By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2009-138

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST


In the Matter of
IDEAL MORTGAGE BANKERS, LTD. D/B/A
LEND AMERICA.
Melville, New York

Mortgage Company License No. MC5278


The Commissioner of Banks ("Commissioner") having determined that IDEAL MORTGAGE BANKERS, LTD., D/B/A LEND AMERICA ("Lend America" or the "Corporation"), located at 520 Broadhollow Road, Melville, New York 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) and chapter 255F, section 8(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. The Division, through the Commissioner, also has jurisdiction over the licensing and regulation of persons engaged in the business of a mortgage loan originator in Massachusetts pursuant to Massachusetts General Laws chapter 255F, section 2 and its implementing regulation 209 CMR 41.00 et seq.
  3. Lend America is, and at all relevant times has been, a foreign corporation doing business in the Commonwealth. Lend America's main office is located at 520 Broadhollow Road, Melville, New York.
  4. Lend America 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 issued a mortgage company license, license number MC5278 to Lend America to engage in the business of a mortgage lender and mortgage broker on or about October 15, 2008. License number MC5278 authorized Lend America to conduct the mortgage company business from the Corporation's main office located at 520 Broadhollow Road, Melville, New York.

    A. Failure to Fund Certain Residential Mortgage Loan Obligations

  5. The Division's regulation at 209 CMR 42.12A(16) states:

    It is a prohibited act or practice for a mortgage lender to contract with a consumer through the underwriting and subsequent execution of mortgage loan closing documents and thereafter fail to fund the mortgage loan.

  6. 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.

  7. The Attorney General's regulation 940 CMR 8.06(8) states:

    It is an unfair or deceptive act or practice for a lender to fail to disburse funds in accordance with any commitment or agreement with the borrower.

  8. The Division's regulation at 209 CMR 42.12A(20) states:

    A violation of 209 CMR 42.12A shall constitute grounds for the issuance of a cease and desist order under M.G.L. c. 255E, § 7; shall constitute grounds for license suspension or revocation under M.G.L. c. 255E, § 6 and shall constitute grounds for an administrative fine or penalty under M.G.L. c. 255E, §§ 11 and 12.

  9. On or about December 1, 2009, representatives from the Division, by and through discussions held with representatives of other state banking and mortgage lending regulators (collectively, the "Mortgage Regulators"), contacted Lend America and requested that the Corporation provide a pipeline report of pending residential mortgage loan applications in all states in which Lend America operates, including Massachusetts. In response to that request, on December 3, 2009, Lend America provided the Mortgage Regulators with a pipeline report that indicated, in part, that as of December 1, 2009, the Corporation failed to disburse loan proceeds for at least two (2) mortgage loan transactions involving residential property in Massachusetts for which closings had occurred. In addition, the pipeline report provided by the Corporation identified at least eleven (11) mortgage loan transactions involving residential property in Massachusetts for which Lend America will fail to timely disburse loan proceeds for closings that are scheduled to occur.
  10. Based upon information and belief, the two mortgage loans referenced in Paragraph 9, have not yet funded as of the effective date of this Temporary Order.
  11. Based upon information and belief, the pipeline report understates the actual number of unfunded transactions based upon information obtained by the Division from the Mortgage Regulators.

    B. Failure to Provide Notice of Cessation of Operations

  12. The Division's regulation at 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.

  13. According to the Division's records, Lend America conducts all of the Corporation's mortgage business in the Commonwealth, through the Corporation's main office located in Melville, New York.
  14. On or around December 1, 2009 the Division was notified by the New York State Banking Department that Lend America ceased operations.
  15. The Division reviewed Lend America's website, www.lendamerica.com, as of December 1, 2009, which confirmed the information referenced in Paragraph 14. The notice stated, in part:

    Effective immediately the company has ceased it[s] loan origination and operations. The company will continue to operate to fulfill its obligations to past and current borrowers, FNMA, GNMA and the regulatory agencies.

  16. As of the issuance of this Temporary Order, Lend America has failed to provide written notification to the Division of the Corporation's cessation of operations.

    C. Failure to Provide Notification of Significant Events

  17. The Division's regulation at 209 CMR 42.12(1)(f) 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: . . . (f) Suspension or termination of the Licensee's status as an approved seller or seller/servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association or an investor approved under 209 CMR 42.11A(1)(a).
  18. On December 1, 2009, the Division became aware through a press release issued by the Department of Housing and Urban Development ("HUD") on or about November 30, 2009, that the Federal Housing Administration ("FHA") had withdrawn Lend America's approval with FHA. The press release stated that the action would be effective immediately and prevented the Corporation from originating and underwriting new FHA-insured mortgages. The press release further stated that the Government National Mortgage Association ("Ginnie Mae") had defaulted Lend America and the Corporation would no longer be able to issue Ginnie Mae securities.
  19. As of the issuance of this Temporary Order, Lend America has not notified the Division of the aforementioned events.

    D. Uncertainty of Lend America's Maintenance of the Statutory Requirements for Holding a Mortgage Lender and Mortgage Broker License in Massachusetts

  20. The Division's regulation at 209 CMR 42.04(2)(b)3 and 209 CMR 42.07(2)(b)3 pertaining to the licensing of mortgage lenders and mortgage brokers respectively, states in part:

    The Commissioner may also deny such an application if the Applicant has: conducted, or will conduct, its business in an unsafe and unsound manner…

  21. The Division's regulation at 209 CMR 42.03(2)(c) and 209 CMR 42.06(2)(c) pertaining to mortgage lenders and mortgage brokers respectively, states in part:

    An Applicant shall be required to submit detailed information supporting the following general requirements:

    Character and Fitness. An Applicant shall submit information demonstrating that the Applicant possesses the character, reputation, integrity and fitness to engage in the business of a mortgage lender in an honest, fair, sound and efficient manner.

  22. Based upon information and belief, Lend America has a portfolio of Massachusetts mortgage loan applications in various stages of processing, underwriting, and funding and based upon the foregoing, the Division is unable to measure the extent to which the FHA and Ginnie Mae actions have impacted the Corporation's ability to meet its obligations to Massachusetts consumers.

    CONCLUSIONS OF LAW

  23. Based upon the information contained in Paragraphs 1 through 22, Lend America's acts or practices of contracting with consumer(s), through the underwriting and subsequent execution of mortgage loan closing documents relating to Massachusetts residential property, and thereafter failing to fund the mortgage loan(s) constitutes unfair and/or deceptive acts or practices in violation of Division's regulation 209 CMR 42.12A(16) Massachusetts General Laws chapter 93A, section 2 and the Attorney General's regulation 940 CMR 8.06(8).
  24. Based upon the information contained in Paragraphs 1 through 22, due to the delay and/or failure in funding contractual mortgage loan obligations Lend America has harmed consumers, mortgage brokers, and/or other parties in as many as thirteen (13) residential mortgage loan transactions in the Commonwealth by engaging in acts or practices which are unfair and/or deceptive in violation of in violation of Division's regulation 209 CMR 42.12A(16) Massachusetts General Laws chapter 93A, section 2 and the Attorney General's regulation 940 CMR 8.06(8).
  25. Based upon the information contained in Paragraphs 1 through 22, Lend America failed to provide the Commissioner with thirty days prior written notice of the Corporation's intention to cease business operations in violation of 209 CMR 42.13(2).
  26. Based upon the information contained in Paragraphs 1 through 22, Lend America failed to notify the Commissioner within one business day of the termination of the Corporation's relationship with the Government National Mortgage Association in violation of 209 CMR 42.12(1)(f).
  27. Based upon the information contained in Paragraphs 1 through 22, Lend America 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 regulations 209 CMR 42.03(2)(c) and 209 CMR 42.06(2)(c).
  28. Based upon the information contained in Paragraphs 1 through 22, the public interest will be harmed by delay in issuing an Order to Cease and Desist under General Laws chapter 255E, section 7(a) because, upon information and belief, Lend America has a portfolio of Massachusetts mortgage loan applications in various stages of processing, underwriting, and funding which require immediate action to protect the interests of the affected Massachusetts consumers. Contrary to these interests, Lend America has announced its intention to cease all mortgage loan origination operations immediately.
  29. Based upon the information contained in Paragraphs 1 through 22, the Commissioner has determined that:
    1. Lend America has engaged 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 Lend America.
  30. Based upon the information contained in Paragraphs 1 through 22, had the facts and conditions found therein existed at the time of Lend America's original mortgage lender and 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 22 present sufficient grounds for the revocation of Lend America's mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulations at 209 CMR 42.04(2)(b), 42.07(2)(b).

    ORDER TO CEASE AND DESIST

  31. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  32. ORDERED that Lend America and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Lend America, and their successors or assigns, shall immediately cease engaging in the activities of: (a) a mortgage lender and mortgage broker, 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, Lend America 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.
  33. IT IS FURTHER ORDERED that Lend America, 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.
  34. IT IS FURTHER ORDERED that Lend America shall immediately place with one or more qualified broker(s) or lender(s), with no loss to applicants, the following: (a) Lend America's entire portfolio of Massachusetts residential mortgage loans which were closed by Lend America, and remain unfunded as of the issuance of this Temporary Order; and (b) Lend America's entire pending application list of Massachusetts residential mortgage loans. It being understood that "no loss to the applicant" shall mean that any loan which was closed by Lend America, as well as any application which was approved by Lend America, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Lend America. In the event that no such placement can be made, Lend America 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. Lend America shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  35. IT IS FURTHER ORDERED that in any instance in which Lend America failed to fund a closed loan and in which the consumer, prior to the effective date of this Temporary Order, obtained funding through an alternate lender, Lend America shall reimburse each consumer the amount necessary to put the consumer in the same position as if Lend America had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
  36. IT IS FURTHER ORDERED that Lend America shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Corporation's pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall include all information on file regarding the Corporation's Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:
    1. Within one (1) day of the effective date of this Temporary Order, Lend America shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation's portfolio of mortgage loans that were closed by Lend America prior to the effective date of this Temporary Order, but remain as yet unfunded. Such information shall include, but is not limited to, the following: The names of all individuals from whom Lend America processed an application and closed the residential mortgage loan, but failed to fund; the applicants' addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; the loan terms; the current funding status; the actual closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with the Corporation's submitted loans;
    2. As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, Lend America shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation's pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom Lend America has accepted an application for a residential mortgage loan; the applicants' addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; rate lock status; the amount of each loan; application status (i.e. filed, submitted to lenders, cleared to close, etc.); loan terms, if approved; scheduled closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender or broker with whom each application will be placed. The record should include telephone numbers of contact persons at each lender or broker who is familiar with the Corporation's submitted loans;
    3. On the last business day of each subsequent week after the effective date of this Temporary Order, Lend America shall provide the Commissioner with an updated, written status report of the mortgage loan applications identified above under subparagraphs 36(a) and 36(b). The form of the status report shall follow the format of the initial submission under subparagraphs 36(a) and 36(b) and shall indicate the final disposition of the loan application and include the final terms under which each approved loan is closed. The reporting requirement shall continue until each of the approved applications is placed with a lender and funded, funded by Lend America, or withdrawn by the applicant(s);
    4. On the last business day of each subsequent week after the effective date of this Temporary Order, Lend America shall provide the Commissioner with an updated, written status report of the mortgage loans identified above under subparagraphs 36(d). The form of the status report shall follow the format of the initial submission under subparagraphs 36(d); and
    5. Within one (1) day of the effective date of this Temporary Order, Lend America shall submit to the Commissioner Lend America's balance sheet and year-to-date income statement, prepared as of the date of submission, and attested by a duly authorized officer of the Corporation. The balance sheet shall indicate Lend America's cash position at each of its depository banks as well as Lend America's bank account numbers.
  37. IT IS FURTHER ORDERED that Lend America shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the residential mortgage loans currently serviced by the Corporation on property located in Massachusetts. The records to be produced shall include but not necessarily be limited to, the following:
    1. As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, Lend America shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation's Massachusetts servicing portfolio including but not limited to: the borrower's addresses and telephone numbers; the loan number; the account balance; the location of the funds currently held for each account; and identification of the applicable servicer to whom the loan will be transferred to, if applicable. The record should include telephone numbers of contact persons at each servicer who is familiar with the Corporation's loans;
    2. On the last business day of each subsequent week after the effective date of this Temporary Order, Lend America shall provide the Commissioner with an updated, written status report of the mortgage loans identified above under subparagraphs 37(a). The form of the status report shall follow the format of the initial submission under subparagraphs 37(a); and
    3. Lend America, shall immediately place all payments collected from Massachusetts consumers relative to any residential mortgage loans serviced by the Corporation in a separate escrow account maintained at a federally insured bank.
  38. IT IS FURTHER ORDERED that Lend America shall not pay or declare a dividend, nor otherwise authorize or execute any financial transaction, either singular or structured, in excess of two hundred and fifty thousand dollars ($250,000.00), except for wages and salaries paid to employees, contractors, officers, or other members of Lend America's management in the normal course of their business, without the prior written approval of the Commissioner. Upon the effective date of this Temporary Order, Lend America shall implement or revise its practices and procedures, as necessary, to ensure that their financial books and records are accurately maintained, in a manner illustrating compliance with the provisions of this Paragraph, and available for review by the Division's examiners upon request.
  39. IT IS FURTHER ORDERED that Lend America 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(s) and or mortgage broker(s) pursuant to Paragraph 34 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Lend America's books and records and shall be available to the Commissioner, in their entirety, upon request.
  40. 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.
  41. 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 Lend America 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 3rd day of December, 2009

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