Temporary Order to Cease and Desist  The Lending Group, Inc.

Date:	06/05/2007
Organization:	Division of Banks
Docket Number:	2007-018
Location:	Jacksonville, FL

The Lending Group, Inc., Jacksonville, FL - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER
LICENSING
Docket No. 2007-018

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

In the Matter of
THE LENDING GROUP, INC
Jacksonville, Florida

Mortgage Lender License No. ML2581

The Commissioner of Banks ("Commissioner") having determined that THE LENDING GROUP, INC., ("The Lending Group" or the "Corporation"), located at 13901 Sutton Park Drive South, Suite 150, Jacksonville, Florida 32224 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

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 in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
2. The Lending Group is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. The Lending Group's main office is located at 13901 Sutton Park Drive South, Suite 150, Jacksonville, Florida 32224.
3. The Lending Group is licensed by the Commissioner as a mortgage lender 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 to The Lending Group to engage in the business of a mortgage lender in Massachusetts on or about April 6, 2004.
4. On Tuesday, May 29, 2007, a licensed Massachusetts mortgage broker ("Mortgage Broker") notified the Division that The Lending Group, had failed to timely disburse loan proceeds in a purchase mortgage loan transaction involving a residential property in Massachusetts which the Mortgage Broker had placed with The Lending Group. The Mortgage Broker further informed the Division of the following alleged facts and circumstances:
   1. The mortgage loan had closed and was scheduled to fund on Monday, May 21, 2007;
   2. On Friday May 25, 2007, four days after the purchase money closing referenced above, The Lending Group sent an e-mail notice (the "Notice") to the title company and/or the closing attorney's office, which stated in part that [The Lending Group] had suspended "all operations due to having no funding capacity."
   3. The Notice further stated that The Lending Group "could have funding in place as early as next week, but… [The Lending Group] did not want to commit to an exact date." In addition, the Notice stated that "any and all loans that have not funded, will not fund with us unless, we secure our facility and re-close."
5. Upon being informed of the above events by the Mortgage Broker, the Division reviewed the Web site maintained by The Lending Group at www.tlg.com which, as of an exact date that is unknown to the Division but at least as of Tuesday, May 29, 2007, confirmed the representations made by the Mortgage Broker. A copy of the notice which appeared on The Lending Group's Web site as of May 26, 2007 is attached as Exhibit 1. The notice stated, in part, that:

   We regret to inform you that as of this time [The Lending Group] must suspend all operations due to having no funding capacity…we are in pursuit of additional funding sources, the timing and probability of these sources are unknown…We could have funding in place as early as next week but we do not want to commit to an exact date... Our plan at this time is to relieve all employees from their role at TLG while we try to meet the new requirements of our existing warehouse lender and try to secure new facilities. For now, to be clear, any and all loans that have not funded, will not fund with us unless we secure our facility and re-close. Any and all loans waiting to close will not close with us until we can guaranty funding.

6. The Division's regulation 209 CMR 42.12(1)(e) 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…expiration, termination or default, technical or otherwise, of any existing line of credit or warehouse credit agreement.

7. The Division's regulation at 209 CMR 42.13(2) states:

   Licensees shall provide thirty days prior written notice of any change or closing of a Massachusetts location to the Commissioner and shall contain such other information as the Commissioner may require.

8. Based upon information and belief, the loan referenced in subparagraph (4)(a), has not yet funded as of the effective date of this Temporary Order.
9. As of the issuance of this Temporary Order, The Lending Group has not notified the Division of the facts and circumstances set forth above.
10. As a result of the events described in Paragraphs 1 through 9, of this Temporary Order, on Wednesday, May 30, 2007, at approximately 11:16 a.m., the Division contacted John Miklos, General Counsel for The Lending Group via e-mail, and requested certain books and records. The Division further advised Mr. Miklos that the records were to be submitted to the Division no later than 10:00 a.m. eastern standard time ("EST"), on Friday, June 1, 2007. The books and records requested include but are not limited to:
    1. A pipeline report of residential mortgage loan applications taken by The Lending Group, on properties located in all states;
    2. Financial statements, including balance sheets and income statements as of the year ended December 31, 2006 and for the interim period from January 1, 2007 to February 28, 2007;
    3. A list of the Corporation's warehouse lines of credit, with current balances and available funds for each line;
    4. A list of loans, if any, that the Corporation was required to repurchase during the past twelve months; and
    5. A list of loans, if any, that the Corporation closed but failed to fund in accordance with the terms of the mortgage note within the time permitted for such funding.
11. On Wednesday, May 30, 2007 at approximately 12:37 p.m., Mr. Miklos acknowledged receipt of the e-mail referenced in Paragraph 10 of this Temporary Order, and notified the Division that he would "respond more definitely by day end."
12. On the morning of Thursday, May 31, 2007, the Division received a phone call from Mr. James McCarthy, co-owner of The Lending Group. Mr. McCarthy was following up on the e-mail request to Mr. Miklos referenced in Paragraph 10 of this Temporary Order and stated that he was wondering "why" the Division needed the requested information. The Division notified Mr. McCarthy, that our request was as a result of the events referenced in Paragraphs 1 through 9 of this Temporary Order, to which he responded that the Corporation "did not have any of the requested information available since the Corporation had closed."
13. On Thursday, May 31, 2007, at approximately 12:39 p.m., Mr. Miklos responded, via e-mail, to the Division's original request referenced in Paragraph 10 of this Temporary Order, and stated that "after careful review and discussing [the Division's] request with senior management of The Lending Group, Inc., a decision had been made to refer [the Division's] inquiry to local counsel [Tritt & Franson, P.A.]."
14. On Thursday, May 31, 2007, at approximately 3:17 p.m. the Division contacted the Arnold D. Tritt, Jr., of Tritt and Franson, P.A., via e-mail., and renewed the Division's request for the information referenced in Paragraph 10. The Division also requested information regarding the status of the Massachusetts mortgage loan referenced in Paragraph 4 of this Temporary Order.
15. On, Thursday, May 31, 2007, at approximately 3:25 p.m., Mr. Tritt e-mailed the Division an acknowledgement of receipt and further stated that "[He] was unaware of the situation." However, Mr. Tritt did note that Albert Franson, another Partner at the firm who "most regularly works with The Lending Group, [was] out of this office [on Thursday],… and [would] report to [the Division] accordingly."
16. 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

17. As of the date of this Temporary Order, the information requested in Paragraphs 10 and 14 of this order have not been provided to the Division.

    CONCLUSIONS OF LAW

18. Based upon the information contained in Paragraphs 1 through 17, The Lending Group's acts or practices of contracting with consumer(s), through the underwriting and subsequent execution of mortgage loan closing documents relating to Massachusetts residential property, and thereafter failing to fund the mortgage loan(s) may constitute unfair and/or deceptive acts or practices in violation of Massachusetts General Laws chapter 93A, section 2.
19. Based upon the information contained in Paragraphs 1 through 17, due to the delay in funding contractual mortgage loan obligations The Lending Group has harmed a consumer, mortgage broker, and other parties in at least one residential mortgage loan transaction in the Commonwealth by engaging in acts or practices which may be unfair and/or deceptive in violation of Massachusetts General Laws chapter 93A, section 2.
20. Based upon the information contained in Paragraphs 1 through 17, by contracting to originate mortgage loan(s) that The Lending Group did not have sufficient warehouse funds available to fund, or any other available alternative source of funds, The Lending Group has engaged in unsafe or unsound practices in violation of the Division's regulation 209 CMR 42.04(2)(b)(3).
21. Based upon the information contained in Paragraphs 1 through 17, The Lending Group failed to notify the Commissioner within one business day of the expiration, termination, or default, technical or otherwise, of at least one existing line of credit or warehouse credit agreement, in violation of the Division's regulation 209 CMR 42.12(1)(e).
22. Based upon the information contained in Paragraphs 1 through 17, The Lending Group failed to provide the Commissioner with thirty days prior written notice of the Corporation's intention to cease business operations in violation of 209 CMR 42.13(2).
23. Based upon the information contained in Paragraphs 1 through 17, The Lending Group failed to provide the Commissioner with the statements and reports requested, in violation of 209 CMR 42.09(4)
24. Based upon the information contained in Paragraphs 1 through 17, The Lending Group 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 42.03(2)(c).
25. Based upon the information contained in Paragraphs 1 through 17, the Commissioner has determined that:
    1. The Lending Group 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 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 The Lending Group.
26. Based upon the information contained in Paragraphs 1 through 17, had the facts and conditions found therein existed at the time of The Lending Group'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 17 present sufficient grounds for the revocation of The Lending Group's mortgage lender license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b).

    ORDER TO CEASE AND DESIST

    After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

27. ORDERED that The Lending Group and any and all officers, directors, employees, independent contractors, or agents operating on behalf of The Lending Group, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage lender, as 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, The Lending Group 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.
28. IT IS FURTHER ORDERED that The Lending Group, 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.
29. IT IS FURTHER ORDERED that The Lending Group shall immediately place with one or more qualified lender(s), with no loss to applicants, the following: (a) The Lending Group's entire portfolio of Massachusetts residential mortgage loans which were closed by The Lending Group, and remain unfunded as of the issuance of this Temporary Order; and (b) The Lending Group's entire pending application list of Massachusetts residential mortgage loans. It being understood that "no loss to the applicant" shall mean that any loan which was closed by The Lending Group, as well as any application which was approved by The Lending Group, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by The Lending Group. In the event that no such placement can be made, The Lending Group 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. The Lending Group shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s).
30. IT IS FURTHER ORDERED that in any instance in which The Lending Group failed to fund a closed loan and in which the consumer, prior to the effective date of this Temporary Order, obtained funding through an alternate lender, The Lending Group shall reimburse each consumer the amount necessary to put the consumer in the same position as if The Lending Group had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
31. IT IS FURTHER ORDERED that The Lending Group shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of The Lending Group's pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall include all information on file regarding its Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:
    1. Within one (1) day of the effective date of this Temporary Order, The Lending Group shall submit to the Commissioner all information on file as of the date of submission regarding its portfolio of mortgage loans that were closed by The Lending Group prior to the effective date of this Temporary Order, but remain as yet unfunded. Such information shall include, but is not limited to, the following: The names of all individuals from whom The Lending Group processed an application and closed the residential mortgage loan, but failed to fund; the applicants' addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; the loan terms; the current funding status; the actual closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with The Lending Group's submitted loans;
    2. As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, The Lending Group shall submit to the Commissioner (i) all information on file as of the date of submission regarding The Lending Group's pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom The Lending Group 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); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with The Lending Group's submitted loans; and (ii) The Lending Group's balance sheet and year-to-date income statement, prepared as of the date of submission, and attested by a duly authorized officer of The Lending Group. The balance sheet should indicate The Lending Group's cash position at each of its depository banks as well as The Lending Group's bank account numbers; and
    3. On the last business day of each subsequent week after the effective date of this Temporary Order, The Lending Group shall provide the Commissioner with an updated, written status report of the mortgage loan applications identified above under subparagraphs 31(a) and 31(b). The form of the status report shall follow the format of the initial submission under subparagraphs 31(a) and 31(b) and shall indicate the final disposition of the loan application and include the final terms under which each approved loan is closed. The reporting requirement shall continue until each of the approved applications is placed with a lender and funded, funded by The Lending Group, or withdrawn by the applicant(s).
32. IT IS FURTHER ORDERED that The Lending Group 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 pursuant to Paragraph 29 of this TEMPORARY ORDER, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in The Lending Group's books and records and shall be available to the Commissioner, in their entirety, upon request.
33. 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.
34. 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 The Lending Group 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 5th day of June, 2007.

By: Steven L. Antonakes
Commissioner of Banks