By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2009-005

FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST


In the Matter of
MIRACLE MORTGAGE CORP.
Canton, Massachusetts

Mortgage Broker License No. MB1670

The Commissioner of Banks ("Commissioner") having determined that MIRACLE MORTGAGE CORP. ("Miracle Mortgage" or the "Corporation"), located at 354 Turnpike Street, Canton, Massachusetts, 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).

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. Miracle Mortgage is, and at all relevant times has been, a Massachusetts Corporation doing business in the Commonwealth. Miracle Mortgage's main office of record is located at 354 Turnpike Street, Canton, Massachusetts.
  3. Miracle Mortgage is licensed by the Commissioner as a mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner initially issued a mortgage broker license, license number MB1670, to Miracle Mortgage to engage in the business of a mortgage broker in Massachusetts on or about June 14, 1999. License number MB1670 authorized Miracle Mortgage to conduct its mortgage broker business from the Corporation's main office located at 354 Turnpike Street, Canton, Massachusetts.
  4. 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.
  5. Pursuant to Massachusetts General Laws chapter 255E, section 8, the Division conducted an onsite examination/inspection of the books, accounts, papers, records, and files maintained by Miracle Mortgage 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 "2008 examination/inspection"). The onsite portion of the 2008 examination/inspection was completed on or about September 4, 2008.
  6. The Division's Report of Examination/Inspection on Consumer Compliance (the "Report"), which was issued to Miracle Mortgage on the effective date of this Temporary Order, presented the findings of the 2008 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 business of a mortgage broker in Massachusetts.

    A. Misleading Representations of a Prospective Borrower's Income

  7. 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.

  8. The Attorney General's regulation 940 CMR 8.06(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 if the representation or statement is false or misleading or has the tendency or capacity to be misleading.

  9. The Division's regulation 209 CMR 42.12A(8), effective as of September, 8, 2006, states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to falsify income or asset information on a mortgage loan application or mortgage loan documents.

  10. The 2008 examination/inspection revealed that Miracle Mortgage, had submitted to lenders Uniform Residential Loan Applications ("1003 Form") in which the applicants' financial information including applicants' gross income differed significantly from the financial information reflected on other pertinent documents including bank statements, and verification of employment forms and reduced documentation loan disclosures found in the file which the Corporation had in its possession. Examples include, but are not limited to the following:
    1. Loan No.:05-825990:
      1. A copy of a stated loan application prepared by Miracle Mortgage for a loan which ultimately closed on August 3, 2005 indicated that the borrower, a senior custodian at the Boston Public Library, earned approximately $5,500 monthly, or $66,000 annually.
      2. Publicly available Commonwealth payroll records indicate that the borrower earned $43,184 in 2007.
      3. The discrepancy reveals that Miracle Mortgage overstated the borrower's annual income by approximately $22,816.
      4. In response to the Division's inquiry regarding the apparent discrepancy, an officer of Miracle Mortgage stated that upon advisement of a lender's account executive, the borrower's income was reported as an amount equal to the combined household income of the borrower and his spouse.
      5. However, the loan application forwarded to the lender did not include the spouse as a co-borrower and only the husband's credit profile was presented for loan qualification.
    2. Loan No.: 4000010923:
      1. A copy of a stated loan application prepared by Miracle Mortgage for a loan which ultimately closed on July 31, 2006 indicated that the borrower, a Dental Assistant, earned approximately $5,700 monthly or $68,400 annually.
      2. Copies of the borrower's checking account statements located in the loan file maintained by Miracle Mortgage indicated that two deposits, each in the amount of $970.61 were made on a monthly basis from the borrower's current employer.
      3. In response to the Division's inquiry regarding the apparent discrepancy, an officer of Miracle Mortgage stated that the borrower was a close friend of the officer's family and that the borrower was the owner of a cleaning company and an accountant, both occupations, which provided an additional source of income. The loan application forwarded to the lender, however, failed to reference these occupations or to identify that the base income included additional funds generated from alternate occupations.
      4. The discrepancy between the information reflected on the loan application and the bank statements maintained in the loan file reveals that Miracle Mortgage overstated or misreported the borrower's annual income as a dental assistant by approximately $45,105.36.
    3. Loan No.: 04-G00996:
      1. A copy of a loan application prepared by Miracle Mortgage for a loan which ultimately closed on November 2, 2004 indicated that the borrower, an employee in the crating and packing department of a shipping company, earned approximately $3,500 monthly, or $42,000 annually.
      2. A copy of a Verification of Employment Form ("VOE") maintained in the loan file revealed that the borrower's annual salary for the previous three years was $27,280, $32,300 and $28,200 respectively. A review of a second VOE located in the loan file reviewed by the Division's examiners revealed that the annual income was concealed with white-out fluid.
      3. In response to the Division's inquiry regarding the apparent discrepancy, an officer of Miracle Mortgage stated the borrower's wife was removed from the application subsequent to determining that her credit score would affect the interest rate and being advised to do so by a lender's account executive.
      4. The discrepancy between the information reflected on the loan application and the highest salary reflected on the VOE located in the loan file maintained by Miracle Mortgage reveals that the Corporation overstated the borrower's annual income by approximately $9,700.
    4. Loan No.: 0000495298:
      1. A copy of a stated loan application prepared by Miracle Mortgage for a loan which ultimately closed on July 24, 2006 indicated that the borrower, earned approximately $42,000 annually as a bus driver and $22,000 annually as a part time security guard for a total of $64,000 annually.
      2. A copy of a VOE submitted by the borrower's part time employer revealed that the income information was manipulated by using "white out" to obscure the borrower's hourly rate, upon closer inspection, was determined to be $13.00 or approximately $13,520 annually.
      3. The discrepancy between the information reflected on the loan application and the VOE located in the loan file maintained by Miracle Mortgage reveals that the Corporation overstated the borrower's annual income as a part time security guard by approximately $8,480.
      4. In response to the Division's inquiry regarding the apparent discrepancy, an officer of Miracle Mortgage stated that the borrower was her nephew and actually worked three jobs, and the third undisclosed job was a "side job." The officer further indicated that a lender's account executive had advised her to take a stated income loan application.
  11. Miracle Mortgage knew or should have known that the above referenced income, asset information, and/or employment information would be relied upon in underwriting the mortgage loan by the mortgage lender or financial institution to which the mortgage loan applications were brokered by Miracle Mortgage.

    B. Failure to Properly Maintain Books and Records

  12. Massachusetts General Laws chapter 255E, section 8 states in part:

    A licensee shall keep and use such business records in such form and at such location as said commissioner shall, by regulation, determine, which shall enable said commissioner to determine whether such licensee is complying with the provisions of this chapter and any rules or regulations promulgated hereunder by said commissioner and nay other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter.

  13. 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.

  14. The Division's regulation 209 CMR 42.09(1) states:

    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...

    (b) The mortgage broker ... 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.

  15. Books and records reviewed by the Division's examiners during the 2008 examination/inspection indicated that Miracle Mortgage failed to retain sufficient documentation to enable the Division's examiners to determine whether the Corporation was complying with certain laws and regulations governing mortgage brokers in Massachusetts, including but not limited to, compliance with timing requirements in which certain disclosures must be provided to consumers.

    C. Providing Mortgage Lender Disclosures to Consumers

  16. Books and records reviewed by the Division's examiners during the 2008 examination/inspection indicate that Miracle Mortgage, a mortgage broker, provided mortgage lender disclosures to consumers in violation of and exceeding its authority under G. L. c. 255E.
  17. The mortgage lender disclosures include, but are not limited to, Equal Credit Opportunity Notices, and Notice to Applicant of Right to Receive Copy of Appraisal Report.

    D. Failure to Provide Notification of the Closing of a Licensed Office Location

  18. The Division's Regulation 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.

  19. During the 2008 examination/inspection, representatives of Miracle Mortgage notified the Division's examiners that the Corporation was in the process of relocating to a new location and such relocation would be effective as of June 1, 2008. As of May 21, 2008, the date upon which the 2008 examination/inspection was initiated, the Division had not received written notice of the relocation of the main office location.

    E. Other Violations

  20. In addition to the violations specifically set forth in this Temporary Order, a Report of Examination/Inspection on Consumer Compliance prepared as of May 21, 2008 and to be provided to Miracle Mortgage in conjunction with the issuance of this Temporary Order, describes other violations and areas of concern observed during the 2008 examination/inspection.

    CONCLUSIONS OF LAW

  21. Based upon the information contained in Paragraphs 1 through 20, Miracle Mortgage has 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).
  22. Based upon the information contained in Paragraphs 1 through 20, by altering loan documentation including income, asset and employment information related to the loan approval process, Miracle Mortgage has violated on numerous occasions the Division's regulation 209 CMR 42.12A(8), Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  23. Based upon the information contained in Paragraphs 1 through 20, by failing to keep and use its books and records in a manner which would allow the Commissioner to determine whether the Corporation was complying with applicable state and federal laws and regulations, Miracle Mortgage has violated the Division's regulations 209 CMR 48.03 and 209 CMR 42.09(1).
  24. Based upon the information contained in Paragraphs 1 through 20, by providing disclosures to consumers that only lenders are authorized to provide Miracle Mortgage has exceeded its authority as a mortgage broker in violation of Massachusetts General Laws chapter 255E, section 2.
  25. Based upon the information contained in Paragraphs 1 through 20, by failing to notify the Commissioner, in writing, at least thirty days prior to a relocation of the licensed office, Miracle Mortgage violated the Division's regulation 209 CMR 42.13(2).
  26. Based upon the information contained in Paragraphs 1 through 20, the Commissioner has determined that:
    1. Miracle 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.
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Miracle Mortgage.
  27. Based upon the information contained in Paragraphs 1 through 20, had the facts and conditions found therein existed at the time of Miracle Mortgage 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 20, present sufficient grounds for the revocation of Miracle Mortgage broker licenses 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

  28. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  29. ORDERED that Miracle Mortgage and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Miracle Mortgage, and their successors or assigns, shall immediately cease engaging in the activities of: (a) a 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, Miracle Mortgage 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.
  30. IT IS FURTHER ORDERED, that Miracle 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, Miracle 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.
  31. IT IS FURTHER ORDERED that Miracle Mortgage shall immediately place with one or more qualified broker(s) or lender(s), as appropriate based on the status of the application and with no loss to applicants, all of its pending Massachusetts residential mortgage loan applications. Miracle Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified broker(s) or lender(s).
  32. IT IS FURTHER ORDERED that Miracle Mortgage 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 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 Miracle Mortgage's open application list as a mortgage broker, including but not limited to, the following: The names of all individuals from whom Miracle 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.

  33. Miracle Mortgage shall immediately secure all pending residential 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 30 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Miracle Mortgage's books and records and shall be available to the Commissioner, in their entirety, upon request.
  34. 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.
  35. 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, prepared by the Division of Banks as of May 21, 2008.
  36. 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 Miracle 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 19th day of February, 2009

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