By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER
LICENSING
Docket No. 2008-021

FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST


In the Matter of
SUN WEST MORTGAGE COMPANY, INC.
Cerritos, California

Mortgage Lender License No. ML3212


The Commissioner of Banks ("Commissioner") having determined that SUN WEST MORTGAGE COMPANY, INC., ("Sun West Mortgage" or the "Corporation"), located at 18303 Gridley Road, Cerritos, 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

  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 in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. Sun West Mortgage is, and at all relevant times has been, a foreign corporation doing business in the Commonwealth. Sun West Mortgage's main office of record is located at 18303 Gridley Road, Cerritos, California.
  3. Sun West Mortgage is licensed by the Commissioner as a mortgage lender under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner initially issued a mortgage lender license, license number ML3212 to Sun West Mortgage to engage in the business of a mortgage lender on or about August 23, 2007.
  4. Mortgage lenders 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 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 lender.
  5. On June 11, 2008, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination of Sun West Mortgage's books and records, initially focusing on four Massachusetts reverse mortgage loan transactions completed by the Corporation, to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage lender business in Massachusetts (the "examination").
  6. The Division presented the findings of the examination in a letter (the "Division's letter"), which was issued to Sun West Mortgage on the effective date of this Temporary Order. The Division's Letter identified significant failures to comply with applicable state laws, and regulations, governing the conduct of those engaged in the business of a mortgage lender in Massachusetts.

    Making Reverse Mortgage Loans without Approval

  7. Books and records reviewed during the examination revealed that Sun West Mortgage acted as a lender in all four of the reverse mortgage loan files reviewed. In addition, a loan list provided to the Division's examiners by the Corporation indicated that Sun West Mortgage had also acted as a lender in three additional Massachusetts reverse mortgage transactions since obtaining its mortgage company license on August 23, 2007.
  8. Six of the reverse mortgage loans referenced above were HUD HECM (Home Equity Conversion Mortgage) reverse mortgage loans, insured by the Federal Housing Administration. One of the reverse mortgage loans referenced above was an uninsured proprietary reverse mortgage loan.
  9. On or about December 10, 2007, Sun West Mortgage submitted to the Division an application for approval ("Application") to offer the HUD HECM reverse mortgage loan program to Massachusetts consumers. At all relevant times, the Division was in communication with a representative of Sun West Mortgage via several e-mails and teleconferences each of which requested additional information in order to complete the review of the Application. As of the date of this Temporary Order, the Division has not approved the Corporation to offer the HUD HECM reverse mortgage loan program.
  10. Books and records reviewed by the Division's examiners revealed that Sun West Mortgage made at least six HUD HECM reverse mortgage loans to Massachusetts consumers between January 29, 2008 and April 18, 2008, while the Corporation's application for approval was pending.
  11. The Division's records indicate that Sun West Mortgage also submitted an application for approval of the Corporation's private jumbo reverse mortgage ("Cashkeeper") program on or around December 10, 2007. On March 24, 2008, Sun West Mortgage notified the Division of the discontinuance of the program and stated it was not offering the product.
  12. Books and records reviewed by the Division's examiners revealed that Sun West Mortgage made at least one proprietary Cashkeeper reverse mortgage loan on property located in Massachusetts on October 16, 2007.
  13. Based upon the information contained in Paragraphs 9 through 12 of this Temporary Order, Sun West Mortgage was fully aware that Massachusetts law requires mortgagees intending to make reverse mortgage loans to submit for the Division's approval, a program which meets specific criteria set forth in Massachusetts General Laws Chapter 167E, section 7, and made applicable to mortgagees through Massachusetts General Laws chapter 183, section 67, prior to making reverse mortgage loans in Massachusetts.
  14. Books and records reviewed by the Division's examiners revealed that Sun West Mortgage has made at least seven reverse mortgage loans on residential property located in the Commonwealth without receiving approval to do so.

    Failure to Demonstrate Compliance with Massachusetts Borrower Protections in Reverse Mortgage Transactions

  15. General Laws, chapter 167E, section 7(d)(2), made applicable to all mortgagees by General Laws, chapter 183, section 67 states:

    The commissioner shall not approve a program for reverse mortgage loans which does not include the following:-

    (2) an applicant for the loan shall not be bound for 7 days after his acceptance, in writing, of the lender's written commitment to make the loan.

  16. Books and records reviewed by the Division's examiners indicated that Sun West Mortgage failed to retain sufficient evidence in at least three loan files to demonstrate that the borrower's were afforded the seven day cooling off period subsequent to the acceptance of the Corporation's commitment to make the loan.

    Failure to Document Prospective Borrowers' Completion of Mandatory Counseling with an Approved Agency

  17. General Laws, chapter 167E, section 7(e), made applicable to all mortgagees by General Laws, chapter 183, section 67 states:

    A bank shall not make a reverse mortgage loan as provided in this section until it has received a notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the executive office of elder affairs and which shall include instruction on reverse mortgage loans. The counseling program shall include, but is not limited to...

  18. Books and records reviewed by the Division's examiners indicated that Sun West Mortgage failed to retain evidence in the loan files maintained by the Corporation, documenting that a reverse mortgage borrower had completed the mandatory counseling program and that the program had been approved by the Executive Office of Elder Affairs.
  19. Books and records reviewed by the Divisions examiners indicated that at least one prospective borrower had completed a reverse mortgage counseling program with an agency that was not approved by the Executive Office of Elder Affairs.

    CONCLUSIONS OF LAW

  20. Based upon the information contained in Paragraphs 1 through 19, Sun West Mortgage has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage lender 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 42.03(2)(c).
  21. Based upon the information contained in Paragraphs 1 through 19, by making reverse mortgage loans prior to obtaining approval from the Division, Sun West Mortgage violated Massachusetts General Laws chapter 167E, section 7, applicable to all mortgagees by Massachusetts General Laws chapter 183, section 67.
  22. Based upon the information contained in Paragraphs 1 through 19, by failing to provide documentation indicating that reverse mortgage borrowers were afforded a seven day cooling off period prior to settlement, Sun West Mortgage violated Massachusetts General Laws chapter 167E, section 7(d)(2), applicable to all mortgagees by Massachusetts General Laws Chapter 183, section 67.
  23. Based upon the information contained in Paragraphs 1 through 19, by failing to ensure that consumers who obtained reverse mortgage loans were counseled through an agency approved by the Executive Office of Elder Affairs, when acting in the capacity of a mortgage lender, Sun West Mortgage violated Massachusetts General Laws chapter 167E, section 7(e), applicable to all mortgagees by Massachusetts General Laws Chapter 183, section 67.
  24. Based upon the information contained in Paragraphs 1 through 19, the Commissioner has determined that:
    1. Sun West Mortgage 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 including, but not limited to, Massachusetts General Laws chapter 255E, 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 Sun West Mortgage.
  25. Based upon the information contained in Paragraphs 1 through 19, had the facts and conditions found therein existed at the time of Sun West Mortgage'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 19 present sufficient grounds for the revocation of Sun West Mortgage's mortgage lender license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b).

    ORDER TO CEASE AND DESIST

  26. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  27. ORDERED that Sun West Mortgage and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Sun West Mortgage, and their successors or assigns, shall immediately cease engaging in the activities of: (a) a mortgage lender, as those activities are defined under Massachusetts General Laws chapter 255E, section 1, and (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, Sun West Mortgage 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.
  28. IT IS FURTHER ORDERED that Sun West Mortgage, 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.
  29. IT IS FURTHER ORDERED that Sun West Mortgage shall immediately place with one or more qualified 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 Sun West Mortgage and remains unfunded, as well as any pending application which has been approved by the Corporation 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 Sun West Mortgage. In the event that no such placement can be made, Sun West Mortgage 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. Sun West Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s).
  30. 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, Sun West Mortgage shall submit the following information in writing to the Commissioner:
    1. A detailed record of all pending residential mortgage loan applications, from the Corporation's lending 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 Sun West Mortgage's submitted loans; and
    2. The entire loan file for each of the Massachusetts reverse mortgage loans closed by the Corporation.
  31. IT IS FURTHER ORDERED that Sun West Mortgage 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 pursuant to Paragraph 29 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Sun West Mortgage'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.
  32. 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.
  33. 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 Sun West Mortgage 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.
  34. Sun West Mortgage is hereby notified of the Division's decision pursuant to a letter issued on the date of this Temporary Order, to deny its pending application for approval of its reverse mortgage program.

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