, an officer of Ben Franklin Bank confirmed via telephone on November 6, 2007 that the form had not been completed by any member of the bank and, furthermore, that the information and signature reflected on the Verification of Deposit were inaccurate.
      4. The individual who purportedly signed the Middlesex Savings Bank Verification of Deposit Form notified the Division via telephone on November 5, 2007 that she does not typically complete such forms. Moreover, she stated that the signature as described on the form included a nickname that is not consistent with her signature.
      5. The Division's examiners confirmed that the above referenced fabricated VOD forms were submitted by Mass Lending to the lender for loan qualification and underwriting purposes.
    4. Loan #206-676522. Redacted copies of the documents are attached hereto as Exhibit 4 pdf format of exhibit_4_011108.pdf
and are incorporated by reference.
      1. A stated income and asset loan application for a loan which closed on July 21, 2006 indicated that the gross monthly base employment income of the applicant was $7,600, or $91,299 annually. In addition, the application indicated that the applicant maintained a savings account and checking account with Bank of America with balances of $15,000 and $4,000, respectively.
      2. The final application signed at closing reflects an increase in the applicant's gross monthly income to $9,000, or $108,000 annually. Assets on the final application consist of Bank of America accounts with $15,000 and $1,800, respectively.
      3. On November 14, 2007, the Division's examiner contacted the applicant to verify the income reflected on the application. The applicant indicated that he earns approximately $40,000 to $50,000 annually working at a family owned business and receives the rest in "family contributions from overseas."
    5. Loan #1565960. Redacted copies of the documents are attached hereto as Exhibit 5 pdf format of exhibit_5_011108.pdf
and are incorporated by reference.
      1. A stated income loan application for a loan which closed on January 16, 2007 indicated that the gross monthly base employment income of the applicant, a certified nurse's assistant at an assisted living facility, was $5,250, or $63,000 annually.
      2. A representative of the applicant's employer confirmed that she completed a Verification of Employment form (VOE) which did not include salary information.
      3. Mass Lending submitted to the lender for loan qualification purposes a letter dated January 10, 2007, purportedly from the employer's representative, which indicated that the applicant's annual salary ranged from $52,500 to $68,500.
      4. The representative of the applicant's employer notified the Division via telephone on November 7, 2007 that she did not write the letter referenced above and, moreover, the salary noted in the letter was a "gross overstatement."
    6. Loan #1524395. Redacted copies of the documents are attached hereto as Exhibit 6 pdf format of exhibit_6_011108.pdf
and are incorporated by reference.
      1. A verified asset loan application for a loan which closed on January 3, 2007 indicated that the applicant maintained a bank account with "Citizens Bank" with a balance of $25,000.
      2. A representative of Citizen's Bank confirmed verbally that VOD form had been completed by an assistant branch manager of Citizen's Bank indicating that the applicant's checking account balance as of December 14, 2006 was $5,000, with an average balance for the previous two months of $4,199.
      3. An inspection of the forms provided by the Company to the Division's examiners revealed that the VOD referenced above had been visibly altered using black pen ink and "white-out" liquid to indicate that the applicant's balance as of December 14, 2006 was $15,000 with an average balance for the previous two months of $10,199.
    7. Loan #1464101. Redacted copies of the documents are attached hereto as Exhibit 7 pdf format of exhibit_7_011108.pdf
and are incorporated by reference.
      1. A verified asset loan application for a loan which closed on November 6, 2006 indicated that the applicant maintained a bank account at Hometown Bank with a balance of $6,785.
      2. A manager at Hometown Bank confirmed via telephone on November 14, 2007 that the VOD form submitted by Mass Lending to the lender for loan qualification purposes, which indicated that the applicant's bank account had a balance of $6,821 as of the application date, appeared to be fabricated. Specifically, the name of the branch manager listed on the VOD was incorrect; the date the account opened should have read September 4, 2003 but was listed as 2000; and the actual balance in the applicant's account as of the date of the VOD was $346.86.
      3. The discrepancy between the information received from Hometown Bank and the information submitted to the lender by Mass Lending reveals that Mass Lending overstated the applicant's account balance by $6,438.14.
    8. Loan #5100010224. Redacted copies of the documents are attached hereto as Exhibit 8 pdf format of exhibit_8_011108.pdf
and are incorporated by reference.
      1. A stated income loan application for a loan which closed on September 15, 2006 indicated that the gross monthly base employment income of the applicant, a nursing assistant at a nursing home and operations manager at a local market, was $8,500, or $102,000 annually.
      2. The Division's examiners contacted the employers referenced in the application by phone and determined that the applicant had never been employed at the businesses referenced in the application.
    9. Loan #1270660. Redacted copies of the documents are attached hereto as Exhibit 9 pdf format of exhibit_9_011108.pdf
and are incorporated by reference.
      1. A verified asset loan application for a loan which closed on July 19, 2006 included VODs that indicated that the applicant maintained two bank checking accounts at Bank of America with balances of $4,296.58 and $3,398.07.
      2. The VOD forms contained in the loan file appear to indicate that the VOD had been fabricated by Mass Lending.
      3. The individual bank officer who purportedly signed the VOD forms on behalf of Bank of America notified the Division via telephone on November 16, 2007 that he had never completed a VOD form on behalf of Bank of America, nor had he ever been asked to complete such a form in his current capacity at the bank. Moreover, after reviewing a copy of the VOD form, the bank representative confirmed that the signature as appearing on the form did not resemble his own signature and the date listed as the opening date of one of the accounts was incorrect. However, the bank officer was unable to assess whether the account information was inaccurate.
      4. The Division's examiners confirmed that the above referenced fabricated VOD forms were submitted by Mass Lending to the lender for loan qualification and underwriting purposes.
    10. Loan #1526202. Redacted copies of the documents are attached hereto as Exhibit 10 pdf format of exhibit_10_011108.pdf
and are incorporated by reference.
      1. A verified income and asset loan application for a loan which closed on December 19, 2007 indicated that the gross monthly base employment income of the applicant was $4,845 or $58,140 annually. According to the application, the applicant was employed as a "sales associate/estimator" at a MaidPro franchise in Chelmsford, Massachusetts. In addition, the application indicated that the applicant maintained a checking account at the Colorado-based Bank of the West with an account balance of $3,000.
      2. Verification of Deposit and Verification of Employment Forms contained in the loan file and submitted by Mass Lending to the Division's examiners for review appear to indicate that one individual had completed both forms. Specifically, the VOD form purportedly completed and signed by a branch manager at Bank of the West and the VOE form purportedly completed and signed by the owner of the MaidPro Chelmsford branch appear to have been written using the same ink and in the same handwriting.
      3. After reviewing a faxed copy of the VOD form allegedly completed by a representative of Bank of the West, a branch supervisor of the bank confirmed via telephone on November 18, 2007 that the signature on the form was not authentic and the date listed on the VOD as the date the account opened was incorrect. However, the branch supervisor was unable to assess whether the account balance information was inaccurate.
      4. The VOE referenced above indicated that the applicant earned $42,565 in 2004 and $44,965 in 2005 while employed at MaidPro. After reviewing a faxed copy of the VOE, the MaidPro Chelmsford branch owner who had purportedly completed and signed the VOE confirmed via telephone on November 20, 2007 that the signature on the form was not authentic and she had not yet become the owner of the branch as the VOE's completion date. However, the branch owner was unable to assess whether the income information was inaccurate.
    11. Loan #1541707. Redacted copies of the documents are attached hereto as Exhibit 11 pdf format of exhibit_11_011108.pdf
and are incorporated by reference.
      1. A verified asset loan application for a loan which closed on December 27, 2006 included a VOD form indicating that the applicant maintained a checking account and a savings account at Citizen's Bank with balances of $32,184 and $85,892, respectively.
      2. A representative of Citizen's Bank notified the Division via telephone in November 19, 2007 that the checking account number referenced in the VOD is not the account number associated with the applicant's checking account, but is the account number associated with the checking account of a different individual who had applied for a mortgage loan through Mass Lending. In addition, the savings account number referenced in the VOD was not associated with the applicant's savings account. The representative also confirmed that the Citizen's Bank accounts opened by the applicant had been closed several years prior to the date the VOD was completed.
    12. Loan #1357208. Redacted copies of the documents are attached hereto as Exhibit 12 pdf format of exhibit_12_011108.pdf
and are incorporated by reference
      1. A verified asset loan application for a loan which closed on September 1, 2006 included a VOD form indicating that the applicant maintained an account at Eastern Bank with a balance of $5,200.
      2. The branch manager who purportedly signed the VOD referenced above informed the Division via telephone on August 29, 2006 that, although the bank account balance information appeared to be accurate as of the date the VOD was completed, she had not completed the form and the signature appearing on the VOD was not authentic.
      3. The Division's examiners confirmed that the above referenced fabricated VOD forms were submitted by Mass Lending to the lender for loan qualification and underwriting purposes.
  12. Mass Lending knew or should have known that the above referenced income and/or asset information 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 Mass Lending.
  13. The Division's regulation 209 CMR 42.12A(7), effective as of September 8, 2006, states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to sign a consumer's name to a mortgage loan application or mortgage loan documents on behalf of a consumer.

  14. The 2007 examination/inspection revealed that Mass Lending engaged in a pattern or practice of "e-copying" consumers' signatures and affixing them on numerous mortgage loan documents using software that enabled the Company to electronically reproduce signatures after scanning the consumers' original signatures as appearing on other documents that were in the Company's possession. The Division's investigation revealed that the e-copied signatures originated from sources including, but not limited to, initial disclosures, Purchase and Sales Agreements, driver's licenses and cancelled checks.
  15. Upon further inquiry, Mass Lending explained that the initial disclosures that were signed by the consumers were ultimately destroyed by the Company because, in most cases, the original loan terms had changed and new disclosures were then produced.
  16. The Division's regulation 209 CMR 42.12A(6), effective as of September 8, 2006, states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to have a consumer sign a blank or incomplete mortgage loan application or mortgage loan documents.

  17. Files reviewed by the Division's examiners pursuant to the 2007 examination/inspection revealed instances in which applicants signed blank or incomplete initial disclosure forms, including but not limited to, Loan Origination and Compensation Agreements and Attorney General's Mortgage Broker Disclosure.
  18. The 2007 examination/inspection revealed that Mass Lending concealed and/or misrepresented certain pertinent information in mortgage loan documents submitted to lenders for loan qualification/approval and underwriting purposes. Examples include but are not limited to the following:
    1. A review of the mortgage loan file #1174471, for a loan which closed on May 5, 2006, revealed that the insurance binder pertaining to the insurance coverage on the subject property had been altered by Mass Lending to obscure the statement, "Policy to cancel on 5/3/06 $258.00 due." Specifically, the language regarding cancellation was obscured with "white-out" tape to conceal the evidence that the premium was past due and that the policy was scheduled to cancel. The information on the insurance binder is legible under the "white-out" tape but would have been obscured in the photocopy of the binder that had been submitted to the mortgage lender.
    2. Books and records reviewed during the 2007 examination/inspection revealed several instances in which Mass Lending had submitted to lenders mortgage loan applications for two or more properties on behalf of a single borrower, with each such application indicating that the subject property was to be used as a primary residence. Details regarding these loan transactions are specifically described in the Report.

    B. Undisclosed Fees



  19. Massachusetts General Laws chapter 183, section 63 states, in part:

    A mortgagee, or a mortgage lender or mortgage broker as defined in section one of chapter two hundred and fifty-five E, shall not charge a loan fee, finder's fee, points, so-called, 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, except to the extent that such fees or points have been previously disclosed to the mortgagor in writing, which disclosure may be in the form required by section seventeen D of chapter one hundred and eighty-four, or such other form which discloses said fees or points. A mortgagor shall not be obligated to pay fees or points which have not been previously disclosed as required herein.

  20. Books and records reviewed by the Division's examiners during the 2007 examination/inspection indicate that the Company engaged in a pattern or practice of understatements or omissions of the fees charged to consumers by Mass Lending.
  21. The Company's books and records indicate that processing fees, application fees, loan fees, or similar fees (collectively, "broker fees") were collected at the loan closing in amounts which the Division's examiners were unable to confirm had been accurately disclosed to consumers, in writing, to the extent charged at closing, if at all. Specifically, because of Mass Lending's practice of "e-copying" consumers' signatures and affixing them to various disclosure forms as described in Paragraphs 14 through 15 of this Temporary Order, the Division's examiners were unable to confirm that any of the broker fees noted on the disclosure forms had, in fact, been disclosed to the consumers prior to the loan closing. (See Exhibit 13 pdf format of exhibits_13_14_011108.pdf
, which is attached and incorporated herein by reference).

    C. Failure to Provide Notification of Regulatory Action

  22. The Division's regulation at 209 CMR 42.12(1)(c) states, in part:
    1. A Licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of any of the following significant developments: . . . (c) [R]eceiving notification of the institution of license . . . revocation procedures, or other formal or informal regulatory action, in any state against the Licensee, and the reasons thereof.
  23. On July 30, 2007, the State of New Hampshire Banking Department ("New Hampshire Department") issued a Cease and Desist Order, Case No. 07-185, against Mass Lending ("New Hampshire Order"). The New Hampshire Order alleges that during the course of an examination of a New Hampshire licensed entity, the New Hampshire Department became aware that the licensed entity had accepted at least ten (10) mortgage originations from Mass Lending, a Company that is not licensed as a mortgage broker in New Hampshire.
  24. The New Hampshire Order states that as Mass Lending was not licensed by the New Hampshire Department, the Company was not entitled to any compensation under New Hampshire law.
  25. As of the effective date of this Temporary Order, the Division has not received notification from Mass Lending of the occurrence of the events referenced above in Paragraphs 23 and 24 of this Temporary Order.

    D. Failure to Timely Provide Notification of the Closing and Relocation of Licensed Office Locations

  26. The Division's Regulation 209 CMR 42.13(2) states:

    Licensees shall provide thirty days prior written notice of any change or closing of a Massachusetts location to the Commissioner and shall contain such other information as the Commissioner may require.

  27. Books and records reviewed during the 2007 examination/inspection revealed that Mass Lending failed to provide thirty days prior notice of the relocation of its main office from Needham, Massachusetts to Norwood, Massachusetts. Specifically, Mass Lending's notification of the office relocation, effective as of June 1, 2007, was received by the Division on June 5, 2007.
  28. Books and records reviewed during the 2007 examination/inspection revealed that Mass Lending failed to provide thirty days prior notice of the closing of its Allston, Massachusetts and Worcester, Massachusetts office locations. Specifically, Mass Lending surrendered its licenses for those branches on or about February 28, 2007 but the Division did not receive notice of such until February 28, 2007 and February 12, 2007, respectively.

    E. Conducting Business with Unlicensed Entities

  29. The Attorney General's Regulation 940 CMR 8.06(9) states:

    It is an unfair or deceptive act or practice for a mortgage broker or lender to conduct business with a person which should be licensed under M.G.L. c. 255E, and which it knows or should know is an unlicensed mortgage broker or lender.

  30. 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.
  31. Books and records reviewed during the 2007 examination/inspection revealed that Mass Lending compensated certain unlicensed business entities for loans originated through Mass Lending, as specifically described in the Report.

    F. Engaging Unauthorized Individuals to Originate Mortgage Loans in Massachusetts



  32. Books and records reviewed by the Division's examiners during the 2007 examination/inspection indicate that Mass Lending, at all relevant times, retained unlicensed individuals, who were acting in the capacity of mortgage brokers and who were associated with and under the direction of the Company to conduct the mortgage broker business.
  33. By prior published opinions, the Division has set forth the standards which an unlicensed individual must satisfy, in advance, when seeking to operate in the capacity of a mortgage broker who is associated with and under the direction of a licensed mortgage broker under General Laws chapter 255E, section 2.
  34. Pursuant to the Division's published Opinion 97-222, the position of the Division of Banks is that exemption from licensure is available only to individuals and not to a corporate entity. The relationship between the licensee and the individual must be exclusive and the individual must execute an Exemption Affidavit to that effect. The licensee must execute a Statement of Accountability for all activities of the individual associated with it. The individual seeking the exemption must be primarily engaged in the activity it is seeking to perform under the direction of a licensed mortgage broker.
  35. The Division's published Opinion 97-061 further states that "this exemption would be effective provided that the Licensee completes and files with the Division a Statement of Accountability agreeing to take responsibility for the exempt individual's activities and the individual seeking the exemption completes and files the required Exemption Affidavit."
  36. Books and records reviewed by the Division's examiners during the 2007 examination/inspection revealed that Mass Lending did not file the required Exemption Affidavits and Statements of Accountability for any of the independent contractors who were operating on behalf of the Company.
  37. Because Mass Lending had failed to file the aforementioned required Exemption Affidavits and Statements of Accountability, the Division was unable to determine if Mass Lending had satisfied the qualifying standards for unlicensed individuals acting in the capacity of mortgage brokers associated with and under the direction of a licensed mortgage brokers and mortgage lenders set forth by the relevant opinions published by the Division.
  38. Books and records reviewed by the Division's examiners during the 2007 examination/inspection revealed that seven individuals, as further identified in the Report, originated loans in Massachusetts on behalf of Mass Lending in their capacity as independent contractors, but were not engaged in the activity of a mortgage broker or mortgage lender as their primary occupation.
  39. Books and records reviewed by the Division's examiners during the 2007 examination/inspection revealed that three individuals originated loans in Massachusetts on behalf of Mass Lending while also working on behalf of other mortgage companies, as more fully described in the Report.

    G. Unearned Fees

  40. The Real Estate Settlement Procedures Act, ("RESPA") implementing regulation, 24 CFR 3500.14(c)states, in part:

    No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section.

  41. Books and records reviewed by the Division's examiners during the 2007 examination/inspection indicate that when acting in the capacity of a mortgage broker, Mass Lending engaged in a pattern or practice of charging consumers fees for which no service was rendered or services which Mass Lending was not authorized to perform as the mortgage broker. (See Exhibit 14 pdf format of exhibits_13_14_011108.pdf
which is attached and incorporated herein by reference).
  42. Books and records reviewed by the Division's examiners during the 2007 examination/inspection revealed that Mass Lending charged consumers "underwriting fees." Mortgage brokers are neither authorized to approve loan terms nor fund mortgage loans. Therefore, Mass Lending, when acting in the capacity of a mortgage broker, would not be able to perform the service for which an underwriting fee would be collected.

    H. Failure to Properly Maintain Books and Records



  43. The Division's regulation 209 CMR 42.09(1)(b) states:

    Each Licensee shall keep and use its books, records and accounts in a manner which will allow the Commissioner to determine whether the Licensee is complying with the provisions of M.G.L. c. 255E and applicable state and federal laws and regulations. Each Licensee shall comply with the provisions of 209 CMR 48.00...

    (b)The mortgage broker ... shall retain for a minimum of three years after a mortgage loan is made the following: the original loan origination and compensation agreement as set out in 209 CMR 42.16; a copy of the settlement statement; an account of fees received in connection with the loan; correspondence; papers or records relating to the loan; and such other documents as the Commissioner may require.

  44. Books and records reviewed by the Division's examiners during the 2007 examination/inspection indicated that Mass Lending failed to retain sufficient documentation to enable the Commissioner to determine whether the Company was complying with certain laws and regulations governing mortgage brokers and mortgage lenders in Massachusetts, including but not limited to, compliance with mandated timing requirements.
    1. Mass Lending's practice of "e-copying" consumers' signatures and affixing them to various disclosure forms as described in Paragraph 14 of this Temporary Order prevented the Division's examiners from determining whether the Company was complying with the laws and regulations governing the provision of required mortgage disclosures.
    2. Mass Lending's practice of destroying initial disclosures as described in Paragraph 15 of this Temporary Order prevented the Division's examiners from determining whether the Company was complying with M.G.L. c. 255E and applicable state and federal laws and regulations governing mortgage brokers and mortgage lenders.

    I. Misrepresentations to the Division

  45. According to a summary of professional experience which was prepared by Lisa Reed and presented to the Division's examiner during the 2007 examination/inspection, Lisa Reed, the current owner of Mass Lending, was formerly employed as a loan originator with APEX Financial Group, Inc., d/b/a AAPEX Mortgage from December 2005 through March 2007, and as a loan originator with Alpine Financial Services, LLC d/b/a Mortgageopia from October 2005 until December 2005.
  46. Pursuant to the Division's licensing requirements, applicants for a mortgage license must identify the names of all "control persons" for the applicant. Each person so designated as a "control person" must submit the Uniform Mortgage Biographical Statement and Consent Form ("MU2 Form"). The MU2 Form must also be submitted in the event of a change of ownership of a licensee.
  47. The MU2 Form requires, in part, that the control person provide a complete employment history for the past 10 years.
  48. In March 2006, Mass Lending designated Lisa Reed as the proposed branch manager for Mass Lending's proposed West Roxbury location and was required to complete and submit to the Division the MU2 Form as part of the branch license application. Ms. Reed failed to include the employment information referenced above in Paragraph 45 of this Temporary Order, describing her employment history during the relevant period between December 2005 and March 2006 as being employed by Mass Lending.
  49. In August 2006, when Mass Lending requested the Division's approval of a change of ownership, resulting in Ms. Reed becoming the new owner, Ms. Reed was again required to complete and submit an MU2 Form. Ms. Reed again failed to include the employment information referenced above in Paragraph 45 of this Temporary Order.
  50. By signing the MU2, Ms. Reed swore or affirmed that her answers (including attachments) were true and complete and that she understood that she would be subject to administrative, civil, or criminal penalties for false or misleading answers.
  51. Pursuant to the Division's licensing requirements, individuals to be designated as branch managers for a licensee must submit the MU2 Form. Such branch managers are subject to the Division's review and approval to ensure that the individuals possess the necessary educational and business experience to engage in the business of a mortgage broker or mortgage lender.
  52. In its application for a license for a branch office location in East Boston, Mass Lending identified Ms. Reed as the branch manager. However, a review of Mass Lending's website revealed that another individual was listed as the branch manager of that location. Upon inquiry, the individual listed as branch manager confirmed that he was in fact the branch manager and that Ms. Reed "never comes to this office." Ms. Reed later informed the Division's examiners that the current branch manager had been acting in the capacity of a branch manager since August 2007.
  53. By failing to notify the Division of the identity of the actual branch manager of the East Boston office location and failing to submit the MU2 Form as required, Mass Lending prevented the Division from reviewing the qualifications of the individual manager.

    J. Refinancing in the Borrower's Interest

  54. Massachusetts General Laws chapter 183, section 28C(a) states in part:

    A lender shall not knowingly make a home loan if the home loan pays off all or part of an existing home loan that was consummated within the prior 60 months or other debt of the borrower, unless the refinancing is in the borrower's interest. The "borrower's interest" shall be narrowly construed, and the burden is upon the lender to determine that the refinancing is in the borrower's interest.

  55. The Division's regulation 209 CMR 53.07(1)(b) states in part:

    A lender may request that a borrower acknowledge receipt of such a worksheet or other documentation; provided, however, a lender shall not shift the burden to the borrower to demonstrate that a home loan is in the borrowers' interest.

  56. Books and records reviewed by the Division's examiners during the 2007 examination/inspection revealed that when acting in the capacity of a mortgage broker, Mass Lending provided consumers a "Massachusetts Predatory/Net Tangible Benefit Worksheet" form ("Worksheet"), a document that only mortgage lenders are authorized to provide to borrowers.
    1. Books and records reviewed by the Division's examiners during the 2007 examination/inspection also revealed that the Worksheet provided to the applicable consumers shifted the burden to the consumers to demonstrate that the loan was in the borrowers' interest and to their benefit.

    CONCLUSIONS OF LAW

  57. Based upon the information contained in Paragraphs 1 through 56, Mass Lending has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the 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).
  58. Based upon the information contained in Paragraphs 1 through 56, by falsifying borrowers' asset and income information on Uniform Residential Loan Applications and falsifying applicants' bank account information and employment information submitted in connection with residential mortgage transactions, Mass Lending has violated the Division's regulation 209 CMR 42.12(A)(8), Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  59. Based upon the information contained in Paragraphs 1 through 56, by e-copying consumers' signatures and affixing them on mortgage loan documents, Mass Lending has violated the Division's regulation 209 CMR 42.12A(7).
  60. Based upon the information contained in Paragraphs 1 through 56, by having consumers sign blank or incomplete disclosure forms, Mass Lending has violated the Division's regulation 209 CMR 42.12A(6).
  61. Based upon the information contained in Paragraphs 1 through 56, by charging loan fees, points, or similar fees in mortgage transactions involving residential property located in the Commonwealth, of four or less units and occupied in whole or in part by the mortgagor, without disclosing such fees or points to the mortgagor prior to the closing of the loan, Mass Lending has violated Massachusetts General Laws chapter 183, section 63.
  62. Based upon the information contained in Paragraphs 1 through 56, Mass Lending failed to notify the Commissioner in writing, within one business day, that on July 30, 2007 the New Hampshire Banking Department issued a Cease and Desist Order in violation of the Division's Regulation 209 CMR 42.12(1)(c).
  63. Based upon the information contained in Paragraphs 1 through 56, Mass Lending relocated its main office and closed two Massachusetts locations without first notifying the Commissioner, in writing, at least thirty days prior to the closing and relocation of the office locations, in violation of the Division's regulation 209 CMR 42.13(2).
  64. Based upon the information contained in Paragraphs 1 through 56, Mass Lending compensated unlicensed business entities for loans originated through the Company in violation of the Attorney General's Regulation 940 CMR 8.06(9).
  65. Based upon the information contained in Paragraphs 1 through 56, Mass Lending 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 Company and who otherwise failed to qualify for an exemption from licensure as set forth by the Division by prior published opinions, including without limitation Opinions 96-221, 97-061, and 97-222 in violation of General Laws chapter 255E, section 2.
  66. Based upon the information contained in Paragraphs 1 through 56 by charging underwriting fees, when acting in the capacity of a mortgage broker, in mortgage transactions involving residential property located in the Commonwealth, Mass Lending has violated the Real Estate Settlement Procedures Act and its implementing regulation, 24 CFR 3500.14(c).
  67. Based upon the information contained in Paragraphs 1 through 56, by failing to keep and use its books and records in a manner which would allow the Commissioner to determine whether the Company was complying with applicable state and federal laws and regulations, Mass Lending has violated the Division's regulations 209 CMR 42.09(1) and 209 CMR 48.03.
  68. Based upon the information contained in Paragraphs 1 through 56, by providing disclosures to consumers that only lenders are authorized to provide when acting in the capacity of a mortgage broker, Mass Lending has violated Massachusetts General Laws chapter 255E, section 2.
  69. Based upon the information contained in Paragraphs 1 through 56, the Commissioner has determined that:
    1. Mass Lending has engaged in, is engaging in, 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 lender and mortgage broker including, but not limited to, the provisions of the Division's regulations at 209 CMR 42.00 et seq.; and
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Mass Lending.
  70. Based upon the information contained in Paragraphs 1 through 56, had the facts and conditions found therein existed at the time of Mass Lending's original mortgage lender license application, the Commissioner would have been warranted in refusing to issue such license. Further, the facts and conditions set forth in Paragraphs 1 through 56 present sufficient grounds for the revocation of Mass Lending's mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b), 42.07(2)(b), and 42.12A(17).

    ORDER TO CEASE AND DESIST

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

  71. ORDERED that Mass Lending and any and all officers, directors, employees, independent contractors, or agents operating on behalf of Mass Lending, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage lender and mortgage broker, as those activities are 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, Mass Lending 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.
  72. IT IS FURTHER ORDERED that Mass Lending, 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.
  73. IT IS FURTHER ORDERED that Mass Lending 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. It being understood that "no loss to the applicant" shall mean that any loan which may have been closed by Mass Lending and remains unfunded, as well as any pending application which has been approved by the Company but has not yet closed, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Mass Lending. In the event that no such placement can be made, Mass Lending shall either independently fund the mortgage loan under such terms and conditions or buy down the mortgage loan offered by the lender so that the applicant does not incur a loss as a result of such placement. Mass Lending shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  74. IT IS FURTHER ORDERED that as soon as possible, but in no event later than two days after the effective date of this Temporary Order, Mass Lending shall submit the following information in writing to the Commissioner:
    1. A year-to-date balance sheet and statement of income and expense. The balance sheet should indicate Mass Lending's cash position at each of its depository banks as well as the corresponding bank account numbers. The balance sheet and statement of income and expense shall be signed and dated by an executive officer of Mass Lending under the pains and penalties of perjury to certify that the information reported is true and accurate and prepared in accordance with generally accepted accounting principles.
    2. A detailed record of all pending residential mortgage loan applications, from both the Company's lending and its brokering operations, which shall include, but is not limited to, the following: customer name, address, telephone number; all prepaid loan fees submitted by the customer; amount of loan; application status (i.e. filed, submitted to lenders); scheduled closing date; rate lock status; the location of all original open application files; and a list of applicable wholesale lenders. The latter list should include telephone numbers of contact persons familiar with Mass Lending's submitted loans.
  75. IT IS FURTHER ORDERED that Mass Lending shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender or mortgage broker pursuant to Paragraph 73 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Mass Lending's books and records and shall be available to the Commissioner, in their entirety, immediately upon request on the date and time specified by the Commissioner.
  76. IT IS FURTHER ORDERED that within sixty (60) days of the effective date of this Temporary Order, the Company shall cause to be made a review of all Massachusetts residential mortgage loans originated by Mass Lending since December 7, 2005 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;
    1. In each mortgage loan transaction identified pursuant to Paragraph 76, Mass Lending 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;
    2. Within sixty (60) days of the effective date of this Temporary Order, Mass Lending 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 Company in accordance with this Paragraph of the Temporary Order; and
    3. Within ninety (90) days of the effective date of this Temporary Order, Mass Lending 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.
  77. IT IS FURTHER ORDERED that within sixty (60) days of the effective date of this Temporary Order, Mass Lending shall cause to be made a review of all Massachusetts residential mortgage loans originated by Mass Lending since December 7, 2005 and shall identify all mortgage loan transactions in which Mass Lending charged an underwriting fee, or collected any other compensation from consumers, (i) in consideration of services which Mass Lending, when operating in the capacity of a mortgage broker, was prohibited from performing in a mortgage loan transaction or (ii) where no, or only a nominal, service was provided by Mass Lending.
    1. In each mortgage loan transaction identified pursuant to Paragraph 77, Mass Lending shall reimburse the consumer for the total amount of the underwriting fee which was charged;
    2. Within sixty (60) days of the effective date of this Temporary Order, Mass Lending 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 Company in accordance with this Paragraph of the Temporary Order; and
    3. Within ninety (90) days of the effective date of this Temporary Order, Mass Lending 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.
  78. IT IS FURTHER ORDERED that, within twenty (20) days of the effective date of this Temporary Order Mass Lending shall submit a payment of five thousand dollars ($5,000.00) in satisfaction of an administrative penalty collected in consideration of the Company's conducting residential mortgage loan business with unlicensed persons not employed by the Company and who otherwise failed to qualify for exemption from licensure. The Company shall remit payment pursuant to this Paragraph of the Temporary Order for the amounts 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 for deposit into the General Fund of the Commonwealth.
  79. 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.
  80. 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 Mass Lending 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 11th day of January, 2008.

By: Steven L. Antonakes
Commissioner of Banks

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