By the Division of Banks




COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LOAN
ORIGINATOR LICENSING
Docket No. 2009-132-MLO

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST


In the Matter of
JAMES EDWARD HIRBOUR

Mortgage Loan Originator License No.: MLO19618


The Commissioner of Banks ("Commissioner") having determined that JAMES EDWARD HIRBOUR, has engaged in, or is engaging in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255F, and applicable regulations found at 209 CMR 41.00 et seq., hereby issues the following FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST ("Temporary Order") pursuant to General Laws 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 loan originator in Massachusetts pursuant to Massachusetts General Laws chapter 255F, section 2 and its implementing regulation at 209 CMR 41.00 et seq.
  2. The Division, through the Commissioner, also 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 and its implementing regulation at 209 CMR 42.00 et seq.
  3. James Edward Hirbour is licensed by the Commissioner as a mortgage loan originator under Massachusetts General Laws chapter 255F, section 2. According to records maintained on file with the Division, the Commissioner initially issued a mortgage loan originator license, license number MLO19618 to James Edward Hirbour to engage in the business of a mortgage loan originator on or about October 31, 2008.
  4. Books and records reviewed indicate that, at all relevant times, James Edward Hirbour was employed as branch manager and loan originator by Union Capital Mortgage Business Trust ("Union Capital" or the "Corporation").
  5. Union Capital 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 MC2202 to Union Capital to engage in the business of a mortgage lender and mortgage broker on or about August 9, 2002. License number MC2202 authorized Union Capital to conduct the mortgage company business from the Corporation's main office located at 1137 North Main Street, Randolph, Massachusetts.
  6. Pursuant to General Laws chapter 255F, section 14, the Division is authorized to inspect the books, accounts, papers, records, and files of mortgage lenders, mortgage brokers and mortgage loan originators, respectively, transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E, chapter 255F, and any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the licensed business.
  7. Mortgage lenders who have made fifty or more home mortgage loans in the last calendar year are also subject to an evaluation of their community investment ("MLCI") practices including a review of the mortgage lender's compliance with fair lending laws, compliance with the requirements of the Equal Opportunity Act, the Home Mortgage Disclosure Act, and the Predatory Home Loan Practices Act. Massachusetts General Laws chapter 255E, section 8 further requires the Division to evaluate such mortgage lender's record of helping to meet the mortgage credit needs of the Commonwealth including low and moderate income neighborhoods and individuals.
  8. On April 15, 2009, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division commenced an MLCI examination of Union Capital to assess the Corporation's record of helping to meet the mortgage credit needs of the Commonwealth, including low to moderate income neighborhoods and individuals, consistent with the safe and sound operation of the mortgage lender. During the course of the MLCI examination, the Division's examiners became concerned with the suitability and sustainability of certain mortgage loans originated by Union Capital and those mortgage loans originated by James Edward Hirbour. On or about August 11, 2009, the Division expanded the scope of the MLCI examination by reviewing additional books and records maintained by the Corporation in response to the concerns raised during the MLCI examination.
  9. The Division's MLCI Report of Examination (the "Report"), which was issued to Union Capital on the effective date of this Temporary Order, presented the findings of the MLCI examination/inspection ("2009 examination/inspection") and alleged significant failures to comply with applicable state and federal laws, rules, regulations, and regulatory bulletins governing the conduct of those engaged in the mortgage business in Massachusetts.
  10. Books and Records reviewed by the Division's examiners revealed that multiple loan files originated by James Edward Hirbour while employed at Union Capital contained certain information including but not limited to the occupancy status, and financial status of certain identified borrowers that was false and/or misleading as fully described in the Report and summarized below.
  11. Unfair or Deceptive Acts and Practices

  12. The Division's regulation 209 CMR 41.09(1) states:
  13. It is a prohibited act or practice for a Licensee to engage in conduct prohibited under 2 09 CMR 42.12A.

  14. The Division's regulation 209 CMR 42.12A(8), states:
  15. It is a prohibited act or practice for a mortgage broker of mortgage lender to falsify income or asset information on a mortgage loan application or mortgage loan documents.

  16. Massachusetts General Laws chapter 93A, section 2(a) states:
  17. Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

  18. Massachusetts General Laws chapter 255F, section 11(a) states;
  19. Whenever the commissioner finds that any licensee has violated this chapter or any rule or regulation promulgated thereunder, or any other law of the commonwealth applicable to the conduct of a mortgage loan originator on residential property in the commonwealth, the commissioner may, by order, in addition to any other action authorized under this chapter or any rule or regulation made thereunder, impose a penalty upon the person which shall not exceed $5,000 for each violation up to a maximum of $100,000 for such violation plus the costs of investigation. The commissioner may impose a penalty which shall not exceed $5,000 for each violation of this chapter, or any rule or regulation promulgated hereunder, by a person other than a licensee, plus the costs of investigation.

  20. The commentary to section 226.2(a)(24) of the Federal Reserve System's Official Staff Commentary on Regulation Z, states in part: "A consumer can only have one principal dwelling at a time."
  21. Loan documents, specifically the mortgage deeds identifying Union Capital as the lender of record in the loan files described below contain a provision that states the following:
  22. Occupancy. Borrower shall occupy, establish, and use the property as the Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control.

  23. Books and records reviewed by the Division's examiners during the 2009 examination/inspection revealed that that certain information including the occupancy status of the property was concealed and/or misrepresented to investors. James Edward Hirbour was noted as the mortgage loan originator in loan files reviewed by the Division's examiners.
  24. Books and records reviewed during the 2009 examination/inspection revealed that James Edward Hirbour prepared and submitted 1003 Forms on behalf of Union Capital to lenders and/or investors, in which the applicants' financial information including but not limited to applicants' income and/or assets, differed significantly and was not supported by the information reflected on other pertinent documentation which James Edward Hirbour had in his possession as more fully described in the Report. Examples include but are not limited to the following:
  25. a. Deceptive Business Practices

    (a) Borrower A:
     

    Property: Loring Avenue, Salem, MA
    Property: Salem Street, Salem, MA
    Loan Originator: James Edward Hirbour

    1. James Edward Hirbour originated two mortgage loans for two properties for Borrower A, within a period of approximately eight days. Union Capital was the lender of record in all transactions. Each mortgage loan was submitted to the investor with information indicating that the borrower would be occupying each property as their primary residence.
    2. Books and records provided to the Division's examiners for review indicate that the Uniform Residential Loan Application ("1003 Form") was prepared by James Edward Hirbour on behalf Union Capital on December 13, 2006 for the refinance of the Loring Avenue property. Borrower A refinanced the Loring Avenue property on January 26, 2007 and a review of documents provided by Union Capital to the Division's examiners indicate that the loan documents reflected that the property would be maintained as the borrower's primary residence.
    3. Books and records provided to the Division's examiners for review indicate that the 1003 Form was prepared by James Edward Hirbour on January 3, 2007 for the purchase of the Salem Street property. Borrower E purchased the Salem Street property on January 31, 2007 and a review of documents provided by Union Capital to the Division's examiners indicate that the property would be maintained as the borrower's primary residence.
    4. A review of the documents maintained in both loan files maintained by Union Capital and provided to the Division for review reflected certain information that appeared to be misleading.
      1. A review of loan documents maintained in the Loring Avenue loan file revealed that the Corporation maintained approximately three copies of a 1003 Form prepared by James Edward Hirbour and each copy reflected different salary amounts.
        1. A copy of a signed 1003 Form reflected a monthly salary of $5,824.50 monthly or $69,894 annually.
        2. A copy of an unsigned 1003 Form reflected a monthly salary of $8,345 monthly or $100,140 annually.
        3. A copy of an unsigned 1003 Form reflected a monthly salary of $8,395 monthly or $100,740 annually.
      2. A review of loan documents maintained in the Salem Street loan file, including but not limited to underwriting determinations by a national lender, a copy of a credit report and a copy of an appraisal indicate that the borrower had applied for a mortgage loan for the purchase of the Salem Street property prior to the January 3, 2007 date. The underwriting determination letter from a national lender was dated December 13, 2006, the same date as the application date for the refinance of the Loring Avenue property, additionally the credit report was dated December 8, 2006 and the appraisal was dated December 26, 2006.
        1. A copy of an initial underwriting determination maintained in the Salem Street loan file indicted that the borrower had initially applied for a 30 year fixed rate loan, however, the underwriting determination form maintained in the loan file stated the following "DTI was pending-currently exceeding max of 50% at 62.11%." Subsequent underwriting determination sheets indicate that the program was subsequently changed to a 40 year reduced documentation loan program.
        2. The 1003 Form maintained in the loan file provided by Union Capital to the Division's examiners did not reflect the Loring Street property as a property owned by the borrower in the real estate owned section of the 1003 Form. Additionally, the Corporation further indicated that the borrower was occupying the property "rent free".
      3. A review of public records and Registry of Deeds records indicate that foreclosure proceedings were initiated on the Loring Avenue property on August 12, 2009 and foreclosure proceedings were initiated on the Salem Street property on February 29, 2009.

    (b) Borrower B:

    Property: Tyler Street, Malden, MA
    Loan Originator: James Edward Hirbour

    1. James Edward Hirbour prepared loan documents on behalf of Union Capital for the refinance of the Tyler Street property for a settlement that occurred on February 20, 2007. The borrower applied for two mortgage loans for the refinance with a 100% Combined Loan to Value ("CLTV"). James Edward Hirbour was the loan originator of record for both transactions.
    2. Books and records reviewed by the Division's examiner indicate that the income reflected on two 1003 Forms maintained in the loan file were inconsistent.
    3. A review of one 1003 Form maintained in the loan file indicated that the borrower was employed as a Sales Associate at an automobile dealership, earning a gross monthly income of $8,496, or $101,952 annually.
      1. The Division's examiners confirmed with documents reviewed from the end investor that the information reflected on the 1003 Form was utilized for qualification and submitted to the investor to whom the mortgage loan was sold by Union Capital.
    4. The loan file reviewed by the examiner also contained a partial copy of the 1003 Form, specifically the income/employment page of a 1003 Form which was initialed by the borrower. The 1003 Form reflected the borrower's gross monthly income as $7,986, or $95,832 annually.
    5. The difference in income between the income reflected on the information submitted to the end investor and the 1003 Form maintained in the loan file was approximately $510 monthly or $6,120 annually.
    6. Foreclosure proceedings were initiated on the Tyler Street property on or about December 20, 2007, ten months after the refinance transaction.
    7. A further review by the Division's examiners revealed that the property was sold for $278,000 on or about July 21, 2008. Information provided to the Division's examiners revealed that the property was sold as a result of a short sale approved by the end investor.
  26. James Edward Hirbour, as a loan originator on behalf of Union Capital, should have known that information collected by the him as the mortgage loan originator of record, during the processing and/or underwriting of the mortgage loans would be relied upon by the mortgage lender, financial institution or investor to which the mortgage loans were brokered and/or sold by Union Capital.
  27. CONCLUSIONS OF LAW

  28. Based upon the information contained in Paragraphs 1 through 19, James Edward Hirbour has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that James Edward Hirbour, as a licensed mortgage loan originator will act honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255F, section 4 and the Division's regulation 209 CMR 41.03(2)(b).
  29. Based upon the information contained in Paragraphs 1 through 19, by submitting misleading and/or inaccurate information to mortgage lenders, financial institutions or investors to whom Union Capital brokered and/or sold mortgage loans to, James Edward Hirbour, has violated Division's regulation 209 CMR 41.09(1) and Massachusetts General Laws chapter 93A, section 2(a).
  30. Based upon the information contained in Paragraphs 1 through 19, by falsifying borrowers' income information on Uniform Residential Loan Applications submitted in connection with residential mortgage transactions, James Edward Hirbour has violated the Division's regulation 209 CMR 41.09(1) and Massachusetts General Laws chapter 93A, section 2(a).
  31. Based upon the information contained in Paragraphs 1 through 19, by misrepresenting the occupancy status on mortgage loan documents submitted during the origination and processing of the residential mortgage transactions, James Edward Hirbour has violated the Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  32. Based upon the information contained in Paragraphs 1 through 19, the Commissioner has determined that:
    1. James Edward Hirbour 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 loan originator including, but not limited to, the provisions of the Division's regulations at 209 CMR 41.00 et seq.; and
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to James Edward Hirbour.
  33. Based upon the information contained in Paragraphs 1 through 19, had the facts and conditions found therein existed at the time of James Edward Hirbour's original mortgage loan originator 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 James Edward Hirbour's mortgage loan originator license pursuant to Massachusetts General Laws chapter 255F, section 7 and the Division's regulation at 209 CMR 41.04(2)(c)(1), 209 CMR 41.04(2)(c)(2) and 209 CMR 41.04(2)(c)(3).
  34. ORDER TO CEASE AND DESIST

  35. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  36. ORDERED that James Edward Hirbour shall immediately cease engaging in the activities of 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, James Edward Hirbour 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.
  37. 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.
  38. 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.
  39. 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 James Edward Hirbour 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 12th day of November, 2009

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

This Order was terminated pursuant to a Consent Order on May 13, 2010.