By the Division of Banks


COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER AND
MORTGAGE LOAN
ORIGINATOR LICENSING

CEASE ORDER

In the Matter of

AMERICAN DREAM HOME MANAGEMENT
PROGRAM, INC.
Avon, Massachusetts

and

JEAN PHILEMOND, Individually
Avon, Massachusetts

and

HAMID MAHMOODI, Individually
Avon, Massachusetts


The Commissioner of Banks (Commissioner) is charged with the administration of Massachusetts General Laws chapter 255E and 255F, and applicable regulations found at 209 CMR 42.00 and 209 CMR 41.00 et seq., relating to the licensing and regulation of mortgage brokers, mortgage lenders and mortgage loan originators. Pursuant to the authority granted by Massachusetts General Laws chapter 255E and 255F, the Commissioner has reviewed information relative to the activities of AMERICAN DREAM HOME MANAGEMENT PROGRAM, INC., (ADHMP), JEAN PHILEMOND and HAMID MAHMOODI to determine if ADHMP, Jean Philemond and Hamid Mahmoodi have engaged in the business of, or are about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255E, section 2, Massachusetts General Laws, chapter 255F, section 2 and Massachusetts General Laws chapter 255F, section 15. Based upon such review, the Commissioner hereby issues the following CEASE ORDER as a result of the findings alleged herein.

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 and its implementing regulation at 209 CMR 42.00 et seq.
  2. The Division, through the Commissioner, also has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a mortgage loan originator in Massachusetts pursuant to Massachusetts General Laws chapter 255F, section 2 and its implementing regulation at 209 CMR 41.00 et seq.
  3. ADHMP is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. According to information reflected on the Nevada Secretary of State’s website ADHMP was incorporated in Nevada on May 6, 2013 and the Corporation’s main office is located at 31 Memorial Drive, Suite 203, Avon, Massachusetts.
  4. According to information reflected on the Commonwealth of Massachusetts Secretary of State’s website, ADHMP is not registered as a foreign corporation conducting business in the Commonwealth.
  5. According to the information reflected on the Nevada Secretary of State’s website, Jean Philemond is the President of ADHMP.
  6. According to the information reflected on the Nevada Secretary of State’s website Hamid Mahmoodi is a Director of ADHMP.
  7. According to the Division’s records and the Nationwide Multi-State Licensing System & Registry (NMLS), ADHMP has never applied for or obtained a Massachusetts mortgage broker and/or mortgage lender license.
  8. According to the Division’s records and the NMLS, Jean Philemond has never applied for or obtained a Massachusetts mortgage loan originator license.
  9. According to the Division’s records and the NMLS, Hamid Mahmoodi has never applied for or obtained a Massachusetts mortgage loan originator license.

    I. Unlicensed Mortgage Lender and Mortgage Broker Activity

  10. Massachusetts General Laws chapter 255E, section 2 states in part:

    No person shall act as a mortgage broker or mortgage lender with respect to residential property unless first obtaining a license from the commissioner.

  11. Massachusetts General Laws chapter 255E, section 1 defines a mortgage lender as:

    Any person engaged in the business of making mortgage loans, or issuing commitments for mortgage loans.

  12. Massachusetts General Laws chapter 255E, section 1 defines a mortgage broker as:

    Any person who for compensation or gain, or in the expectation of compensation or gain, directly or indirectly negotiates, places, assists in placement, finds or offers to negotiate, place, assist in placement or find mortgage loans on residential property for others.

  13. On or about August 22, 2013, the Division received an inquiry regarding ADHMP’s licensing status and business activities in the Commonwealth.
  14. The Division's review of the documents provided, which included a welcome letter that appeared to have been provided to a Massachusetts consumer and a member agreement contract form (Contract), indicated that ADHPM was soliciting and/or accepting mortgage loan applications from Massachusetts consumers. Additionally, the information reviewed by the Division indicated that ADHMP was targeting Massachusetts consumers with poor credit and made promises of obtaining a mortgage for those consumers. Redacted copies of both the consumer letter and Contract are attached hereto as Exhibit 1 pdf format of americandreamexhibit109102013.pdf
and Exhibit 2 pdf format of americandreamexhibit209102013.pdf
.
  15. The welcome letter congratulated the consumer on joining ADHMP’s program and stated in part “I am sure that you feel the sense of pride of belonging to this program, and tak[ing] advantage of being a member of ADHMP through owning your home in the near future.” The welcome letter also notified the consumer that they were required to pay a weekly membership fee in the amount of $75.00 until the purchase of the property.
  16. The Division’s review of the Contract revealed that ADHMP requested information including but not limited to: the consumer/applicant’s name, social security number, driver’s license number, date of birth, and a self-evaluation of the consumer/applicant’s credit rating.
  17. The Contract stated that ADHMP would pre-approve a mortgage based on the amount of the consumer/applicant’s income and the amount of the applicant’s rent for the past year. The Division’s review of the terms of the Contract stated that ADHMP was offering an interest rate as low as 2% for a loan term of either 30 years, 20 years or 15 years, and the consumer would be offered the lowest closing costs if they elected to have the Corporation’s attorney perform the closing.
  18. The terms of the Contract also required the consumer to pay a processing/application fee of $500.00 and attend a credit counseling course offered by ADHMP’s management team for a fee of $250.00.
  19. The Division’s review of the contract revealed that the consumer was required to pay a weekly membership fee of $75.00 until the mortgage loan [was] funded which could take between three (3) months to twelve (12) months and noted that if the consumer failed to make the $75 weekly payment, the agreement would be terminated and any funds previously collected from consumers would not be refunded.
  20. The Division’s review of ADHMP’s website, www.adhmp.com revealed that ADHMP was engaged in the mortgage lender and mortgage broker business by soliciting business from Massachusetts consumers with the promise of obtaining a mortgage loan.
  21. ADHMP’s website stated that the Corporation was a “Private Mortgage Investor Company” which helped consumers with poor credit purchase a home at a low interest rate and noted that the Corporation charged consumers a $75 weekly fee as “a credit training program of three (3) to twelve (12) months to ensure that the consumer learned the value of credit.”
  22. The website noted that ADHMP was funded by investors which included: “private individuals, trusts, partnerships, real estate investment groups and retirement funds and did not deal with banks or the banking divisions.”

    i. Division’s Visitation

  23. On Wednesday, August 28, 2013, as a result of the concerns raised in Paragraphs 12 through 22 of this Cease Order, the Division’s examiners conducted a visitation of ADHMP’s Avon, Massachusetts office location (Visitation) to further investigate the matter.
  24. During the August 28, 2013 Visitation, the Division’s examiners interviewed ADHMP’s management team, Jean Philemond, who identified himself as the Owner and Program Coordinator and Hamid Mahmoodi, who identified himself as the Director and Legal Advisor of the Corporation.
  25. During the Division’s Visitation and interviews with ADHMP’s management team, the Division’s examiners were informed that in order to become an enrolled member of the program, Massachusetts consumers were required to complete the information requested in the Contract, provide ADHMP with 2 years of tax returns, a copy of pay stubs for one month, a copy of lease (or release from a landlord), a copy of an identification card, a processing fee of $500.00, 2 months of bank statements and attend a two hour credit counseling course offered by ADHMP’s management team that would cost $250.00.
  26. The Division’s examiners requested and reviewed a copy of a sample contract that was provided by the management team of ADHMP during the Visitation and the terms of that sample contract included terms that varied from the Contract that the Division had previously reviewed and referenced in Paragraph 14 of this Cease Order. A copy of the contract provided at the visitation is attached hereto as Exhibit 3 pdf format of americandreamexhibit309102013.pdf
.
  27. The different terms included the interest rate offered, the addition of an origination fee and the contract provided to the Division’s examiners also required the consumer to provide proof of funds, upon a request by the Corporation, to cover the costs associated with the loan prior to closing.
  28. The terms of the sample contract reviewed by the Division’s examiners during the Visitation indicated that upon acceptance of the application, the consumer would be required to pay a $75 weekly fee to the Corporation, for approximately three (3) to fourteen (14) months. The Contract also noted that 40% of the weekly payments would be applied towards the closing costs and the other 60% would be used for the “management premium administration fee for the program.”
  29. According to statements made by ADHMP’s management team, the weekly fees are collected from all consumers and deposited into the bank account which would fund their consumer-members mortgages at the conclusion of the processing time, estimated to be one year. At the end of the one year processing time, ADHMP’s management team stated that the Corporation would then issue a pre-approval letter and the consumer could then utilize that pre-approval to purchase a home. The language in the Contract made assurances that consumers were guaranteed a mortgage loan at the end of the processing time for the interest rate noted on the sample contract.
  30. The management team of ADHMP stated that the Corporation would be identified as the lender of record, and ADHMP would fund the mortgage loans from the funds previously received from consumers. Additionally, ADHMP would service all the mortgages as consumers would be submitting their monthly mortgage payments to ADHMP.
  31. Based on information and belief, ADHMP currently has seventy-five (75) consumer-members from Massachusetts and 6 from other states. According to statements made by ADHMP’s management team during the Visitation, the Corporation’s business model is based on having 5000 members within the year, nationwide.
  32. According to the Division’s records, as of the date of this Cease Order, ADHMP is not licensed as a mortgage lender or a mortgage broker in the Commonwealth nor has the Corporation filed a license application with the Division.

    ii. Engaging in Prohibited Acts or Practices

  33. 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 sign a mortgage loan application or mortgage loan documents.

  34. The Division’s regulation 209 CMR 42.12A(10) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to pressure or coerce a consumer to sign a mortgage loan application or mortgage loan documents by misrepresenting or omitting crucial information about the terms of the mortgage.

  35. 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.

  36. During the August 28, 2013 Visitation, the Divisions’ examiners discovered through their interviews with management that the Corporation intended on collecting the weekly fee for at least twelve (12) months, and that the entire weekly fee of $75 would be deposited in a bank account for the benefit of ADHMP.
  37. The sample contract reviewed during the Visitation was inconsistent with statements made by ADHMP’s management. The sample contract indicated that the time frame that consumer would have to pay the $75 weekly fee would vary from three (3) to a maximum of fourteen (14) months, while ADHMP’s management stated they would be collecting weekly payments for at least twelve (12) months. Additionally, while the contract reviewed by the Division’s examiners noted that 40% of the $75 weekly payments were to be credited toward closing costs, ADHMP’s management notified the Division’s examiners that no percentage of any payments made by Massachusetts consumers would be credited towards their closing costs.
  38. The Division’s review of advertisements in ADHMP’s main office and on ADHMP’s website offered interest rates starting at 2% and ADHMP’s website identified themselves as a Private Mortgage Investor Company, whose loans are funded by more than a hundred investors.
  39. Upon further discussions with management during the August 28, 2013 Visitation, it was noted that at no time did the Corporation offer an interest rate of 2% and ADHMP is planning on funding the Membership Program and member mortgages through the money collected not investor contributions. At this time, ADHMP has no investor commitments.
  40. Based on upon information reflected in Paragraphs 13 through 39 of this Order by engaging in the mortgage lender and mortgage broker business without obtaining a mortgage lender and mortgage broker license, making false promises to consumers regarding the origination of the source of funds for their mortgage loans, misrepresenting and/or omitting crucial information regarding the terms of loans on contracts provided to Massachusetts consumers, ADHMP violated Massachusetts General Laws chapter 255E, section 2, the Division's regulations 209 CMR 42.2.12A(9) and 209 CMR 42.12A(10).
  41. Based on the information reflected in Paragraphs 13 through 39 of this Order, by maintaining a website that contained false or misleading language or had the tendency to be false or misleading, ADHMP violated the Attorney General’s regulation 940 CMR 8.04(1)

    II. Engaging in Unauthorized Mortgage Loan Originator Activity

  42. Massachusetts General Laws 255F, section 2 states in part:

    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 under subsection

  43. Massachusetts General Laws 255F, section 1 defines a mortgage loan originator as:

    A person who for compensation or gain or in the expectation of compensation or gain: (i) takes a residential mortgage loan application; or (ii) offers or negotiates terms of a residential mortgage loan.

  44. Massachusetts General Laws 255F, section 15 (f) states in part:

    It shall be a violation of this chapter for any person to: (f) conduct any business covered by this chapter without holding a valid license as required under this chapter, or assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter.

  45. The Division’s review of the Contract identified Hamid Mahmoodi as the signatory and Corporation’s representative. A review of the information requested on the Contract indicates that Mr. Mahmoodi was engaging in the business of a mortgage loan originator by collecting information that the Corporation itself noted was “an application for a mortgage.”
  46. During the August 28, 2013 Visitation, and interviews with ADHMP’s management, the Division’s examiners were notified that both Mr. Hamid Mahmoodi and Mr. Jean Philemond were entering into Membership Agreement Contracts with Massachusetts consumers and both individuals were completing the forms that the Corporation identified as a mortgage loan application. The Contract and documents reviewed by the Division’s examiners during the August 28, 2013 visitation revealed that by completing the Contracts and requesting the information in the Contracts, both Mr. Philemond and Mr. Mahmoodi and were engaged in the mortgage loan originator business by offering or negotiating terms of a residential mortgage loan.
  47. Based on upon information reflected in Paragraphs 13 through 46 of this Order by engaging in the mortgage loan originator business without obtaining a license, Jean Philemond violated Massachusetts General Laws chapter 255F, section 2 and Massachusetts General Laws chapter 255F, section 15(f).
  48. Based on upon information reflected in Paragraphs 13 through 46 of this Order by engaging in the mortgage loan originator business without obtaining a license, Hamid Mahmoodi violated Massachusetts General Laws chapter 255F, section 2 and Massachusetts General Laws chapter 255F, section 15(f).

    CEASE ORDER

  49. ADHMP and any and all shareholders, officers, directors, employees, and their successors or assigns, operating on behalf of ADHMP, are hereby directed to cease and desist from 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. Therefore, ADHMP 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.
  50. 0. Jean Philemond is directed to cease engaging in the activities of a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts. Therefore, Jean Philemond is ordered to immediately cease taking an application or offering or negotiating terms of a residential mortgage loan from consumers for residential property located in Massachusetts.
  51. Hamid Mahmoodi is hereby directed to cease engaging in the activities of a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts. Therefore, Hamid Mahmoodi is ordered to immediately cease taking an application or offering or negotiating terms of a residential mortgage loan from consumers for residential property located in Massachusetts.
  52. ADHMP and any and all shareholders, officers, directors, employees, and their successors or assigns are hereby directed to immediately cease and desist from attempting to or entering into any Member Agreement Contracts.
  53. ADHMP and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of ADHMP, and their successors or assigns, are hereby directed to immediately cease and desist from collecting or attempting to collect any funds from Massachusetts consumers including but not limited to weekly payments from members of the program, and any other fees related to program membership.
  54. ADHMP, shall immediately place any consumer funds including but not limited to weekly membership payments, credit counseling fees and/or application/processing fees previously collected from Massachusetts consumers in a separate escrow account maintained at a federally insured bank.
  55. Within two (2) days of the receipt of this Cease Order, ADHMP is directed to produce the following:
    1. Information or documents setting forth the total number of consumer-members that ADHMP has solicited since the commencement date of the program.
    2. Escrow account and operating account bank statements reflecting the consumer-member deposits since June 2013 through the date of this Order.
    3. Information or documents describing the following for each consumer-member since the commencement date of the program:
      1. the name of the Consumer;
      2. the member's phone number(s), home address, and e-mail address;
      3. the date that the agreement with ADHMP was executed;
      4. the pre-approval amount of the loan;
      5. all fees that the consumer-member was required to pay;
      6. the payment history for each consumer-member, including the date and amount of each payment made by the consumer, and how that money was collected and tracked; and
      7. the total amount of money paid by the consumer-member, including any processing fees, membership fees, origination fees, credit counseling fees or any other fees that were paid.
  56. Within ten (10) days of the effect date of this Order, ADHMP is hereby directed to refund all funds collected from Massachusetts consumers. Those funds include but are not limited to: weekly membership payments, processing fees, administrative fees, origination fees, and credit counseling fees collected since the commencement of this ADHMP’s business in the Commonwealth.
    1. Within fifteen (15) days of the effective date of this Order, ADHMP shall submit to the Commissioner a list of all consumers to whom a reimbursement is owed by ADHMP in accordance with this Paragraph of the Order; and
    2. Within thirty (30) days of the effective date of this Order, ADHMP shall submit evidence of all reimbursements issued to consumers pursuant to this Paragraph of the Order, including the consumers’ names, check numbers, the amount of the reimbursements and certified mail receipts to illustrate the consumers’ receipt of the reimbursement.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 10th day of September, 2013

By:
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts