By the Division of Banks
COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER LICENSING
Docket No. 2013-023
In the Matter of
TERRACE MORTGAGE CORPORATION d/b/a
Mortgage Corporation License No(s). MC7101 et al.
WHEREAS, TERRACE MORTGAGE CORPORATION d/b/a BRIGHTPATH MORTGAGE, (Terrace Mortgage or the Corporation), a licensed mortgage broker and mortgage lender 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 July 10, 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 broker and mortgage lender, Terrace Mortgage agrees to the issuance of this CONSENT ORDER (Consent Order) by the Commissioner of Banks (Commissioner);
WHEREAS, an examination of Terrace Mortgage was conducted pursuant to General Laws chapter 255E, section 8, as of December 13, 2012 to assess the Corporation’s level of 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 the Commonwealth;
WHEREAS, the Report of Examination (Report) issued pursuant to the Division’s examination of Terrace Mortgage alleged substantial non-compliance with applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts; and
WHEREAS, the parties now seek to resolve by mutual agreement, the matters identified in the Report.
NOW COME the parties in the above-captioned matter, the Division and Terrace Mortgage, and stipulate and agree as follows:
- Terrace 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 CFR Part 1003 (Regulation C).
- Terrace Mortgage must establish, implement, and maintain procedures to ensure that, for all HMDA reportable loan applications, Terrace Mortgage accurately compiles and records all required data in the Corporation’s HMDA Loan Application Register (LAR).
- Within thirty (30) days of the effective date of this Consent Order, Terrace Mortgage shall file a HMDA LAR to the appropriate federal government agency for data compiled in calendar year 2010.
- Terrace Mortgage must establish, implement, maintain, and periodically update internal controls 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 shall necessarily ensure the proper implementation and execution of the revised practices and procedures adopted by Terrace Mortgage pursuant to this Section of the Consent Order.
- Terrace 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 CFR Part 1002 (Regulation B).
- Terrace Mortgage must implement internal controls to ensure that it properly notifies applicants of adverse actions taken on applications, in compliance with Section 1002.9(a) of Regulation B. Such adverse action notices must contain all the information required under Section 1002.9(a), including but not limited to, a statement of specific reasons for the adverse action; and must be retained in the Corporation’s books and records as evidence of compliance.
- Terrace Mortgage must establish, implement, and maintain procedures to ensure that the Corporation properly documents the outcome of each loan application received and retains documentation clearly reflecting such outcome in its books and records.
- Terrace Mortgage must establish, implement, and maintain appropriate policies and procedures for the monitoring and oversight of its settlement agents and/or closing attorneys to ensure that no duplicate discharge/release recording fees are collected from Massachusetts borrowers.
- Terrace Mortgage must reimburse the borrowers identified in the Report for any duplicate discharge/release fees that were collected by Terrace Mortgage and retained by the closing agent. The amount of the reimbursements shall equal the amount of the duplicative discharge/release fee collected by Terrace Mortgage when Terrace Mortgage’s closing attorney did not pay the discharge/release fee on behalf of the consumers and did not reimburse the consumers for duplicative discharge/release fees collected. In instances where the borrowers identified in the Report were previously issued a refund of the duplicate fee, Terrace Mortgage will submit evidence of such. With its response to the Report, Terrace Mortgage must submit evidence of the reimbursements/refunds issued pursuant to this Sub-Section of the Consent Order. Evidence shall include the consumers’ names, the amounts of the reimbursements, the dates of the reimbursements, copies of the refund checks, and copies of certified mail receipts to illustrate the borrowers’ receipt of the reimbursements, as appropriate.
- Terrace Mortgage must conduct a review of all Massachusetts residential refinance mortgage loans closed since January 2, 2011 to identify transactions in which the borrower was charged duplicate discharge/release fees. Terrace Mortgage must investigate the loan transactions so identified to determine whether the discharge/release was performed by the Corporation’s closing attorney or by the prior lien holder and, in cases where the closing attorney did not perform the service, to determine whether the full discharge/release fee amount listed on the settlement statement was promptly refunded to the borrower. Terrace Mortgage shall submit a description of the methodology used to complete the portfolio review with its response to the Report.
- If the investigation of the loan files referenced above identifies cases where appropriate refunds were not issued to the borrower by the Corporation’s closing attorney or settlement agent, the Corporation must reimburse the affected borrowers for the duplicate fee. Terrace Mortgage shall submit the results of the portfolio review and any reimbursements issued pursuant to this Sub-Section of the Consent Order to the Division within thirty (30) days of the effective date of this Consent Order.
- Terrace Mortgage must establish, implement and maintain procedures to ensure that the Corporation establishes whether it is performing in the capacity of a mortgage broker or mortgage lender at the inception of the loan transaction and must ensure that all disclosures provided to the consumers accurately reflect the capacity in which the Corporation is performing.
- Terrace Mortgage must establish, implement, and maintain policies and procedures to ensure that the Corporation is in compliance with the Division’s regulation 209 CMR 53.00 et seq. regarding determination and documentation of a borrower’s interest when refinancing a home loan that was consummated within 60 months prior to the Corporation’s receipt of an application for a new home loan. Such procedures shall ensure that in any transaction in which Terrace Mortgage is performing in a mortgage lender capacity, the burden is upon Terrace Mortgage, exclusively, to determine that the refinancing is in the borrower’s interest.
- Terrace Mortgage must ensure that the worksheet or other document indicating that a refinance loan is in the borrower’s interest is completed by Terrace Mortgage and does not, in any manner, shift the burden to the borrower to determine and to demonstrate that the home loan is in the borrower’s interest.
- Terrace Mortgage must establish, implement, and maintain procedures to ensure that the Corporation files all quarterly and annual reports on a timely basis.
- Terrace Mortgage must establish, implement, and maintain procedures to ensure every residential mortgage presented for record in which a mortgage broker is involved contains the name, address, and license number of the mortgage broker responsible for placing the mortgage loan with the Corporation, and the name, address, and license number of the mortgage loan originator who acted on behalf of the mortgage broker, as required pursuant to General Laws chapter 183, section 6D.
- Terrace Mortgage must establish, implement and maintain procedures to ensure all applicants whose residential mortgage loan application is denied receive a Mortgage Review Board Disclosure Form notifying applicants of their right to appeal such denial to the appropriate review board in accordance with Massachusetts General Laws chapter 167, section 14A. For each consumer loan file, a completed copy of the Mortgage Review Board Disclosure Form shall be retained in the Corporation’s books and records as evidence of compliance.
- Terrace Mortgage must establish, implement, and maintain procedures to ensure that the Corporation delivers the servicing disclosure statement within three (3) business days of receipt of an application, as required pursuant to 12 CFR 1024.21(c).
- Terrace Mortgage agrees to submit a payment in the amount of five hundred dollars ($500.00) in satisfaction of an administrative penalty collected in consideration of the Corporation acting as a mortgage broker in Massachusetts prior to being licensed as such. Terrace Mortgage shall remit payment in full of the amount indicated above, payable to the “Commonwealth of Massachusetts,” with the executed copy of the Consent Agreement, to Massachusetts Division of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
- Terrace Mortgage must address and correct, within thirty (30) days of receipt of the Report, all violations and areas of concern addressed in the Report.
- Within thirty (30) days of Terrace 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 shall describe the revised policies and procedures adopted by Terrace Mortgage to implement all corrective actions set forth in: (i) the “Significant Violations” section of the Report and (ii) the provisions of this Consent Order;
- Within thirty (30) days from the effective date of this Consent Order, Terrace Mortgage shall establish, implement, and maintain quality control standards which provide for a 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. Such quality control standards shall be designed to prevent the recurrence of the violations addressed in the Report; and
- Terrace Mortgage shall establish, implement, and maintain procedures and policies to ensure 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.
- On the thirtieth (30th) day after the end of each calendar quarter following the date of this Consent Order, Terrace Mortgage must furnish written progress reports to the Division, which shall address and include the following:
- A description of the form, content, and manner of any actions taken to address each Section of this Consent Order, as well as violations and other areas of concern reflected in the Report, and the results thereof; and
- Written findings prepared by Terrace 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 Terrace Mortgage’s compliance condition in Massachusetts and the results thereof.
- The reporting requirement to the Division referenced in Section 12 of this Consent Order shall remain in effect and shall not be amended or rescinded without the prior written modification, termination, or suspension of the applicable provision of this Consent Order from the Commissioner.
- Nothing in this Consent Order shall be construed as permitting Terrace Mortgage to violate any law, rule, regulation, or regulatory bulletin to which Terrace Mortgage is subject.
- In consideration of the foregoing Consent Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Terrace Mortgage’s mortgage licenses under General Laws chapter 255E, section 6, while this Consent Order is in effect.
- Failure to comply with the terms of this Consent Order shall constitute grounds for license suspension and/or revocation, or other formal regulatory action pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
- Terrace Mortgage agrees, in the event the Corporation fails to submit the payment set forth in this Consent Order in the amount specified herein and in accordance with the applicable deadline, the Division shall be authorized to submit a claim for such amount against the mortgage lender and/ mortgage broker Massachusetts surety bond maintained by Terrace Mortgage pursuant to the Division’s regulations 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a).
- This Consent Order shall become effective immediately upon the date of its issuance.
- 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 a court of competent jurisdiction.
- 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 Terrace Mortgage.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:
Dated at Boston, Massachusetts, this 10th day of July, 2013
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts