By the Division of Banks


COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2011-012

CONSENT ORDER

In the Matter of
THE MORTGAGE SPECIALISTS, INC.
Plaistow, New Hampshire

Mortgage Broker License No(s). MB1966 et al.


WHEREAS, The Mortgage Specialists, Inc., Plaistow, New Hampshire ("Mortgage Specialists" or the "Corporation"), a licensed 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 January 20, 2012, 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 broker, Mortgage Specialists agrees to the issuance of this CONSENT ORDER ("Consent Order") by the Commissioner of Banks ("Commissioner");

WHEREAS, pursuant to General Laws chapter 255E, section (7)(b), the Commissioner issued a FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST, Docket No. 2008-015 (the "Temporary Order"), against Mortgage Specialists on July 31, 2008, based upon an examination/inspection of Mortgage Specialists which commenced on March 25, 2008;

WHEREAS, the parties resolved the matters identified in the Temporary Order pursuant to a Consent Order dated August 18, 2008 ("2008 Consent Order");

WHEREAS, another examination/inspection of Mortgage Specialists was conducted pursuant to General Laws chapter 255E, section 8, as of June 21, 2010 to assess the Corporation’s level of compliance with applicable Massachusetts statutes and regulations governing the conduct of those engaged in the business of a mortgage broker in the Commonwealth, as well as to assess the Corporation’s compliance with the 2008 Consent Order;

WHEREAS, the Division issued a Report of Examination/Inspection (the "Report") detailing the findings of the 2010 examination/inspection;

WHEREAS, the Division has considered the findings presented in the Report and has determined that the Corporation is not in full compliance with the provisions of the 2008 Consent Order;

WHEREAS, the parties now seek to resolve by mutual agreement, the matters identified in the Report; and

WHEREAS, by mutual agreement of the Corporation and the Division, the 2008 Consent Order is hereby superseded and replaced by this Consent Order.

ORDER

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

  1. Mortgage Specialists shall cease conducting business with any individuals who engage in the activities of a Mortgage Loan Originator, as that term is defined under Massachusetts General Laws chapter 255F, section 1, regarding residential property located in Massachusetts, who are not duly licensed as a mortgage loan originators under M.G.L. chapter 255F and properly sponsored by Mortgage Specialists through the Nationwide Mortgage Licensing System (NMLS).
    1. Mortgage Specialists 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 the Corporation.
    2. Mortgage Specialists agrees to pay forty-eight thousand dollars ($48,000.00) in satisfaction of an agreed upon administrative penalty collected in consideration of the Corporation’s conducting business with mortgage loan originators who did not hold an active Massachusetts mortgage loan originator license or who were not properly sponsored by the Corporation. The administrative penalty shall be satisfied as follows:
      1. Twenty-four thousand dollars ($24,000.00) shall be due and payable immediately upon Mortgage Specialists’ execution of the Consent Agreement;
      2. A payment of twenty-four thousand dollars ($24,000.00) shall be due and payable thirty (30) calendar days after the effective date of this Consent Order; and
      3. Mortgage Specialists shall remit payment(s) pursuant to this Section of the Consent Order for the amount then due, payable to the "Commonwealth of Massachusetts," to the Division of Banks, Attn: Mortgage Broker Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118. 
  2. With the executed Consent Agreement, Mortgage Specialists agrees to contemporaneously file with the Division Mortgage Specialists’ updated financial statements, including a balance sheet and interim income statement prepared as of December 31, 2011. Mortgage Specialists agrees that, for the purpose of this Paragraph, the filing of all updated financial statements shall be completed by submitting such statements through the NMLS.
    1. With each of the quarterly progress reports prepared pursuant to Paragraph 9 of this Consent Order, Mortgage Specialists agrees to report performance under the profitability plan described in the Licensee’s response to the Report.
    2. With each quarterly progress report, Mortgage Specialists shall submit updated financial statements prepared as of the last day of the calendar quarter, including a balance sheet and statement of income and expense. The financial statements must be submitted through the NMLS and signed by a duly authorized officer of Mortgage Specialists with sufficient knowledge to attest to the accuracy of the information reported.
  3. Mortgage Specialists agrees to maintain written policies and procedures to ensure that the Corporation maintains all books, records, and accounts in accordance with the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09. The policies and procedures are to include but are not limited to:
    1. Maintaining procedures to ensure that Mortgage Specialists retains original paper copies of all records relating to Massachusetts residential loans. Such procedures shall ensure that the Corporation retains the entire loan file relative to each mortgage loan, including all documentation provided by the lender in a brokered transaction;
    2. Providing that Mortgage Specialists conducts on-going, periodic reviews of document filing and retention procedures, and its compliance thereto, to ensure its books, records, and accounts are maintained in a manner sufficient to evidence compliance with applicable federal and state laws, rules and regulations;
    3. Maintaining procedures to ensure the full cooperation of all Mortgage Specialists employees with the Division during any future examinations of the Corporation which shall necessarily provide for complete and timely access to its books, records, accounts, and any other additional, relevant materials pursuant to the provisions of Massachusetts General Laws chapter 255E, section 8; and
    4. Providing that all applicable staff of Mortgage Specialists with form completion and/or document filing and retention responsibilities, receive adequate training to ensure proper implementation and execution of the revised policies and procedures adopted by the Corporation under this Paragraph of the Consent Order.
  4. Mortgage Specialists shall establish, implement, and maintain procedures to ensure that 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.
  5. Mortgage Specialists shall review its advertisements and revise as necessary, to eliminate any representations or statements that could be considered false, misleading, or have the tendency to be misleading, including, but not limited to, any representation that the Corporation, a licensed mortgage broker, is approving or funding the loan.
  6. Mortgage Specialists agrees to continue its relationship with the Auditing Firm that was previously approved by the Commissioner pursuant to the 2008 Consent Order. The Auditing Firm shall continue to conduct reviews of residential mortgage loan applications processed by Mortgage Specialists.
    1. The scope of the Auditing Firm’s review of Mortgage Specialists’ Massachusetts mortgage broker activity shall address and include, but shall not be limited to, the following: 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.); application completion procedures; verification and due diligence procedures; internal policies and quality control procedures; books and records retention, and document destruction, procedures; relationships and interactions with appraisers and the criteria for their selection; privacy policies and practices, including security of computer and electronic transmissions; compliance with the provisions of each Lender-Broker agreement and/or Lender Guidelines which govern Mortgage Specialists’ mortgage broker activity; and the Corporation’s compliance with the state and federal laws, regulations, and regulatory bulletins governing the conduct and operation of those engaged in the business of a mortgage broker in Massachusetts.
  7. On or before February 14, 2012, the Auditing Firm shall prepare and submit to the Commissioner a written report detailing the auditor’s findings relative to a twelve (12) month review of Massachusetts loan transactions pursuant to subparagraph 6(c) of the 2008 Consent Order, which shall be completed by executing a reasonable and acceptable sampling procedure.
  8. Mortgage Specialists shall comply with all laws and regulations applicable to its conducting the business of a 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 all violations and areas of concern addressed in the Report.
    1. Within thirty days of the effective date of this Consent Order, Mortgage Specialists 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 in Massachusetts, and (ii) 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
    2. Mortgage Specialists 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.
  9. On the thirtieth (30th) day after the end of each calendar quarter following the date of this Consent Order, Mortgage Specialists shall furnish written progress reports to the Commissioner, detailing the form, content, and manner of any actions taken to address each Paragraph of this Consent Order and the results thereof. The written progress reports shall further describe any initiatives implemented by the Corporation during the proceeding calendar quarter to improve the Corporation’s practices in the area of consumer compliance and the results thereof.
  10. The reporting requirements to the Commissioner contained in Paragraph 9 of this Consent Order shall remain in effect and shall not be amended or rescinded without prior written modification, termination, or suspension of the applicable provisions of this Consent Order from the Commissioner. For the purposes of this Consent Order, it is understood that the Division will consider a termination of the reporting requirement referenced in Paragraph 9 based upon the findings of the Division’s next examination/inspection of Mortgage Specialists conducted pursuant to General Laws chapter 255E, section 8 and Mortgage Specialists’ written response thereto.
  11. This Consent Order shall become effective immediately upon the date of its issuance.
  12. The provisions of this Consent Order shall be binding upon Mortgage Specialists and its officers and directors, and their successors or assigns.
  13. Mortgage Specialists agrees that, in the event that the Corporation fails to submit the payments set forth in this Consent Order in the amounts specified herein and in accordance with the applicable deadlines, the Division shall be authorized to submit a claim for such amounts against the mortgage broker Massachusetts surety bond maintained by Mortgage Specialists pursuant to the Division’s regulation 209 CMR 42.06(2)(a).
  14. Failure to comply with the terms of this Consent Order shall constitute grounds for license denial, suspension, and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
  15. In accordance with the terms of the Consent Agreement entered by Mortgage Specialists and the Commissioner, Mortgage Specialists has waived all rights of appeal that it may have.
  16. 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 order of a court of competent jurisdiction.
  17. 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 other than those set forth in this Consent Order and the Consent Agreement, which replace and supersede all prior agreements between Mortgage Specialists and the Commissioner.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 20th day of January, 2012

By:
David J. Cotney
Commissioner of Banks