By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2010-001

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST


In the Matter of
FIRST OHIO BANC & LENDING, INC.
Independence, Ohio

Mortgage Company License No.: MC3973


The Commissioner of Banks ("Commissioner") having determined that FIRST OHIO BANC & LENDING, INC., ("First Ohio Banc" or the "Corporation"), located at 6100 Rockside Woods Boulevard, Independence, Ohio, 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 11(a).

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. First Ohio Banc is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts First Ohio Banc's main office is located at 6100 Rockside Woods Boulevard, Independence, Ohio.
  4. First Ohio Banc 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 MC3973, to First Ohio Banc to engage in the business of a mortgage lender and mortgage broker on or about June 22, 2005. License number MC3973 authorized First Ohio Banc to conduct the mortgage company business from the Corporation's main office located at 6100 Rockside Woods Boulevard, Independence, Ohio.
  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 September 21, 2009, 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 First Ohio Banc 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 "2009 examination/inspection"). The analysis of the books and records that were reviewed relative to the 2009 examination/inspection continued until an exit meeting was held with First Ohio Banc on April 22, 2010.
  7. The Division's Report of Examination/Inspection on Consumer Compliance (the "Report"), which was issued to First Ohio Banc on the effective date of this Temporary Order, presented the findings of the 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 business of a mortgage broker and mortgage lender in Massachusetts.

    A. False and/or Misleading Representations of Prospective Borrowers' 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. The 2009 examination/inspection revealed that First Ohio Banc falsified or misrepresented income information on mortgage loan documents relating to loans originated by the Corporation. Examples include, but are not limited to the following documents, as summarized below:
    1. Loan #11779329.
      1. A loan application for a loan originated by Lee Bachman and signed by the applicant as of November 8, 2006 indicated that the gross monthly base employment income of the applicant, was $2,900 or $34,800 annually.
      2. A final loan application completed as of November 24, 2006, reflects an increase in the applicant's gross monthly income to $3,400, or $40,800 annually.
      3. A copy of a Verification of Employment ("VOE") form maintained in the loan file provided by the Corporation for review reflected a year to date income through November 4, 2006 of $17,991. The VOE reflected an hourly wage of $9.81 and the average hours per week as 40-45 which when aggregated indicated that the applicant earned approximately $1,912.95 monthly or $22,955.40 annually if the applicant had worked the maximum 45 hours a week.
      4. The discrepancy in income reflected on the loan application signed at closing and the VOE form maintained in the loan file reveals an overstatement of the applicant's gross annual income of approximately $17,845.
    2. Loan #124010292.
      1. A final loan application for a loan originated by Allen Pesci, for a loan which closed on August 14, 2006 indicated that the gross monthly base employment income of the applicant, a senior lead auto glass technician, was $8,969, monthly or $107,628 annually.
      2. A pay stub maintained in the loan file for the pay period for the week of June 11, 2006 reflected a payment of $760.00 for the week which would project a gross base monthly income of $3,293, or $39,520 annually.
      3. A copy of the applicant's "online banking activity" form maintained in the loan file reflected a payroll deposit of $578.90 on June 4, 2006.
      4. A copy of a "Client Information Sheet" maintained in the loan file indicated that the borrower's income from the same employer as that reported on the 1003 loan application was $41,000.
      5. The discrepancy in income reflected on the loan application and the paystub maintained in the loan file reveals an overstatement of the applicant's gross annual income of approximately $68,108.
      6. A review of Registry of Deeds records indicates that a foreclosure deed was filed on April 17, 2008.
    3. Loan #0124329420.
      1. A loan application for a loan originated by Mike Nader and completed as of July 1, 2006 for a loan which closed on September 7, 2006 indicated that the gross monthly base employment income of the applicant, a customer service representative was $5,688.14 monthly or $68,257.68 annually.
      2. The final application signed at closing reflected the applicant's gross monthly income to $4,900 monthly, or $58,800 annually.
      3. A copy of an "Initial Interview Sheet" maintained in the loan file reviewed by the Division's examiner reflected the applicant's hourly wage as $10 per hour and a yearly income of $20,800.
      4. The discrepancy in income reflected on the final loan application and the Initial Interview Sheet in the loan file reveals an overstatement of the applicant's gross annual income of approximately $38,000.
      5. A review of the loan file provided for review indicated that there was nothing maintained in the loan file that would indicate or support the source or occupation generating additional income to determine its accuracy, nor was any information reflected under the additional income section of the 1003 loan application as required, if the additional income was generated from the applicant's employment as a customer service representative above the borrower's base salary.
      6. A review of the Registry of Deeds records indicate that foreclosure proceedings were initiated on or about April 8, 2008 and the property was ultimately foreclosed upon on or about August 27, 2008.
  12. First Ohio Banc knew or should have known that the above referenced income and/or asset information would be relied upon by the mortgage lender, financial institution or investor to which the mortgage loans were brokered and/or sold by First Ohio Banc.

    B. Undisclosed Fees

  13. 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.

  14. Books and records reviewed by the Division's examiners during the 2009 examination/inspection indicate, as more fully described in the Report, that First Ohio Banc engaged in a pattern or practice of collecting fees that were not previously disclosed to the mortgagor in writing.

    C. Conducting Residential Mortgage Loan Business in Massachusetts with Unlicensed Mortgage Loan Originators

  15. Effective July 31, 2009, Massachusetts General Laws chapter 255F, section 2(a), states, in part: (Effective July 1, 2008 until July 31, 2009, M.G.L. chapter 255F, section 2 stated: "No person shall act as a mortgage loan originator unless such person has first obtained a mortgage loan originator license from the commissioner. An entity shall not knowingly employ or retain a mortgage loan originator unless the mortgage loan originator is licensed under this chapter.")

    No individual shall act as a mortgage loan originator with respect to any dwelling unless such person has first obtained a mortgage loan originator license from the commissioner or is exempt from the licensure requirement . . . No person shall knowingly employ or retain a mortgage loan originator unless the mortgage loan originator is licensed under this chapter or is exempt from the licensure requirement.

  16. Massachusetts General Laws chapter 255F section 11(e) states:

    The commissioner may suspend, revoke or refuse to renew the license of the entity employing any licensed mortgage originator upon finding that: (i) the entity knew or reasonably should have known that the mortgage loan originator violated this chapter or any rule or regulation promulgated hereunder, or any other law applicable to the conduct of its business; (ii) the entity knew of any fact or condition which, if it had existed at the time of the original application for such license, would have warranted the commissioner in refusing to issue such license; or (iii) the mortgage loan originator committed any fraud, misappropriated funds or misrepresented any of the material particulars of a mortgage loan transaction approved by the entity.

  17. The Division's regulation 209 CMR 42.12A(17) states:

    It is a prohibited act or practice for a mortgage broker or a mortgage lender to conduct business with an individual who should be licensed as a mortgage loan originator under M.G.L. c. 255F, and who the mortgage broker or mortgage lender knows or should know is an unlicensed mortgage loan originator.

  18. Books and records reviewed during the 2009 examination/inspection revealed that fifty-two residential mortgage loan applications were originated by fifteen unlicensed individuals on behalf of First Ohio Banc between September 3, 2008 and October 6, 2009.

    D. Engaging in the Mortgage Lender and Mortgage Broker Business in Massachusetts from Unlicensed Locations

  19. Massachusetts General Laws chapter 255E, section 5 states in part:

    Each [mortgage broker/mortgage lender] license shall state the address at which the business is to be conducted and shall state the name of the licensee. If a licensee intends to carry on such business at any place in addition to the address on the license, he shall so notify the commissioner, in writing, at least 30 days prior thereto.

  20. The Division's regulation 209 CMR 42.13(1) states:

    A Licensee who intends to carry on its business at any location in addition to the address on its original license shall notify the Commissioner, in writing, at least 30 days prior to the opening of the branch location. Such notice shall contain the address of any such place and such other information as the Commissioner may require.

  21. Books and records reviewed by the Division's examiners during the 2009 examination/inspection indicate that, beginning on a date that is unknown to the Division and continuing at least until the date of the 2009 examination/inspection, First Ohio Banc conducted its mortgage lender and mortgage broker business at seven office locations, for which First Ohio Banc failed to provide prior notice to the Commissioner, submit a branch license application, or receive approval from the Commissioner to engage in the mortgage lender and mortgage broker business from such locations.
  22. The seven referenced office locations included locations in WestLake, Ohio; Middleburg Heights, Ohio; Fairlawn, Ohio; Medina, Ohio; two locations in Mentor, Ohio; and Boynton Beach, Florida.

    E. Excessive Late Charges

  23. Massachusetts General Laws chapter 183, section 59 states in part:

    A mortgagee, assignee or holder of a mortgage note secured by a first or subordinate lien on a dwelling house of 4 or less separate households or on a residential condominium unit occupied or to be occupied in whole or in part by the mortgagor shall not require the mortgagor to pay a penalty or late charge for any payment paid within 15 days or in the case of a bi-weekly mortgage payment, paid within 10 days, from the date the payment is due.

    In no event, in assessing a penalty because of the delinquency in making all or any part of a periodic payment under a mortgage note, shall the penalty or late charge exceed 3 per cent of the amount of principal and interest overdue, and in calculating the penalty or late charge, any amount of the periodic payment representing estimated tax payments required by the terms of the mortgage note or deed shall not be included.

  24. Books and records reviewed by the Division's examiners during the 2009 examination/inspection revealed that in at least two loan files reviewed, First Ohio Banc when acting in the capacity of a mortgage lender, provided consumers with a final Truth in Lending Form ("TIL") that indicated that the late charge to be assessed would be three (3) percent of the total mortgage payment and would include any escrow payments.
  25. Books and records reviewed by the Division's examiners during the 2009 examination/inspection revealed that in at least one loan file reviewed, First Ohio Banc provided consumers with a final TIL that reflected a five (5) percent late charge.

    F. Failure to Provide Consumers with Accurate Variable Rate Loan Program Disclosure

  26. The Division's regulation 209 CMR 32.19(2)(8)(b) states:

    The maximum interest rate and payment for a $10,000 loan originated at the initial interest rate (index value plus margin, adjusted by the amount of any discount or premium) in effect as of an identified month and year for the loan program disclosure assuming the maximum periodic increases in rates and payments under the program; and the initial interest rate and payment for that loan and a statement that the periodic payment may increase or decrease substantially depending on changes in the rate.

  27. Books and records reviewed by the Division's examiners revealed that in at least two loan files, First Ohio Banc when acting in the capacity of a mortgage lender, failed to complete the Variable Rate Loan Program Disclosure ("Disclosure") accurately. In one loan file reviewed the Corporation failed to complete a particular section of the Disclosure. A second Disclosure reviewed by the Division's examiners indicated that the interest rate could not increase or decrease more than two percentage points at initial adjustment and would not increase or decrease more than six percentage points over the term of the loan, however a review of the terms of the mortgage indicated that the initial adjustment and the term of the loan could not increase or decrease by more than five percentage points.

    G. Understated Finance Charges

  28. Massachusetts General Laws chapter 140D, section 5(a) states:

    The annual percentage rate applicable to any extension of consumer credit shall be determined in accordance with the regulations of the commissioner.

  29. The Division's regulation at 209 CMR 32.18(4)(a) states:

    In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

    1. is understated by no more than $100; or

    2. is greater than the amount required to be disclosed.

     

  30. Books and records reviewed by the Division's examiners during the 2009 examination/inspection revealed that in one loan file reviewed, First Ohio Banc when acting in the capacity of a mortgage lender, provided consumers with a final TIL that reflected an understated finance charge.

    H. Failure to Provide Required Statements and Information

  31. Massachusetts General Laws chapter 184, section 17B states

    Every application for a mortgage loan on 1-to-4- family residential property and occupied or to be occupied in whole or in part by the obligor on the mortgage debt shall be made on a printed form which shall contain the following 2 statements in type of at least 2 points larger than the other type used on the application:

    1. The responsibility of the attorney for the mortgagee is to protect the interest of the mortgagee.
    2. Mortgagors may, at their own expense, engage an attorney of their selection to represent their interests in the transaction.

    A printed copy of the above statements and information shall be given to the mortgagor at the time of making the application.

  32. Books and records reviewed by the Division's examiners revealed that First Ohio Banc when acting in the capacity of a mortgage lender, failed to retain evidence of having provided the required Notice in several loan files reviewed.

    I. Failure to Disclose License Type and Number

  33. 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.

  34. Attorney General's regulation 940 CMR 8.04(2) states, in part:

    It is an unfair or deceptive act or practice for a mortgage broker or lender to advertise without clearly and conspicuously disclosing its business name, the words "broker" or "lender", as applicable, and the license number.

  35. First Ohio Banc failed to disclose the Corporation's license type and number on the Corporation's website.
  36. Books and records reviewed by the Division's examiners revealed that First Ohio Banc when acting in the capacity of a mortgage lender, failed to retain evidence of having disclosed the Corporation's license type and number at application in at least four loan files reviewed.

    J. Failure to Provide Required Notices

  37. Massachusetts General Laws chapter 167, section 14A states:

    Any applicant whose residential mortgage loan application is denied by any mortgagee making five or more mortgage loans in any calendar year on residential property located in the commonwealth of four units or less and occupied in whole or in part by the mortgagor shall be instructed by the mortgagee, in writing, at the time of denial of his right to appeal any such denial to the appropriate mortgage review board.

  38. 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.

  39. Books and records reviewed by the Division's examiners revealed that First Ohio Banc, failed to retain evidence of having provided the Mortgage Review Board Notice in all denied loan files reviewed.

    K. Loan Origination and Compensation Agreement

  40. 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.

  41. 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.

  42. Books and records reviewed by the Division's examiners during the 2009 examination/inspection revealed that First Ohio Banc when acting in the capacity of a mortgage broker, failed to retain evidence of having provided the Loan Origination and Compensation Agreements in all files reviewed.

    L. Providing Mortgage Lender Disclosures to Consumers when Acting in the Capacity of a Mortgage Broker

  43. Books and records reviewed by the Division's examiners during the 2009 examination/inspection indicate that First Ohio Banc when acting in the capacity of a mortgage broker, routinely provided several mortgage lender disclosures to consumers to consumers in violation of and exceeding its authority under G. L. c. 255E.
  44. The mortgage lender disclosures include, but are not limited to, Equal Credit Opportunity Notice, Notices to Applicant's of Right to Receive Copy of Appraisal Report, Servicing Disclosure, Truth in Lending Disclosure, and Variable Rate Mortgage Program Disclosure.

    M. Misleading Statements

  45. 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.

  46. Books and records reviewed during the 2009 examination/inspection revealed that First Ohio Banc, 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 suggests that First Ohio Banc, while acting as the mortgage broker in the transaction, was approving or funding the mortgage loan which, if true, would exceed the authority of the mortgage broker in the transaction.

    N. Interest Rate Lock Commitments

  47. The Division's regulation 209 CMR 42.12A(3)(b) states, in part:

    (b) ...A mortgage broker may only take a rate lock commitment fee for transmittal to the mortgage lender which intends to make the loan. Nothing herein shall prohibit a mortgage broker from negotiating the terms or conditions of a mortgage loan, including the interest rate, on behalf of a consumer. A mortgage broker may also use such forms or other evidence as desired to allow a consumer to indicate a preference to enter into a mortgage rate lock commitment with a mortgage lender. However, any such forms or evidence must clearly and conspicuously contain the following statement: "This is a request, not a commitment, to lock your interest rate with a mortgage lender".

  48. The 2009 examination/inspection revealed that when acting in the capacity of a mortgage broker, First Ohio Banc provided consumers with a "Loan Pricing Agreement Defining Interest Rate and Terms" ("Form") which included language that detailed the loan programs requested by the prospective borrowers and locked in a particular interest rate. The Form did not contain the required language, "This is a request, not a commitment, to lock your interest rate with a mortgage lender."

    O. Other Violations

  49. In addition to the violations specifically set forth in this Temporary Order, a Report of Examination/Inspection prepared as of September 21, 2009 and to be provided to First Ohio Banc in conjunction with the issuance of this Temporary Order, describes other violations observed during the 2009 examination/inspection.

    CONCLUSIONS OF LAW

  50. Based upon the information contained in Paragraphs 1 through 49, First Ohio Banc 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).
  51. Based upon the information contained in Paragraphs 1 through 49, by submitting misleading and/or inaccurate information to mortgage lenders, financial institutions, or investors to whom First Ohio Banc brokered and/or sold mortgage loans, 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).
  52. Based upon the information contained in Paragraphs 1 through 49, by falsifying borrowers' income information on Uniform Residential Loan Applications submitted in connection with residential mortgage transactions, First Ohio Banc 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).
  53. Based upon the information contained in Paragraphs 1 through 49, by charging loan fees, points, 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, in amounts exceeding those previously disclosed for such fees or points to the mortgagor in writing, First Ohio Banc has violated Massachusetts General Laws chapter 183, section 63.
  54. Based upon the information contained in Paragraphs 1 through 49, by engaging in residential mortgage business with unlicensed individuals who should be licensed as mortgage loan originators under M.G.L. chapter 255F, First Ohio Banc has violated M.G.L, chapter 255F, section 2(a) and the Division's regulation 209 CMR 42.12A(17).
  55. Based upon the information contained in Paragraphs 1 through 49, by engaging in the business of a mortgage lender and mortgage broker through a network of unlicensed locations, First Ohio Banc violated Massachusetts General Laws chapter 255E, section 5 and the Division's regulation 209 CMR 42.13(1).
  56. Based upon the information contained in Paragraphs 1 through 49, by overstating late charges that could be assessed on mortgage loan disclosures provided to consumers, First Ohio Banc violated Massachusetts General Laws chapter 183, section 59.
  57. Based upon the information contained in Paragraphs 1 through 49, by providing consumers with Variable Rate Loan Program Loan Disclosures that were inaccurate, First Ohio Banc violated the Division's regulation 209 CMR 32.19(2)(8)(b).
  58. Based upon the information contained in Paragraphs 1 through 49, by understating the finance charge on mortgage loan disclosures provided to consumers, First Ohio Banc has violated the Division's regulation 209 CMR 32.18(4)(a).
  59. Based upon the information contained in Paragraphs 1 through 49, by failing to provide consumers with certain statements and information regarding the responsibility of the attorney of the mortgagee and an applicant's right to engage an attorney to represent their interests at the time the application was made, First Ohio Banc has violated Massachusetts General Laws chapter 184, section 17B.
  60. Based upon the information contained in Paragraphs 1 through 49, by failing to disclose the Corporation's license type and number in writing at the time a fee was paid and/or a when the mortgage loan application was accepted, First Ohio Banc has violated the Division's regulation 209 CMR 42.15.
  61. Based upon the information contained in Paragraphs 1 through 49, by failing to disclose the Corporation's license type and number on the Corporation's website, First Ohio Banc has violated the Division's regulation 209 CMR 42.15 and the Office of the Attorney General's implementing regulation 940 CMR 8.04(2)
  62. Based upon the information contained in Paragraphs 1 through 49, by failing to provide consumers with the Mortgage Review Board Notice, First Ohio Banc has violated Massachusetts General Laws chapter 167, section 14A and the Division's regulation 209 CMR 42.12A(12).
  63. Based upon the information contained in Paragraphs 1 through 49, 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, First Ohio Banc has violated the Division's regulation 209 CMR 42.12A(5) and 209 CMR 42.09(1)(b).
  64. Based upon the information contained in Paragraphs 1 through 49, by providing disclosures to consumers that only lenders are authorized to provide when acting in the capacity of a mortgage broker, First Ohio Banc has exceeded its authority in violation of Massachusetts General Laws chapter 255E, section 2.
  65. Based upon the information contained in Paragraphs 1 through 49, 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, First Ohio Banc has violated the Attorney General's regulation 940 CMR 8.06(1).
  66. Based upon the information contained in Paragraphs 1 through 49, when acting in the capacity of a mortgage broker by providing the "Loan Pricing Agreement Defining Interest Rate and Terms" form, which presents the inference that the Corporation can lock an interest rate on behalf of the consumer and by failing to include required disclosure language in the aforementioned form, First Ohio Banc has violated the Division's regulation 209 CMR 42.12A(3)(b).
  67. Based upon the information contained in Paragraphs 1 through 49, including: significant activity by unlicensed or unsponsored mortgage loan originators operating on behalf of the Corporation; evidence that the Corporation falsified or misrepresented information on a substantial number of mortgage loan documents; and numerous other examples of the Corporation's failure to comply with applicable state and federal consumer protection laws and regulations, the public interest will be harmed by delay in issuing an Order to Cease and Desist under General Laws chapter 255E, section 7(a). Upon information and belief, First Ohio Banc has a portfolio of Massachusetts mortgage loan applications in various stages of processing, underwriting, and funding; therefore immediate action by the Division is required to protect the interests of Massachusetts consumers.
  68. Based upon the information contained in Paragraphs 1 through 49, the Commissioner has determined that:
    1. First Ohio Banc 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 First Ohio Banc.
  69. Based upon the information contained in Paragraphs 1 through 49, had the facts and conditions found therein existed at the time of First Ohio Banc'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 49 present sufficient grounds for the revocation of First Ohio Banc'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(20).

    ORDER TO CEASE AND DESIST

  70. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  71. ORDERED that First Ohio Banc and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of First Ohio Banc, 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, First Ohio Banc 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.
  72. IT IS FURTHER ORDERED that First Ohio Banc, 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.
  73. IT IS FURTHER ORDERED that First Ohio Banc 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 First Ohio Banc 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 First Ohio Banc. In the event that no such placement can be made, First Ohio Banc 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. First Ohio Banc shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  74. 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, First Ohio Banc 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 First Ohio Banc's submitted loans.
  75. IT IS FURTHER ORDERED that First Ohio Banc 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 73 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in First Ohio Banc'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.
  76. 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 First Ohio Banc since June 2, 2006 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 76, First Ohio Banc 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, First Ohio Banc 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, First Ohio Banc 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, the amount of the reimbursements and certified mail receipts to illustrate the consumers' receipt of the reimbursement.
  77. IT IS FURTHER ORDERED that, within twenty (20) days of the effective date of this Temporary Order, First Ohio Banc shall submit a payment of one hundred and four thousand dollars ($104,000) in satisfaction of a civil assessment collected in consideration of the Corporation's conducting business with unlicensed mortgage loan originators. Such civil assessment is imposed pursuant to Massachusetts General Laws chapter 255F, section 11(b). The Corporation shall remit payment pursuant to this Paragraph of the Temporary 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.
  78. IT IS FURTHER ORDERED that within twenty (20) days of the effective date of this Temporary Order, First Ohio Banc shall submit a payment of thirty-five thousand dollars ($35,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation's engaging in mortgage lender and/or mortgage broker activity at unlicensed locations. Such administrative penalty is imposed pursuant to Massachusetts General Laws chapter 255E, section 11. The Corporation shall remit payment pursuant to this Paragraph of the Temporary 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.
  79. 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.
  80. 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 21, 2009.
  81. IT IS FURTHER ORDERED that the civil assessment and administrative penalty imposed on First Ohio Banc as referenced in this Temporary Order are subject to review as provided in Massachusetts General Laws chapter 30A. Accordingly, First Ohio Banc may request a hearing to contest said civil assessment and administrative penalty. Such request for a hearing must be filed in writing within 30 days of First Ohio Banc's receipt of this Temporary Order. If the Corporation fails to request a hearing within the prescribed time frame pursuant to this Paragraph, the aforementioned civil assessment and administrative penalty shall be deemed final and binding and shall be due and owing to the Commonwealth.
  82. 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 Ohio Banc 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 April, 2010

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

This Order was terminated pursuant to a Consent Order on June 13, 2011.