By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER AND
MORTGAGE LOAN
ORIGINATOR LICENSING
Docket No. 2010-077

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST


In the Matter of
FIRST CAPITAL MORTGAGE GROUP, LLC
Mortgage Broker License No. MB1464
South Boston, Massachusetts

and

David Gefke, Individually
Mortgage Loan Originator License No. MLO18878


The Commissioner of Banks ("Commissioner") having determined that FIRST CAPITAL MORTGAGE GROUP, LLC ("First Capital Mortgage" or the "Company"), located at 202-206 K Street, South Boston, Massachusetts and david gefke, have engaged in, or are engaging in, or are about to engage in, acts or practices constituting violations of Massachusetts General Laws chapters 255E and 255F, and applicable regulations found at 209 CMR 41.00 and 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 11(a).

FINDINGS OF FACT

  1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of those engaged in the business of a mortgage broker pursuant to Massachusetts General Laws chapter 255E, section 2 and Massachusetts General Laws chapter 255E, section 8; and of those engaged in the business of a mortgage loan originator pursuant to Massachusetts General Laws chapter 255F.
  2. First Capital Mortgage is, and at all relevant times, has been a company conducting business in the Commonwealth of Massachusetts. First Capital Mortgage's main office is located at located at 202-206 K Street, South Boston, Massachusetts.
  3. David Gefke is, and at all relevant times has been, the sole member of First Capital Mortgage.
  4. First Capital Mortgage was 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 MB1464, to First Capital Mortgage to engage in the business of a mortgage broker on or about November 10, 1998. License number MB1464 authorized First Capital Mortgage to conduct the mortgage broker business from the Company's main office located at 202-206 K Street, South Boston, Massachusetts.
  5. David Gefke is licensed by the Commissioner as a mortgage loan originator under Massachusetts General Laws chapter 255F, section 2. According to the Division's records, the Commissioner initially issued a mortgage loan originator license, license number MLO18878, to David Gefke to engage in the business of a mortgage loan originator on or about October 31, 2008.

    i. Felony Charges Affecting a Determination of the Licensee's Financial Responsibility, Character, Reputation, Integrity and General Fitness to Engage in the Licensed Business

  6. Massachusetts General Laws chapter 255E section 4 applicable to the licensing of mortgage brokers states, in part:

    [I]f the commissioner finds that the financial responsibility, character, reputation, integrity and general fitness of the applicant, and of the partners or members thereof if the applicant is a partnership or association, and of the officers, directors and principal employees if the applicant is a corporation, are such as to warrant belief that the business will be operated honestly, fairly, soundly and efficiently in the public interest consistent with the purposes of this chapter, he shall thereupon issue the applicant a license to engage in the business of a mortgage lender or mortgage broker. If the commissioner shall not so find, he shall not issue a license and he shall notify the applicant of the denial. [Emphasis added].

  7. The Division's regulation 209 CMR 42.06(2)(c) applicable to mortgage brokers states:
  8. An Applicant shall be required to submit detailed information supporting the following general requirements:

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

  9. The Division's regulation 209 CMR 42.07(2)(a) applicable to mortgage brokers states:
  10. The Commissioner may deny an application to engage in the business of a mortgage broker, if the Commissioner upon review of the application and other relevant information, determines that the Applicant has not satisfied the requirements of M.G.L. c. 255E or 209 CMR 42.06.

  11. Massachusetts General Laws chapter 255E, section 7(b) states, in part:

    If the commissioner makes written findings of fact that the public interest will be irreparably harmed by delay in issuing an order under subsection (a) he may issue a temporary cease and desist order.

  12. Massachusetts General Laws chapter 255F, section 4(a)(iii) applicable to the licensing of mortgage loan originators states in part:
  13. The commissioner shall issue a mortgage loan originator license to an applicant therefore unless the applicant: (iii) has failed to demonstrate financial responsibility, character, reputation, integrity and general fitness such as to command the confidence of the community and to warrant a determination that such applicant will operate honestly, fairly, soundly and efficiently in the public interest, consistent with the purposes of this chapter.

  14. The Division's regulation 209 CMR 41.04(2)(d) applicable to the licensing of mortgage loan originators states in part:
  15. An Applicant shall be required to submit detailed information supporting the following requirements:

    Character and Fitness. An Applicant shall submit information demonstrating that the Applicant possesses the character, reputation, integrity, and general fitness such as to command the confidence of the community and to warrant a determination that the Applicant will engage in the business of a Mortgage Loan Originator in an honest, fair, sound, and efficient manner.

  16. The Division's regulation 209 CMR 41.05(3)(a)(6) applicable to the licensing of mortgage loan originators states in part:

    The Commissioner shall deny an application for a Mortgage Loan Originator license if the Commissioner upon review of the application and any other relevant information, determines that the Applicant has:

    failed to satisfy the requirements of M.G.L. c. 255F or 209 CMR 41.04.

  17. Massachusetts General Laws chapter 255F, section 11(a) states, in part:
  18. The commissioner may for the administration and enforcement of this chapter, pursuant to chapter 30A: (ii) deny, suspend, revoke, condition or decline to renew a license if a . . . licensee fails at any time to meet the requirements of section 4 . . . (vii) enter immediate temporary orders to cease business under a license if the commissioner determines that . . . the licensee is currently in violation of this chapter.

  19. On February 5, 2010, the United States Attorney's Office in the District of Massachusetts, filed a complaint against David Gefke charging him with one felony count of knowingly conspiring to participate in any way in the use of any extortionate means to collect or attempt to collect any extension of credit in violation of 18 U.S.C. §894.
  20. According to an Affidavit filed in conjunction with the criminal complaint, David Gefke was charged for his role in allegedly conspiring with a co-defendant to collect, using extortionate means, approximately $90,000 owed to David Gefke from an unnamed individual. The Affidavit further alleged that the unnamed individual had owed the money to David Gefke in connection with a renovation project for a property located in Boston, and had entered into an agreement to pay the amount due to David Gefke within a certain period of time. The individual was unable to make those payments and was subsequently approached by the co-defendant and three individuals who attempted to collect the debt owed to David Gefke. The Affidavit alleged that the co-defendant attempted to collect the debt owed to David Gefke beginning January 28, 2010 through February 4, 2010 through various means including, but not limited to, approaching the individual at his home, office, and through telephone calls made to the individual's wife.
  21. ii. Failure to Notify the Division of the Occurrence of Significant Developments

  22. The Division's regulation 209 CMR 41.09(1)(a) applicable to mortgage loan originators states, in part:
  23. A Licensee shall notify the Commissioner immediately, in writing, and amend the Licensee's information and disclosures in the NMLS, within 2 business days of the occurrence of any of the following significant developments:

    (a) Being charged with or convicted of any criminal felony offense.

  24. As of the effective date of this Temporary Order, the Division has not received notification from David Gefke of the occurrence of the events referenced above in Paragraphs 14 and 15 of this Temporary Order.
  25. CONCLUSIONS OF LAW

  26. Based upon the information contained in Paragraphs 1 through 17, First Capital Mortgage has failed to demonstrate and maintain the character, reputation, integrity, and general fitness such as to command the confidence of the community and to warrant a determination that it will operate honestly, fairly, soundly and efficiently in the public interest, as a mortgage broker in violation of Massachusetts General Laws chapter 255E, section 4 and the Division's regulation 209 CMR 42.06(2)(c).
  27. Based upon the information contained in Paragraphs 1 through 17, David Gefke has failed to demonstrate and maintain the character, reputation, integrity, and general fitness such as to command the confidence of the community and to warrant a determination that he will operate honestly, fairly, soundly and efficiently in the public interest, as a mortgage loan originator in violation of Massachusetts General Laws chapter 255F, section 4 and the Division's regulation 209 CMR 41.04(2)(d).
  28. Based upon the information contained in Paragraphs 1 through 17, David Gefke failed to notify the Commissioner in writing, within two business days, that he had been charged with a felony, in violation of the Division's regulation 209 CMR 41.09(1)(a).
  29. Based upon the information contained in Paragraphs 1 through 17, the Commissioner has determined that:
    1. First Capital Mortgage 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 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.;
    2. David Gefke has engaged in, is engaging in, or is about to engage in, acts or practices which warrant the belief that it is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a mortgage loan originator including, but not limited to, the provisions of the Division's regulations at 209 CMR 41.00 et seq.; and
    3. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to First Capital Mortgage and David Gefke.
  30. Based upon the information contained in Paragraphs 1 through 17, had the facts and conditions found therein existed at the time of First Capital Mortgage's 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 17 present sufficient grounds for the issuance of a Temporary Order during the pendency of the criminal case filed against the Principal of First Capital Mortgage and supporting allegations contained in an Affidavit filed by the United States Attorney's Office as referenced in Paragraphs 14 and 15 as they suggest that the Principal of First Capital Mortgage has failed to demonstrate the character, reputation, integrity and fitness to engage in the business of a mortgage broker in an honest, fair, sound and efficient manner in violation of Massachusetts General Laws chapter 255E, section 6 and the Division's regulation 209 CMR 42.07.
  31. Based upon the information contained in Paragraphs 1 through 17, had the facts and conditions found therein existed at the time of David Gefke's original mortgage loan originator license application, the Commissioner would have been warranted in refusing to issue such license. Further, the facts and conditions set forth in Paragraphs 1 through 17 present sufficient grounds for the issuance of a Temporary Order during the pendency of the criminal charges filed against David Gefke and supporting allegations contained in an Affidavit filed by the United States Attorney's Office as referenced in Paragraphs 14 and 15 as they suggest that David Gefke has failed to demonstrate the character, reputation, integrity and general fitness such as to command the confidence of the community and that he will engage in the mortgage loan originator business honestly, fairly, soundly and efficiently in the public interest Massachusetts General Laws chapter 255F, section 4 and the Division's regulation 209 CMR 41.05.
  32. ORDER TO CEASE AND DESIST

  33. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  34. ORDERED that First Capital Mortgage and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of First Capital 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, First Capital 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.
  35. IT IS FURTHER ORDERED that David Gefke shall immediately cease engaging in the activities of a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts. Therefore, David Gefke is ordered to immediately cease soliciting, accepting, or further originating, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in Massachusetts.
  36. IT IS FURTHER ORDERED First Capital Mortgage, 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.
  37. IT IS FURTHER ORDERED that First Capital 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. First Capital Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified broker(s) or lender(s).
  38. IT IS FURTHER ORDERED that First Capital Mortgage shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Company'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 Company's open application list, including but not necessarily limited to, the following:
  39. All information on file as of the date of submission regarding First Capital Mortgage's open application list as a mortgage broker, including but not limited to, the following: The names of all individuals from whom First Capital 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 Company's submitted loans.

  40. First Capital 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 28 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in First Capital Mortgage's books and records and shall be available to the Commissioner, in their entirety, upon request.
  41. 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.
  42. 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.
  43. 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 First Capital Mortgage and David Gefke 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 18th day of February, 2010

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