COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2013-028

CONSENT ORDER

In the Matter of
RESIDENTIAL MORTGAGE SERVICES, INC.
SOUTH PORTLAND, MAINE
Mortgage Company License No. MC1760

 

WHEREAS, RESIDENTIAL MORTGAGE SERVICES, INC., South Portland, Maine (Residential Mortgage or the Corporation), a licensed mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2, has entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (Consent Agreement) with representatives of the Division of Banks (Division) dated October 15, 2013, whereby, solely for the purpose of settling this matter, and without admitting any allegations or implications of fact or the existence of any violation of state or federal laws and regulations governing the conduct and operation of a mortgage lender and mortgage broker, Residential Mortgage agrees to the issuance of this CONSENT ORDER (Consent Order) by the Commissioner of Banks (Commissioner);

WHEREAS, an examination of Residential Mortgage was conducted pursuant to General Laws chapter 255E, section 8, as of October 16, 2012 to assess the Corporation's level of compliance with applicable Massachusetts and federal statutes and regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in the Commonwealth; and

WHEREAS, the Report of Examination (Report) issued pursuant to the Division's examination of Residential Mortgage as of October 16, 2012 alleged substantial non-compliance with applicable Massachusetts and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts.

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

ORDER

NOW COME the parties in the above-captioned matter, the Division and Residential Mortgage, and stipulate and agree as follows:
  1. Residential Mortgage must establish and implement procedures to maintain all loan files 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 the Division's regulations 209 CMR 42.09 and 209 CMR 48.03.
    1. Procedures implemented pursuant to this Section of the Consent Order shall ensure that the Corporation is capable of compiling and generating an accurate and complete loan list upon request from the Division that correctly reflects all of the Corporation's loan activity.
    2. Procedures implemented pursuant to this Section of the Consent Order shall ensure that the Mortgage Company Annual Report, Quarterly Mortgage Call Reports, and any other reports which are completed by the Corporation and submitted to the Division, are accurate and reliable accounts of the reported conditions and/or transactions.
    3. Procedures implemented pursuant to this Section of the Consent Order shall necessarily require that the Corporation properly documents the initial date of application and ensures that all disclosures are properly dated and maintained in a manner that will allow the Commissioner to determine whether time-sensitive documents are being provided to consumers within the mandated timing requirements.
    4. Procedures implemented pursuant to this Section of the Consent Order shall ensure that Residential Mortgage retains complete loan files, including, but not limited to, documentation reflecting each application's outcome in each loan file.

  2. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation properly documents and tracks the receipt of advance fees paid by consumers outside of closing; and ensures that the correct amount is properly itemized on the settlement statement and that any excess fees are promptly reimbursed to the consumer.
    1. Procedures implemented pursuant to this Section of the Consent Order shall necessarily require that Residential Mortgage retains in each loan file all documentation relative to advance fees paid by consumers.
    2. Residential Mortgage must conduct a review of all Massachusetts residential mortgage loan transactions closed by the Corporation since October 16, 2009 to identify transactions in which the consumer was charged in excess of the amount of the advance appraisal fee. Residential Mortgage shall investigate the loan transactions so identified to determine whether the excess amounts were refunded to the consumers. With the executed copy of the Consent Agreement, Residential Mortgage must submit a description of the methodology it will use to complete the portfolio review.
    3. Residential Mortgage must reimburse all consumers identified pursuant to the portfolio review for any excess fees that were collected and not reimbursed by the Corporation. Evidence of the reimbursements issued pursuant to this Subsection of the Consent Order must be submitted within forty-five (45) days after the execution of the Consent Order. Evidence of the reimbursements must include the consumers' names, the amounts of the reimbursements, the dates of the reimbursements, and either copies of the cashed refund checks or copies of certified mail receipts to illustrate the borrowers' receipt of the reimbursements, as appropriate.

  3. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation notifies the Division, in writing, within one business day of receiving notification of license denial, cease and desist, suspension or revocation procedures, or other formal or informal regulatory action, in any state against the Corporation in accordance with the Division's regulation 209 CMR 42.12(1)(c). Compliance with this Section of the Consent Order also requires Residential Mortgage to update the regulatory action section in the Nationwide Multi-State Licensing System & Registry (NMLS) for formal regulatory actions, as necessary.

  4. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation monitors all settlement agents and/or closing attorneys to ensure that no duplicative discharge fees are collected from Massachusetts borrowers.
    1. Residential Mortgage shall conduct a review of all Massachusetts residential refinance mortgage loan transactions closed since October 16, 2009 to identify transactions in which the consumer was charged duplicate discharge fees. Residential Mortgage shall investigate the loan transactions so identified to determine whether the duplicate discharge fees listed on the settlement statements were refunded to the consumers.
    2. Residential Mortgage shall reimburse all consumers identified in the Report and in the Corporation's portfolio review for any duplicate discharge fees that were collected and which were not otherwise reimbursed. In instances in which the borrower was previously refunded the duplicate fee, the Corporation must submit evidence of such.
    3. With the executed copy of the Consent Agreement, Residential Mortgage must submit a description of the methodology used to complete the portfolio review. Evidence of the reimbursements issued pursuant to this Section of the Consent Order shall be submitted within forty-five (45) days after the execution of this Consent Order. Evidence of the reimbursements must include the consumers' names, the amounts of the reimbursements, the dates of the reimbursements, and either copies of the cashed refund checks or copies of certified mail receipts to illustrate the borrowers' receipt of the reimbursements, as appropriate.

  5. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation refrains from engaging directly or indirectly in the business of a mortgage lender and/or mortgage broker for residential property located in Massachusetts from any location, whether within or outside of the Commonwealth, for which the Corporation has not previously obtained a license from the Commissioner for such location in accordance with the Division's regulation 209 CMR 42.13(1).
    1. Residential Mortgage agrees to submit a payment in the amount of twelve thousand dollars ($12,000.00) in lieu of an administrative penalty for the Corporation engaging in mortgage lender and/or mortgage broker activity at unlicensed locations. Residential Mortgage must remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Consent Agreement, to the Division of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.

  6. Residential Mortgage must establish, implement, and maintain procedures to ensure that all mortgage loan originators with whom the Corporation conducts business are duly licensed as mortgage loan originators under Massachusetts General Laws chapter 255F, and properly sponsored by Residential Mortgage through the NMLS.
    1. Residential Mortgage agrees to submit a payment in the amount of nineteen thousand two hundred fifty dollars ($19,250.00) in lieu of an administrative penalty for the Corporation conducting business with mortgage loan originators who did not hold an active mortgage loan originator license or who were not properly sponsored by the Corporation. Residential Mortgage must remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Consent Agreement, to the Division of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.

  7. Residential Mortgage must establish, implement, and maintain procedures to ensure compliance with the Equal Credit Opportunity Act, 15 U.S.C. 1691 et seq., as implemented by 12 C.F.R. Part 1002 (Regulation B). Such procedures must require that Residential Mortgage implement internal controls to ensure that the Corporation properly notifies applicants of actions taken on applications, in compliance with Section 1002.9 of Regulation B.

  8. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation refrains from disclosing or imposing a late charge which is in excess of the amount permitted under Massachusetts General Laws chapter 183, section 59. Residential Mortgage shall review and revise as necessary all documentation containing provisions referencing late payment charges to ensure that such provisions are in compliance with Massachusetts General Laws chapter 183, section 59.
    1. Residential Mortgage must conduct a review of all Massachusetts loans closed since October 16, 2009 and determine whether late charges were assessed by the Company or by the entities to whom the notes were sold (the Assignees), and shall reimburse all consumers from whom a late charge was collected that was in excess of three percent of the amount of principal and interest overdue. The amount of such reimbursements shall equal the amounts collected as late charges that were in excess of the amount allowed by with Massachusetts General Laws chapter 183, section 59. Evidence of any reimbursements will be submitted to the Division stating the consumer's name, the date of the loan and loan number, the amount reimbursed and the check number.

  9. Residential Mortgage must establish, implement, and maintain procedures to ensure that each mortgage loan applicant whose loan application is denied by the Corporation is provided, in writing, at the time of denial with a notice of his/her right to appeal the denial to the appropriate mortgage review board, pursuant to Massachusetts General Laws chapter 167, section 14A. For each consumer loan file, a completed copy of the disclosure form must be retained in the Corporation's books and records, as evidence of compliance.

  10. Residential Mortgage must establish, implement, and maintain procedures to ensure compliance with the loan reporting requirements set forth in the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. section 2801 et seq., as implemented by 12 C.F.R. Part 1003 (Regulation C). Such procedures shall require the Corporation to implement internal controls to ensure that Residential Mortgage accurately determines if a loan is reportable pursuant to the requirements of Regulation C and accurately compiles and records all required data for such loans in the Corporation's HMDA Loan Application Register (LAR).
    1. li>Residential Mortgage must establish, implement, maintain, and periodically update operating policies and training procedures to ensure that all applicable personnel possess a comprehensive understanding of the HMDA reporting requirements under Regulation C. Such training must necessarily ensure the proper implementation and execution of the revised practices and procedures adopted by Residential Mortgage pursuant to this Section of the Consent Order.
    2. Residential Mortgage agrees to submit a payment in the amount of twenty-five thousand dollars ($25,000.00) in lieu of an administrative penalty for the Corporation's failure to comply with the statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage lender in Massachusetts. Residential Mortgage must remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed copy of the Consent Agreement, to the Division of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.

  11. Residential Mortgage must establish, implement, and maintain procedures to ensure that, when acting in the capacity of a mortgage broker, 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.

  12. Residential Mortgage must revise its "Borrowers' Certification and Authorization" form, when acting in the capacity of a mortgage broker, to eliminate any representation or statement that could be considered false, misleading, or have the tendency to be misleading, including, but not limited to, any representation that the Corporation is approving or funding the loan.

  13. Residential Mortgage must establish, implement, and maintain procedures to ensure that, when the Corporation is acting the capacity of a mortgage broker, it provides to all consumers a loan origination and compensation agreement that strictly conforms to the content and format as set forth in the Division's regulation 209 CMR 42.16. For each consumer loan file, a completed copy of the loan origination and compensation agreement must be retained in the Corporation's books and records, as provided in 209 CMR 42.09(1)(b).

  14. Residential Mortgage must establish, implement, and maintain procedures to ensure that the Corporation accurately discloses the terms, conditions, and changes incident to the mortgage loan in all advertisements, including, but not limited to, the annual percentage rate.

  15. Residential Mortgage must address and correct all violations and areas of concern addressed in the Report.
    1. Within twenty (20) days of Residential Mortgage's receipt of the Report, the Corporation shall submit to the Commissioner a written response that addresses each of the violations and areas of concern specified in the Report. The written response will describe the revised policies and procedures adopted by Residential Mortgage to implement all corrective actions set forth in the "Examiner's Comments and Conclusions" section of the Report.
    2. Within forty-five (45) days of the effective date of this Consent Order, Residential Mortgage 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 and mortgage broker in Massachusetts, and (ii) the provisions of this Consent Order; and
    3. Residential Mortgage 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.

  16. On the thirtieth day after the end of each calendar quarter following the date of this Consent Order commencing October 30, 2013, Residential Mortgage shall furnish written progress reports to the Division, which will address and include the following:
    1. A description of the form, content, and manner of any actions taken to address each Section of this Consent Order and the results thereof; and
    2. Written findings prepared by Residential Mortgage detailing a review of management's and staff persons' adherence to the policies, programs, and procedures adopted pursuant to this Consent Order and to applicable statutes, regulations, and rules, as well as a description of any operational changes implemented during such quarter which are intended to improve Residential Mortgage's compliance condition in Massachusetts, and the results thereof.
  17. The reporting requirement to the Division referenced in Section 16 of this Consent Order will remain in effect and will not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this Consent Order from the Commissioner.

  18. Nothing in this Consent Order will be construed as permitting Residential Mortgage to violate any law, rule, regulation, or regulatory bulletin to which Residential Mortgage is subject.

  19. In consideration of the foregoing Consent Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Residential Mortgage's mortgage lender and mortgage broker licenses under Massachusetts General Laws chapter 255E, section 6, while this Consent Order is in effect.

  20. Failure to comply with the terms of this Consent Order will constitute grounds for license suspension and/or revocation, or other formal regulatory actions pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.

  21. This Consent Order will become effective immediately upon the date of its issuance.

  22. Residential Mortgage 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 will be authorized to submit a claim for such amounts against the mortgage lender and/or mortgage broker Massachusetts surety bonds maintained by Residential Mortgage pursuant to the Division's regulation 209 CMR 42.03(2)(a) and 209 42.06(2)(a).

  23. The provisions of this Consent Order will remain effective and enforceable except to the extent that, and until such time as, any provision of this Consent Order be modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.

  24. This Consent Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements, promises, representations, or warranties between the Division and Residential Mortgage.



    BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

    Dated at Boston, Massachusetts, this 15th day of October, 2013

    David J. Cotney
    Commissioner of Banks
    Commonwealth of Massachusetts