By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2009-124

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST


In the Matter of
UNION CAPITAL MORTGAGE BUSINESS TRUST
Randolph, Massachusetts

Mortgage Company License No.: MC2202


The Commissioner of Banks ("Commissioner") having determined that UNION CAPITAL MORTGAGE BUSINESS TRUST ("Union Capital" or the "Corporation"), located at 1137 North Main Street, Randolph, 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) 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. Union Capital is, and at all relevant times has been, a Massachusetts Corporation doing business in the Commonwealth. Union Capital's main office is located at 1137 North Main Street, Randolph, Massachusetts.
  4. 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.
  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. 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.
  7. 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. The Division's examiners reviewed multiple loan files that exhibited patterns of early payment defaults, which resulted in the initiation of foreclosure actions for certain properties located in the Boston area.
  8. On or about August 11, 2009, the Division's examiners 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. A. Failure to Provide Books and Records.

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

  13. The Division's regulation 209 CMR 42.09(1)(a) applicable to mortgage lenders states :
  14. Each mortgage lender required to be licensed by M.G.L. c. 255E, § 2 and 209 CMR 42.05 shall retain for a minimum of three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever occurs first, copies of the note, settlement statement, truth-in-lending disclosure, correspondence, papers or records relating to the loan and such other documents as the Commissioner may require.

  15. The Division's regulation 209 CMR 42.09(1)(b) applicable to mortgage brokers states:
  16. Each mortgage broker required to be licensed by M.G.L. c. 255E, § 2 and 209 CMR 42.08 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.

  17. On or about August 11, 2009, the Division's examiners requested fifteen mortgage loan files from the Corporation. Union Capital was unable to provide six mortgage loan files or forty percent of the loan files that were requested. The Corporation informed the Division's examiners that at least two of the requested files may have inadvertently been destroyed during a recent relocation.
  18. On September 8, 2009, the Division requested thirty-four additional loan files from Union Capital, and furthermore required the Corporation to permit the Division's examiners to retrieve the loan files from Union Capital's file room. Ten loan files or twenty nine percent of the Division's sample were not retained by the Licensee.
  19. A review of a loan list provided by Union Capital and review of Registry of Deeds records revealed that the sixteen mortgage loan files that were unaccounted for by Union Capital exhibited certain patterns including high rates of foreclosure as early as nine months after settlement for certain properties that were located in the Boston metro area. The Division's examiners determined the following as illustrated by Exhibit 1 attached hereto and incorporated by reference:
    1. Thirteen properties located in the Boston metro area had been subject to a foreclosure proceeding, either through an initiation of the foreclosure process or through the ultimate possession of the property.
    2. A review of available Registry of Deeds records revealed that of the thirteen properties that were subject to foreclosure proceedings, those proceedings had been initiated 9 to 17 months after settlement for 12 of the properties and one foreclosure proceeding was initiated approximately 28 months after settlement.
    3. Eleven of the thirteen mortgage loans originated by John K. Richman, Vice President and shareholder of Union Capital were all subject to foreclosure.

    B. Unfair or Deceptive Acts and Practices

    a. Deceptive Business Practices

  20. The Division's regulation 209 CMR 42.12A(8), effective as of September, 8, 2006, states:
  21. 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.

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

  24. The Attorney General's regulation 940 CMR 8.06(1) states, in part:
  25. 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.

  26. Books and Records reviewed by the Division's examiners during the 2009 examination/inspection revealed that a disproportionately high number of mortgage loans originated by Union Capital were subject to early payment defaults and ultimately the initiation of foreclosure proceedings.
  27. Books and records reviewed by the Division's examiners revealed that certain information submitted by the Corporation to investors including but not limited to the occupancy status, and financial status of the borrowers identified on the mortgage loan documents were false and/or misleading. Union Capital was identified as the mortgage lender of record in several loan files reviewed, and on loan documents signed at settlement, however, a review of Registry of Deeds records indicates that the loans were assigned to investors at settlement as fully described in the Report. Examples include but are not limited to the following:
  28. (a) Borrower A
    Property Address: Rock Avenue, Dorchester, MA
    Loan Originator: Miguel Serrano

    Property Address: Stellman Road, Unit 2, Roslindale, MA
    Loan Originator: John K. Richman

    1. A review of books and records maintained and provided by Union Capital to the Division's examiners and Registry of Deeds records indicate that the Borrower purchased two properties in Dorchester and Roslindale both of which were financed through two mortgage loans within a period of two months. Union Capital was noted as the lender of record on all mortgage documents signed by the borrower. A review of Registry of Deeds records revealed that foreclosure proceedings for each property were initiated approximately 14 months after settlement.
    2. A review of loan files for the purchase of Rock Avenue revealed that the borrower purchased the property on January 22, 2007 and obtained two mortgage loans. Union Capital was referenced as the seller, and lender. Additionally, the principals of Union Capital were shareholders of the settlement agency that represented Union Capital at settlement.
      1. The property purchased by the borrower previously had been subject to foreclosure proceedings by a national lender approximately six months prior to the aforementioned purchase and publically available records indicate that the previous owner had purchased the property with Union Capital as the lender only two years before in 2005 and was subject to foreclosure within seven months of settlement.
    3. A review of the loan file for the purchase of the Stellman Road property revealed that the borrower purchased the property on March 21, 2007 and was qualified for two mortgage loans with Union Capital as the lender of record. A review of the loan documents revealed that borrower owned approximately five properties, four of which were identified as rental properties with a net rental income loss of $154,528 annually, the borrower's debt was approximately $268,344 annually.
    4. A review of Registry of Deeds records indicate that the property was subject to foreclosure proceedings on or about March 18, 2008, 12 months after settlement.
      1. Registry of Deeds records also reveal that the same borrower purchased Unit 1 of Stellman Road with what appeared to be another investor, although the settlement agent was the same in both transactions. The Uniform Residential Loan Application ("1003 Form") maintained in the loan file provided by Union Capital to the Division's examiners did not reflect any information relative to the purchase of Unit 1 the 1003 Form. Unit 1 was subject to foreclosure 12 months after settlement.

    (b) Borrower B
    Property Address: Stellman Road, Unit 3, Roslindale, MA,
    Loan Originator: John K. Richman

    1. A review of books and records maintained in the loan files provided by Union Capital to the Division's examiners and Registry of Deeds records indicate that Union Capital misrepresented and omitted certain information during the origination of the mortgage loan.
    2. Books and records reviewed by the Division's examiners indicate that Borrower B purchased the Stellman Road property on or about March 21, 2007, John K. Richman was the loan originator of record and Kalonji D. Franklin was the underwriter.
      1. A 1003 Form maintained in the loan file reflected certain real estate owned by the borrower and certain mortgage payments the borrower was obligated to pay.
      2. A review of the 1003 Form, Registry of Deeds records and a loan list previously provided by the Corporation revealed that Union Capital omitted two mortgage loan obligations on the 1003 Form. A copy of at least one mortgage statement for a property located on Whitfield Street in Dorchester, Massachusetts was maintained in the loan file for a property owned by the borrower. A Registry of Deeds search revealed that the borrower had purchased and mortgaged at least one other property on or about November 27, 2006. Neither mortgage payments were included in the debt-to-income ratio.
      3. A review of the Corporation's books and records further revealed that the borrower had purchased and financed the Whitfield Street property through Union Capital on October 26, 2006, four months before the settlement of the Stellman Road property. The loan originator of record for the purchase of that property was also John K. Richman.
    3. The Division's examiner determined that the monthly payments for the payment of the mortgages on the four properties owned by Borrower B would be approximately $10,121 monthly or $121,452 annually including a miscellaneous debt reflected on the credit report reviewed by the Division's examiner. Had Union Capital included all mortgage payments during the origination of the mortgage loan, the total debt-to-income ratio would have been 96%.

    (c) Borrower C
    Property Address: Highland, Unit 2 and Unit 3 Roxbury, MA
    Loan Originator, John K. Richman

    1. A review of loan files maintained by Union Capital revealed that the Corporation misrepresented certain information on mortgage loan documents prepared by the Corporation during the origination of the purchase of both Units of Highland Street.
    2. Borrower C purchased both properties on May 9, 2007 with Union Capital as the lender of record. The borrower was qualified for two mortgage loans on each property or 100% Combined Loan to Value ("CLTV"). Both first mortgage loans for each property were submitted through two different investors and loan documents reviewed by the Division's examiners indicated that each property was identified as the borrower's primary residence.
    3. A review of the loan file for the purchase of Unit 3, revealed that Union Capital failed to include a reference to the application for the purchase of Unit 2. The mortgage payment for Unit 2 also was not considered in the total obligations and debt-to-income ratio. The Division's examiner determined that had both payment obligations been included, the borrower would have had a total debt-to-income ratio of 94%.
    4. A review of the Registry of Deeds records indicates that Unit 3 entered into foreclosure on March 5, 2009. Foreclosure proceedings on the Unit 2 were initiated on September 29, 2009.

    (d) Borrower D:
    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 CLTV. James Edward Hirbour was the loan originator of record for both transactions. Kalonji D. Franklin was the underwriter of record.
    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 that the information reflected on the 1003 Form was utilized for loan 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.

    b. Deceptive Business Practices: Misrepresentation of Occupancy Status

  29. 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."
  30. 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:
  31. 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.

  32. The Division's 2009 examination/inspection revealed that Union Capital concealed and/or misrepresented information relating to the occupancy status of multiple properties for which Union Capital sought residential mortgage loans on behalf of Massachusetts applicants. Books and records reviewed by the Division's examiners revealed that Union Capital, in multiple transactions in which the Corporation acted in the capacity of both a mortgage lender in table funded transactions and mortgage broker, prepared and submitted, simultaneously, purchase money mortgage loan applications for multiple properties on behalf of an individual borrower, with each application indicating that the subject property was to be used as the borrower's primary residence. Examples include but are not limited to the following:
  33. (a) Borrower E:
    Property: Topliff Street, Dorchester, MA
    Property: Geneva Avenue, Unit 2, Dorchester, MA
    Loan Originator: John K. Richman

    1. Union Capital originated four purchase money loans for the purchase of two properties for Borrower E on or about April 25, 2007. Union Capital was the lender of record in all transactions. A review of loan files revealed that Union Capital was the table-funding lender and subsequently assigned the mortgages to national lenders. John K. Richman was the loan originator of record for all four transactions and Kalonji D. Franklin was the underwriter of record. Each mortgage loan was submitted to the investor with information stating that the borrower would be occupying each property as their primary residence.
    2. Borrower E purchased the Topliff Street property on May 4, 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. Borrower E purchased the Geneva Avenue property on June 4, 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 conflicting information.
      1. A review of a Verification of Deposit ("VOD") form maintained in the loan file for the purchase of Geneva Avenue was prepared on April 10, 2007 and indicated that the Borrower maintained a savings and checking account with balances of $8,934 and $22,291 respectively. The VOD indicated that both accounts were opened on March 27, 2004.
      2. The VOD form maintained in the loan file for the purchase of Topliff Street was prepared by the same individual who prepared the Geneva Avenue VOD and was prepared as of May 20, 2007. The VOD indicated that the borrower maintained a savings and checking account and also held a certificate of deposit, with balances of $42,498, $9,934 and $95,000 respectively. The account numbers for the checking and savings account were the same as those reflected on the VOD for the purchase of the Geneva Avenue property. The VOD indicated that the checking and savings accounts were opened on January 27, 2000 and the certificate of deposit was opened on May 18, 2005.
    5. Foreclosure proceedings were initiated on the Topliff Street property on or about July 30, 2008 and a foreclosure deed was recorded at the Registry of Deeds on January 20, 2009.
    6. Foreclosure proceedings were initiated on the Geneva Avenue property on or about March 26, 2008 and a foreclosure deed was recorded at the Registry of Deeds on May 23, 2008.

    (b) Borrower F:
    Property: Loring Avenue, Salem, MA
    Property: Salem Street, Salem, MA
    Loan Originator: James Edward Hirbour

    1. Union Capital originated two mortgage loans for two properties for Borrower F, within a period of approximately eight days. Union Capital was the lender of record for all transactions. James Edward Hirbour was the loan originator of record for both 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 1003 Form was prepared by Union Capital on December 13, 2006 for the refinance of the Loring Avenue property. Borrower F 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 Union Capital on January 3, 2007 for the purchase of the Salem Street property. Borrower F 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 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 (debt-to-income) 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.

    (c) Borrower G:
    Property: D Street, Units 1 and 2 South Boston, MA
    Loan Originator: John K. Richman

    1. Union Capital originated three purchase money loans for the purchase of both Unit 1 and 2 for a property located at D Street in South Boston, for Borrower G on December 26, 2006. Union Capital was the lender of record for all transactions. A review of loan files revealed that Union Capital was the table-funding lender and subsequently assigned the mortgages to national lenders. The borrower was qualified for two mortgage loans or 100 CLTV for the purchase of Unit 1, John K. Richman was the loan originator of record for the first mortgage loan on Unit 1 and Kalonji D. Franklin was the loan originator of record for the second mortgage loan on Unit 1. John K. Richman was the loan originator of record for the purchase of Unit 2. Kalonji D. Franklin was the underwriter of record. Each mortgage loan was submitted to the investor with information indicating that the borrower would be occupying each property as their primary residence.
    2. Registry of Deeds records indicated that Borrower G purchased Unit 1 on February 14, 2007 and a review of loan documents indicated that the property would be maintained as the borrower's primary residence.
      1. Foreclosure proceedings were initiated on Unit 1 on March 18, 2008 and a foreclosure deed was recorded on July 7, 2008.
    3. Registry of Deeds records indicated that Borrower G purchased Unit 2 of the D Street property on February 27, 2007 and a review of loan documents indicated that the property would be maintained as the borrower's primary residence.
      1. Foreclosure proceedings were initiated on Unit 2 on February 18, 2008 and a foreclosure deed was recorded on May 2, 2008.
  34. Union Capital knew or should have known that information collected by the Corporation during the processing and/or underwriting of the aforementioned 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.
  35. c. False and/or Misleading Representations of Prospective Borrowers' Income

  36. The Division's regulation 209 CMR 42.12A(8), effective as of September, 8, 2006, states:
  37. 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.

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

  40. The Attorney General's regulation 940 CMR 8.06(1) states, in part:
  41. 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.

  42. Books and records reviewed during the 2009 examination/inspection revealed that Union Capital submitted to lenders and/or investors, loan files which contained 1003 Forms in which the applicants' financial information including but not limited to applicants' income, assets, and/or employment information differed significantly and was not supported by the information reflected on other pertinent documentation which Union Capital had in its possession as more fully described in the Report. Examples include but are not limited to the following:
    1. Loan No. 08090009:
      1. A loan application prepared by Union Capital for a loan which ultimately closed on September 19, 2007, indicated that the borrower, a graphic designer, earned approximately $7,311.05 monthly or $87,732.60 annually.
      2. Paystubs maintained in the loan file reviewed by the Division's examiners revealed that the borrower earned $2,500 bi-weekly or monthly $5,416.67 monthly aggregated to $65,000 annually.
      3. The discrepancy between the information reflected on the loan application, and the paystubs located in the loan file maintained by Union Capital revealed that the Corporation overstated the borrower's income by approximately $1,894.38 monthly or $22,732.56 annually.
    2. Loan No.(s): 07090028:
      1. A loan application prepared by Union Capital for a loan which ultimately closed on October 24, 2007, indicated that the borrower, a certified nursing assistant maintained two jobs. The loan application reflected the borrower's gross monthly income as $5,101 monthly or $61,202 annually.
      2. A copy of a Verification of Employment ("VOE") from the borrower's primary employer maintained in the loan file indicated that the borrower earned $14.76 hourly for 40 hours a week or approximately $2,558.40 monthly and $30,700 annually.
      3. The discrepancy between the information reflected on the loan application, and the paystub located in the loan file maintained by Union Capital revealed that the Corporation overstated the annual income by approximately $415.60 monthly or $4,987.20 annually
      4. Union Capital reported the total debt-to-income ratio was 55.50% based on the information reported on the 1003 Form maintained in the loan file. Based on the actual income figures, the borrower's total debt-to-income ratio would have been 60.52%.
      5. A review of Registry of Deeds records revealed that foreclosure proceedings were initiated on July 30, 2009.
  43. Union Capital knew or should have known that the above referenced income and/or asset information collected by the Corporation 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.
  44. C. Other Violations

  45. In addition to the violations specifically set forth in this Temporary Order, a Report of Examination/Inspection prepared as of April 15, 2009 and to be provided to Union Capital in conjunction with the issuance of this Temporary Order, describes other violations observed during the 2009 examination/inspection.
  46. CONCLUSIONS OF LAW

  47. Based upon the information contained in Paragraphs 1 through 30, Union Capital 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).
  48. Based upon the information contained in Paragraphs 1 through 30, 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 the Corporation has violated the Division's regulation 209 CMR 42.12A(8) and Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  49. Based upon the information contained in Paragraphs 1 through 30, by misrepresenting applicant's primary residency status prior to submitting loan documents to the mortgage lenders, financial institutions or investors to whom Union Capital brokered and/or sold mortgage loans to the Corporation has violated Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  50. Based upon the information contained in Paragraphs 1 through 30, by falsifying borrowers' income information on Uniform Residential Loan Applications submitted in connection with residential mortgage transactions, Union Capital has violated the Division's regulation 209 CMR 42.12A(8) and Massachusetts General Laws chapter 93A, section 2(a) and the Office of the Attorney General's implementing regulation 940 CMR 8.06(1).
  51. Based upon the information contained in Paragraphs 1 through 30, 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, Union Capital has violated Massachusetts General Laws chapter 255E, section 8, the Division's regulations 209 CMR 42.09(1) and 209 CMR 42.12A(12).
  52. Based upon the information contained in Paragraphs 1 through 30, 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, Union Capital 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.
  53. Based upon the information contained in Paragraphs 1 through 30, the Commissioner has determined that:
    1. Union Capital 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 Massachusetts General Laws chapter 255E, section 7 and 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 Union Capital.
  54. Based upon the information contained in Paragraphs 1 through 30, had the facts and conditions found therein existed at the time of Union Capital'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 30 present sufficient grounds for the revocation of Union Capital's 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).
  55. ORDER TO CEASE AND DESIST

  56. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  57. ORDERED that Union Capital and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Union Capital, 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, Union Capital 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.
  58. IT IS FURTHER ORDERED that Union Capital, 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.
  59. IT IS FURTHER ORDERED that Union Capital 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 Union Capital 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 Union Capital. In the event that no such placement can be made, Union Capital 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. Union Capital shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  60. 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, Union Capital 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 Union Capital's submitted loans.
  61. IT IS FURTHER ORDERED that Union Capital 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 42 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Union Capital's 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.
  62. 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.
  63. 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 April 15, 2009.
  64. 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 Union Capital 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 June 3, 2010.