COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
Docket No. 2011-017
ORDER TO CEASE AND DESIST
NOTICE OF ADMINISTRATIVE
In the Matter of
WESTSTAR MORTGAGE, INC.
Mortgage Lender License No: ML2925
The Commissioner of Banks ("Commissioner") having determined that WESTSTAR MORTGAGE, INC., ("Weststar Mortgage" or the "Corporation") located at 3350 Commission Court, Woodbridge, Virginia 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
- 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.
- Weststar Mortgage is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. Weststar Mortgage's main office is located at 3350 Commission Court, Woodbridge, Virginia.
- Weststar Mortgage is currently licensed by the Commissioner as a mortgage lender under Massachusetts General Laws chapter 255E, section 2. According to records maintained by the Division, the Commissioner issued a mortgage lender license, license number ML2925 to Weststar Mortgage to engage in the business of a mortgage lender on or about December 2, 2004.
- License number ML2925 authorizes Weststar Mortgage to conduct the business of a mortgage lender from the Corporation's main office located at 3350 Commission Court, Woodbridge, Virginia.
- On or about March 3, 2011 the Division was forwarded a copy of a solicitation ("Solicitation") received by a Massachusetts consumer from Weststar Mortgage. A copy of the Solicitation is attached as Exhibit 1 .
Misleading and Deceptive Advertising Practices
- 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.
- 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.
- 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.
- The Division's review of the Solicitation revealed that it included several statements which were misleading and deceptive. The mailing portion of the Solicitation was marked "PMI INCREASE NOTICE." The body of the Solicitation included the header "Mortgage Insurance Increase Notice" and included a statement indicating that the Solicitation was a notification of a "mortgage insurance refund." It is unclear how the Solicitation could be both a notice of mortgage insurance increase and a notice of insurance refund. A review of the body of the Solicitation contained no further explanation of the reference to a mortgage insurance refund.
- The body of the Solicitation advised the consumer that the United States Department of Housing and Urban Development ("HUD") would be increasing the monthly mortgage insurance on Federal Housing Administration ("FHA") mortgages effective April 18, 2011, which gave the impression that all consumers who currently held FHA mortgagees would be affected by the increase. Weststar Mortgage advised the consumer that the "FHA Department has allowed all customers to lock in the lower PMI rate by April 18, 2011." The Solicitation further advised the consumer that the increase would "drastically increase monthly payments on FHA Mortgages, as much as $100 per month."
- By a mortgagee letter dated February 14, 2011, HUD stated that that the increase in the insurance would affect only those loans which were issued case numbers after the April 18, 2011 date, thereby making it clear that consumers who currently held FHA mortgages would not be affected by the increase. Additionally, for those consumers that obtained an FHA mortgage after the April 18, 2011 date, the mortgagee letter specifically stated the following "It is anticipated that this increase will have minimal impact on borrowers," a statement which was contrary to the representations made in the Solicitation issued by Weststar Mortgage which stated that changes to the program would "drastically increase monthly payments."
- The body of the Solicitation also stated that as a result of the increase in mortgage insurance by FHA, "many lenders like us have modified our loan products to offer customers with FICO scores above 720 a chance to refinance at a low rate and HAVE NO PMI INSURANCE."
- The Solicitation made reference to the consumer's current mortgage amount and notified the consumer that they had a "mortgage amount of $307,000 and an equity position of 5% or more." The Solicitation further stated that based on that information, the consumer qualified for a "NO PMI REFINANCE!!!!!" The Solicitation stated that Weststar Mortgage was offering the consumer 30 year fixed rate at 4.50% (4.625% APR) or a 5 year Fixed Rate at 3.375% (3.246 % APR). However, below that offer in a section identified as the "Rate Reduction Program" section, Weststar Mortgage quoted "TODAY'S BEST INTEREST RATE AS 3.875% (4.012% APR) terms contrary to the rates offered to the consumer in the preceding paragraph. Additionally, the section also included a comparison between the consumer's current mortgage payment by referencing the original lender of record and what the consumer would have to pay if they obtained a mortgage through Weststar Mortgage. The comparison appeared to indicate that the consumer would be saving $497.34 per month if they refinanced through Weststar Mortgage. It is unclear how the Corporation determined the consumer's current mortgage payment or interest rate with limited public information that would have been available to Weststar Mortgage.
- Weststar Mortgage also indicated that the consumer qualified for an "additional $30,000 to pay bills at a payment of only $155.43 per month."
- The Solicitation notified the consumer that they were in a "pending" status and a prompt response would be necessary in order to take advantage of the offer before its expiration on April 15, 2011. The Solicitation notified the consumer that their first payment to Weststar Mortgage would be May 1, 2011, and furthermore made representations that the consumer would have one month of no payments, a statement that was both inaccurate and misleading. The deadline and statements made throughout the Solicitation collectively could lead the consumer to believe that if they did not take advantage of the offer by April 15, 2011 and currently had an FHA mortgage, they would be affected by the increase in mortgage insurance. Information received from the consumer confirmed that although Weststar Mortgage forwarded the consumer a Solicitation referencing an "increase in PMI payments," the consumer had never paid PMI on their current mortgage. It is unclear why the Corporation targeted this consumer and made a determination that they would have been making PMI payments, as that information is not a matter of public record.
- The notice instructed the consumer to call a designated telephone number "24 hours a day, 7 days a week." Language at the bottom of the notice disclosed that eligibility was subject to underwriting guidelines, that underwriting guidelines include but are not limited to acceptable credit and income history, current homeowners insurance and does not include escrows, that minimum and maximum loan amounts apply, and that APR's and loan amounts may vary at any time subject to equity, qualifications and market conditions. However, this language was in a font size that was significantly smaller than that in the body of the Solicitation and was located on a non-prominent location at the bottom of the Solicitation.
- Language indicating that the offer was being made by Weststar Mortgage and not a government agency was included in the Solicitation. However, such language was in a 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.
CONCLUSIONS OF LAW
- Based upon the information contained in Paragraphs 1 through 17, Weststar Mortgage has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage lender 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).
- Based upon the information contained in Paragraphs 1 through 17, 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 they were going to be affected by the increase in insurance even if they were not a current FHA mortgage holder, Weststar Mortgage 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).
- Based upon the information contained in Paragraphs 1 through 17, 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 Weststar Mortgage by a certain date stating that the offer would expire, Weststar Mortgage violated the Division's regulation 209 CMR 42.12A(9).
- Based upon the information contained in Paragraphs 1 through 17, the Commissioner has determined that:
Weststar Mortgage 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 Weststar Mortgage
ORDER TO CEASE AND DESIST AND NOTICE OF ADMINISTRATIVE PENALTY
- After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
- ORDERED that Weststar Mortgage shall cease mailing the Solicitation identified as Exhibit 1 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:
- Solicitations containing false or misleading language or language that had the tendency to be false or misleading;
- 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 government imposed higher rates, stricter guidelines and increased payments in the future.
- IT IS FURTHER ORDERED that within five (5) days of the effective date of this Order, Weststar Mortgage shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all Massachusetts consumers to whom the Corporation distributed the Solicitation. The records to be produced shall include the consumers' names and addresses.
- IT IS FURTHER ORDERED that within twenty (20) days of the effective date of this Order, Weststar Mortgage shall submit a payment of ten thousand dollars ($10,000.00), in satisfaction of an administrative penalty collected in consideration of the Corporation's engaging in deceptive and prohibited advertising. 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 Order for the amounts due, payable to the "Massachusetts Office of Consumer Affairs Expendable Trust" to the Office of the Commissioner of Banks, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-6400.
- The administrative penalty imposed on Weststar Mortgage is subject to review as provided in Massachusetts General Laws chapter 30A. Accordingly, Weststar Mortgage may request a hearing to contest said administrative penalty. Such request for a hearing must be filed in writing within 20 days of Weststar Mortgage's receipt of this Order. If the Corporation 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.
- 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 Weststar Mortgage 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.
- 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.
- IT IS FURTHER ORDERED that Weststar Mortgage shall review and revise, as necessary, the Corporation's policies and procedures to ensure that individuals performing on behalf of the Corporation neither act, nor represent themselves, as a government agency; and
- IT IS FURTHER ORDERED that a copy of each advertisement used by Weststar Mortgage shall be retained in the Corporation's books and records and shall be made available to the Division at its examinations/inspections of Weststar Mortgage.
- Weststar Mortgage shall revise its advertising practices and procedures to ensure that all solicitations and advertising materials used by the Corporation do not contain any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading.
- Weststar Mortgage shall take all necessary steps to ensure that the Solicitation or any similar solicitation are not published or distributed to consumers in Massachusetts.
- Weststar Mortgage shall implement, establish and maintain a system of internal controls to monitor the Corporation'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.
- Weststar Mortgage 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 22nd day of April, 2011
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts