By the Division of Banks

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
2011-053

CONSENT ORDER

In the Matter of

FAIRWAY INDEPENDENT MORTGAGE CORPORATION
Sun Prairie, Wisconsin

Mortgage Corporation License Nos. MC2839, et al.


WHEREAS, FAIRWAY INDEPENDENT MORTGAGE CORPORATION, Sun Prairie, Wisconsin ("Fairway" or the "Corporation"), a licensed mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2, has been advised of its right to Notice and Hearing pursuant to General Laws chapter 255E, section 7(a), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER ("Consent Agreement") with representatives of the Division of Banks ("Division") dated July 21, 2011, whereby, solely for the purpose of settling this matter, 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, Fairway agrees to the issuance of this CONSENT ORDER ("Consent Order") by the Commissioner of Banks ("Commissioner");

WHEREAS, an examination/inspection of Fairway was conducted pursuant to General Laws chapter 255E, section 8, as of April 21, 2010 to assess the Corporation's level of compliance with applicable Massachusetts 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; and

WHEREAS, the Report of Examination/Inspection (the "Report") issued pursuant to the Division's examination/inspection of Fairway as of April 21, 2010 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.

ORDER

NOW COME the parties in the above-captioned matter, the Division and Fairway, and stipulate and agree as follows:

  1. Fairway shall establish, implement, and maintain procedures to ensure that all loan fees, points, or similar fees collected by the Corporation in a mortgage transaction involving residential property located in the Commonwealth are not charged to consumers except to the extent that such loans fees or points have been properly disclosed to the consumers by the Corporation, in writing, prior to the closing of the mortgage loan in accordance with Massachusetts General Laws chapter 183, section 63.
    1. The Corporation shall reimburse the consumers identified in the Report for the amounts collected as loan fees, points or similar fees at settlement that had not been disclosed to the consumers, in writing, prior to loan closing. The amount of such reimbursements shall equal the difference between the actual charges assessed to the consumers and the amount disclosed in writing for such fees prior to loan closing;
    2. The Corporation shall conduct a review of all Massachusetts residential mortgage loans closed by the Corporation in a mortgage lender capacity, as well as all loans originated by the Corporation in a mortgage broker capacity, since April 21, 2007, and shall reimburse all consumers from whom any broker fee, loan fee, point(s), or similar fee was collected by the Corporation where the amount charged for such fee or point was not previously disclosed to the consumer, as a loan fee, point(s), or similar fee, in writing, prior to the closing of the loan. The amount of such reimbursements shall equal the difference between the actual charges assessed to the individual consumer and the amount disclosed in writing prior to loan closing; and
    3. Within sixty (60) days of the effective date of this Consent Order, the Corporation shall submit evidence of all reimbursements issued pursuant to this Section of the Consent Order. Evidence of the reimbursements shall include the consumers' names, the dates the loans closed, the check numbers, the amount of the reimbursements, and certified mail receipts to illustrate the consumers' receipt of the reimbursements.
  2. Fairway will prevent any individual from engaging in the activities of a Mortgage Loan Originator, as that term is defined under Massachusetts General Laws chapter 255F, section 1, on Fairway's behalf who is not duly licensed as a mortgage loan originator under M.G.L. chapter 255F and properly sponsored by Fairway through the Nationwide Mortgage Licensing System (NMLS).
    1. Fairway shall establish, implement and maintain procedures to ensure that all mortgage loan originators with whom the Corporation conducts business are properly licensed as mortgage loan originators under Massachusetts General Laws chapter 255F, and properly sponsored through the Nationwide Mortgage Licensing System by Fairway.
    2. Fairway agrees to submit a payment in the amount of one hundred fifty-six thousand dollars ($156,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation's conducting business with mortgage loan originators who either did not hold an active mortgage loan originator license or were not sponsored by the Corporation. Fairway shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Consent Agreement, to the Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
  3. Fairway shall establish and implement procedures to maintain all loan files in the Corporation's books and records for a minimum of three years and 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.
    1. Procedures implemented pursuant to this Section of the Consent Order shall ensure that Fairway retains all correspondence and records relating to each loan, including without limitation, all disclosure forms and Settlement Statements.
    2. Procedures implemented pursuant to this Section of the Consent Order shall necessarily require that the Corporation properly documents the initial date of application and ensures that all disclosures are properly dated and maintained in a manner that will allow the Commissioner to determine whether time-sensitive documents are being provided to consumers within the mandated timing requirements.
    3. Fairway shall submit a payment of six thousand dollars ($6,000) in satisfaction of an administrative penalty collected in consideration of Fairway's failure to properly retain documents and records as required by the Division's regulation 209 CMR 42.09. Fairway shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed Consent Agreement, to the Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-2218. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
  4. With its response to the Report, Fairway shall submit to the Commissioner a record-keeping plan pursuant to which the Corporation will request approval to maintain loan files in an electronic format, as required by the Division's regulation 209 CMR 48.05.
    1. Fairway shall establish, implement, and maintain procedures to ensure that all books, records, and accounts currently maintained by the Corporation in electronic format are readily accessible for examination upon the Division's request.
  5. Fairway shall establish, implement, and 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 necessarily require that the Corporation implement internal controls to ensure that, for all HMDA reportable loan applications, Fairway accurately compiles and records all required data in the Corporation's HMDA Loan Application Register ("LAR").
    1. Fairway shall 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 necessarily ensure the proper implementation and execution of the revised practices and procedures adopted by Fairway pursuant to this Section of the Consent Order.
  6. Fairway shall establish, implement, and maintain policies and procedures to ensure that the Corporation is in compliance with the Division's regulation 209 CMR 53.00 et seq. regarding determination and documentation of a borrower's interest when refinancing a home loan that was consummated within 60 months prior to the Corporation's receipt of an application for a new home loan. Such procedures shall ensure that in any transaction in which Fairway is performing in a mortgage lender capacity, the burden is upon Fairway, exclusively, to determine that the refinancing is in the borrower's interest.
    1. Compliance with this Section of the Consent Order shall necessarily require that Fairway establish, implement and maintain procedures to ensure that the Corporation completes a worksheet or other document indicating how the Corporation determined that a refinance loan was in the borrower's interest. Such document shall include all the information required under 209 CMR 53.07 and the language contained therein shall not in any manner shift the burden to the borrower to determine and to demonstrate that the home loan is in the borrower's interest.
  7. Fairway shall establish, implement and maintain procedures to ensure that the Corporation establishes whether it is performing in the capacity of a mortgage broker or mortgage lender at the inception of the loan transaction and shall ensure that all disclosures provided to the consumers accurately reflect the capacity in which the Corporation is performing. In addition, such procedures shall provide for clear documentation and appropriate disclosures to the applicant in the event that the Corporation subsequently seeks to perform in another capacity for the same applicant.
  8. Fairway shall revise its "Borrowers' 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 the Corporation is approving or funding the loan when it is acting in the capacity of a mortgage broker.
  9. Fairway shall establish, implement, and maintain procedures to ensure that, when the Corporation is acting in the capacity of a mortgage broker, all consumers receive a loan origination and compensation agreement that strictly conforms to the content and format as set forth in the Division's regulation 209 CMR 42.16. For each consumer loan file, a completed copy of the loan origination and compensation agreement shall be retained in the Corporation's books and records, as provided in 209 CMR 42.09(1)(b).
  10. Fairway shall establish, implement and maintain procedures to ensure that the Credit Score Disclosure is provided to consumers in accordance with the requirements of the Fair Credit Reporting Act, Section 609(g). For each consumer loan file, a completed copy of the Credit Score Disclosure shall be retained in the Corporation's books and records as evidence of compliance.
  11. Fairway 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 in order to ensure compliance with the provisions of the Division's regulation 209 CMR 42.12A(3).
    1. Procedures implemented pursuant to this Section of the Consent Order shall ensure that Fairway desists from providing consumers with any written documentation, or oral representations or assurances, that state, suggest, or infer that Fairway is locking an interest rate on behalf of the consumer for residential property in Massachusetts.
  12. Fairway shall establish, implement, and maintain procedures to ensure that all consumers receive a Notice of Privacy Policies and Practices in accordance with, and in the form required by, the Federal Trade Commission's Regulation 16 CFR 313. For each consumer loan file, a copy of the Notice of Privacy Policies and Practices shall be retained in the Corporation's books and records as evidence of compliance.
  13. Fairway shall establish, implement, and maintain procedures to ensure that all licensed mortgage loan originators sponsored by the Corporation disclose their mortgage loan originator license number 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, as required under the Division's regulation 209 CMR 41.12.
  14. Fairway 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 necessarily include the duty to address and correct, within thirty (30) days of receipt of the Report, all violations and areas of concern addressed in the Report.
    1. Within thirty (30) days of Fairway's receipt of the Report, the Corporation shall submit to the Commissioner a written response that addresses each of the violations and areas of concern specified in the Report. The written response shall describe the revised policies and procedures adopted by Fairway to implement all corrective actions set forth in: (i) the "Examiner's Comments and Conclusions" section of the Report and (ii) the provisions of this Consent Order;
    2. Within thirty (30) days from the effective date of this Consent Order, Fairway shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Corporation's compliance with: (a) 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 (b) the provisions of this Consent Order. Such quality control standards shall be designed to prevent the recurrence of the violations addressed in the Report; and
    3. Fairway 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 Consent Order.
  15. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this Consent Order, Fairway 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 Section of this Consent Order and the results thereof; and
    2. Written findings prepared by Fairway detailing a review of management's and staff persons' adherence to the policies, programs, and procedures adopted pursuant to this Consent Order 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 Fairway's compliance condition in Massachusetts and the results thereof.
  16. The reporting requirement to the Division referenced in Section 15 of this Consent Order 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 Consent Order from the Commissioner.
  17. Nothing in this Consent Order shall be construed as permitting Fairway to violate any law, rule, regulation, or regulatory bulletin to which Fairway is subject.
  18. In consideration of the foregoing Consent Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Fairway's mortgage lender and mortgage broker licenses under General Laws chapter 255E, section 6, while this Consent Order is in effect.
  19. Failure to comply with the terms of this Consent Order shall constitute grounds for license suspension and/or revocation, or other formal regulatory action pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
  20. This Consent Order shall become effective immediately upon the date of its issuance.
  21. The provisions of this Consent Order shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Consent Order shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an Consent Order of a court of competent jurisdiction.
  22. This Consent Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements, promises, representations, or warranties between the Division and Fairway.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 21st day of July, 2011

David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts