By the Division of Banks
COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
MORTGAGE LENDER AND MORTGAGE BROKER LICENSING
Docket No. 2013-027
In the Matter of
MORTGAGE RESEARCH CENTER, LLC
d/b/a VETERANS UNITED HOME LOANS
Mortgage Company License No. MC1907
WHEREAS, MORTGAGE RESEARCH CENTER, LLC, d/b/a VETERANS UNITED HOME LOANS, a Missouri limited liability company (Mortgage Research or the Company), a licensed mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2, has been advised of its right to Notice and Hearing pursuant to General Laws chapter 255E, section 7(a), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (Consent Agreement) with representatives of the Division of Banks (Division) dated June 13, 2014, whereby, solely for the purpose of settling this matter, and without admitting any allegations, implications of fact, conclusions, 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, Mortgage Research agrees to the issuance of this CONSENT ORDER (Consent Order) by the Commissioner of Banks (Commissioner);
WHEREAS, as of July 30, 2012, the Division commenced a Mortgage Lender Community Investment examination (MLCI Examination) and a targeted Consumer Protection review of Mortgage Research pursuant to General Laws chapter 255E, section 8, to assess the Company’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;
WHEREAS, the Report of Examination (the Report) issued pursuant to the Division’s examination of Mortgage Research as of July 30, 2012 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 (Alleged Violations”);
WHEREAS, Mortgage Research cooperated fully with the Division in producing information and responding to questions relevant to the examination, and submitting a detailed response to the Report, attending two in-person conferences with the Division, and conferring with the Division on several dates;
WHEREAS, the Report does not identify any instance of actual harm to any borrower in connection with the allegations in the Report, and Mortgage Research has commenced and taken affirmative steps to establish and implement policies and procedures to correct the Alleged Violations identified in the Report and this Consent Order;
WHEREAS, the parties now seek to resolve by mutual agreement, the matters identified in the Report; and
WHEREAS, the provisions of this Consent Order shall apply to Mortgage Research’s Massachusetts business as a licensed mortgage lender and mortgage broker.
NOW COME the parties in the above-captioned matter, the Division and Mortgage Research, and stipulate and agree as follows:
- Mortgage Research shall establish, implement and maintain procedures to ensure that all mortgage loan originators with whom the Company conducts business are duly licensed as mortgage loan originators under Massachusetts General Laws chapter 255F, and properly sponsored through the Nationwide Multi-State Licensing System and Registry (NMLS) by Mortgage Research.
- Mortgage Research agrees to submit a payment in the amount of seven hundred and fifty thousand dollars ($750,000) in satisfaction of an administrative penalty collected in consideration of the Company’s conducting business with mortgage loan originators who were not appropriately licensed in Massachusetts. Mortgage Research 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 the Division of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
- Within forty-five (45) days of the Effective Date of this Consent Order, Mortgage Research shall identify to the Division an independent auditing or law firm (Auditing Firm) to develop an acceptable internal control plan (the Plan). Mortgage Research shall obtain prior written approval from the Division of the Auditing Firm proposed before such engagement and review is initiated. Within forty-five (45) days of the approval date, the Auditing Firm shall commence its review. The scope of the Auditing Firm’s review shall include, at a minimum:
- Review of policies and procedures to ensure that Mortgage Research’s compliance system is managed by managers with assigned responsibility for all consumer compliance and related matters, including, but not limited to, monitoring the Company’s compliance and ensuring that all corrective action is taken to address all compliance violations relating to and/or set forth in the Report as required by this Consent Order;
- Review of policies and procedures which provide for adequate training to applicable staff persons, conducted by qualified and trained personnel, which includes, but is not limited to, proper instruction, adequate supervision and ongoing training to ensure proper implementation and execution of the revised policies and procedures implemented pursuant to this Consent Order;
- Identify the type and number of senior management and officer personnel necessary to manage adequately and supervise properly the Company’s mortgage business activity and the compliance system; ensure that each individual identified possesses the ability, experience and other qualifications necessary to competently perform present and anticipated duties, and to implement and adhere to Mortgage Research’s revised policies, procedures and Plan adopted pursuant to this Consent Order; and confirm the level of staffing needed to conduct competently the Company’s operations affecting Massachusetts’ consumers;
- Review and revise policies, procedures and controls to ensure that individuals engaged in the activities of a mortgage loan originator on Mortgage Research’s behalf are licensed; and
- Develop, implement and enhance internal controls, including controls over mortgage loan origination activities, to comply with applicable federal and Massachusetts laws and regulations and regulatory bulletins.
- Mortgage Research shall establish, implement and maintain procedures to ensure that the Company is not engaging in insurance sales activity without obtaining prior approval from the Division, in accordance with the requirements of Massachusetts General Laws chapter 167F, section 2A(b)(1) and the Division’s regulation 209 CMR 49.05(1).
- Within forty-five (45) days of the Effective Date of this Consent Order, Mortgage Research shall identify an independent consultant (Consultant) to conduct a written risk assessment of the Company’s compliance with fair lending laws and regulations. Mortgage Research shall obtain written approval from the Division before such engagement is initiated.
- The scope of the Consultant’s review shall include, at a minimum, the following: application intake and processing; applicant counseling processes; loan pricing and authorized discretion; loan decision making; exceptions to loan policies; all lending policies and procedures; maintenance and collection of loan data for analysis purposes; and fair lending training for all employees, including management, specific to job function and responsibilities assigned.
- Within ninety (90) days of the Division’s written approval of the Consultant, the Consultant shall prepare and submit to the Division and Mortgage Research simultaneously the final written report detailing the findings.
- Mortgage Research shall develop and implement a written action plan (Action Plan) reasonably designed to address and mitigate risks and weaknesses, and correct violations identified in the Consultant’s final report. Upon written approval of the Action Plan from the Division, the Company shall take reasonable actions to adopt and ensure implementation of the Action Plan. The Company shall review and update the fair lending risk assessment and action plan at least annually. The Action Plan shall require at a minimum, the following:
- Developing and implementing ongoing fair lending monitoring procedures; Monitoring should include reviews of all loan products and the underwriting guidelines and procedures on a periodic basis, and special attention should be provided to the terms and conditions and the effect on protected classes as compared to other borrowers. The results of fair lending monitoring reviews should be reported to senior management at least quarterly.
- Employing a qualified third party to conduct a comprehensive fair lending audit annually. The scope of the audit should, at a minimum, include areas of elevated risk as identified through the fair lending risk assessment. All fair lending audit findings shall be presented to senior management in a timely manner. Corrective actions or recommendations resulting from the audit should be promptly addressed by management.
- Ensure all management and staff are provided comprehensive fair lending training. Training should be in-depth, address risks specific to the institution, and describe measures to mitigate these risks.
- Mortgage Research shall establish, implement and maintain policies and procedures to ensure that the Company maintains all books, records, and accounts in accordance with the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulations at 209 CMR 42.09 and 209 CMR 48.00 et seq., (Massachusetts Record Keeping Requirements). The policies and procedures are to include but are not limited to:
- Maintaining procedures to ensure that Mortgage Research maintains loan files in a manner consistent with the Massachusetts Record-Keeping Requirements;
- Ensuring that Mortgage Research conducts on-going, periodic reviews of document filing and retention procedures, and its adherence thereto, to ensure its books, records, and accounts are maintained in a manner sufficient to evidence compliance with applicable federal laws, rules and regulations and Massachusetts Record Keeping Requirements; and
- Ensuring that all applicable staff of Mortgage Research with form completion and/or document filing and retention responsibilities receive adequate training to ensure proper implementation and execution of the revised policies and procedures adopted by the Company under this Section of the Consent Order.
- Mortgage Research shall 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 administered by the Consumer Financial Protection Bureau, 12 C.F.R. Part 1003 (Regulation C). Such procedures shall require the Company to implement internal controls to ensure that Mortgage Research accurately determines if a loan is reportable pursuant to the requirements of Regulation C and accurately compiles and records all required data in the Company’s HMDA Loan Application Register (LAR) if a loan is deemed to be reportable.
- Mortgage Research shall establish, implement and maintain procedures to identify and address any reporting errors and retain records demonstrating that the Company’s findings and corrective action are taken.
- Mortgage Research shall establish, implement and 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 shall necessarily ensure the proper implementation and execution of the revised practices and procedures adopted by Mortgage Research pursuant to this Section of the Consent Order.
- Mortgage Research shall establish, implement, and maintain procedures to ensure compliance with the Equal Credit Opportunity Act, 15 U.S.C. 1691 et seq., as administered by the Consumer Financial Protection Bureau, 12 C.F.R. Part 1002 (Regulation B).
- Mortgage Research shall establish, implement and maintain procedures to ensure that the Company provides applicants the appropriate notification of action taken on applications within 30 days of receipt of a completed application, and provides all applicants with all the information required in accordance with Section 1002.9 of Regulation B.
- Mortgage Research shall establish, implement and maintain procedures to ensure that the Company collects and records the proper Government Monitoring information on all applications or properly records that the information was not provided in accordance with Section 1002.13(b) of Regulation B.
- Mortgage Research shall comply with all laws and regulations applicable to its conducting the business of a mortgage lender and mortgage broker in Massachusetts, including, but not limited to, Massachusetts General Laws chapters 255E and 255F, and the Division’s regulations 209 CMR 41.00 et seq. and 209 CMR 42.00 et seq. Such obligations shall necessarily include Mortgage Research’s duty to correct any violations of law identified in the Report.
- Within forty-five (45) days from the effective date of this Consent Order, Mortgage Research shall establish, implement, and maintain a loan review process to assess the Company’s compliance with: (a) applicable statutes, rules, regulations, regulatory bulletins, and other relevant provisions of law for those entities engaged in the business of a mortgage lender and mortgage broker (b) the provisions of this Consent Order. Such loan review process shall be designed to prevent the recurrence of the violations addressed in the Report; and
- Mortgage Research 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.
- On the thirtieth (30th) day after the end of each calendar quarter following the date of this Consent Order, Mortgage Research shall 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 and the results thereof.
- Mortgage Research agrees that, in the event that the Company fails to submit the payments set forth in this Consent Order in the amounts specified herein and in accordance with the applicable deadlines, the Division shall be authorized to submit a claim for such amounts against the mortgage lender and/or mortgage broker Massachusetts surety bonds maintained by Mortgage Research pursuant to the Division’s regulations 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a).
- Nothing in this Consent Order shall be construed as permitting Mortgage Research to violate any law, rule, regulation, or regulatory bulletin to which Mortgage Research is subject.
- In consideration of the foregoing Consent Order, the Division agrees not to pursue formal measures of any kind, relative to this matter, against Mortgage Research to suspend or revoke Mortgage Research’s mortgage lender and mortgage broker licenses under General Laws chapter 255E, section 6, or against Mortgage Research or against any of the employees of Mortgage Research under General Laws chapter 255F, 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. It being understood that this Consent Order is the complete document representing the resolution of the Alleged Violations noted in the Report. It is the express purpose and intention of the parties that Mortgage Research will not be subject to any future enforcement or other regulatory action by the Division arising out of any mortgage loan activities that; fall within the scope covered by the MLCI examination and limited scope compliance examination; and occurred prior to the effective date of this Consent Order. It being understood that the Division reserves all of its rights, duties, and authority to enforce all statutes, rules and regulations under its jurisdiction, against Mortgage Research regarding any mortgage loan activities falling beyond either the subject matter scope of the MLCI examination and limited scope compliance examination and beyond the effective date of this Consent Order.
- 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 upon 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 Commissioner of Banks and Mortgage Research.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:
Dated at Boston, Massachusetts, this 13th day of June 2014.
David J. Cotney
Commissioner of Banks