By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2010-372

TEMPORARY
ORDER TO CEASE AND DESIST

AND

NOTICE OF ADMINISTRATIVE
PENALTY

In the Matter of
COASTAL FINANCE, LLC
Quincy, Massachusetts

Mortgage Broker License No. MB5335


The Commissioner of Banks ("Commissioner") having determined that COASTAL FINANCE, LLC ("Coastal Finance" or the "Company") located at 400 Crown Colony Drive, Suite 103, Quincy, 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 TEMPORARY ORDER TO CEASE AND DESIST AND NOTICE OF ADMINISTRATIVE PENALTY ("Order") pursuant to General Laws chapter 255E, section 7(b) and General Laws chapter 255E, section 11.

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. Coastal Finance is, and at all relevant times, has been a limited liability company conducting business in the Commonwealth of Massachusetts. Coastal Finance's main office is located at 400 Crown Colony Drive, Quincy, Massachusetts.
  3. Coastal Finance is currently licensed by the Commissioner as a mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to the Division's records Coastal Finance was previously licensed by the Commissioner as mortgage lender and mortgage broker under Massachusetts General Laws 255E, section 2. According to records maintained by the Division, the Commissioner issued a mortgage company license, license number MC5160 to Coastal Finance to engage in the business of a mortgage lender and mortgage broker on or about March 19, 2008. The Division's records indicate that on or around August 31, 2009, Coastal Finance opted to surrender its mortgage lender license and was thereafter assigned license number MB5335 to engage solely in the business of a mortgage broker in the Commonwealth.
  4. License number MB5335 authorizes Coastal Finance to conduct the business of a mortgage broker from the Company's main office located at 400 Crown Colony Drive, Suite 103, Quincy, Massachusetts.
  5. On or about October 1, 2010, the Division was forwarded a copy of a solicitation ("Solicitation") received by a Massachusetts consumer from Coastal Finance. A copy of the Solicitation is attached as Exhibit 1. pdf format of coastalexhibit10292010.pdf

    Misleading and Deceptive Advertising Practices

  6. 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.

  7. The Attorney General's regulation 940 CMR 8.04(1) states:

    It is an unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading, or if the mortgage broker or lender does not have sufficient information upon which a reasonable belief in the truth of the representation or statement could be based. Such claims or representations include, but are not limited to the availability, terms, conditions, or charges, incident to the mortgage transaction and the possibility of refinancing.

  8. The Division's Regulation 209 CMR 42.12A(9) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to make false promises to influence, persuade, or induce a consumer to a sign a mortgage loan application or mortgage loan documents.

  9. The Division's regulation 209 CMR 42.12A(4) states:

    It is a prohibited act or practice for a mortgage broker to advertise any interest rate or loan term described in 209 CMR 32.24(3)(a) in any media without the following statement: "We arrange but do not make loans". No advertisement by a mortgage broker in any media shall contain language which indicates or suggests that the mortgage broker will fund or approve a mortgage loan or guarantee any rate.

  10. The Division's review of the Solicitation revealed that it included several references which were misleading and deceptive, including references that gave the appearance that Coastal Finance is licensed as a mortgage lender in the Commonwealth. The Solicitation included certain references which collectively created an appearance that it was issued by a government agency by making references to the "Economic Stimulus Act" and the Company's "FHA Lending Division."
  11. The Solicitation, marked "Economic Stimulus Act 2010 - SECOND NOTICE" advised the consumer that they had been selected by the Company's FHA lending division and were "eligible to apply for a lower fixed rate, mortgage payment reduction, debt consolidation and/or receive cash out."
  12. The body of the Solicitation referenced a file number, and indicated that the Economic Stimulus Act allowed the Federal Housing Authority to "temporarily adjust lending policies to soften the crises for mortgage holders and promote economic stimulus."
  13. The Solicitation further noted that Coastal Finance had previously attempted to contact the consumer and that this was a "Second Notice." The Solicitation instructed the consumer to respond immediately in order to take advantage before the program expired, and that the program would no longer be offered, effective October 4, 2010.
  14. The Solicitation made reference to the consumer's current mortgage amount and notified the consumer that they had a "high interest rate," and could qualify for one of three reduced payment options. The Solicitation identified monthly mortgage payments for a 30 year fixed, 15 year fixed and 5 year adjustable rate mortgage with the annual percentage rate identified. Coastal Finance also identified two "cash out" options for the consumer and identified an "Estimated Escrow Refund," however failed to identify how the Company determined the Consumer's escrow refund as it was not the current mortgage holder. The Solicitation also did not include the statement, "We arrange but do not make loans" as required pursuant to 209 CMR 42.12A(4).
  15. The Solicitation notified the consumer that if they began the transaction in September, their next payment "may not be due until November," a statement that was misleading as it could lead the reader to believe that they would be skipping two mortgage payments.
  16. Language indicating that the offer was being made by Coastal Finance and not a government agency was included in the Solicitation. However, such language was in font size that was significantly smaller than that of the body of the Solicitation and was located in a non prominent location at the bottom.
  17. Based on the Division's records, Coastal Finance is not a government agency.

    Failure to Disclose License Type and Number

  18. The Division's regulation 209 CMR 42.15 states:

    A Licensee shall disclose the type and number of its license(s) to all clients and/or residential mortgage loan applicants in writing at the time a fee is paid or a mortgage loan application is accepted. A Licensee shall also disclose the type and number of its license(s) in all advertisements.

  19. The Division's regulation 209 CMR 42.12A(14) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender for an employee or a person associated with and acting under the direction of a mortgage broker or a mortgage lender to advertise residential mortgage loan services without naming the licensee and disclosing the license number of the mortgage broker or mortgage lender under whose license the individual is acting.

  20. The bottom of the Solicitation identified Coastal Finance as an FHA approved lender however did not include a reference to the type and license number held by Coastal Finance.
  21. Coastal Finance is not currently licensed by the Commissioner to conduct business as a mortgage lender in Massachusetts under M.G.L. chapter 255E, section 2 and the Division's regulation 209 42.00 et seq., and has not been since August of 2009.

    CONCLUSIONS OF LAW

  22. Based upon the information contained in Paragraphs 1 through 21, Coastal Finance has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage broker business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255E, section 4 and the Division's regulations 209 CMR 42.06(2)(c).
  23. Based upon the information contained in Paragraphs 1 through 21, by mailing Massachusetts consumers a Solicitation that contained false or misleading language or language that had the tendency to be false or misleading, including language that could lead the reader to believe that the Solicitation was issued by a government agency, Coastal Finance has violated Massachusetts General Laws chapter 93A, section 2(a), and the Office of the Attorney General's implementing regulation 940 CMR 8.04(1).
  24. Based upon the information contained in Paragraphs 1 through 21, by mailing Massachusetts consumers a Solicitation that made false promises to influence, persuade or induce a consumer to sign a mortgage loan application, asserting the consumer's eligibility for a lower fixed rate a reduced payment on their original loan amount, and urging the consumer to respond to Coastal Finance immediately stating that program would expire, Coastal Finance violated the Division's regulation 209 CMR 42.12A(9).
  25. Based upon the information contained in Paragraphs 1 through 21, by mailing Massachusetts consumers a Solicitation that failed to disclose Coastal Finance's license type and number, the Company violation the Division's regulation 209 CMR 42.15 and 209 CMR 42.12A(14).
  26. Based upon the information contained in Paragraphs 1 through 21, the Commissioner has determined that:

    Coastal Finance has engaged in, is engaging in, or is about to engage in, acts or practices which warrant the belief that the public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Coastal Finance.

    ORDER TO CEASE AND DESIST AND NOTICE OF ADMINISTRATIVE PENALTY

  27. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  28. ORDERED that Coastal Finance shall cease mailing the Solicitation identified as Exhibit 1 pdf format of coastalexhibit10292010.pdf
and any Solicitation to Massachusetts consumers that contains any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading including but not limited to:
    1. Solicitations containing false or misleading language or language that had the tendency to be false or misleading, including language that could lead the reader to believe that the Solicitation was issued by a government agency;
    2. Solicitations containing false or misleading language or language that had the tendency to be false or misleading, including language that could lead the reader to believe that the Solicitation was issued by a licensed mortgage lender;
    3. Solicitations that have the tendency to make false promises to influence, persuade or induce a consumer to sign a mortgage loan application including references to the consumer's eligibility for a new fixed rate mortgage, lower monthly payments, and/or eligibility to skip 2 monthly payments.
  29. IT IS FURTHER ORDERED that within five (5) days of the effective date of this Order, Coastal Finance shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all Massachusetts consumers to whom the Company distributed the Solicitation. The records to be produced shall include the consumers' names and addresses.
  30. IT IS FURTHER ORDERED that within twenty (20) days of the effective date of this Order, Coastal Finance shall submit a payment of ten thousand dollars ($10,000.00) in satisfaction of an administrative penalty collected in consideration of the Company's engaging in deceptive and prohibited advertising. Such administrative penalty is imposed pursuant to Massachusetts General Laws chapter 255E, section 11. The Company shall remit payment pursuant to this Paragraph of the Order for the amounts due, payable to the "Commonwealth of Massachusetts," to the Office of the Commissioner of Banks, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-6400. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
  31. The administrative penalty imposed on Coastal Finance is subject to review as provided in Massachusetts General Laws chapter 30A. Accordingly, Coastal Finance may request a hearing to contest said administrative penalty. Such request for a hearing must be filed in writing within 20 days of Coastal Finance's receipt of this Order. If the Company fails to request a hearing within the prescribed time frame pursuant to this Paragraph, the aforementioned administrative penalty shall be deemed final and binding and shall be due and owing to the Commonwealth.
  32. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such Order shall become permanent and final only upon receipt of a written request for such a hearing from Coastal Finance within twenty (20) days of the effective date of this Order. If no hearing is requested within this twenty (20) day period, this Order shall become permanent and final until it is modified or vacated by the Commissioner.
  33. IT IS FURTHER ORDERED that this 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.
  34. IT IS FURTHER ORDERED that Coastal Finance shall review and revise, as necessary, the Company's policies and procedures to ensure that individuals performing on behalf of the Company neither act, nor represent themselves, as a government agency and/or a licensed mortgage lender; and
  35. IT IS FURTHER ORDERED that a copy of each advertisement used by Coastal Finance shall be retained in the Company's books and records and shall be made available to the Division at its examinations/inspections of Coastal Finance.

    GENERAL PROVISIONS

  36. Coastal Finance shall revise its advertising practices and procedures to ensure that all solicitations and advertising materials used by the Company do not contain any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading.
  37. Coastal Finance shall take all necessary steps to ensure that the Solicitation or any similar solicitation are not published or distributed to consumers in Massachusetts.
  38. Coastal Finance shall implement, establish and maintain a system of internal controls to monitor the Company's compliance with the laws and regulations applicable to advertising practices including, but not limited to the Division's regulations 209 CMR 42.12A and the Office of the Attorney General's regulation 940 CMR 8.00 et seq.
  39. Coastal Finance shall establish, implement and maintain policies and procedures to ensure that all advertisements are thoroughly reviewed by senior management prior to publication or distribution to consumers. Such procedures shall include a review of the criteria utilized to generate mailing lists to ensure that targeted solicitations are appropriate for the consumers to whom such solicitations are distributed.

    BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

    Dated at Boston, Massachusetts, this 29th day of October, 2010

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

This Order was terminated pursuant to a Consent Order on February 7, 2011.