By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2009-003

FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST


In the Matter of
MORTGAGE ASSOCIATES, INC.
North Dartmouth, Massachusetts

Mortgage Company License No(s). MC0112
MC2336, MC4785 and MC5244

The Commissioner of Banks ("Commissioner") having determined that MORTGAGE ASSOCIATES, INC., ("Mortgage Associates" or the "Corporation"), located at 125 Faunce Corner Road, Unit C, North Dartmouth, 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 lender and mortgage broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. Mortgage Associates is, and at all relevant times has been, a Massachusetts Corporation doing business in the Commonwealth. Mortgage Associates' main office is located at 125 Faunce Corner Road, Unit C, North Dartmouth, Massachusetts.
  3. Mortgage Associates 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 initially issued a mortgage lender and mortgage broker license, license numbers, ML0112 and MB0127 respectively, to Mortgage Associates to engage in the business of a mortgage lender and mortgage broker on or about January 1, 1992. On or about May 31, 2003, the Commissioner issued a consolidated mortgage lender and mortgage broker license to the Corporation, with license number MC0112. License number MC0112 authorized Mortgage Associates to conduct the mortgage business from the Corporation's main office located at 125 Faunce Corner Road, Unit C, North Dartmouth, Massachusetts.
  4. Mortgage Associates maintains three additional mortgage lender and mortgage broker licenses, license numbers MC2336, MC4785 and MC5244 for licensed office locations at 31 Belmont Street, Easton, Massachusetts, 18 S. Main Street, Ext, Plymouth, Massachusetts and 875 Centerville Road, Warwick, Rhode Island respectively, from which the Corporation conducts its mortgage business.
  5. Mortgage lenders and 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 lenders and 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 lender and mortgage broker.
  6. On Monday, September 29, 2008, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination/inspection of the books, accounts, papers, records, and files maintained by Mortgage Associates to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage lender and mortgage broker business in Massachusetts (the "2008 examination/inspection").
  7. The Division's Report of Examination/Inspection on Consumer Compliance (the "Report"), which was issued to Mortgage Associates 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 lender and mortgage broker in Massachusetts.

    A. Unfair or Deceptive Acts and Practices

    a. Misleading Representations of a Prospective Borrower's Income

  8. 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 of mortgage lender to falsify income or asset information on a mortgage loan application or mortgage loan documents.

  9. 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.

  10. 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.

  11. Books and records reviewed during the 2008 examination/inspection revealed that Mortgage Associates, when acting in the capacity of a mortgage broker, had completed and submitted to lenders Uniform Residential Loan Applications ("1003 Form") in which the applicants' financial information, including but not limited to, applicants' base employment income, differed significantly from the financial information reflected on other pertinent documentation, including, but not limited to bank statements and W-2 statements which Mortgage Associates had in its possession. Examples include but are not limited to the following:
    1. Loan # 0005553714:
      1. A stated income purchase money loan application prepared by Mortgage Associates for a loan which ultimately closed on May 8, 2007, indicated that the borrower, a retiree, earned approximately $4,352 monthly, with additional rental income in the amount of $2,250, for a total of $6,602 monthly or $79,224 annually.
      2. A review of redacted bank statements located in the loan file however revealed single monthly social security of $910 or $10,920.
      3. Land records reviewed by the Division's examiners revealed that the property secured by the loan had subsequently been foreclosed in January 2008.
    2. Loan #107031612374000
      1. A stated income, second mortgage loan application prepared by Mortgage Associates for a loan which ultimately closed on March 30, 2007, indicated that the borrower, a Lead Transportation Security Officer for the Department of Homeland Security earned approximately $15,250, with additional monthly rental income of $622 for a total of $15,872 monthly or $190,464 annually.
      2. A copy of a 2006 W-2 statement located in the loan file maintained by Mortgage Associates revealed that the borrower's gross earnings were $3,577.98 monthly or $42,935.87 annually.
      3. A year-end 1099 statement located in the loan file revealed an additional source of income indicating that the borrower was also employed at a mortgage company as a loan originator. However, this source of income was not reflected on the loan application forwarded to the lender. Gross earnings reflected on the 1099 statement were $73,018.66.
      4. The discrepancy between the information reflected on the loan application, relative to the combined annual income derived from the W-2 statement and the 1099 statement located in the loan file maintained by Mortgage Associates, revealed that the Corporation overstated the borrower's annual income by approximately $74,509.
      5. Land records reviewed by the Division's examiners revealed that the property secured by the loan had subsequently been foreclosed in May 2008.
    3. Loan No(s). 1890295383& 1000111506300917102
      1. A copy of a purchase money stated loan application for a first lien prepared by Mortgage Associates for a loan which ultimately closed on May 31, 2006 indicated that the borrower, a manager at a waste disposal company, earned approximately $12,000 monthly or $144,000 annually.
      2. A copy of a purchase money stated loan application for a simultaneous second lien prepared by Mortgage Associates for a loan which ultimately closed on May 31, 2006 indicated that the borrower, a manager at a waste disposal company, earned approximately $14,300 monthly or $176,600 annually. The application noted additional rental income of $1,200 monthly or $14,400 annually.
      3. Copies of three pay stubs issued during April 2006 and retained in the loan file maintained by Mortgage Associates reflected that the borrower earned $12.50 per hour, which after four months when aggregated yielded gross year-to-date earnings of $9,821.90, which extrapolated through the end of the year would be $29,465.70 annually.
      4. A copy of year-end W-2 statement for 2005 maintained by Mortgage Associates reflected the borrower's gross income as 27,749.64.
      5. The discrepancy between the information reflected on the purchase money stated loan application for a first lien, the 2006 paystubs and the W-2 statement located in the loan file maintained by Mortgage Associates revealed that the Corporation overstated the borrower's annual income by approximately $116,251.
      6. The discrepancy between the information reflected on purchase money stated loan application for a simultaneous second lien the 2006 paystubs and the W-2 statement located in the loan file maintained by Mortgage Associates revealed that the Corporation overstated the borrower's annual income by approximately $148,850.
  12. The practices referenced in the Paragraph above were also observed in the following loan transactions reviewed by the Division's examiners: Loan Nos.: 0059590257, 1890183506, 1008865873, 381026167, 6854213342, 106051214578000, 122741200, 4660540, 0055912257, 0055912554, 826858860, 0056130636, 105087402397000, 5100001432, and 105087402397000. The examiners' specific findings are fully described in the Report and are incorporated herein by reference.
  13. Mortgage Associates knew or should have known that the above referenced income and/or asset 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 Mortgage Associates.
  14. Land records reviewed by the Division's examiners during the 2008 examination/inspection revealed that at least two properties were foreclosed subsequent to settlement.

    b. Alteration and/or Manipulation of Mortgage Loan Documents

  15. 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.

  16. 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.

  17. The 2008 examination/inspection revealed that Mortgage Associates manipulated and/or altered various mortgage loan related documents. Examples of this practice include, but are not limited to,: cutting and pasting samples of borrower signatures onto additional loan related documents; altering execution dates on various loan related documents; and adding and/or deleting information on loan related documents subsequent to receiving the completed documents from a third party.
  18. The practices referenced in the Paragraph above were observed in the following eight (8) loan transactions reviewed by the Division's examiners: Loan Nos.: 6189667808, 6204704685, 6727173863, 1008865873, 0004354814, 0062812532, 106111715778000 and 6277873706. The examiners' specific findings are fully described in the Report and are incorporated herein by reference.
  19. Mortgage Associates knew or should have known that the information reflected on the above referenced documents would have been relied upon in underwriting the mortgage loan by the mortgage lender or financial institution to which the mortgage loan applications were brokered by Mortgage Associates.
  20. The Division's regulation 209 CMR 42.12A(7), effective as of September 8, 2006, 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 a consumer.

  21. Books and records reviewed by the Division's examiners during the 2008 examination/inspection revealed substantial inconsistencies in the appearance of the borrowers' signatures between documents signed by the borrower at the loan closing and applications and broker disclosures retained in Mortgage Associates' books and records. The inconsistencies suggest that the applications and broker disclosures were signed by a party other than the borrower.
  22. The above practices were observed in the following eight (8) loan transactions: Loan No(s).: 1890361502, 6727173863, 6204704685, 10098699706, 105063010033000, 105110802427000, 106080211029000 and 1009659719. The examiners' specific findings are fully described in the Report and are incorporated herein by reference.
  23. Mortgage Associates knew or should have known that the mortgage lender and/or financial institution to which Mortgage Associates brokered the aforementioned loans would have made the borrower's receipt of either the initial or subsequent broker disclosures a condition of the loan closing and would have relied on the borrower's signature on either document as evidence of receipt.

    c. Misrepresentation of the Applicant's Residency Status

  24. The 2008 examination/inspection revealed that Mortgage Associates concealed and/or misrepresented information relating to the occupancy of the subject premises. Mortgage Associates had submitted to separate lenders, purchase money mortgage loan applications for two properties on behalf of a single borrower simultaneously, with each application indicating that the subject property was to be used as the borrower's primary residence.
  25. The above practices were observed in the following loan transactions: (a) Loan No(s). 40783230 and 40783232; and (b) Loan No(s). 0159437938 and 2070316123740000. The examiners' specific findings are more fully described in the Report and are incorporated herein by reference.

    B. Undisclosed Fees

  26. Massachusetts General Laws chapter 183, section 63 states, in part:

    A mortgagee, or a mortgage lender or mortgage broker as defined in section one of chapter two hundred and fifty-five E, shall not charge a loan fee, finder's fee, points, so-called, or similar fees in a mortgage transaction involving residential property located in the commonwealth of four or less units and occupied in whole or in part by the mortgagor, except to the extent that such fees or points have been previously disclosed to the mortgagor in writing, which disclosure may be in the form required by section seventeen D of chapter one hundred and eighty-four, or such other form which discloses said fees or points. A mortgagor shall not be obligated to pay fees or points which have not been previously disclosed as required herein.

  27. Books and records reviewed by the Division's examiners during the 2008 examination/inspection indicate, as more fully described in the Report, that Mortgage Associates engaged in a pattern or practice of understatements or omissions of the fees charged to consumers by Mortgage Associates.
  28. The Corporations books and records indicate that processing fees, origination fees, loan fees, or similar fees (collectively, "broker fees") were collected at the loan closing in amounts which Mortgage Associates books and records failed to illustrate had been fully and accurately disclosed to consumers, in writing, to the extent charged at closing, if at all as more fully described in the Report.

    C. Failure to Maintain Net Worth Requirements

  29. Pursuant to the Division's regulation 209 CMR 42.03(2)(a), as applicable to Mortgage Associates (Pursuant to the Division's regulation 209 CMR 42.17, mortgage lenders and brokers are required to demonstrate compliance with amendments to 209 CMR 42.03 by December 31, 2008. The cited language included in this Paragraph of the Temporary Order is reproduced from the Division's regulation as it existed prior to the regulatory amendments, thus representing the requirements applicable to Mortgage Associates at the time of the 2008 examination/inspection.):

    (2)(a)... An Applicant shall demonstrate and maintain:

    1. a net worth of not less than $100,000; or

    2. a combination of a net worth of not less than $ 25,000 and a bond of up to $ 75,000 in such form and with such sureties as may be approved by the Commissioner, provided such net worth and bond in the aggregate equal or exceed $ 100,000.

  30. Books and records reviewed by the Division's examiners during the 2008 examination/inspection revealed that, after adjusting Mortgage Associates' capital position in accordance with the definition of "net worth" under 209 CMR 42.02, Mortgage Associates reported a net worth position which was less than the $100,000 minimum requirement.
  31. At the time of the 2008 Examination/Inspection, Mortgage Associates did not maintain a surety bond to supplement its net worth position.

    D. Providing Mortgage Lender Disclosures to Consumers When Acting in the Capacity of a Mortgage Broker

  32. Massachusetts General Laws chapter 183, section 28C(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 that was consummated within the prior 60 months or other debt of the borrower, unless the refinancing is in the borrower's interest. The "borrower's interest" shall be narrowly construed, and the burden is upon the lender to determine that the refinancing is in the borrower's interest.

  33. 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 borrowers' interest.

  34. Books and records reviewed by the Division's examiners during the 2008 examination/inspection revealed that when acting in the capacity of a mortgage broker, Mortgage Associates provided consumers with a "Net Tangible Benefit Disclosure and Acknowledgement" ("Form") on the Corporation's letterhead. It has been the Division's longstanding position that the determination of the borrower's interest is the lender's responsibility and the burden should not be shifted to the borrower or made by a mortgage broker. By distributing the Form to prospective borrowers on the Corporation's letterhead when acting in the capacity of a mortgage broker, Mortgage Associates exceeded its authority as a mortgage broker and distributed a form which appeared to shift the burden to the borrower.
  35. Books and records reviewed by the Division's examiners during the 2008 examination/inspection indicate that Mortgage Associates, when acting in the capacity of a mortgage broker, routinely provided several other mortgage lender disclosures to consumers in addition to the referenced Form.
  36. The mortgage lender disclosures include, but are not limited to, Equal Credit Opportunity Notices, Servicing Disclosure Statements, Truth in Lending Statements and Pre-Approval Letters.

    E. Loan Origination and Compensation Agreement

  37. The Division's regulation 209 CMR 42.12A(5) states in part:

    It is a prohibited act or practice for a mortgage broker to fail to provide to the consumer at the time of application the loan origination and compensation agreement required under 209 CMR 42.16. The content of the agreement shall strictly conform to 209 CMR 42.16 and include signatures and dates by the consumer(s) and the mortgage broker.

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

    Each 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.

  39. Books and records reviewed by the Division's examiners during the 2008 examination/inspection revealed that Mortgage Associates when acting in the capacity of a mortgage broker, failed to retain evidence of having provided the Loan Origination and Compensation Agreements in several loan files reviewed.

    F. Failure to Properly Maintain Books and Records

  40. 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 any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter.

  41. 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.

  42. 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.

  43. Books and records reviewed by the Division's examiners during the 2008 examination/inspection indicated that Mortgage Associates, when acting in the capacity of a mortgage broker, 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.

    G. Misleading Statements

  44. 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.

  45. Books and records reviewed during the 2008 examination/inspection revealed that Mortgage Associates, when acting in the capacity of a mortgage broker, provided applicants with a Borrower's Certification and Authorization Form that contained language that was false or misleading or had the tendency or capacity to be false or misleading. Specifically, the Borrower's Certification and Authorization Form contained language which would present the appearance that Mortgage Associates was approving or funding the mortgage loan.

    H. Failure to Properly Complete Good Faith Estimates

  46. The Real Estate Settlement Procedures Act ("RESPA") regulation 24 CMR 3500.7, Appendix B section 13 states, in part:

    Any . . .fee or payment received by the mortgage broker from either the lender or the borrower arising from the initial funding transaction, including a servicing release premium or yield spread premium, is to be noted on the Good Faith Estimate and listed in the 800 series of the HUD-1 Settlement Statement.

  47. Books and records reviewed during the 2008 examination/inspection revealed that, in all loan files reviewed, Mortgage Associates failed to disclose the yield spread premium paid at closing on the good faith estimate provided to the borrower(s), as specifically identified in the Report.

    I. Failure to Provide the Division Required Notice of Significant Events

    a. Failure to Provide Notice of Change in Net Worth

  48. The Division's regulation 209 CMR 42.12(1)(k) states in part:

    A Licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of ... (k) Any change to net worth resulting from market valuation or future loss liability or any other change which causes the net worth of the licensee to fall below the requirements of 209 CMR 42.03, 209 CMR 42.06, 209 CMR 42.08A, and 209 CMR 42.11A(1)(a).

  49. The 2008 examination/inspection revealed that Mortgage Associates failed to notify the Division of the Corporation's change in net worth. Specifically, Mortgage Associates submitted a quarterly report to the Division which indicated that the Corporation's insufficient capital position and was thereafter notified by the Division that Mortgage Associates net worth was below the regulatory requirements.

    b. Failure to Provide Notice of Change in Ownership

  50. The Division's regulation 209 CMR 42.12(3)(a) states:

    15 days prior to any proposed change in control in the ownership of a Licensee, or among the officers, partners or directors of a Licensee, a notice shall forthwith be filed with the Commissioner who may thereupon cause such investigation to be made as he deems necessary, as if it were a new license. In the case of a corporation, control is defined as a change of ownership by a person or group acting in concert to acquire ten percent of the stock, or the ability of a person or group acting in concert to elect a majority of the directors or otherwise effect a change in policy of the corporation.

  51. Books and records reviewed during the 2008 examination/inspection revealed that Mortgage Associates failed to provide fifteen days prior notice of a change in control in the ownership of the Corporation. Specifically, on March 27, 2008, President Michael DeBarros purchased 25% of ownership shares previously held by an individual associated with the Corporation.

    J. Other Violations

  52. In addition to the violations specifically set forth in this Temporary Order, a Report of Examination/Inspection on Consumer Compliance prepared as of September 29, 2008 and to be provided to Mortgage Associates 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

  53. Based upon the information contained in Paragraphs 1 through 52, Mortgage Associates has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage lender and 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 regulations 209 CMR 42.03(2)(c) and 209 CMR 42.06(2)(c).
  54. Based upon the information contained in Paragraphs 1 through 52, by altering loan documentation including income, asset and employment information related to the loan approval process, Mortgage Associates 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).
  55. Based upon the information contained in Paragraphs 1 through 52, by engaging in the act or practice of altering documents relating to the mortgage loan process by affixing photocopied signatures loan documents prior to submitting such documents to the mortgage lender, Mortgage Associates has violated the Division's regulation 209 CMR 42.12A(7), Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  56. Based upon the information contained in Paragraphs 1 through 52, by signing consumers' names on mortgage loan documents, Mortgage Associates has violated the Division's regulation 209 CMR 42.12A(7) Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  57. Based upon the information contained in Paragraphs 1 through 52, by misrepresenting applicant's residency status prior to submitting loan documents to the mortgage lender, Mortgage Associates 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).
  58. Based upon the information contained in Paragraphs 1 through 52, by charging loan fees, points, or similar fees in mortgage transactions involving residential property located in the Commonwealth, of four or less units and occupied in whole or in part by the mortgagor, without disclosing such fees or points to the mortgagor prior to the closing of the loan, Mortgage Associates has violated Massachusetts General Laws chapter 183, section 63.
  59. Based upon the information contained in Paragraphs 1 through 52, by failing to maintain a net worth of not less than $100,000 or a combination of a net worth of not less than $25,000 and a bond of up to $75,000 that in the aggregate equal or exceed $100,000, Mortgage Associates violated the Division's regulation 209 CMR 42.03(2).
  60. Based upon the information contained in Paragraphs 1 through 52, by providing disclosures to consumers that only lenders are authorized to provide when acting in the capacity of a mortgage broker, Mortgage Associates has exceeded its authority in violation of Massachusetts General Laws chapter 255E, section 2.
  61. Based upon the information contained in Paragraphs 1 through 52, by failing to retain all copies of the Loan Origination and Compensation Agreement provided to consumers when acting in the capacity of a mortgage broker, Mortgage Associates has violated the Division's regulation 209 CMR 42.12A(5) and 209 CMR 42.09(1)(b).
  62. Based upon the information contained in Paragraphs 1 through 52, 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, Mortgage Associates has violated the Division's regulations 209 CMR 48.03 and 209 CMR 42.09(1).
  63. Based upon the information contained in Paragraphs 1 through 52, by providing disclosures to consumers that contained language that was false or misleading or had the tendency or capacity to be false or misleading, when acting in the capacity of a mortgage broker, Mortgage Associates is in violation of the Attorney General's regulation 940 CMR 8.06(1).
  64. Based upon the information contained in Paragraphs 1 through 52, by failing to properly complete the Good Faith Estimate disclosure when acting in the capacity of a mortgage broker, Mortgage Associates has violated the RESPA regulation 24 CFR 3500.
  65. Based upon the information contained in Paragraphs 1 through 52, by failing to notify the Commissioner, in writing, at least fifteen days prior to a change in ownership, Mortgage Associates has violated the Division's regulation 209 CMR 42.12(3)(b).
  66. Based upon the information contained in Paragraphs 1 through 52, by failing to notify the Commissioner, in writing, within one business day, that the Corporation net worth fell below regulatory requirements, Mortgage Associates has violated 209 CMR 42.12(1)(k).
  67. Based upon the information contained in Paragraphs 1 through 52, the Commissioner has determined that:
    1. Mortgage Associates 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 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 Mortgage Associates.
  68. Based upon the information contained in Paragraphs 1 through 52, had the facts and conditions found therein existed at the time of Mortgage Associates' 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 52 present sufficient grounds for the revocation of Mortgage Associates' mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b), 42.07(2)(b), and 42.12A(19).

    ORDER TO CEASE AND DESIST

  69. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  70. ORDERED that Mortgage Associates and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Mortgage Associates, 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, Mortgage Associates 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.
  71. IT IS FURTHER ORDERED that Mortgage Associates, 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.
  72. IT IS FURTHER ORDERED that Mortgage Associates 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. It being understood that "no loss to the applicant" shall mean that any loan which may have been closed by Mortgage Associates and remains unfunded, as well as any pending application which has been approved by the Corporation but has not yet closed, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Mortgage Associates. In the event that no such placement can be made, Mortgage Associates 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. Mortgage Associates shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  73. IT IS FURTHER ORDERED that as soon as possible, but in no event later than two days after the effective date of this Temporary Order, Mortgage Associates shall submit the following information in writing to the Commissioner:
    1. A detailed record of all pending residential mortgage loan applications, from both the Corporation's lending and its brokering operations, which shall include, but is not limited to, the following: customer name, address, telephone number; all prepaid loan fees submitted by the customer; amount of loan; application status (i.e. filed, submitted to lenders); scheduled closing date; rate lock status; the location of all original open application files; and a list of applicable wholesale lenders. The latter list should include telephone numbers of contact persons familiar with Mortgage Associates' submitted loans.
  74. IT IS FURTHER ORDERED that Mortgage Associates 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 or mortgage broker pursuant to Paragraph 72 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Mortgage Associates' books and records and shall be available to the Commissioner, in their entirety, immediately upon request on the date and time specified by the Commissioner.
  75. IT IS FURTHER ORDERED that within sixty (60) days of the effective date of this Temporary Order, the Corporation shall cause to be made a review of all Massachusetts residential mortgage loans originated by Mortgage Associates since September 29, 2004 and shall identify all mortgage loan transactions in which the amount actually paid by the consumer as a loan fee, mortgage broker fee, application fee, or similar fee, as recorded on the settlement agreement, exceeded the amount disclosed to the consumer, in writing, for such fees prior to closing;
    1. In each mortgage loan transaction identified pursuant to Paragraph 75, Mortgage Associates shall reimburse the consumer the difference between the actual charge assessed to the individual consumer as a loan fee, mortgage broker fee, processing fee, or similar fee and the amount disclosed in writing for such fees prior to closing;
    2. Within sixty (60) days of the effective date of this Temporary Order, Mortgage Associates shall submit to the Commissioner a list of all borrowers identified pursuant to the above described review of residential mortgage loan transactions to whom a reimbursement is owed by the Corporation in accordance with this Paragraph of the Temporary Order; and
    3. Within ninety (90) days of the effective date of this Temporary Order, Mortgage Associates shall submit evidence of all reimbursements issued to consumers pursuant to this Paragraph of the Temporary Order, including the consumers' names, the dates the loans closed, check numbers, and the amount of the reimbursements.
  76. 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.
  77. 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 September 29, 2008.
  78. 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 Mortgage Associates 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 29th day of January, 2009

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

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