Related to:
Consent Order

Consent Order Mortgage Security, Inc.

Date: 06/16/2011
Organization: Division of Banks
Docket Number: 2009-125-CO
Location: East Falmouth, MA

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER AND
LENDER LICENSING
Docket No. 2009-125-CO

CONSENT ORDER

In the Matter of

MORTGAGE SECURITY, INC.
East Falmouth, Massachusetts

Mortgage Company License No: MC0490

WHEREAS, MORTGAGE SECURITY, INC. ("Mortgage Security" or the "Corporation") a formerly licensed mortgage broker and mortgage lender under Massachusetts General Laws chapter 255E, section 2, has been advised of its right to Notice and Hearing pursuant to Massachusetts General Laws chapter 30A, section 10, 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 16, 2011, whereby, solely for the purpose of settling this matter and without admitting any allegations or implications of fact or the existence of any violations of applicable state and federal statutes or rules, Mortgage Security agrees to the issuance of this CONSENT ORDER ("Consent Order") by the Commissioner of Banks ("Commissioner");

WHEREAS, the Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of those engaged in the business of a mortgage broker and mortgage lender in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2 and the Division's regulations 209 CMR 42.00 et seq.;

WHEREAS, on July 21, 2008, pursuant to the authority granted under Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination/inspection of the books, accounts, papers, records, and files maintained by Mortgage Security to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of a mortgage lender and mortgage broker business in Massachusetts (the "examination/inspection");

WHEREAS, the Division's Report of Examination/Inspection (the "Report"), which was issued to Mortgage Security on or about November 12, 2009, presented the findings of the examination/inspection, which was finalized through subsequent visitation(s), and alleged significant failures to comply with applicable state and federal laws, rules, regulations, and regulatory bulletins governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in Massachusetts;

WHEREAS, on November 12, 2009, based upon the findings as set forth in the Report, the Division issued an ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (the "Order and Notice"), Docket No. 2009-125, against Mortgage Security;

WHEREAS, Mortgage Security voluntarily ceased originating Massachusetts residential mortgage loans on or before September 30, 2009;

WHEREAS, on or about November 30, 2009, Mortgage Security, through counsel, filed a Response to the Order and Notice, whereby Mortgage Security contested certain of the Division's findings as set forth in the Report and the Order and Notice. By the Response, Mortgage Security further reserved the right to proceed to an administrative hearing in accordance with Massachusetts General Laws chapter 30A;

WHEREAS, Mortgage Security's mortgage lender and broker licenses expired without renewal on December 31, 2010;

WHEREAS, on March 16, 2011, Mortgage Security appeared at the Division's offices for an informal conference to continue the ongoing discussions of the matters raised by the Order and Notice;

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

WHEREAS, without this Consent Order constituting an admission by Mortgage Security of any allegations made or implied by the provisions of the Order and Notice; solely for the purpose of settlement of all alleged violations without protracted administrative proceedings and judicial review, Mortgage Security hereby waives all rights to complete the hearing process relative to this proceeding and affirms that it is willing to take all necessary action as set forth in this Consent Order; and

WHEREAS, in recognition of the Division and Mortgage Security having reached the following mutual agreement under this Consent Order to resolve the matters raised by the Order and Notice, the Commissioner has terminated the Order and Notice on this 16th day of June, 2011.

ORDER

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

  1. After the execution of this Consent Order, Mortgage Security shall submit an application for renewal through the Nationwide Mortgage Licensing System (NMLS) to initiate the process for the reinstatement of its mortgage company license(s). Mortgage Security shall be subject to all current licensing requirements and the Commissioner shall have the discretion set forth within General Laws chapter 255E, section 4 and the Division's regulation 209 CMR 42.00 et seq. in determining whether to issue a license to Mortgage Security to conduct the licensed business, provided however, that any such application shall not be denied on the basis of the Order and Notice.
  2. Mortgage Security shall establish, implement and maintain procedures to ensure that the Corporation maintains and uses all loan documents in the Corporation's books and records in a manner sufficient to evidence compliance with applicable state and federal statutes and regulations, in accordance with the record keeping requirements specified by Massachusetts General Laws, chapter 255E, section 8, and the Division's regulations 209 CMR 42.09 and 209 CMR 48.03.
    1. Mortgage Security shall establish and implement procedures to ensure that the Corporation is capable of compiling and generating an accurate loan application list of pending, closed, denied, and withdrawn residential mortgage loan applications taken and/or placed by the Corporation. The loan list so generated shall contain information including, but not limited to the following: the consumer's name, the date of application, loan amount requested, loan purpose, property address, loan program requested, application status, the name of the mortgage loan originator who took the application, and the name of lender to which the application was placed.
    2. For all residential mortgage loans funded by Mortgage Security, the Corporation shall retain the entire loan file relative to each mortgage loan for a minimum of three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever occurs first. For all residential mortgage loans brokered by the Mortgage Security, the Corporation shall retain the entire loan file relative to each mortgage loan for a minimum of three years after a mortgage loan is made. The entire loan file shall include, but not be limited to, the following: all documents related to income/asset verification; settlement statement; a signed loan application form; credit report(s); appraisal(s); lender documentation, including underwriting guidelines; employment verification documentation; all required consumer disclosure forms; and all correspondence and papers relating to the mortgage loan.
    3. Mortgage Security shall conduct 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. At a minimum, such reviews shall be conducted on a quarterly basis.
    4. Mortgage Security shall provide adequate training to all applicable staff persons of Mortgage Security who have form completion and/or document filing and retention responsibilities, to ensure proper implementation and execution of the revised policies and procedures adopted by the Corporation under this Paragraph of the Consent Order.
    5. Mortgage Security shall establish, implement, and maintain procedures to ensure the full cooperation of Mortgage Security employees with the Division during all future examinations of the Corporation, which shall necessarily provide for the Division's access, within 72 hours of an official request, to any requested books, records, accounts, and any other additional, relevant materials, under the provisions of Massachusetts General Laws chapter 255E, section 8.
  3. Mortgage Security shall submit a payment of five thousand dollars ($5,000) in satisfaction of an administrative penalty collected in consideration of Mortgage Security's failure to properly retain documents and records as required by 209 CMR 42.09. Mortgage Security 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, Attention: Mortgage Lender Exam Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-2218.
  4. Mortgage Security 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 Nationwide Mortgage Licensing System by Mortgage Security.
    1. Mortgage Security agrees to submit a payment in the amount of twenty-six thousand dollars ($26,000.00) in satisfaction of an administrative penalty collected in consideration of the Corporation's conducting business with mortgage loan originators who either did not hold an active mortgage loan originator license or were not sponsored by the Corporation. Mortgage Security 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, 10 th Floor, Boston, Massachusetts 02118.
  5. Mortgage Security shall establish, implement, and maintain quality control procedures governing the placement of loan applications into alternative documentation loan programs (including, but not limited to, stated income; no income, no asset verification; no income verification; no ratio loans; low and no documentation loans; etc.) to ensure accurate application completion procedures; verification and due diligence procedures; and books and records retention in compliance with applicable state and federal laws, regulations, and regulatory bulletins governing the conduct and operation of those engaged in the business of a mortgage broker in Massachusetts.
    1. Compliance with this Section of the Consent Order shall require that Mortgage Security review the Division's Regulatory Bulletin 5.1-103: Guidance on Non-Traditional Mortgage Product Risks, the Division's September 2006 Industry Letter, and the Division's Regulatory Bulletin 5.1-104: Statement on Subprime Mortgage Lending and implement procedures to ensure Mortgage Security's compliance therewith.
  6. Within thirty (30) days from the effective date of this Consent Order, Mortgage Security shall identify and/or appoint one member of senior management who will be responsible for oversight and internal auditing of the Corporation's mortgage lender and mortgage broker activities ("Compliance Officer"). Such Compliance Officer will implement and maintain internal quality controls that provide for a loan review process to assess the compliance of the Corporation with: 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 with the provisions of this Consent Order. Mortgage Security shall ensure that the individual so identified possesses the ability, experience, and other qualifications necessary to effectively enforce the Corporation's revised policies and procedures adopted pursuant to this Consent Order.
    1. Prior to retaining or appointing the Compliance Officer, Mortgage Security shall submit to the Division the name and resumé of the designated Compliance Officer.
    2. Within thirty (30) days from the effective date of this Consent Order, Mortgage Security shall submit to the Division a compliance manual which shall set forth quality control standards and internal auditing procedures for a loan review process that is designed to prevent the recurrence of the violations addressed in the Report.
  7. Mortgage Security shall reimburse the consumer identified in the Report for the full amount collected as an escrow waiver fee; a fee for services which the Corporation, acting as a mortgage broker, was prohibited from performing in the mortgage loan transaction.
    1. Within thirty (30) days of the effective date of this Consent Order, Mortgage Security shall submit to the Division sufficient evidence to illustrate the consumer's receipt of the reimbursement set forth in this Paragraph of the Consent Order, including, but not limited to, the consumer's name, the check number, the amount of the reimbursement, and a certified mail receipt to illustrate the consumer's receipt of the reimbursement check.
  8. Mortgage Security shall establish, implement, and maintain procedures to ensure that all consumers receive a loan origination and compensation agreement in accordance with the provisions of the Division's regulation 209 CMR 42.16. 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 in 209 CMR 42.09(1)(b).
  9. Mortgage Security shall establish, implement, and maintain procedures to ensure that 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.
  10. Mortgage Security shall establish, implement and maintain procedures to ensure that the Credit Score Disclosure is provided to consumers in accordance with the requirements of the Fair Credit Reporting Act, Section 609(g). For each consumer loan file, a completed copy of the Credit Score Disclosure shall be retained in the Corporation's books and records as evidence of compliance.
  11. Mortgage Security shall establish, implement, and maintain procedures to ensure that the Corporation files all quarterly reports and annual reports on a timely basis pursuant to the Division's regulation 209 CMR 42.09(4) and M.G.L. c. 255E, section 8, respectively. It is understood that beginning with the first calendar quarter of 2011, the Nationwide Mortgage Licensing System Call Report ("Call Report") will replace the Massachusetts quarterly report. The quarterly reporting requirement will be satisfied by completing and submitting the Call report within prescribed timeframes.
  12. On the thirtieth (30 th) day after the end of each calendar quarter following the date of this Consent Order, Mortgage Security, through its Compliance Officer, shall furnish written progress reports to the Division, detailing the form, content and manner of any actions taken to address each Section of this Consent Order, and shall describe, in detail, all initiatives instituted during the calendar quarter to improve the compliance position of Mortgage Security, and the results thereof. Each progress report submitted to the Division pursuant to this Section of the Consent Order shall be reviewed and signed by a duly authorized senior officer of Mortgage Security.
  13. Within three hundred sixty (360) days from the effective date of this Consent Order, the Division shall conduct an examination/inspection of Mortgage Security, at Mortgage Security's expense, which may include, but not be limited to: a review of all transactions conducted since the effective date of this Consent Order.
  14. The provisions of this Consent Order shall not limit, estop, or otherwise prevent any other state agency or department, from taking any other action affecting Mortgage Security.
  15. This Consent Order shall become effective immediately upon the date of its issuance.
  16. In accordance with the terms of the Consent Agreement entered by Mortgage Security and the Commissioner, Mortgage Security has waived all rights, relative to this matter, to bring any civil claim, cause of action, counterclaim, or appeal that it may have relative to the Order and Notice and this Consent Order or any of its provisions.
  17. 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 order of a court of competent jurisdiction.
  18. 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 other than those set forth in this Consent Order and the Consent Agreement.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 16th day of June, 2011

David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts

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