By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2009-002

FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST


In the Matter of
ABBOTT MORTGAGE CORPORATION
SEMYON KARASIK, individually
Woburn, Massachusetts

Mortgage Broker License No. MB0170


The Commissioner of Banks ("Commissioner") having determined that ABBOTT MORTGAGE CORPORATION and SEMYON KARASIK (collectively, "Abbott Mortgage" or the "Corporation"), with its main business office located at 10 Tower Office Park, Woburn, Massachusetts, has engaged in, or is engaged in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255E, and applicable regulations found at 209 CMR 42.00 et seq., hereby issues the following FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST ("Temporary Order") pursuant to General Laws chapter 255E section 7(b).

FINDINGS OF FACT

  1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a mortgage broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. At all relevant times, Abbott Mortgage was a corporation conducting business in the Commonwealth. At all relevant times, Abbott Mortgage's main office was located at 10 Tower Office Park, Woburn, Massachusetts.
  3. At relevant times, Abbott Mortgage was licensed by the Division as a mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner issued mortgage broker license number MB0170 to Abbott Mortgage to engage in the business of a mortgage broker at 10 Tower Office Park, Woburn, Massachusetts on April 9, 1996.
  4. Through license renewal applications filed with the Division, Abbott Mortgage maintained mortgage broker license number MB0170 through the period ending December 31, 2008.
  5. At all relevant times, Semyon Karasik was President and 100% owner of Abbott Mortgage.
  6. Mortgage brokers in Massachusetts are licensed and regulated under Massachusetts General Laws chapter 255E, which is administered and enforced by the Commissioner. Pursuant to Massachusetts General Laws chapter 255E, section 8, the Division is authorized to inspect the books, accounts, papers, records, and files of mortgage brokers transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E or any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a mortgage broker.
  7. 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 Abbott Mortgage on or about November 4, 2008 to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage broker business in Massachusetts (the "Examination/Inspection").
  8. The Division's Report of Examination/Inspection prepared as of November 4, 2008 (the "Report"), which was issued to Abbott Mortgage on the effective date of this Temporary Order, presents the findings from the Examination/Inspection. As set forth in part below, the Report alleges 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 broker in Massachusetts. The findings and conclusions of the Report are incorporated herein in their entirety by reference.

    A. Deceptive Business Practices

  9. Effective as of September 8, 2006, the Division's regulation 209 CMR 42.12A(7) 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 the consumer."

  10. 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."

  11. Books and records reviewed by the Division's examiners during the Examination/Inspection revealed that loan documents including initial consumer disclosures, had been modified and/or altered by Abbott Mortgage. Specifically, the Division's examiners determined that Abbott Mortgage engaged in a pattern or practice of cutting borrowers' signatures from copies of original documents that were in the Corporation's files and affixing the copied signatures onto other loan documents prior to submitting said documents to a lender for funding. These loan documents include but are not limited to: Loan Origination and Compensation Agreement ("Agreement"), Borrower's Certification and Authorization Form ("Certification"), Automatic Loan Payment Authorization ("Authorization"), Biweekly Electronic Funds Transfer Authorization ("Biweekly Authorization"), Consent to Social Security Administration's Release of Social Security Number Verification Form ("Consent to the Social Security Administration") and a Notice About Appraisal of Your Property Form ("Notice of Appraisal).
  12. Examples of the practices referenced in the Paragraph above are cited in the Report and include, but are not limited to, the following loan files: Loan Nos. 4904598, 3060702879, 0045029543, and 2818040446. The examiners' specific findings are fully described in the Report and are incorporated herein by reference.
  13. Effective as of September 8, 2006, the Division's regulation 209 CMR 42.12A(6) 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."

  14. Books and records reviewed during the Examination/Inspection revealed instances in which Abbott Mortgage had applicants sign blank or incomplete initial disclosure forms, including but not limited to, Loan Origination and Compensation Agreements and an Attorney General's Mortgage Broker Disclosure. Examples of the practice referenced in this Paragraph include, but are not limited to, the following loan files: Loan Nos. 07005319946 and AMC4033-07-2Q.

    B. Failure to Properly Maintain Books and Records

  15. The Division's regulation 209 CMR 42.09(1)(b) states in part:

    "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. The following records shall be maintainedââ'¬Â¦(b) each mortgage broker required ââ'¬Â¦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."

  16. The Examination/Inspection revealed that, in an apparent attempt to recycle paper documents by using the blank side of original loan-related documents for printer/photocopy paper, Abbott Mortgage failed to retain all documents relating to the loan transaction in the appropriate loan files. Moreover, in numerous instances, this practice resulted in the placement of certain applicants' personal loan information, including social security numbers and other sensitive information, in the loan files of other unrelated applicants.

    C. Mortgage Broker Acting as a Mortgage Lender & Diminishing Protection of Borrower's Interest Regulation

  17. General Laws chapter 183, section 28(c)(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 ââ'¬Â¦unless the refinancing is in the borrower's interest. The "borrower's interest" standard shall be narrowly construed, and the burden is upon the lender to determine and to demonstrate that the refinancing is in the borrower's interest."

  18. 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 borrower's interest; and provided further that a lender shall not require a borrower to sign a waiver of future claims under G.L. c. 183, s. 28C or 209 CMR 53.00."

  19. Books and records reviewed by the Division's examiners during the Examination/Inspection revealed that Abbott Mortgage provided applicants with a document entitled, "Massachusetts Compliance Worksheet on Borrower's Interest" ("Worksheet"), a document that only mortgage lenders are authorized to provide to borrowers.
  20. Books and records reviewed by the Division's examiners during the Examination/Inspection also revealed that the language used in the Worksheet provided to the applicable consumers was not in compliance with 209 CMR 53.07(1)(b) inasmuch as it shifted the burden to the borrowers to demonstrate that the loan was in the their interest and to their benefit.

    D. Failure to Provide Required Disclosures

  21. The Division's regulation 209 CMR 42.12A(12) states:

    "It is a prohibited act or practice for a mortgage broker or mortgage lender to engage in a pattern or practice of failing to make any disclosure to a consumer required by and at the time specified by any applicable state or federal law, regulation or directive."

  22. Books and records reviewed by the Division's examiners during the Examination/Inspection revealed that Abbott Mortgage consistently failed to retain evidence of having provided applicants with the credit score disclosure required under Section 609(g) of the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 [15 U.S.C. Ã'§ 1681g(g)]. This practice was observed in all loan files reviewed during the Examination/Inspection.

    E. Engaging in Prohibited Advertising Practices

  23. The Attorney General's regulation 940 CMR 8.04(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 in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading."

  24. Abbott Mortgage identified itself as a "Lender" on several advertisements and flyers forwarded to consumers throughout the Commonwealth. A newsletter mailed by Abbott mortgage contained a section under the heading "Ask the Underwriter." The Corporation's website indicated that some of the services provided by Abbott Mortgage included "pre-approval before you start shopping for a house." The language cited in this Paragraph has the tendency or capacity to mislead consumers by presenting the appearance that Abbott Mortgage, a mortgage broker, is approving or funding loans.
  25. 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."

  26. Abbott Mortgage's website advertised interest rates and/or loan terms without including the statement, "We arrange but do not make loans."
  27. The Attorney General's regulation 940 CMR 8.04(4)(d) states:

    "(4) It is an unfair or deceptive act or practice for a mortgage broker or lender to engage in bait advertising or to misrepresent (directly or by failure to adequately disclose) the terms, conditions or charges incident to the mortgage loan being advertised in any advertisement. Violation of 940 CMR 8.04(4) shall include, but not be limited to:

    (d) the advertisement through terms such as "bad credit no problem" or words of similar import or that an applicant will have unqualified access to credit without clearly and conspicuously disclosing the material limitations on the availability of credit that may exist, such as:

    1. requirements for the availability of credit (such as income);
    2. that a higher rate or more points may be required for a consumer with bad credit; and
    3. that restrictions as to the maximum principal amount of the loan offered may apply."
  28. A consumer solicitation issued by Abbott Mortgage contains the phrase "Bankruptcy Discharged 1 day . . . OK!", presenting the appearance that applicants will have unqualified access to credit and does not include the disclosure language required pursuant to 940 CMR 8.04(4)(d).
  29. The Division's regulation 209 CMR 32.24(3)(b) states:

    "An advertisement stating any of the terms in 209 CMR 32.24(3)(a) [e.g. amount and/or number of payments] shall state the following terms, as applicable:

    1. The amount or percentage of the downpayment.
    2. The terms of repayment.
    3. The "annual percentage rate", using that term, and, if the rate may be increased after consummation, that fact."
  30. Abbott Mortgage's website set forth the amount and number of payments but failed to include the additional disclosures required pursuant to 209 CMR 32.24(3)(b).

    CONCLUSIONS OF LAW

  31. Based upon the information contained in Paragraphs 1 through 30, Semyon Karasik and Abbott Mortgage have 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).
  32. Based upon the information contained in Paragraphs 1 through 30, by modifying and altering loan documents prepared on behalf of consumers and submitted to mortgage lenders for funding, Abbott Mortgage has engaged in unfair and deceptive business practices in violation of Massachusetts General Laws chapter 93A, section 2(a).
  33. Based upon the information contained in Paragraphs 1 through 30, by cutting and pasting consumers signatures to mortgage loan documents, Abbott Mortgage has violated the Division's regulation 209 CMR 42.12A(7).
  34. Based upon the information contained in Paragraphs 1 through 30, by having consumer's sign blank loan documents, Abbott Mortgage has violated the Division's regulation 209 CMR 42.12A(6).
  35. Based upon the information contained in Paragraphs 1 through 30, by recycling the reverse of certain loan documents to use for photocopying and printing, Abbott Mortgage has failed to properly maintain books and records in violation of the Division's regulation 209 CMR 42.09(1).
  36. Based upon the information contained in Paragraphs 1 through 30, by providing mortgage loan applicants with disclosures that only mortgage lenders are authorized to provide, Abbott Mortgage has acted as a mortgage lender without holding a mortgage lender license, in violation of Massachusetts General Laws, chapter 255E, section 2.
  37. Based upon the information contained in Paragraphs 1 through 30, by disseminating consumer solicitations that contained false or misleading language or had the tendency to be false or misleading, Abbott Mortgage has violated the Attorney General's regulation 940 CMR 8.04(1).
  38. Based upon the information contained in Paragraphs 1 through 30, by advertising interest rates and/or loan terms on the Corporation's website without including the statement, "We arrange but do not make loans," Abbott Mortgage has violated the Division's regulation 209 CMR 42.12A(4).
  39. Based upon the information contained in Paragraphs 1 through 30, by engaging in so-called "bait advertising" and failing to include required disclosure language on consumer solicitations, Abbott Mortgage has violated the Attorney General's regulation 940 CMR 8.04(4).
  40. Based upon the information contained in Paragraphs 1 through 35, by failing to include required language on the Corporation's website when advertising certain credit terms, Abbott Mortgage has violated the Division's regulations 209 32.24(3).
  41. Based upon the information contained in Paragraphs 1 through 30, the Commissioner has determined that:

    (a) Abbott Mortgage 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.

    (b)The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Semyon Karasik and Abbott Mortgage.

  42. Based upon the information contained in Paragraphs 1 through 30, had the facts and conditions found therein existed at the time of Abbott Mortgage's original mortgage broker 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 30 present sufficient grounds for the revocation of Abbott Mortgage's mortgage broker license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.07(2)(b), and 42.12A(19).

    ORDER TO CEASE AND DESIST

  43. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  44. ORDERED that Semyon Karasik, Abbott Mortgage, its officers, directors, employees, and their successors or assigns, shall immediately cease engaging in the activities of a 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.
  45. IT IS FURTHER ORDERED, that Abbott Mortgage, 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, Abbott Mortgage 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.
  46. IT IS FURTHER ORDERED that Abbott Mortgage shall immediately place with one or more qualified broker or lender, as appropriate based on the status of the application and with no loss to applicants, all of its pending Massachusetts residential mortgage loan applications. The pending applications to be placed with a qualified broker or lender shall include all transactions in which Abbott Mortgage was performing in the capacity of a mortgage broker. Abbott Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified broker(s) or lender(s).
  47. IT IS FURTHER ORDERED that Abbott Mortgage shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all 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 Abbott Mortgage's open application list as a mortgage broker, including but not limited to, the following: The names of all individuals from whom Abbott Mortgage 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.

  48. IT IS FURTHER ORDERED that Abbott Mortgage shall immediately secure all pending residential mortgage loan application files and shall make such files, in their entirety, available to the Commissioner upon request.
  49. 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.
  50. IT IS FURTHER ORDERED that this Temporary Order shall not be construed as approving any act, practice, or conduct not specifically set forth herein which was, is, or may be in violation of relevant state or federal laws and regulations. The findings, conclusions, and required action set forth in this Temporary Order are in addition to, and not in lieu of, any findings, conclusions, and corrective action which may be set forth in the Report of Examination/Inspection which was prepared by the Division of Banks and issued to Abbott Mortgage on the effective date of this Temporary Order
  51. 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 Abbott 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.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 27th day of March, 2009

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