By the Division of Banks


COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2013-20

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST

In the Matter of
MORTGAGE SECURITY, INC.

East Falmouth, Massachusetts
Mortgage Company License No. MC20164

and

ROBERT PENA, Individually


The Commissioner of Banks (Commissioner) having determined that MORTGAGE SECURITY, INC. (Mortgage Security or the Corporation), located at 31 Teaticket Highway, Suite 2-7, East Falmouth, Massachusetts, 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 FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST (Temporary Order) pursuant to General Laws chapter 255E, section 7(b) and chapter 255F, section 8(b).

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 209 CMR 42.00 et seq.
  2. The Division also has jurisdiction over the licensing and regulation of persons engaged in the business of a mortgage loan originator in Massachusetts pursuant to Massachusetts General Laws chapter 255F, section 2 and its implementing regulation 209 CMR 41.00 et seq.
  3. Mortgage Security is, and at all relevant times, has been a corporation conducting business in the Commonwealth of Massachusetts. Mortgage Security’s main office is located at 31 Teaticket Highway, Suite 2-7, East Falmouth, Massachusetts.
  4. According to the Division’s records, Robert Pena is and at all relevant times has been President and sole owner of the Corporation.
  5. Mortgage Security is licensed by the Commissioner as a mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2.

    A. REGULATORY BACKGROUND

  6. According to records maintained on file with the Division, the Commissioner initially issued a mortgage lender and mortgage broker license, MC0490 to Mortgage Security which authorized the Corporation to engage in the business of a mortgage lender and mortgage broker at the Corporation’s main office located at 31 Teaticket Highway, Suite 2-7, Falmouth, Massachusetts on or about October 28, 1993.
  7. On November 12, 2009, based upon the findings of an examination of the books and records of the Corporation and as set forth in a Report of Examination, the Division issued an ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (Order and Notice), Docket No. 2009-125, against Mortgage Security. The Order and Notice are incorporated herein by reference.
  8. On or about November 30, 2009, Mortgage Security, through counsel, filed a Response to the Order and Notice, whereby Mortgage Security contested certain of the Division’s findings as set forth in the Report and the Order and Notice. By the Response, Mortgage Security further reserved the right to proceed to an administrative hearing in accordance with Massachusetts General Laws chapter 30A.
  9. On December 31, 2010, while the matter was pending before the Division’s administrative hearings department, Mortgage Security's mortgage lender and mortgage broker licenses expired without renewal.
  10. On June 16, 2011, the Commissioner and Mortgage Security entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (2011 Consent Order) for the purpose of settling the matters raised by the Order to Show Cause. The 2011 Consent Order is incorporated herein by reference.
  11. The provisions of the 2011 Consent Order stated in part that Mortgage Security would submit an application for renewal through the Nationwide Mortgage Licensing System (NMLS) to initiate the process for the reinstatement of its mortgage company license(s). The provisions of the 2011 Consent Order also stated that Mortgage Security would be subject to all licensing requirements.
  12. According to the Division’s records on August 9, 2011, Mortgage Security’s application for a mortgage lender and mortgage broker license in Massachusetts was approved. Mortgage company license number, MC20164 authorized Mortgage Security to engage in the business of a mortgage lender and mortgage broker at 31 Teaticket Highway, Suite 2-7, Falmouth, Massachusetts.

    i. Substantial Non-Compliance with the Terms of a Consent Order

  13. Paragraph 2 of the 2011 Consent Order states:

    Mortgage Security 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 Massachusetts General Laws, chapter 255E, section 8, and the Division's regulations 209 CMR 42.09 and 209 CMR 48.03.

  14. Paragraph 2(c)-(e) of the 2011 Consent Order states:

    (c) Mortgage Security shall conduct 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. At a minimum, such reviews shall be conducted on a quarterly basis.

    (d) Mortgage Security shall provide adequate training to all applicable staff persons of Mortgage Security who have form completion and/or document filing and retention responsibilities, to ensure proper implementation and execution of the revised policies and procedures adopted by the Corporation under this Paragraph of the Consent Order.

    (e) Mortgage Security shall establish, implement, and maintain procedures to ensure the full cooperation of Mortgage Security employees with the Division during all future examinations of the Corporation, which shall necessarily provide for the Division's access, within 72 hours of an official request, to any requested books, records, accounts, and any other additional, relevant materials, under the provisions of Massachusetts General Laws chapter 255E, section 8.

  15. Paragraph 11 of the 2011 Consent Order states:

    Mortgage Security shall establish, implement, and maintain procedures to ensure that the Corporation files all quarterly reports and annual reports on a timely basis pursuant to the Division's regulation 209 CMR 42.09(4) and M.G.L. c. 255E, section 8, respectively. It is understood that beginning with the first calendar quarter of 2011, the Nationwide Mortgage Licensing System Call Report ("Call Report") will replace the Massachusetts quarterly report. The quarterly reporting requirement will be satisfied by completing and submitting the Call Report within prescribed timeframes.

  16. Books and records reviewed by the Division revealed that Mortgage Security is in substantial non-compliance with the provisions of the 2011 Consent Order as further described in this Temporary Order.

    B. CONSUMER COMPLAINTS

  17. On December 5, 2012, the Division’s Consumer Assistance Unit received a consumer complaint from a Connecticut consumer regarding Mortgage Security’s loan servicing activity in the State of Connecticut.
  18. The Connecticut consumer notified the Division’s Consumer Assistance Unit that Mortgage Security had been non-responsive to the consumer’s repeated calls and inquiries regarding the Corporation’s failure to timely pay real estate tax payments that had been held in an escrow account by Mortgage Security. As a result of Mortgage Security’s failure to submit timely real estate tax payments the consumer had been notified by the town in which the Connecticut consumer resided, that late charges and penalties were continuing to incur and furthermore that the town’s tax assessor was in the process of preparing a lien to place on the consumer’s property.
  19. As the consumer was a Connecticut resident, the Division’s staff referred the Complaint to the Connecticut Banking Department for their review and processing.
  20. On March 5, 2013, the Division’s Consumer Assistance Unit received a second call from the Connecticut consumer referenced in Paragraph 17 of this Temporary Order and the consumer indicated that Mortgage Security had failed to respond to the Connecticut Banking Department and had failed to pay real estate taxes owed a second time.
  21. The Connecticut consumer also notified representatives of the Division that they had repeatedly attempted to contact representatives of Mortgage Security regarding concerns related to certain tax information reflected on the consumer’s 1098 mortgage interest tax form that had been generated by Mortgage Security, however Mortgage Security had failed to respond to the consumer’s inquiries.
  22. On March 5, 2013, as a result of concerns raised by the Connecticut consumer, the Division contacted Mortgage Security in order to investigate the matter further.
  23. On April 1, 2013, the Division of Banks’ Consumer Assistance Unit received a consumer complaint from a Massachusetts consumer regarding the Corporation’s failure to make real estate tax payments that had been collected and escrowed by Mortgage Security and were owed to the town in which the consumer resided. Based upon information and belief, Mortgage Security had failed to make real estate tax payments for a total of nine (9) months.

    C. DIVISION’S INVESTIGATION

  24. Mortgage lenders and mortgage brokers in Massachusetts are licensed and regulated under Massachusetts General Laws chapter 255E, which is administered and enforced by the Commissioner. Pursuant to Massachusetts General Laws chapter 255E, section 8, the Division is authorized to inspect the books, accounts, papers, records and files of mortgage lenders and mortgage brokers transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E or any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a mortgage lender and mortgage broker.
  25. On Wednesday, April 3, 2013, as a result of the concerns raised in the Consumer Complaints, the Division commenced an investigation (2013 Investigation) of Mortgage Security’s books and records, pursuant to Massachusetts General Laws chapter 255E, section 8, at the Corporation’s main office for the purpose of assessing the Corporation’s level of compliance with applicable Massachusetts statutes and regulations governing the conduct of those engaged in the business of a mortgage lender and broker in the Commonwealth.

    i. Engaging in Unauthorized Activity

  26. Massachusetts General Laws chapter 93 sections 24 through 24F and its implementing regulation 209 CMR 18.00 et seq., requires all entities engaged in the business of a third party loan servicer to be registered as a loan servicer.
  27. Massachusetts General Laws chapter 93, section 24A(b) states in part:

    A person shall not directly or indirectly engage in the commonwealth in the business of a third party loan servicer without registering with the commissioner.

  28. Books and records reviewed by the Division’s examiners during the 2013 Investigation revealed that Mortgage Security had been engaged in the business of a loan servicer for an extended period of time.
  29. Books and records reviewed by the Division’s examiners indicated that Mortgage Security was designated as a Fannie Mae authorized seller/servicer and had until at least July 31, 2012 contracted a Massachusetts authorized sub-servicer to service most Massachusetts mortgage loans.
  30. The Division’s examiners became aware that the sub-servicer retained by Mortgage Security terminated the contract with the Corporation effective July 31, 2012 and as a result had transferred the servicing portfolio back to Mortgage Security.
  31. Based upon information and belief, beginning as early as July 31, 2012 and continuing through February 2013, Mortgage Security serviced mortgage loans for consumers from Massachusetts and other states.
  32. According to the Division’s records, as of the date of this Temporary Order, Mortgage Security is not registered as a loan servicer nor has the Corporation filed an application with the Division to register as a small loan servicer.

    a. Engaging in Unfair and Unconscionable Servicing Activity

  33. The Division’s regulation 209 CMR 18.21 applicable to loan servicing activity states in part:

    A third party loan servicer may not use unfair or unconscionable means in servicing any loan. Without limiting the general application of the foregoing, the following conduct is a violation of 209 CMR 18.21:

    (1) Knowingly misapplying or recklessly applying loan payments to the outstanding balance of a loan.

    (2) Knowingly misapplying or recklessly applying payments to escrow accounts.

  34. The Real Estate Settlement Procedures Act, (RESPA) and its implementing regulation, Regulation X, at 12 C.F.R. 1024 relative to escrow accounts sets forth the requirements for an escrow account that a lender establishes in connection with a federally related mortgage loan. It sets limits for escrow accounts using calculations based on monthly payments and disbursements within a calendar year.
  35. The provisions of 12 C.F.R.1024 requires lenders that are engaged in the business of loan servicing to appropriately account for any funds deposited into a consumer escrow account and furthermore requires loan services to make timely payments of all disbursements required on or before the requisite deadline to avoid a penalty.
  36. 12 C.F.R 1024(k)(1) states in part:

    Timely payments. (1) If the terms of any federally related mortgage loan require the borrower to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the deadline to avoid a penalty.

  37. 12 C.F.R. 1024(I)(1) states in part:

    (l) System of recordkeeping. (1) Each servicer shall keep records, which may involve electronic storage, microfiche storage, or any method of computerized storage, so long as the information is easily retrievable, reflecting the servicer's handling of each borrower's escrow account. The servicer's records shall include, but not be limited to, the payment of amounts into and from the escrow account and the submission of initial and annual escrow account statements to the borrower.

  38. Books and records reviewed by the Division’s examiners indicated that Mortgage Security serviced loans on behalf of numerous consumers and received scheduled periodic payments from multiple borrowers pursuant to the terms of their mortgage loans, including amounts for escrow accounts, and thereafter failed to make the required real estate tax payments and homeowners insurance payments on behalf of consumers for which the Corporation had collected escrow payments, for an extended period of time.
  39. The Division’s examiners’ review of the limited documents provided, revealed several inconsistencies, including but not limited to incorrect starting escrow balances on loan histories and monthly mortgage loan payments that had been posted and accounted for incorrectly.
  40. Books and records reviewed by the Division’s examiners during the 2013 investigation revealed that all checks received from consumers are deposited by Mortgage Security into one bank account, the "clearing account."
  41. Upon information and belief, Mortgage Security, at its discretion, transfers the funds from the clearing account into the respective escrow accounts. These funds are transferred in batches and at the earliest after the check clears which approximately is 1-2 business days.
  42. During a review of the Corporation’s books and records, the Division’s examiners determined that policy or procedures do not exist for transferring consumer funds from the clearing account into an escrow account as funds were transferred days after the checks had cleared.
  43. As of the date of this Temporary Order, the Division is in the process of determining the number of consumers affected by Mortgage Security’s failure to appropriately account for escrow payments received, it is unknown the extent to which Massachusetts consumers have been harmed by Mortgage Security’s failure to make required escrow payments within the timeframes required.
  44. As of the date of this Temporary Order, the Division’s examiners were unable to determine how consumer funds were distributed and payment histories contained multiple reversals on principal, interest and tax payments with no explanation provided

    ii. Failure to Maintain Books and Records

  45. Massachusetts General Laws chapter 255E, section 8 states in part:

    A licensee shall keep and use such business records in such form and at such location as said commissioner shall, by regulation, determine, which shall enable said commissioner to determine whether such licensee is complying with the provisions of this chapter and any rules or regulations promulgated hereunder by said commissioner and any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter.

  46. The Division’s regulation at 209 CMR 48.06(2) states, in part, that:

    Failure of a Licensee to keep its books and records in accordance with 209 CMR 48.00 et seq., may result in suspension or revocation of the license under the authority contained in the specific statute applicable to the Licensee.

  47. During the 2013 Investigation, examiners requested multiple documents and reports from Mortgage Security which to date have not been provided.
  48. These documents include financial statements, property tax information on loans being serviced by Mortgage Security, loan histories for delinquent loans, consumer conversation logs, evidence of escrow analysis and missing documentation of taxes or insurance paid on serviced loans.

    iii. Failure to Notify the Division of a Significant Event and Failure to Update NMLS Record Regarding the Occurrence of a Significant Event

  49. The Division’s regulation 209 CMR 42.12(1)(f) states in part:

    A licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of...

    (f) Suspension or termination of the Licensee's status as an approved seller or seller/servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association or an investor approved under 209 CMR 42.11A(1)(a).

  50. On or about July 31, 2012, Mortgage Security’s sub-servicer terminated its servicing relationship with Mortgage Security and transferred the servicing rights back to the Corporation. On or about November 16, 2012, Fannie Mae terminated Mortgage Security’s Seller/Servicer approval due to the Corporation’s inability to service the loans.
  51. As of the date of this Temporary Order, Mortgage Security has failed to notify the Division of the events noted in Paragraph 50 and update its disclosure questions on NMLS.

    iv. Employee Oversight

  52. The Division’s regulation 209 CMR 42.03(2)(d) states in part:

    An Applicant shall demonstrate to the Commissioner's satisfaction that the Applicant, and its applicable officers and employees, possess the necessary educational and business experience to engage in the business of a mortgage lender.

  53. Upon and information and belief, Mortgage Security delegated authority to one individual who oversaw incoming consumer mortgage payments, processed the payments and deposited the payments without supervision by management.
  54. The Division’s 2013 Investigation revealed that there was no segregation of duties as most responsibilities fell upon one person who lacked the appropriate supervision and or experience to collect and process consumer loan payments.

    v. Late Charges

  55. Massachusetts General Laws chapter 183, section 59 states in part:

    In no event, in assessing a penalty because of the delinquency in making all or any part of a periodic payment under a mortgage note, shall the penalty or late charge exceed 3 per cent of the amount of principal and interest overdue, and in calculating the penalty or late charge, any amount of the periodic payment representing estimated tax payments required by the terms of the mortgage note or deed shall not be included.

  56. Books and records reviewed during the 2013 Investigation revealed that late fees in excess of three per cent were charged to Massachusetts consumers by Mortgage Security.
  57. In the majority of loan files reviewed, Massachusetts consumers were charged five per cent or more in late fees.

    vi. Failure to File Annual and Quarterly Reports

  58. The Division’s Regulation 209 CMR 42.09(4) states:

    In addition to the reports required by law, a Licensee shall make such other statements and reports to the Commissioner as he or she may require from time to time. The Commissioner may require regular quarterly reports and may furnish blank forms for all such statements or reports, required by 209 CMR 42.09.

  59. The Division’s Regulation 209 CMR 42.10 states:

    By March 31, each Licensee shall file an annual report with the Commissioner in such form as the Commissioner shall prescribe for the preceding calendar year. The annual report shall be in writing, subscribed by the Licensee under the pains and penalty of perjury.

  60. According to the Division’s records, Mortgage Security filed incomplete quarterly and annual reports as the financial information requested was not furnished.

    CONCLUSIONS OF LAW

  61. Based upon the information contained in Paragraphs 1 through 60, Mortgage Security has failed to demonstrate and maintain the financial responsibility, character, reputation, integrity, and general fitness such as to command the confidence of the community and to warrant a determination that it will operate honestly, fairly, soundly, and efficiently in the public interest, as a mortgage lender and mortgage broker, in violation of Massachusetts General Laws chapter 255E, section 4 and the Division’s regulations 209 CMR 42.03(2)(c) and 209 CMR 42.06(2)(c).
  62. Based upon the information contained in Paragraphs 1 through 60, by receiving payments from Massachusetts consumers pursuant to the terms of a mortgage loan, including amounts for escrow accounts, Mortgage Security engaged in the business of a loan servicer prior to obtaining the necessary approval from the Commissioner of Banks in violation of Massachusetts General Laws chapter 93 section 24A.
  63. Based upon the information contained in Paragraphs 1 through 60, by knowingly misapplying or recklessly applying loan payments to the outstanding balance of consumer mortgage loans, Mortgage Security engaged in unfair and unconscionable servicer activity and violated 209 CMR 18.21(1).
  64. Based upon the information contained in Paragraphs 1 through 60, by knowingly misapplying or recklessly applying consumer payments to escrow accounts Mortgage Security engaged in unfair and unconscionable servicer activity and violated 209 CMR 18.21(2).
  65. Based upon the information contained in Paragraphs 1 through 60, by failing to timely make required real estate tax payments and homeowners insurance payments on behalf of consumers for which the Corporation collected escrow payments, Mortgage Security violated 12 C.F.R.1024(k)(1) of RESPA
  66. Based upon the information contained in Paragraphs 1 through 60, by failing to maintain accurate recordkeeping of consumers’ escrow accounts, Mortgage Security violated 12 C.F.R. 1024(I)(1) of RESPA
  67. Based upon the information contained in Paragraphs 1 through 60, by failing to keep and use its books, records and accounts in a manner which would allow the Commissioner to determine whether the Corporation was complying with the provisions of Massachusetts General Laws chapter 255E and applicable state and federal laws and regulations, Mortgage Security violated the Division's regulation 209 CMR 209 42.09(1) and the 2011 Consent Order.
  68. Based upon the information contained in Paragraphs 1 through 60, by failing to update information on the NMLS and notify the Commissioner, in writing, within one business day, to notify the Commissioner within one business day of the termination of the Corporation's relationship with the Federal National Mortgage Association, Mortgage Security violated the Division’s regulation 209 CMR 42.12(1)(f).
  69. Based upon the information contained in Paragraphs 1 through 60, by failing to maintain sufficient employee oversight, Mortgage Security violated the Division’s regulation 209 CMR 42.03(2)(d).
  70. Based upon the information contained in Paragraphs 1 through 60, by charging Massachusetts consumers late charges in excess of three per cent, Mortgage Security violated Massachusetts General Laws chapter 183, section 59.
  71. Based upon the information contained in Paragraphs 1 through 60, by filing substantially incomplete quarterly and annual reports, Mortgage Security violated Massachusetts General Laws chapter 255E section 8, the Division's regulations 209 CMR 42.10, 209 CMR 42.09(4) and the 2011 Consent Order.
  72. Based upon the information contained in Paragraphs 1 through 60, the public interest will be harmed by delay in issuing an Order to Cease and Desist under General Laws chapter 255E, section 7(a) because, upon information and belief, Mortgage Security had or has a portfolio of consumer loans which the Corporation was and/or is currently servicing and Mortgage Security has failed to appropriately account for consumer payments received. At this time, based on the Corporation’s failure to timely submit accurate records to the Division, it is unknown the extent to which Massachusetts consumers have been harmed by Mortgage Security’s failure to account for consumer payments received within the timeframes required. The Corporation’s failure to account for consumer funds requires immediate action to protect the interests of the affected Massachusetts consumers. 
  73. Based upon the information contained in Paragraphs 1 through 60, the Commissioner has determined that:
    1. Mortgage Security has engaged in, or is about to engage in, acts or practices which warrant the belief that it is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a mortgage lender and mortgage broker including, but not limited to, the provisions of the Division’s regulations at 209 CMR 42.00 et seq.; and
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Mortgage Security.
  74. Based upon the information contained in Paragraphs 1 through 60, had the facts and conditions found therein existed at the time of Mortgage Security’s original mortgage lender and mortgage broker license application, the Commissioner would have been warranted in refusing to issue such license. Further, the facts and conditions set forth in Paragraphs 1 through 60 present sufficient grounds for the revocation of Mortgage Security’s mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulations at 209 CMR 42.04(2)(b), 42.07(2)(b).

    ORDER TO CEASE AND DESIST

  75. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  76. ORDERED that Mortgage Security and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Mortgage Security, and their successors or assigns, shall immediately cease 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, not otherwise expressly permitted by the terms of this Temporary Order. Therefore, Mortgage Security 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.
  77. IT IS FURTHER ORDERED that Mortgage Security and any and all officers, members, managers, employees, independent contractors, or agents, operating on behalf of Mortgage Security, and their successors or assigns, shall immediately cease engaging in the business of a loan servicer, as those activities are defined under Massachusetts General Laws chapter 93, sections 24 through 24F and 12 C.F.R 1024, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this Temporary Order.
  78. IT IS FURTHER ORDERED that Mortgage Security, shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan applications in a separate escrow account maintained at a federally insured bank.
  79. IT IS FURTHER ORDERED Mortgage Security, shall immediately place all payments collected from Massachusetts consumers relative to any residential mortgage loans serviced by the Corporation in a separate escrow account maintained at a federally insured bank.
  80. IT IS FURTHER ORDERED that Mortgage Security shall not authorize or execute any financial transaction, either singular or structured, in excess of one hundred and fifty thousand dollars ($150,000.00), except for wages and salaries paid to employees, contractors, officers, or other members of Mortgage Security’s management in the normal course of their business, without the prior written approval of the Commissioner. Upon the effective date of this Temporary Order, Mortgage Security shall implement or revise its practices and procedures, as necessary, to ensure that their financial books and records are accurately maintained, in a manner illustrating compliance with the provisions of this Paragraph, and available for review by the Division's examiners upon request.
  81. IT IS FURTHER ORDERED that Mortgage Security shall immediately place with one or more qualified broker(s) or lender(s), as appropriate based on the status of the application and with no loss to applicants, all of its pending mortgage loan applications. It being understood that "no loss to the applicant" shall mean that any loan which may have been closed by Mortgage Security and remains unfunded, as well as any pending application which has been approved by the Corporation but has not yet closed, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Mortgage Security. In the event that no such placement can be made, Mortgage Security shall either independently fund the mortgage loan under such terms and conditions or buy down the mortgage loan offered by the lender so that the applicant does not incur a loss as a result of such placement. Mortgage Security shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
  82. IT IS FURTHER ORDERED that Mortgage Security shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Corporation’s pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall be submitted to the Commissioner within five (5) days of the effective date of this Temporary Order and shall include all information on file regarding the Corporation’s Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:
    1. As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, Mortgage Security shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation’s pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom Mortgage Security has accepted an application for a residential mortgage loan; the applicants’ addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; rate lock status; the amount of each loan; application status (i.e. filed, submitted to lenders, cleared to close, etc.); loan terms, if approved; scheduled closing dates; the loan purpose (i.e. purchase or refinance); capacity in which Mortgage Security accepted the application (i.e. mortgage broker or mortgage lender) and identification of the applicable lender or broker with whom each application will be placed. The record should include telephone numbers of contact persons at each lender or broker who is familiar with the Corporation’s submitted loans;
  83. IT IS FURTHER ORDERED that Mortgage Security shall immediately secure all pending residential mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender(s) and or mortgage broker (s) pursuant to Paragraph 81 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Mortgage Security’s books and records and shall be available to the Commissioner, in their entirety, upon request.
  84. IT IS FURTHER ORDERED that Mortgage Security shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the residential mortgage loans currently serviced by the Corporation. The records to be produced shall include but not necessarily be limited to, the following:
    1. As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, Mortgage Security shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation’s Massachusetts servicing portfolio including but not limited to: the borrower’s addresses and telephone numbers; the loan number; the account balance; the location of the funds currently held for each account; and identification of the applicable servicer to whom the loan will be transferred to, if applicable. The record should include telephone numbers of contact persons at each servicer who is familiar with the Corporation’s loans;
    2. On the last business day of each subsequent week after the effective date of this Temporary Order, Mortgage Security shall provide the Commissioner with an updated, written status report of the mortgage loans identified above under subparagraph 84(a). The form of the status report shall follow the format of the initial submission under subparagraph 84(a).
  85. IT IS FURTHER ORDERED that within thirty (30) days of the effective date of this Temporary Order, the Corporation shall cause to be made a review of all Massachusetts residential mortgage loans originated and/or serviced by Mortgage Security and shall identify all mortgage loan transactions in which the consumer was a charged a late fee in excess of three percent.
    1. In each mortgage loan transaction identified pursuant to Paragraph 85, Mortgage Security shall reimburse the consumer any late charges of the amount of principal and interest overdue collected in excess of three percent;
    2. Within forty-five (45) days of the effective date of this Temporary Order, Mortgage Security shall submit to the Commissioner a list of all borrowers identified pursuant to the above described review to whom a reimbursement is owed by the Corporation in accordance with this Paragraph of the Temporary Order; and
    3. Within sixty (60) days of the effective date of this Temporary Order, Mortgage Security shall submit evidence of all reimbursements issued to consumers pursuant to this Paragraph of the Temporary Order, including the consumers' names, check numbers, the amount of the reimbursements and certified mail receipts to illustrate the consumers' receipt of the reimbursement.
  86. IT IS FURTHER ORDERED that within ten (10) days of the effective date of this Temporary Order, the Corporation shall cause to be made a review of all Massachusetts residential mortgage loans serviced by Mortgage Security and shall identify all transactions in which the consumer made payments to mortgage escrow accounts held by Mortgage Security for payments of the consumer’s real estate taxes and homeowners insurance, and which the Corporation thereafter failed to make the required real estate tax payments and homeowners insurance payments on behalf of consumers.
    1. In each transaction identified pursuant to Paragraph 86, Mortgage Security shall identify the total amount of late fees and penalties assessed by the relevant tax authority or insurer as a result of Mortgage Security’s failure to submit timely real estate tax payments and/or insurance payments and shall within fifteen (15) days submit payments of all penalties incurred, to the relevant tax authority and insurance company.
    2. Within fifteen (15) days of the effective date of this Temporary Order, Mortgage Security shall submit to the Commissioner a list of all borrowers, taxing authorities and insurance companies identified pursuant to the above described review to whom a payment is owed by the Corporation in accordance with this Paragraph of the Temporary Order; and
    3. Within twenty (20) days of the effective date of this Temporary Order, Mortgage Security shall submit evidence of all payments made on behalf of the affected Massachusetts consumers pursuant to this Paragraph of the Temporary Order, including the consumers' names, the taxing authority’s’ or insurance company’s’ names; check numbers; the amount of the penalty payment; and certified mail receipts to illustrate the appropriate receipt of the payment.
  87. IT IS FURTHER ORDERED that Mortgage Security shall submit payment of all costs associated with the investigation of the aforementioned matter as set forth in the relevant invoice issued to Mortgage Security. The payment shall be made payable to the "Commonwealth of Massachusetts," to the Office of the Commissioner of Banks, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-6400.
  88. IT IS FURTHER ORDERED that this Temporary 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.
  89. IT IS FURTHER ORDERED that this Temporary Order shall not be construed as approving any act, practice or conduct not specifically set forth herein which was, is, or may be in violation of relevant state or federal laws and regulations.
  90. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such Temporary Order shall become permanent and final only upon receipt of a written request for such a hearing from Mortgage Security within twenty (20) days of the effective date of this Temporary Order. If no hearing is requested within this twenty (20) day period, this Temporary Order shall become permanent and final until it is modified or vacated by the Commissioner.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 30th day of April, 2013

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