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Consent Order

Consent Order  Loans, Inc. d/b/a U.S. National Mortgage Company

Date: 01/29/2004
Organization: Division of Banks
Docket Number: 2003-038
Location: Cambridge, MA
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Loans, Inc. d/b/a U.S. National Mortgage Company, Cambridge, MA - Consent Order

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER LICENSING
Docket No. 2003-038

CONSENT ORDER

In the Matter of
Loans, Inc.
d/b/a U.S. National Mortgage Company
Cambridge, Massachusetts

Mortgage Broker License No. MB0001

WHEREAS, Loans, Inc. d/b/a U.S. National Mortgage Company, Cambridge, Massachusetts ("Loans, Inc." or the "Corporation"), a licensed 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 January 29th, 2004, 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, Loans, Inc. agrees to the issuance of this CONSENT ORDER ("ORDER") by the Commissioner of Banks ("Commissioner");

WHEREAS, as a result of the findings of the Division's examination/inspection of the Corporation as of May 25, 2001, the parties entered into a Memorandum of Understanding (MEMORANDUM) whereby Narain D. Bhatia in his capacity as President of Loans, Inc. and on behalf of the Corporation agreed to take all necessary steps to address and correct the compliance deficiencies incorporated in the MEMORANDUM.

WHEREAS, an examination/inspection of Loans, Inc. was conducted pursuant to General Laws chapter 255E, section 8, as of June 6, 2003, to assess Loans, Inc.'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 broker in the Commonwealth; and

WHEREAS, the Report of Examination/Inspection (the "Report") issued pursuant to the Division's examination/inspection of Loans, Inc. as of June 6, 2003 alleged (a) continued violations of matters previously identified and intended to be corrected by the terms of the MEMORANDUM and (b) substantial non-compliance with other applicable state and federal statutes, rules, and regulations governing the conduct of those engaged in the business of a mortgage broker in Massachusetts.

ORDER

NOW COME the parties in the above-captioned matter, the Division and Loans, Inc., and stipulate and agree as follows:

  1. Within twenty (20) days of the effective date of this ORDER, Loans, Inc. shall submit fiscal year-to-date financial statements as of September 30, 2003, that have been prepared in accordance with generally accepted accounting principles. The financial statements that are to be submitted pursuant to this Section of the ORDER, shall include a balance sheet, a statement of income and expense, and a statement of cash flows, signed and dated under the pains and penalties of perjury by an authorized senior officer of Loans, Inc. The financial statements shall illustrate Loans, Inc.'s compliance with the financial responsibility requirements of the Division's regulation 209 CMR 42.06(2)(a).

  2. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this ORDER, Loans, Inc. shall submit to the Commissioner monthly financial statements, prepared in accordance with generally accepted accounting principles, for each month of such calendar quarter, including a balance sheet, a statement of income and expense, and a statement of cash flows, signed and dated under the pains and penalties of perjury by an authorized senior officer of Loans, Inc.

  3. Within twenty (20) days of the effective date of this ORDER, Loans, Inc., shall reimburse the borrower cited in the Report where the amount actually paid by the borrower as an origination fee, as recorded on the settlement agreement, exceeded the amount disclosed in writing by the Corporation as an origination fee prior to closing. The amount of such reimbursement shall equal the difference between the actual charge assessed to the borrower and the amount disclosed in writing prior to closing. With the Corporation's first written progress report which is to be submitted to the Commissioner pursuant to Section 11 of this ORDER, Loans, Inc. shall submit evidence of the reimbursement issued to the borrower, including the borrower's name, the date the loan closed, the check number, and the amount of the reimbursement.

  4. Loans, Inc. shall immediately cease collecting loan discount fees from consumers and shall provide to the Commissioner within twenty (20) days of the effective date of this Order, evidence of the reimbursement paid to the consumer identified in the Report from whom a loan discount fee was collected by the Corporation where the amount collected as a loan discount fee was not previously disclosed to the borrower in writing as an origination fee or point prior to the closing of the loan. Within twenty (20) days of the effective date of this ORDER, the Corporation shall submit to the Commissioner evidence of the reimbursement issued the borrower for the loan discount fee collected, including the borrower's name, the check number, and the amount of the reimbursement.

  5. Loans, Inc. shall immediately deposit all credit report fees, appraisal fees, application fees, and all other prepaid loan fees, which it may accept, in an escrow account to be established at a federally insured bank. On the fifteenth day after the end of each calendar quarter following the date of this ORDER, the escrow account shall be reconciled, and a copy of its reconcilement shall be submitted to the Commissioner with the progress reports. Loans, Inc. may withdraw funds from the escrow account as individual loans are closed, loan applications are withdrawn, or as otherwise provided in the Division's regulation 209 CMR 42.11.

  6. Loans, Inc. shall revise its procedures to ensure that all applicable consumers are provided with an Attorney General's Mortgage Broker Disclosure Form, completed in accordance with, and in the form specified, by the provisions of the Attorney General's regulation 940 CMR 8.05(1) through 8.05(8), inclusive.

  7. Loans, Inc. shall revise its procedures to ensure that Good Faith Estimates are issued to borrowers in accordance with the timing requirements established by the Real Estate Settlement Procedures Act, 24 CFR §3500.7(b).

  8. Loans, Inc. shall disclose yield spread premiums on Good Faith Estimates in accordance with the provisions of the Real Estate Settlement Procedures Act, 24 CFR Part 3500, Appendix B, comment 13.

  9. Loans, Inc. shall comply with all laws and regulations applicable to its conducting the business of a mortgage broker, including, but not limited to, Massachusetts General Laws chapter 255E, and the Division's regulation 209 CMR 42.00 et seq. Such obligations shall necessarily include the duty to address and correct, within twenty (20) days from the effective date of this ORDER, all violations as specified in the Report issued pursuant to the Division's examination/inspection of Loans, Inc. as of June 6, 2003. Furthermore, Loans, Inc. shall implement appropriate procedures designed to prevent the recurrence of those violations cited in the Report.

  10. In consideration of the foregoing ORDER, the Division agrees not to pursue formal measures, relative to this matter, to suspend or revoke Loans, Inc.' mortgage broker license under General Laws chapter 255E, section 6, while this ORDER is in effect.

  11. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this ORDER, Loans, Inc. shall furnish written progress reports to the Division, detailing the form, content, and manner of any actions taken to address each Section of this ORDER and the results thereof.

  12. Failure to comply with the terms of this ORDER shall constitute grounds for license suspension and/or revocation pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.

  13. This ORDER shall become effective immediately upon the date of its issuance.

  14. The provisions of this ORDER shall be binding upon Loans, Inc., its officers, directors, employees, and any other regulated persons, in their capacity as such, on behalf of Loans, Inc.

  15. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.

  16. This ORDER and the CONSENT AGREEMENT are the complete documents representing the resolution of the matters presented by the Report. Nothing contained in this ORDER is intended to modify, supercede, vacate, or otherwise limit the duties and obligations imposed upon the Corporation by the Memorandum adopted by Loans, Inc. as of May 17, 2002 in response to the Division's previous examination/inspection of the Corporation as of May 25, 2001.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 29th day of January, 2004.

By: Steven L. Antonakes
Commissioner of Banks

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