By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2008-017

STIPULATION AND
CONSENT TO THE
ISSUANCE OF A
CONSENT ORDER


In the Matter of
FIRST COVENANT MORTGAGE CO., INC.
Quincy, Massachusetts

Mortgage Broker License No. MB4815


WHEREAS, FIRST COVENANT MORTGAGE CO., INC., Quincy, Massachusetts ("First Covenant Mortgage" 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 February 3, 2009, 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, First Covenant Mortgage agrees to the issuance of this CONSENT ORDER ("ORDER") by the Commissioner of Banks ("Commissioner");

WHEREAS, an examination/inspection of First Covenant Mortgage was conducted pursuant to General Laws chapter 255E, section 8, as of March 20, 2008, to assess the Corporation's level of compliance with applicable Massachusetts statutes and the Division's regulations governing the conduct of those engaged in the business of a mortgage broker in the Commonwealth; and

WHEREAS, the Report of Examination/Inspection (the "Report") issued pursuant to the Division's examination/inspection of First Covenant Mortgage as of March 20, 2008 alleged substantial non-compliance with applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage broker in Massachusetts.

ORDER

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

  1. First Covenant Mortgage shall establish, implement, and maintain revised procedures to ensure that the Corporation refrains from collecting compensation from consumers in consideration of services which the Corporation, as a mortgage broker, is prohibited from performing in a mortgage loan transaction.
    1. First Covenant shall reimburse the consumers identified in the Report for the amounts collected as an underwriting fee or rate lock fee, at settlement that had collected from the consumers at loan closing. The amount of such reimbursement shall equal the actual charges assessed to the consumers from whom underwriting and rate lock fees were collected;
    2. With First Covenant's written response to the findings presented in the Report, which is to be submitted to the Commissioner pursuant to Section 9(a) of this Order, the Corporation shall submit evidence of the reimbursements issued pursuant to this Section of the Order. Evidence of the reimbursements shall include the consumers' names, the dates the loans closed, the check numbers, the amount of the reimbursements, and sufficient evidence to illustrate the consumers' receipt of the reimbursements; and
    3. First Covenant Mortgage shall ensure that a system of internal controls is established to monitor the Corporation's compliance with the revised practices and procedures established and implemented pursuant to this Section of the ORDER.
  2. First Covenant Mortgage shall establish, implement and maintain policies and procedures to ensure that any loan fees, mortgage broker fees, application fees, processing fees, or similar fees collected as compensation for administrative costs incurred in originating the mortgage loan are not charged to consumers except to the extent that such fees or points have been properly disclosed to the consumer, in writing, prior to the closing of the mortgage loan.
    1. First Covenant Mortgage shall reimburse the consumers identified in the Report for the amounts collected as a broker fee, loan fee, points or similar fee at settlement that had not been disclosed to the consumers, in writing, prior to loan closing. The amount of such reimbursement shall equal the difference between the actual charges assessed to the consumers and the amount disclosed in writing for such fees prior to loan closing; and
    2. With First Covenant's written response to the findings presented in the Report, which is to be submitted to the Commissioner pursuant to Section 9(a) of this Order, the Corporation shall submit evidence of the reimbursements issued pursuant to this Section of the Order. Evidence of the reimbursements shall include the consumers' names, the dates the loans closed, the check numbers, the amount of the reimbursements, and sufficient evidence to illustrate the consumers' receipt of the reimbursements.
    3. First Covenant shall establish procedures to provide re-disclosure of points and fees charged by the Corporation at least twenty four hourss prior to closing if such fees increase from the prior written disclosure
  3. First Covenant shall immediately desist from providing consumers with any oral representations or assurances, or any written documentation that states, suggests, or infers that the Corporation is locking an interest rate on behalf of the consumer for residential property in Massachusetts. The provisions of this Section of the ORDER shall necessarily require that the Corporation review and revise as necessary all documentation provided to consumers, including website materials and advertising, in order to ensure compliance with the provisions of the Division's regulation 209 CMR 42.12A(3).
  4. First Covenant Mortgage shall establish escrow account reconciliation procedures and practices to ensure compliance with all provisions set forth the Division's regulation 209 CMR 42.11A.
  5. First Covenant Mortgage shall immediately revise its "Borrower's Certification and Authorization" form to eliminate any representation or statement that could be considered false, misleading, or have the tendency to be misleading, including, but not limited to, any representation that the Corporation, is approving or funding the loan.
  6. First Covenant Mortgage shall establish, implement, and maintain procedures to ensure that the Corporation discloses yield spread premiums, as a dollar amount or range, on good faith estimates in accordance with the provisions of the RESPA implementing regulation 24 CFR 3500.7. Such procedures shall necessarily ensure that, when the yield spread premium is disclosed as an estimate or range, such amount set forth in the good faith estimate shall be based upon the Corporation's experience in collecting yield spread premiums in similar transactions and shall provide the consumer with an accurate, good faith estimate of the amount that is likely to be collected.
  7. First Covenant Mortgage shall revise its procedures to ensure that all residential mortgage loan applicants are provided with a Loan Origination and Compensation Agreement, completed in accordance with, and in the form specified, by the provisions of the Division's regulation 209 CMR 42.16.
  8. First Covenant Mortgage shall comply with all laws and regulations applicable to his conducting the business of a mortgage broker, including, but not limited to, Massachusetts General Laws chapter 255E, and the Division's regulation 209 CMR 42.00 et seq. Such obligations shall necessarily include the duty to address and correct, within thirty (30) days of receipt of the Report, all violations and areas of concern addressed in the Report.
    1. Within thirty (30) days of First Covenant Mortgage's receipt of the Report, the Corporation shall submit to the Commissioner a written response that addresses each of the violations and areas of concern specified in the Report. The written response shall describe the revised policies and procedures adopted by First Covenant Mortgage to implement all corrective actions set forth in: (i) the "Examiner's Comments and Conclusions" section of the Report and (ii) the provisions of this Order;
    2. Within thirty (30) days from the effective date of this Order, First Covenant Mortgage shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Corporation's compliance with: (a) the statutes, rules, regulations, regulatory bulletins, and other relevant provisions of law applicable to those engaged in the business of a mortgage broker in Massachusetts and (b) the provisions of this Order. Such quality control standards shall be designed to prevent the recurrence of the violations addressed in the Report; and
    3. First Covenant Mortgage shall establish, implement, and maintain procedures and policies to ensure that all applicable staff persons receive adequate instruction and ongoing, periodic training to ensure proper implementation and execution of the revised practices and procedures implemented pursuant to this Order.
  9. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this Order, beginning with the calendar quarter ending March 31, 2009, First Covenant Mortgage shall furnish written progress reports to the Division, which shall address and include the following:
    1. A description of the form, content, and manner of any actions taken to address each Section of this Order and the results thereof; and
    2. Written findings prepared by First Covenant Mortgage detailing a review of management's and staff persons' adherence to the policies, programs, and procedures adopted pursuant to this Order and to applicable statutes, regulations, and rules, as well as a description of any operational changes implemented during such quarter which are intended to improve First Covenant Mortgage's compliance condition in Massachusetts and the results thereof.
  10. The reporting requirement to the Division referenced in Section 10 of this Order shall remain in effect and shall not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this Order from the Commissioner.
  11. Nothing in this Order shall be construed as permitting First Covenant Mortgage to violate any law, rule, regulation, or regulatory bulletin to which First Covenant Mortgage is subject.
  12. In consideration of the foregoing Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke First Covenant Mortgage's mortgage broker license under General Laws chapter 255E, section 6, while this Order is in effect.
  13. Failure to comply with the terms of this Order shall constitute grounds for license suspension and/or revocation, or other formal regulatory action pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
  14. This Order shall become effective immediately upon the date of its issuance.
  15. The provisions of this Order shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Order shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
  16. This Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements between the Division and First Covenant Mortgage.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 3rd day of February, 2009

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