By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2008-015-CO

CONSENT ORDER


In the Matter of
THE MORTGAGE SPECIALISTS, INC
Plaistow, New Hampshire

Mortgage Broker License No(s). MB0413 et al


WHEREAS, The Mortgage Specialists, Inc., Plaistow, New Hampshire ("Mortgage Specialists" or the "Corporation"), a licensed mortgage broker under Massachusetts General Laws chapter 255E, section 2 has been advised of its right to Notice and Hearing pursuant to General Laws chapter 255E, section 7(a), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER ("Consent Agreement") with representatives of the Division of Banks ("Division") dated , August 18, 2008, whereby, solely for the purpose of settling this matter, and without admitting any allegations or implications of fact or the existence of any violation of state or federal laws and regulations governing the conduct and operation of a mortgage broker, Mortgage Specialists agrees to the issuance of this CONSENT ORDER ("Consent Order") by the Commissioner of Banks ("Commissioner";);

WHEREAS, pursuant to General Laws chapter 255E, section (7)(b), the Commissioner issued a FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST, Docket No. 2008-015 (the "Temporary Order"), against Mortgage Specialists on July 31, 2008, based upon an examination/inspection of Mortgage Specialists which commenced on March 25, 2008, and included related subsequent inspections, which alleged Mortgage Specialists's failure to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that its 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);

WHEREAS, the parties now seek to resolve by mutual agreement, the matters identified in the Temporary Order;

WHEREAS, without this Consent Order constituting an admission by Mortgage Specialists of any allegations made or implied by the provisions of the Temporary Order; solely for the purpose of settlement of all alleged violations without protracted administrative proceedings and judicial review, Mortgage Specialists hereby waives its right to complete the hearing process relative to this proceeding and affirms that it is willing to take all necessary action as set forth in this Consent Order; and

WHEREAS, in recognition of the Division and Mortgage Specialists having reached the following mutual agreement under this Consent Order to fully resolve the matters raised by the Temporary Order, the Commissioner has terminated the Temporary Order on this 18th day of August, 2008.

ORDER

NOW COME the parties in the above-captioned matter, the Division and Mortgage Specialists, and stipulate and agree as follows:

  1. Within ten (10) days of the effective date of this Consent Order, Mortgage Specialists shall cause to be made a review of its staffing and operations to ensure that any and all personnel identified as a "mortgage loan originator" as that term is defined under General Laws chapter 255F, section 1 and the Division's regulation 209 CMR 41.00 et seq., have filed the required loan originator license application to the Division through the Nationwide Mortgage Licensing System ("NMLS"). Mortgage Specialists shall further ensure that, within the referenced time period, Mortgage Specialists executes the necessary measures to ensure that each mortgage loan originator is designated as having a relationship with Mortgage Specialists in the NMLS and that Mortgage Specialists has accepted the sponsorship of the relevant mortgage loan originators in the NMLS.
  2. Within sixty (60) days of the effective date of this Consent Order, Mortgage Specialists shall engage an independent auditing firm ("Auditing Firm") to conduct a review of certain residential mortgage loan applications processed by Mortgage Specialists from March 25, 2005 through the date that the Auditing Firm commences its review. The Auditing Firm's engagement letter shall set forth a reasonable and acceptable sampling procedure which will be applied to complete the application review for the referenced review period. Mortgage Specialists shall obtain the prior written approval of the Commissioner of the Auditing Firm proposed by the Corporation, and the proposed sampling procedure, before such review is initiated. The Auditing Firm's review shall commence within one hundred and twenty (120) days of the effective date of this Consent Order.
  3. The scope of the Auditing Firm's review of Mortgage Specialists' Massachusetts mortgage broker activity shall address and include, but shall not be limited to, the following: the placement of loan applications into alternative documentation loan programs (stated income; no income, no asset verification; no income verification; no ratio loans; low and no documentation loans; etc.); application completion procedures; verification and due diligence procedures; internal policies and quality control procedures; books and records retention, and document destruction, procedures; relationships and interactions with appraisers and the criteria for their selection; privacy policies and practices, including security of computer and electronic transmissions; compliance with the provisions of each Lender-Broker agreement and/or Lender Guidelines which govern Mortgage Specialists' mortgage broker activity; and the Corporation's compliance with the state and federal laws, regulations, and regulatory bulletins governing the conduct and operation of those engaged in the business of a mortgage broker in Massachusetts.
  4. The Auditing Firm shall prepare, and submit to the Commissioner a written report detailing the auditor's findings within one hundred and eighty (180) days of the effective date of this Consent Order.
  5. The Auditing Firm shall continue to review Massachusetts loan transactions for compliance with state and federal law, regulations and orders as they occur for a period of time of eighteen (18) months from the date that the Auditing Firm begins its review. It being understood that this Paragraph will require that the Auditing Firm review each mortgage loan application originated by Mortgage Specialists and will not be governed by the sampling procedures permitted under other provisions of this Consent Order.
  6. For a period not to exceed three years, Mortgage Specialists agrees to engage the Auditing Firm to conduct a review addressing the matters set forth in Paragraph 3 with the following timeline. Within forty-five (45) days of completion of the following reviews, the Auditing Firm shall prepare and submit to the Commissioner a written report detailing the auditor's findings relative to the following:
    1. The eighteen (18) month review set out in Paragraph 5, which again shall be a daily review. It being understood that the Auditing Firm shall agree to prepare and submit a weekly report to the Commissioner describing any violations of law or potential unfair or deceptive practices observed during the preceding week so that the Commissioner may respond to any such conditions in a timely manner;
    2. A six (6) month review, to begin after the eighteen (18) month review is complete which shall be completed by executing a reasonable and acceptable sampling procedure; and
    3. A twelve (12) month review, to begin after the six (6) month review is complete which shall be completed by executing a reasonable and acceptable sampling procedure.
  7. In consideration of the activities identified by the Division and detailed in the Temporary Order, Mortgage Specialists agrees to the following:
    1. Mortgage Specialists agrees to submit a payment in the amount of three hundred thousand dollars ($300,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation's alleged failure to comply with certain state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage broker in Massachusetts. The administrative penalty shall be satisfied as follows:
      1. One hundred thousand dollars ($100,000.00) shall be due and payable immediately upon execution of this Consent Order; and
      2. A payment of twenty-five thousand dollars ($25,000.00) shall be due and payable upon the last day of each calendar quarter following the effective date of this Consent Order, beginning with the calendar quarter ending September 30, 2008, until the administrative penalty set forth in Paragraph 7(a) is satisfied in full.
    2. Mortgage Specialists shall remit payment(s) pursuant to Paragraph 7(a) of this Consent Order for the amount then due, payable to the "Commonwealth of Massachusetts,"; to the Office of the Commissioner of Banks, One South Station, 3rd Floor, Boston, Massachusetts 02110. The Division shall remit the payment(s) for deposit into the General Fund of the Commonwealth.
  8. Mortgage Specialists acknowledges that the administrative penalty set forth above is in addition to the examination fee which as yet has not been billed by the Division, but shall become due within thirty (30) days of the issuance of the relevant invoice.
  9. Within one hundred and twenty (120) days of the effective date of this Consent Order, Mortgage Specialists' agrees to submit to the Commissioner a revised, written compliance program designed to maintain compliance by Mortgage Specialists' with all state and federal laws, regulations, and regulatory bulletins governing the conduct and operation of a mortgage broker in Massachusetts. The compliance program, at a minimum, shall:
    1. Provide for a loan review process to assess the compliance of Mortgage Specialists', and all applicable employees, staff, and independent contractors who operate on behalf of the Corporation, with: (1) the statutes, regulations, regulatory bulletins, and other relevant provisions of law applicable to those engaged in the business of a mortgage broker in Massachusetts and (2) the provisions of this Consent Order;
    2. Ensure that Mortgage Specialists' compliance program is managed by a qualified manager who shall have responsibility for all consumer compliance and related matters, including, but not limited to, monitoring the Corporation's compliance and ensuring that corrective action is taken to address all alleged violations and areas of concern previously identified by the Division; and
    3. Provide adequate training to applicable staff persons, conducted by qualified and trained personnel, which includes, but is not limited to, proper instruction, adequate supervision and ongoing training to ensure proper implementation and execution of the revised policies and procedures implemented pursuant to this Consent Order.
  10. Within sixty (60) days of the effective date of this Consent Order, the Corporation agrees to submit to the Commissioner a written report, which has been signed by a duly authorized officer of Mortgage Specialists to reflect that Mortgage Specialists has reviewed such report, which addresses:
    1. the identification of the type and number of senior management and officer personnel necessary to manage adequately and supervise properly the Corporation's mortgage broker activity;
    2. a statement that each individual identified pursuant to subparagraph (a) possesses the ability, experience, and other qualifications necessary to perform competently present and anticipated duties, to follow and enforce the Corporation's revised policies and procedures adopted pursuant to this Consent Order, and to comply with the provisions of this Consent Order; and
    3. A determination of the level of staffing needed to conduct competently the Corporation's operations affecting Massachusetts consumers.
  11. Mortgage Specialists agrees to establish, implement, and maintain written policies and procedures within twenty (20) days of the effective date of this Consent Order to ensure that the Corporation maintains all books, records, and accounts in accordance with the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09. Mortgage Specialist further agrees that the written policies and procedures will be submitted to the Division within the 20 day period. The policies and procedures are to include but are not limited to:
    1. Implementing procedures to ensure that Mortgage Specialists maintains original paper copies of all records relating to Massachusetts residential loans. Such procedures shall ensure that the Corporation retains the entire loan file relative to each mortgage loan, including all documentation provided by the lender in a brokered transaction;
    2. Providing that Mortgage Specialists conducts on-going, periodic reviews of document filing and retention procedures, and its compliance thereto, to ensure its books, records, and accounts are maintained in a manner sufficient to evidence compliance with applicable federal and state laws, rules and regulations;
    3. Implementing procedures to ensure the full cooperation of all Mortgage Specialists employees with the Division during any future examinations of the Corporation which shall necessarily provide for complete and timely access to its books, records, accounts, and any other additional, relevant materials pursuant to the provisions of Massachusetts General Laws chapter 255E, section 8; and
    4. Providing that all applicable staff of Mortgage Specialists with form completion and/or document filing and retention responsibilities, receive adequate training to ensure proper implementation and execution of the revised policies and procedures adopted by the Corporation under this Paragraph of the Consent Order.
  12. Mortgage Specialists' shall comply with all laws and regulations applicable to its conducting the business of a mortgage broker, including, but not limited to, Massachusetts General Laws chapter 255E, chapter 255F, and the Division's regulations 209 CMR 42.00 et seq. and 209 CMR 41.00 et seq.
  13. On the thirtieth (30th) day after the end of each calendar quarter following the date of this Consent Order, beginning with the calendar quarter ending September 30, 2008, Mortgage Specialists' shall furnish written progress reports to the Commissioner, detailing the form, content, and manner of any actions taken to address each Paragraph of this Consent Order and the results thereof. The written progress reports shall further describe any initiatives implemented by the Corporation during the proceeding calendar quarter to improve the Corporation's practices in the area of consumer compliance and the results thereof.
  14. The reporting requirements to the Commissioner contained in Paragraph 13 of this Consent Order shall remain in effect and shall not be amended or rescinded without prior written modification, termination, or suspension of the applicable provisions of this Consent Order from the Commissioner.
  15. This Consent Order shall become effective immediately upon the date of its issuance.
  16. The provisions of this Consent Order shall be binding upon Mortgage Specialists and its officers and directors, and their successors or assigns.
  17. Failure to comply with the terms of this Consent Order shall constitute grounds for license denial, suspension, and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
  18. In accordance with the terms of the Consent Agreement entered by Mortgage Specialists and the Commissioner, Mortgage Specialists has waived all rights of appeal that it may have.
  19. The provisions of this Consent Order shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Consent Order shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
  20. This Consent Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements, promises, representations, or warranties other than those set forth in this Consent Order and the Consent Agreement.


BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 18th day of August, 2008.

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

August 15, 2008
_____________
Date

This Consent Order was superseded and replaced by a Consent Order on January 20, 2012.