COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
Docket No. 2007-014
FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST
In the Matter of
APEX FINANCIAL GROUP, INC.,
d/b/a AAPEX MORTGAGE
Mortgage Company License No(s). MC1248 and MC4665
The Commissioner of Banks ("Commissioner") having determined that APEX FINANCIAL GROUP, INC., d/b/a AAPEX MORTGAGE ("Aapex Mortgage" or the "Corporation"), located at 213 Bloomingdale Avenue, Brandon, Florida 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).
FINDINGS OF FACT
- 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.
- Aapex Mortgage is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. Aapex Mortgage's main office is located at 213 Bloomingdale Avenue, Brandon, Florida.
- Aapex Mortgage is licensed by the Commissioner as a mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner initially issued a mortgage lender license, license number ML1248, to Aapex Mortgage to engage in the business of a mortgage lender on or about September 30, 1999. The Commissioner initially issued a mortgage broker license, license number MB2216, to Aapex Mortgage to engage in the business of a mortgage broker on or about March 28, 2001. On or about June 1, 2003, the mortgage lender and mortgage broker licenses were combined under a mortgage company license, license number MC1248. License number MC1248 authorized Aapex Mortgage to conduct the mortgage company business from the Corporation's main office located at 213 Bloomingdale Avenue, Brandon, Florida.
- Aapex Mortgage maintains an additional licensed office location at 17 Poplar Street, Roslindale, Massachusetts, from which the Corporation conducts its mortgage lender and mortgage broker business. According to records maintained on file with the Division, the Commissioner issued a mortgage company license, license number MC4665, to Aapex Mortgage for that location on or about January 12, 2007.
- Failure to Provide Notification of Regulatory Actions Entered in Other States
- North Carolina Consent Agreement
- On January 24, 2007, the Office of the Commissioner of Banks of the State of North Carolina ("North Carolina Banking Department") and Aapex Mortgage entered into a Consent Agreement, Docket No 06:078:MBB ("Consent Agreement") to resolve matters initially raised by a North Carolina Banking Department examination of Aapex Mortgage.
- In the Consent Agreement, the North Carolina Banking Department recites that, if the matter were to proceed to hearing, the North Carolina Office of the Commissioner of Banks would put on evidence which it contends would show that a routine examination conducted by the North Carolina Banking Department in October 2005, revealed that 32 of 185 loans reviewed as part of the examination were closed through Aapex Mortgage by unlicensed individuals.
- In the Consent Agreement, the North Carolina Banking Department further alleges that the October examination revealed that Aapex Mortgage had violated additional North Carolina statutes and rules, including laws relevant to net branching, charging of fees to consumers, record keeping, and the use of trust accounts in North Carolina.
- Pursuant to the terms of the Consent Agreement, Aapex Mortgage did not admit or deny the allegations relating to unlicensed activity.
- Alabama Revocation Order
- On January 25, 2007, The State of Alabama State Banking Department ("Alabama Banking Department") issued an Order revoking the license of Aapex Mortgage and requiring that Aapex Mortgage cease and desist from further operations in the state of Alabama, Case #CC-2006-10. ("Alabama Order").
- In the Alabama Order, the Alabama Banking Department concluded that Aapex Mortgage was conducting business from several unlicensed locations in Alabama.
- The Alabama Order further states that several complaints had been filed with the Alabama Banking Department regarding the operations of Aapex Mortgage and one particular employee, Christopher Collins.
- The complaints specifically referenced in the Alabama Order were taken in April and September 2006. According to the Alabama Order, Mr. Collins had been collecting "cash deposits" from applicants and then failing to obtain a loan for them. The Alabama Order notes that in its response to the April 2006 complaint to the Alabama Banking Department, the Corporation identified Mr. Collins as a "potential employee." In the interim, Mr. Collins was hired by Aapex Mortgage. Mr. Collins was terminated in October 2006, after another compliant had been forwarded by the Alabama Banking Department to Aapex Mortgage. The Alabama Order notes that Mr. Collins' conduct in April "would seem valid grounds NOT to hire a "potential employee".
- The Alabama Order states, " [I]n consideration of the track record of [Aapex Mortgage] as a whole, it appears that there are sufficient grounds for revocation of Aapex's license . `. . . [Aapex Mortgage] has not conducted its business in accordance with the laws of this state."
- Ohio Notice of Intent
- On February 27, 2007, The State of Ohio Department of Commerce, Division of Financial Institutions ("Ohio Department of Commerce") issued a Notice of Intent to Revoke Aapex Mortgage's mortgage broker certificate of registration, Case No. M2007-80. ("Ohio Notice").
- The Ohio Notice stated that on February 6, 2007, Aapex Mortgage was notified by the Ohio Secretary of State ("Secretary of State") that the Corporation's Articles of Incorporation/Certificate of Authority had been cancelled due to the Corporation's nonpayment of its franchise tax within the time required by law.
- The Division's regulation at 209 CMR 42.12(1)(c) states, in part:
A Licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of any of the following significant developments: . . . (c) Receiving notification of the institution of license . . . revocation procedures, or other formal or informal regulatory action, in any state against the Licensee, and the reasons thereof.
- As of the effective date of this TEMPORARY ORDER, the Division has not received notification from Aapex Mortgage of the occurrence of the events referenced above in Paragraphs 5 through 16 of this TEMPORARY ORDER.
- Failure to File Quarterly Reports and Financial Statements in Accordance with Division Reporting Standards
- The Division requires licensed mortgage lenders to submit quarterly reports to the Division within forty-five days of the end of the calendar quarter.
- The Division's Regulation 209 CMR 42.09(4) states in part:
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.
- As of the effective date of this TEMPORARY ORDER, Aapex Mortgage has failed to submit quarterly reports and corresponding financial statements for the quarters ending June 30, 2006 and September 30, 2006. In addition, for the quarter ending March 31, 2006, the Corporation submitted only the quarterly report, and failed to submit the corresponding financial statement.
- Failure to Provide Information Requested Pursuant to a Division Inspection of the Corporation
- Massachusetts General Laws chapter 255E, section 8 states, in part, that:
Each licensee shall, when directed by said commissioner, permit said commissioner or his duly authorized representative to inspect its relevant records and evidence of compliance with the provisions of this chapter or any rule or regulation issued hereunder and with any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter . . . . For the purposes of such inspection, said commissioner or his representative shall have access to the offices and place of business, books, accounts, papers, records and files of all such licensees.
- On November 16, 2006, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division requested access to Aapex Mortgage's books and records in order to assess Aapex Mortgage's level of compliance with applicable Massachusetts statutes and the Division's regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in the Commonwealth.
- At all relevant times, information reported by Aapex Mortgage and maintained in the Division's records indicate that all books, records, and accounts relating to the licensed mortgage company business have been maintained by Aapex Mortgage at the Corporation's main office in Brandon, Florida.
- On November 28, 2006, the Division once again requested the documents referenced in Paragraph 22. Mr. Paul Czap, the individual designated by the Corporation as the contact person for Division requests, stated that the Corporation was "working" on the request.
- On December 8, 2006, during a series of e-mail communications with the Division, Mr. Czap stated that although the company was having some "hardware problems" they would be e-mailing the requested information the next day, December 9, 2006, at the latest.
- The Division's regulation governing the maintenance of books and records, at 209 CMR 48.04 states, in part:
"Each Licensee shall keep and use its books, records, and accounts within the Commonwealth, except, however, that with the prior approval by the Commissioner of a written plan, a Licensee may keep such books, records, and accounts at a location, or locations, outside of the Commonwealth. Such written plan shall contain:
(1) an agreement to provide access, within 72 hours of an official request, to any requested books, records, and accounts to a suitable and mutually agreed upon location within the Commonwealth for the purpose of examination…"
- On December 11, 2006, after failing to receive the information referenced in Paragraph 25, the Division e-mailed the Corporation a letter referencing the above regulation and renewed the Division's request for the information.
- On December 22, 2006, the Division notified Aapex Mortgage that although most files had been received, some additional information was necessary in order for the examination to commence.
- On December, 29, 2006, January 8, 2007, and January 17, 2007, the Division contacted Aapex Mortgage to follow up on the December 22, 2006 notification, regarding the additional information. In all correspondence, the Division referenced the Division's regulation cited in Paragraph 26 of this Temporary Order.
- On January 26, 2007, pursuant to her request on such date, Beverly Alexander, another representative of the Corporation, was provided with a duplicate list of the documents that were necessary to be submitted in order to permit the initiation of the Division's examination.
- On January 30, 2007, the Division received some of the requested documents, including a revised list of Massachusetts residential loans made during the review period.
- On January 30, 2007, January 31, 2007, February 1, 2007, and February 2, 2007 the Division had several telephone conversations with Beverly Alexander regarding the remaining documents that had been requested by the Division.
- On February 7, 2007, after several telephone conversations with Beverly Alexander, Roy Williams, President of Aapex Mortgage, notified the Division that Aapex Mortgage was unable to provide the Division with the requested information regarding the number of loans the Corporation had closed as a mortgage broker and as a mortgage lender.
- On February 8, 2007, the Division received a revised loan list, after contacting the Corporation about some discrepancies in the information reported. The new list provided by the Corporation referenced 648 Massachusetts residential loan transactions whereas the list provided to the Division by Aapex Mortgage in December 2006 identified only 13 transactions.
- On February 23, 2007, the Division requested more information regarding the discrepancy in the number of transactions reported during previous communications with the Corporation in December 2006, and further referenced the documents that had previously been requested on November 16, 2006, December 22, 2006, and January 26, 2007.
- As of the effective date of this Temporary Order, certain information which was requested in an accordance with an examination which was initiated on or about November 16, 2006 has not been provided to the Division by Aapex Mortgage.
CONCLUSIONS OF LAW
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255E, section 4 and the Division's regulation 209 CMR 42.06(2)(c).
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage failed to notify the Commissioner in writing, within one business day, that on January 24, 2007, the North Carolina Banking Department and Aapex Mortgage entered into a Consent Agreement, in violation of 209 CMR 42.12(1)(c).
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage failed to notify the Commissioner in writing, within one business day, that on January 25, 2007 the AlabamaBanking Department issued an Order revoking the Corporation's license and requiring that that the Corporation cease and desist from further activity in the state of Alabama, in violation of 209 CMR 42.12(1)(c).
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage failed to notify the Commissioner, in writing, within one business day, that on February 27, 2007, the Ohio Department of Commerce issued to the Corporation a Notice of Intent to Revoke Mortgage Broker Registration, in violation of 209 CMR 42.12(1)(c).
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage repeatedly failed to provide the Division's representatives with access to Aapex Mortgage's books, accounts, records and files to permit an inspection in violation of the Division's regulation 209 CMR 48.04(1), which authorizes such an inspection within 72 hours of an official request.
- Based upon the information contained in Paragraphs 1 through 36, Aapex Mortgage failed to allow the Division's representatives access to Aapex Mortgage's office, books, accounts, papers, records and files to permit an inspection, in violation of Massachusetts General Laws chapter 255E, section 8 which authorizes such inspection with or without prior notice to the licensee.
- Based upon the information contained in Paragraphs 1 through 36, the Commissioner has determined that:
- Aapex Mortgage has engaged in, is engaging 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
- The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Aapex Mortgage.
- Based upon the information contained in Paragraphs 1 through 36, had the facts and conditions found therein existed at the time of Aapex Mortgage's original mortgage lender 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 36 present sufficient grounds for the revocation of Aapex Mortgage's mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b) and 209 CMR 42.07(2) (b).
ORDER TO CEASE AND DESIST
After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
- ORDERED that Aapex Mortgage and any and all officers, directors, employees, independent contractors, or agents operating on behalf of Aapex Mortgage, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage lender and mortgage broker, as those activities are defined under Massachusetts General Laws chapter 255E, section 1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this Temporary Order. Therefore, Aapex Mortgage 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.
- IT IS FURTHER ORDERED that Aapex Mortgage, 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.
- IT IS FURTHER ORDERED that Aapex Mortgage 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 Massachusetts residential mortgage loan applications. It being understood that "no loss to the applicant" shall mean that any loan which may have been closed by Aapex Mortgage 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 Aapex Mortgage. In the event that no such placement can be made, Aapex Mortgage 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. Aapex Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
- IT IS FURTHER ORDERED that as soon as possible, but in no event later than two days after the effective date of this Temporary Order, Aapex Mortgage shall submit the following information in writing to the Commissioner:
- A year-to-date balance sheet and statement of income and expense. The balance sheet should indicate Aapex Mortgage's cash position at each of its depository banks as well as the corresponding bank account numbers. The balance sheet and statement of income and expense shall be signed and dated by an executive officer of Aapex Mortgage under the pains and penalties of perjury to certify that the information reported is true and accurate and prepared in accordance with generally accepted accounting principles.
- A detailed record of all pending residential mortgage loan applications, from both the Corporation's lending and its brokering operations, which shall include, but is not limited to, the following: customer name, address, telephone number; all prepaid loan fees submitted by the customer; amount of loan; application status (i.e. filed, submitted to lenders); scheduled closing date; rate lock status; the location of all original open application files; and a list of applicable wholesale lenders. The latter list should include telephone numbers of contact persons familiar with Aapex Mortgage's submitted loans.
- IT IS FURTHER ORDERED that Aapex Mortgage shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender or mortgage broker pursuant to Paragraph 47 of this Temporary Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Aapex Mortgage's books and records and shall be available to the Commissioner, in their entirety, immediately upon request on the date and time specified by the Commissioner.
- 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.
- 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 Aapex Mortgage 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 13th day of March, 2007.
By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts