Consent Order  Clearpoint Funding, Inc.

Date:	02/25/2013
Organization:	Division of Banks
Docket Number:	2012-027
Location:	Westborough, MA

Clearpoint Funding, Inc., Westborough, MA - Consent Order

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2012-027

CONSENT ORDER

In the Matter of
CLEARPOINT FUNDING, INC.
Westborough, Massachusetts

Mortgage Company License No. MC1898

WHEREAS, CLEARPOINT FUNDING, INC., ("ClearPoint Funding" or the "Corporation"), 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 February 25, 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, ClearPoint Funding agrees to the issuance of this CONSENT ORDER ("Consent Order") by the Commissioner of Banks ("Commissioner");

WHEREAS, on September 1, 2010, as result of findings from an examination/inspection conducted by the Division as of May 14, 2009, ClearPoint Funding and the Commissioner entered into a Consent Order ("2010 Consent Order");

WHEREAS, on January 30 2012, the Division conducted a Mortgage Lender Community Investment examination and a Compliance examination/inspection of ClearPoint Funding pursuant to General Laws chapter 255E, section 8, 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, as well as to assess the Corporation’s compliance with the 2010 Consent Order;

WHEREAS, the Report of Examination/Inspection (the "Report") issued pursuant to the Division’s examination/inspection of ClearPoint Funding as of January 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;

WHEREAS, the Division has considered the findings presented in the Report and has determined that the Corporation is not in full compliance with the provisions of the 2010 Consent Order;

WHEREAS, on or about September 18, 2012, ClearPoint Funding submitted a preliminary response to the Report in which the Corporation indicated that it had commenced corrective action on several of the violation areas noted in the Report and this Consent Order during the examination/inspection or immediately upon receipt of the Report.

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

WHEREAS, by mutual agreement of the Corporation and the Division, the 2010 Consent Order is hereby superseded and replaced by this Consent Order.

ORDER

NOW COME the parties in the above-captioned matter, the Division and ClearPoint Funding, and stipulate and agree as follows:

1. With the Corporation’s preliminary response to the Report, ClearPoint Funding submitted a written profit plan, consisting of goals and strategies for providing the foundation for improved profitability.
   1. The written profit plan included:
      1. identification of the major areas in, and means by which, management sought to improve ClearPoint Funding’s operating performance and enhance capital formation;
      2. a description of the operating assumptions that formed the basis for, and adequately supported, major projected income and expense components; and
      3. a statement of the Board of Director’s commitment to the continued maintenance of acceptable levels of liquidity and capital.
2. On the thirtieth day after the end of each calendar quarter following the date of this Consent Order, ClearPoint Funding, shall, while holding an active license with the Division, upload to the Nationwide Mortgage Licensing System and Registry ("NMLS") updated financial statements prepared in accordance with GAAP, signed and dated by a duly authorized officer of ClearPoint Funding with sufficient knowledge to attest to the information reported in the financial statements. Each such filing submitted to the Division shall include updated financial statements prepared as of the last day of the calendar quarter, including a balance sheet and statement of income and expense.
3. ClearPoint Funding shall establish, implement and maintain procedures to ensure that the Corporation notifies the Division, in writing, within one business day, of the expiration, termination or default, technical or otherwise, of any existing line of credit or warehouse credit agreement in accordance with the Division’s regulation 209 CMR 42.12(1)(e).
4. ClearPoint Funding shall establish, implement and maintain procedures to ensure that loans to Massachusetts consumers are funded on time and any additional fees and expenses due to funding delays are not charged to the consumers.
   1. With its preliminary response to the Report, ClearPoint Funding indicated that the Corporation had refunded all Massachusetts consumers as identified in the Report, any additional costs incurred by the Corporation’s failure to timely fund their loans.
   2. With its preliminary response to the Report, ClearPoint Funding submitted evidence of the reimbursements issued pursuant to this Section of the Consent Order.
5. ClearPoint Funding shall establish, implement and maintain policies and procedures to ensure that the HUD-1 or HUD-1A is prepared in accordance with the instructions as set forth in Appendix A of the Real Estate Settlement Procedures Act’s ("RESPA") regulation as administered by the Consumer Financial Protection Bureau at 12 C.F.R. Section 1024.8(b) ("Regulation X"). The provisions of this order shall necessarily ensure that ClearPoint Funding will transmit to the settlement agent all information necessary to accurately complete the HUD-1 or HUD-1A.
   1. With its preliminary response to the Report, ClearPoint Funding indicated that the Corporation has ensured compliance with the provisions of 12 C.F.R. Section 1024.8(b), by implementing the appropriate corrective action for the misapplication of the principal reduction fee collected by ClearPoint Funding for the loan identified in the Report issued to the Corporation.
   2. Within the preliminary response to the Report, the Corporation submitted evidence of the corrective action issued pursuant to this Section of the Consent Order.
6. ClearPoint Funding shall establish, implement and maintain policies and procedures to ensure that the Corporation maintains all books, records, and accounts in accordance with the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09. The policies and procedures are to include but are not limited to:
   1. Maintaining procedures to ensure that ClearPoint Funding retains the entire loan file relative to each mortgage loan, including all documentation provided by the lender in a brokered transaction;
   2. Ensuring that ClearPoint Funding conducts on-going, periodic reviews of document filing and retention procedures, and its compliance thereto, to ensure its books, records, and accounts are maintained in a manner sufficient to evidence compliance with applicable federal and state laws, rules and regulations; and
   3. Ensuring that all applicable staff of ClearPoint Funding 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 Corporation under this Section of the Consent Order.
7. ClearPoint Mortgage shall submit a payment of sixteen thousand dollars ($16,000) in satisfaction of an administrative penalty collected in consideration of the Corporation’s failure to properly retain documents and records as required by Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09. ClearPoint Funding shall remit payment in full of the amount indicated above, payable to the "Commonwealth of Massachusetts," with the executed Consent Agreement, to the Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-2218. The Division shall remit the payment for deposit into the General Fund of the Commonwealth.
8. ClearPoint Funding shall establish, implement and maintain procedures to ensure that Corporation files and receives the appropriate approval of a written plan that authorizes the Corporation to maintain its books, records, and accounts at a location, outside of the Commonwealth prior to maintaining such records in a location in accordance with the Division’s regulation 209 CMR 48.04. The provisions of this Section shall necessarily ensure that if ClearPoint Funding prefers to maintain its books and records electronically, the Corporation shall be required to file and receive the appropriate approval through a written plan in accordance with the Division’s regulation 209 CMR 48.05. Compliance with this Section of the Consent Order shall also require ClearPoint Funding to update the location of its books and records in the NMLS, as necessary.
9. ClearPoint Funding shall 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 through the NMLS by ClearPoint Funding or by the licensed mortgage broker, as appropriate.
   1. ClearPoint Funding agrees to submit a payment in the amount of fourteen thousand dollars ($14,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation’s conducting business with mortgage loan originators who did not hold an active mortgage loan originator license or who were actively sponsored by another mortgage entity when acting on behalf of Corporation. ClearPoint Funding 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, 10^th Floor, Boston, Massachusetts 02118.
10. ClearPoint Funding shall establish, implement, and maintain procedures to ensure that the Good Faith Estimate provided to all applicants is completed in accordance with the requirements of the RESPA as administered by the Consumer Financial Protection Bureau, 12 C.F.R. Part 1024. Compliance with this Section of the Consent Order shall necessarily ensure that the Corporation, when acting in the capacity of a mortgage lender, understands that it is bound by the loan terms and settlement charges on the Good Faith Estimate if it accepts a Good Faith Estimate issued by the mortgage broker.
11. ClearPoint Funding shall establish, implement, and maintain procedures to ensure that every residential mortgage presented for record contains the accurate name, address, and license number of the mortgage loan originator responsible for originating the mortgage loan and, in cases where a mortgage broker is involved, shall also contain the name, address, and license number of the mortgage broker responsible for placing the mortgage loan with the Corporation, as required pursuant to Massachusetts General Laws chapter 183, section 6D.
12. ClearPoint Funding shall 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 require that ClearPoint Funding complete a worksheet or other document indicating how the Corporation determined that such refinance loan was in the borrower’s interest. Such document shall include all the information in accordance with 209 CMR 53.07 and shall be retained in the Corporation’s books and records as evidence of compliance.
13. ClearPoint Funding shall establish, implement, and maintain procedures to ensure that the Corporation files all quarterly reports on a timely basis pursuant to the Division’s regulation 209 CMR 42.09(4). It is understood that beginning with the first calendar quarter of 2011, the Nationwide Mortgage Licensing System Mortgage Call Report ("Call Report") replaced the Massachusetts quarterly report. The quarterly reporting requirement will be satisfied by completing and submitting the Call Report within prescribed timeframes.
14. ClearPoint Funding shall 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.
15. ClearPoint Funding shall establish, implement and maintain policies and procedures to ensure that, when acting in the capacity of a mortgage broker, all consumers receive a complete Loan Origination and Compensation Agreement, pursuant to the Division’s regulation 209 CMR 42.12A(5), within the specified timing requirement. For each consumer loan file, a completed copy of the Loan Origination and Compensation Agreement shall be retained in the Corporation’s books and records, as provided by the Division’s regulation 209 CMR 42.09(1)(b).
16. ClearPoint Funding 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 Corporation to implement internal controls to ensure that ClearPoint Funding accurately determines if a loan is reportable pursuant to the requirements of Regulation C and accurately compiles and records all required data in the Corporation’s HMDA Loan Application Register ("LAR") if a loan is deemed to be reportable.
    1. ClearPoint Funding shall 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 shall necessarily ensure the proper implementation and execution of the revised practices and procedures adopted by ClearPoint Funding pursuant to this Section of the Consent Order.
    2. ClearPoint Funding agrees to submit a payment in the amount of twelve thousand five hundred dollars ($12,500.00) in satisfaction of an administrative penalty collected in consideration of 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. ClearPoint Funding 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 Office of the Commissioner of Banks, Attn: Mortgage Lender Examination Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
17. ClearPoint Funding 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").
    1. ClearPoint Funding shall implement internal controls to ensure that the Corporation provides applicants the appropriate notification of action taken on applications, and provides all applicants with all the information required in accordance with Section 1002.9 of Regulation B. Such procedures shall require the Corporation to ensure that applications are only deemed withdrawn when they are expressly withdrawn by the applicant.
    2. ClearPoint Funding must implement internal controls to ensure that the Corporation 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.
18. ClearPoint Funding shall establish, implement and maintain procedures to ensure that all applicants whose residential mortgage loan application is denied receive a Mortgage Review Board Disclosure Form notifying them that they may appeal such denial to the 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.
19. ClearPoint Funding shall comply with all laws and regulations applicable to its conducting the business of a mortgage lender and mortgage broker, 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 the duty to address and correct, all violations and areas of concern addressed in the Report.
    1. On or about September 18, 2012, the Corporation submitted to the Commissioner, a preliminary response addressing each of the violations and areas of concern specified in the Report. The written response described the revised policies and procedures adopted by ClearPoint Funding to implement all corrective actions set forth in: (i) the "Examiner’s Comments and Conclusions" section of the Report and (ii) the provisions of this Consent Order;
    2. Within thirty (30) days from the effective date of this Consent Order, ClearPoint Funding shall establish, implement, and maintain quality control standards which provide for a loan review process to assess the Corporation’s compliance with: (a) 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 (b) 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
    3. ClearPoint Funding 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.
20. On the thirtieth (30^th) day after the end of each calendar quarter following the date of this Consent Order, while holding an active license with the Division, ClearPoint Funding shall furnish written progress reports to the Division, which shall 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 ClearPoint Funding 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 ClearPoint Funding’s compliance condition in Massachusetts and the results thereof.
21. The reporting requirement to the Division referenced in Section 20 of this Consent Order shall remain in effect while ClearPoint Funding holds an active license with the Division, 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.
22. ClearPoint Funding 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 shall be authorized to submit a claim for such amounts against the mortgage lender and/or mortgage broker Massachusetts surety bonds maintained by ClearPoint Funding pursuant to the Division’s regulations 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a).
23. Nothing in this Consent Order shall be construed as permitting ClearPoint Funding to violate any law, rule, regulation, or regulatory bulletin to which ClearPoint Funding is subject.
24. In consideration of the foregoing Consent Order, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke ClearPoint Funding’s mortgage lender and mortgage broker licenses under General Laws chapter 255E, section 6, while this Consent Order is in effect.
25. 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.
26. This Consent Order shall become effective immediately upon the date of its issuance.
27. 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 an Consent Order of a court of competent jurisdiction.
28. 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 ClearPoint Funding.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 25th day of February, 2013

By:
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts