By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2010-044

SETTLEMENT AGREEMENT


In the Matter of
MORTGAGE MASTER, INC.
Walpole, Massachusetts

Mortgage Company License Nos. MC0226 et al.


SETTLEMENT AGREEMENT

THIS SETTLEMENT AGREEMENT is made this 29th day of June, 2010 between MORTGAGE MASTER, INC., Walpole, Massachusetts ("Mortgage Master" or "Corporation"), a licensed mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2, and the Commonwealth of Massachusetts Division of Banks ("Division").

BACKGROUND

WHEREAS, an examination/inspection of Mortgage Master was conducted pursuant to Massachusetts General Laws chapter 255E, section 8, as of February 9, 2009, to assess the Corporation's level of compliance with applicable Massachusetts and federal statutes and the Division's regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in the Commonwealth.

WHEREAS, the Report of Examination/Inspection ("Report") issued pursuant to the Division's examination/inspection of Mortgage Master as of February 9, 2009 alleged substantial non-compliance with applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts.

WHEREAS, Mortgage Master cooperated fully with the Division in voluntarily producing information and responding to questions relevant to the examination/inspection, and submitting a detailed response to the Report, attending a conference with the Division, and conferring with the Division on several dates.

WHEREAS Mortgage Master had commenced, if not completed, corrective action on several of the alleged violation areas noted in the Report and this Settlement Agreement prior to, or during, the Examination/Inspection.

WHEREAS, the findings of the Report allege that Mortgage Master allowed individuals to conduct the mortgage business on its behalf who were either not licensed as a mortgage loan originator in accordance with Massachusetts General Laws chapter 255F or were not properly sponsored by Mortgage Master in accordance with 209 CMR 41.00 et seq., and whereas, without any requirement or obligation to do so, Mortgage Master has agreed to satisfy any administrative penalties assessed against some, but not all, of the identified individuals (those so selected by Mortgage Master herein referred to as the "MLO Class Members" and identified in Addendum 1 to this Settlement Agreement).

WHEREAS, prior to the Division's examination, Mortgage Master had already taken affirmative steps to identify and address certain findings presented in the Report, including the alleged licensing error(s) that occurred, and continues to move forward with review and enhancements to its internal control environment.

WHEREAS, there is no evidence that the alleged licensing error(s) resulted in any consumer harm and/or impact and the MLO Class Members all were ultimately licensed or licensable.

WHEREAS, Mortgage Master has been advised of its right to Notice and Hearing pursuant to Massachusetts General Laws chapter 255E, section 7(a), and having waived those rights and without admitting any allegations or implications of fact or the existence of any violation of state or federal laws and regulations governing the conduct and operation of a mortgage lender and mortgage broker.

WHEREAS, to avoid unnecessary time and expense for all concerned, Mortgage Master desires to resolve the concerns of the Division through this Settlement Agreement; and Mortgage Master is entering into this Settlement Agreement with the Division on the terms stated herein.

AGREEMENT

NOW COME the parties in the above-captioned matter, the Division and Mortgage Master, both of whom desire to resolve this matter and agree as follows:

  1. Mortgage Master has established, implemented, enhanced and will continue to maintain procedures to ensure that Mortgage Master does not engage directly or indirectly in the business of a mortgage lender and/or mortgage broker for residential property located in Massachusetts from any location, whether within or without the Commonwealth, for which the Corporation has not previously obtained a license from the Commissioner for such location in accordance with Massachusetts General Laws chapter 255E, section 2.
    1. Mortgage Master agrees to submit a payment of sixty thousand dollars ($60,000.00) in satisfaction of an administrative penalty collected in consideration of the Division's findings alleging that the Corporation engaged in mortgage lender and/or mortgage broker activity at unlicensed locations. Mortgage Master shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Settlement Agreement, to the Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10 th Floor, Boston, Massachusetts 02118. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
  2. Mortgage Master has established, implemented, enhanced and will continue to maintain procedures to ensure that Mortgage Master does not conduct business with any individuals who engage in loan originator activity regarding residential property located in Massachusetts who are not duly licensed and actively sponsored as mortgage loan originators under Massachusetts General Laws chapter 255F and 209 CMR 41.00 et seq.
    1. Mortgage Master agrees to submit a payment totaling four hundred ninety-five thousand dollars ($495,000.00) in satisfaction of an administrative penalty collected in consideration of the Division's findings alleging that the Corporation conducted mortgage business in Massachusetts with and through unlicensed and/or non-sponsored mortgage loan originators. The sum of the administrative penalty representing the combination of a two hundred thousand dollar ($200,000.00) penalty assessed against Mortgage Master and a penalty, in aggregate, of two hundred and ninety-five thousand dollars ($295,000.00) assessed against the MLO Class Members which Mortgage Master agrees to satisfy on behalf of the MLO Class Members. The administrative penalty shall be satisfied as follows:
      1. One hundred thousand dollars ($100,000.00) shall be due and payable within ninety (90) days of the effective date of this Settlement Agreement; and
      2. A payment of ninety-eight thousand, seven hundred and fifty dollars ($98,750.00) shall be due and payable upon the last day of each calendar quarter following the effective date of this Settlement Agreement, beginning with the calendar quarter ending September 30, 2010, until the administrative penalty set forth in Paragraph 2(a) is satisfied in full.
    2. Mortgage Master shall remit payment(s) in the amounts indicated above, payable to the "Commonwealth of Massachusetts," to the Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10 th Floor, Boston, Massachusetts 02118.
  3. Mortgage Master has established, implemented, enhanced and will continue to maintain procedures to ensure that Mortgage Master does not make or offer any reverse mortgage loans on residential property in Massachusetts unless the Corporation obtains prior approval of the reverse mortgage program from the Division pursuant to Massachusetts General Laws chapter 167E, section 7.
    1. Mortgage Master has withdrawn its pending application for approval of the Corporation's reverse mortgage program, which was entered in the Division's records as application A08566. Having voluntarily withdrawn the Corporation's application for approval, Mortgage Master will refrain from submitting an application to the Division to obtain approval to make reverse mortgage loans in the Commonwealth for a period of twelve (12) months from the effective date of this Settlement Agreement; and
    2. Mortgage Master agrees to submit a payment of five thousand dollars ($5,000.00) in satisfaction of an administrative penalty collected in consideration of the Division's findings alleging that Mortgage Master made reverse mortgage loans on residential property in Massachusetts without first obtaining the Division's approval of the reverse mortgage program(s). Mortgage Master shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Settlement Agreement, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10 th Floor, Boston, Massachusetts 02118. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
  4. Mortgage Master has established, implemented, enhanced and will continue to maintain procedures to ensure compliance with the loan reporting requirements set forth in the Home Mortgage Disclosure Act ("HMDA"), 12 U.S.C. section 2801 et seq., as implemented by Regulations of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 203 ("Regulation C"). Such procedures shall require the Corporation to implement internal controls to ensure that, for all HMDA reportable loan applications, Mortgage Master accurately compiles and records all required data in the Corporation's HMDA Loan Application Register ("LAR").
    1. Within ninety (90) days of the effective date of this Settlement Agreement, Mortgage Master shall review for accuracy the HMDA data collected for all Massachusetts residential mortgage loans originated during the 2007 calendar year, and shall re-file with the Federal Reserve Board corrected information of all erroneous and/or incomplete data previously submitted on the LAR.
    2. Mortgage Master shall continue to establish, implement, and maintain operating policies and training procedures to ensure that all applicable personnel possess a comprehensive understanding of the HMDA reporting requirements under Regulation C. Such training shall ensure the proper implementation and execution of the revised practices and procedures adopted by Mortgage Master pursuant to this Paragraph of the Settlement Agreement.
    3. Within ninety (90) days of the effective date of this Settlement Agreement, Mortgage Master shall prepare and submit to the Division a written report detailing the HMDA data that was re-filed by the Corporation pursuant to Paragraph 4(a) of this Settlement Agreement.
    4. Mortgage Master agrees to submit a payment of twenty-five thousand dollars ($25,000.00) in satisfaction of an administrative penalty collected in consideration of the Division's findings alleging that the Corporation failed to comply with the statutes, rules and regulations governing the conduct of those engaged in the business of a mortgage lender in Massachusetts. Mortgage Master shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Settlement Agreement, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10 th Floor, Boston, Massachusetts 02118. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
  5. Mortgage Master shall establish, implement, and maintain quality control procedures regarding the placement of loan applications into alternative documentation loan programs (stated income; no income, no asset verification; no income verification; no ratio loans; low and no documentation loans; etc.) to ensure proper application completion procedures; verification and due diligence procedures; and books and records retention in compliance with applicable state and federal laws, regulations, and regulatory bulletins governing the conduct and operation of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts.
    1. Compliance with this Paragraph of the Settlement Agreement shall require that Mortgage Master review the Division's Regulatory Bulletin 5.1-103: Guidance on Non-Traditional Mortgage Product Risks, the Division's September 2006 Industry Letter, and the Division's Regulatory Bulletin 5.1-104: Statement on Subprime Mortgage Lending, and implement appropriate procedures to ensure compliance therewith.
  6. Mortgage Master shall establish, implement, and maintain policies and procedures to ensure that the Corporation refrains from requiring or permitting consumers to sign blank or partially completed mortgage loan documents. Moreover, Mortgage Master shall ensure that all disclosure documents that require a consumer's acknowledgment of receipt are properly dated to reflect the date the consumer signed or initialed said documents. Mortgage Master will establish and strictly monitor internal controls to identify and prevent any instances in which consumers would be requested to sign blank or partially completed mortgage loan related documents.
  7. Mortgage Master shall establish, implement, and maintain policies and procedures to ensure that any loan fees, application fees, processing fees, discount fees, points, or similar fees collected in a mortgage transaction in Massachusetts are not charged to consumers except to the extent that such fees or points have been properly disclosed to the consumer, in writing, prior to the closing of the mortgage loan.
    1. Mortgage Master agrees to reimburse the consumers identified in the Report for the amounts collected as loan fees, application fees, processing fees, discount fees, points, or similar fees at settlement that had not been disclosed to the consumer, in writing, prior to loan closing. The amount of such reimbursement shall equal the difference between the actual charges assessed to the consumer and the amount disclosed in writing for such fee(s) prior to loan closing, as set forth in the Report; and
    2. Within thirty (30) days of the effective date of this Settlement Agreement, Mortgage Master shall submit to the Division sufficient evidence to illustrate the consumers' receipt of the reimbursements issued pursuant to this Paragraph of the Settlement Agreement, including, but not limited to, the consumers' name, the check number(s), the amount of the reimbursement(s), and certified mail receipt(s) to illustrate the consumers' receipt of the reimbursement.
  8. Mortgage Master shall establish, implement and maintain procedures to ensure that finance charges imposed in any residential mortgage loan transactions are accurately calculated and disclosed in accordance with the provisions of Massachusetts General Laws chapter 140D, section 4 and the Division's regulations 209 CMR 32.04.
  9. Mortgage Master shall establish, implement, and maintain procedures to ensure that the Corporation notifies the Division fifteen (15) days prior to any proposed change in control of the Corporation through the Nationwide Mortgage Licensing System, and submits all information required under the Division's regulation 209 CMR 42.12(3).
  10. Mortgage Master shall establish, implement, and maintain procedures to ensure that when the Corporation is acting in the capacity of a mortgage broker, the Corporation refrains from providing consumers with any disclosure which, pursuant to the applicable statute, regulation, or regulatory bulletin, is intended to be issued exclusively by the lender or creditor in the residential mortgage loan transaction.
  11. Mortgage Master shall revise its "Borrower's Certification and Authorization" form to eliminate any representation or statement that could be considered false, misleading, or have the tendency to be misleading, including, but not limited to, any representation that Mortgage Master is approving or funding the loan when the Corporation is acting in the capacity of a mortgage broker.
  12. Mortgage Master shall establish, implement, and maintain procedures to ensure that the Corporation fully complies with the Division's regulation 209 CMR 42.12A(3) concerning restrictions and prohibitions imposed upon mortgage brokers who convey rate lock information between a mortgage lender and a consumer. Procedures shall necessarily include reviewing and revising as necessary all documentation provided to consumers when the Corporation is acting in the capacity of a mortgage broker, in order to ensure compliance with the provisions of the Division's regulation 209 CMR 42.12A(3).
  13. Mortgage Master shall establish, implement, and maintain procedures to ensure that the Corporation maintains and uses all loan documents in the Corporation's books and records in a manner sufficient to evidence compliance with applicable state and federal statutes and regulations, in accordance with the record keeping requirements specified by the Division's regulations 209 CMR 42.09 and 209 CMR 48.03. Such procedures shall necessarily ensure that the Corporation retains copies of all required consumer disclosure forms, mortgage-related documents, and papers, correspondence, and notes associated with the mortgage loan file.
  14. Mortgage Master shall establish, implement, and maintain procedures to ensure that each mortgage loan originator employed by or associated with the Corporation disclose his/her Massachusetts Mortgage Loan Originator license number to all consumers, in writing, at the time a fee is paid or a mortgage loan application is accepted, as required under the Division's regulation 209 CMR 41.10.
  15. Mortgage Master shall comply with all laws and regulations applicable to its conducting the business of a mortgage lender and mortgage broker, including, but not limited to, Massachusetts General Laws chapters 255E and 255F, and the Division's regulations 209 CMR 41.00 et seq. and 209 CMR 42.00 et seq. Such obligations shall include the duty to address and correct, within thirty (30) days of the effective date of this Settlement Agreement, all alleged violations and areas of concern addressed in the Report.
    1. Within thirty (30) days of the effective date of this Settlement Agreement, Mortgage Master shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Corporation's compliance with: (i) the statutes, rules, regulations, regulatory bulletins, and other relevant provisions of law applicable to those engaged in the business of a mortgage lender and mortgage broker in Massachusetts, and (ii) the provisions of this Settlement Agreement. Such quality control standards shall be designed to prevent the recurrence of the violations addressed in the Report; and
    2. Mortgage Master shall establish, implement, and maintain procedures and policies to ensure that all applicable staff persons receive adequate instruction and ongoing, periodic training to ensure proper implementation and execution of the revised practices and procedures implemented pursuant to this Settlement Agreement.
  16. On the thirtieth day after the end of each calendar quarter following the date of this Settlement Agreement, Mortgage Master shall furnish written progress reports to the Division, which shall address and include the following:
    1. A description of the form, content, and manner of any actions taken to address each Paragraph of this Settlement Agreement and the results thereof; and
    2. Written findings prepared by Mortgage Master detailing a review of management's and staff persons' adherence to the policies, programs, and procedures adopted pursuant to this Settlement Agreement and to applicable statutes, regulations, and rules, as well as a description of any operational changes implemented during such quarter which are intended to improve Mortgage Master's compliance condition in Massachusetts, and the results thereof. It being understood that written progress reports submitted to the Division pursuant to this Paragraph shall be treated as confidential information submitted in response to the Report pursuant to Massachusetts General Laws chapter 255E, section 8.
  17. The reporting requirement to the Division referenced in Paragraph 16 of this Settlement Agreement shall remain in effect and shall not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this Settlement Agreement from the Commissioner.

    GENERAL PROVISIONS

  18. The Corporation hereby waives, solely for purposes for settling this proceeding:
    1. The receipt of Notice specifying the allegations (the "Charges") which form the basis for issuance of the Settlement Agreement;
    2. All defenses to the issuance of the Settlement Agreement;
    3. A hearing under General Laws chapter 255E, section 7(a), for the purpose of taking evidence on such alleged Charges;
    4. The filing of proposed findings of fact and conclusions of law;
    5. A written decision of the Commissioner;
    6. Exceptions and briefs with respect to such written decision; and
    7. Review of this Settlement Agreement pursuant to General Laws chapter 30A.
  19. Nothing in this Settlement Agreement shall be construed as permitting Mortgage Master to violate any law, rule, regulation, or regulatory bulletin to which Mortgage Master is subject, nor shall this Settlement Agreement be construed as evidence that Mortgage Master has violated any law, rule, regulation, or regulatory bulletin to which Mortgage Master is subject.
  20. In consideration of the foregoing Settlement Agreement, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Mortgage Master's mortgage lender and mortgage broker licenses under Massachusetts General Laws chapter 255E, section 6, while this Settlement Agreement is in effect.
  21. Failure to comply with the terms of this Settlement Agreement shall constitute grounds for license suspension and/or revocation, or other formal regulatory actions pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
  22. This Settlement Agreement shall become effective and public immediately upon the date of its issuance.
  23. The provisions of this Settlement Agreement shall not limit, estop, or otherwise prevent any other state agency or department, from taking any other action affecting Mortgage Master or the MLO Class Members.
  24. The provisions of this Settlement Agreement shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Settlement Agreement shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
  25. This Settlement Agreement is the complete document representing the resolution of this matter. There are no other agreements, promises, representations, or warranties other than those set forth in this Settlement Agreement.

Agreed to this 29th day of June, 2010.

Mortgage Master, Inc.
Walpole, Massachusetts

By its duly authorized officer:

Paul G. Anastos

Agreed to this 29th day of June, 2010.

Commonwealth of Massachusetts Division of Banks

By: Steven L. Antonakes
Commissioner of Banks