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Division of Banks

Decision

Decision American Lending Group, Inc.

Date:	12/12/2017
Organization:	Division of Banks
Docket Number:	2009-088
Location:	Saint Peters, MO

Petitioner: Division of Banks
Respondent: American Lending Group, Inc.

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Division of Banks, Boston, MA, Petitioner vs. American Lending Group, Inc., Saint Peters, MO, Respondent - Final Order and Decision

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

IN A MATTER
BEFORE THE COMMISSIONER OF BANKS

FINAL ORDER AND DECISION
DOCKET NUMBER: 2009-088

MASSACHUSETTS DIVISION OF BANKS
Boston, Massachusetts
Petitioner

vs.

AMERICAN LENDING GROUP, INC.
Saint Peters, Missouri
Respondent

Mortgage Company License No(s): MC5051 and MC5053

Appearance for Respondent:

Naren Chaganti, Esq.
713 The Hamptons Lane
Town & Country, MO 63017

Appearing for the Division of Banks:

Valerie Carbone, Esq.
Massachusetts Division of Banks
1000 Washington Street, 10 ^th Floor
Boston, MA 02118

Designated Administrative Hearing Officer of the Commissioner of Banks:

Aimee Desai, Esq.

BACKGROUND

THIS MATTER was scheduled for hearing before the Office of the Commissioner of Banks ("Commissioner") on September 20, 2010, pursuant to Massachusetts General Laws chapter 30A, sections 10 and 11 and the Standard Adjudicatory Rules of Practice and Procedure 801 CMR 1.01 et seq., upon a Notice of Hearing which was mailed to the parties on August 24, 2010.

On September 15, 2010, American Lending Group, Inc., ("American Lending" or "Respondent") through its counsel filed a motion requesting that the Corporation be excused from appearance at the hearing and indicated that: American Lending was no longer in business; American Lending had no funds to pay counsel for his time or travel; American Lending did not have any funds to pay for any witness to appear on its behalf; and American Lending had been administratively dissolved in Missouri.

In addition, on September 17, 2010, American Lending filed a Motion to Submit the Case on the Documents on File and having received no objection to ruling on the Motions and Documents filed from Division of Banks ("Division" or "Petitioner") the following ruling is made on the Motions and Documents previously filed by the parties pursuant to 801 CMR 1.01(10)(c).

The Motions and Documents submitted by the parties include:

Exhibit 1: Temporary Order to Cease and Desist issued by the Petitioner.

Exhibit 2: Order to Show Cause and Notice of Right to a Hearing issued by the Petitioner.

Exhibit 3: Letter sent by the Respondent Exercising its Right to a Hearing.

Exhibit 4: Respondent's January 8, 2010 response to the Order to Show Cause and Notice of Right to a Hearing.

Exhibit 5: Request to Appear by Telephone filed by American Lending.

Exhibit 6: Written Argument of American Lending filed on August 5, 2010.

Exhibit 7 Division's response to the Respondent's Written Argument with three attachments:

Attachment 1: Respondent's Licensing History.

Attachment 2: Letter dated October 14, 2009 from American Lending requesting reconsideration of Administrative Penalty.

Attachment 3: Letter dated November 12, 2009 issued by the Division denying American Lending's request for reconsideration.

Exhibit 8: American Lending's response to the Division's response with three attachments:

Attachment 1: Letter dated October 14, 2009 from American Lending requesting reconsideration of Administrative Penalty.

Attachment 2: Letter dated November 12, 2009 issued by the Division denying American Lending's request for reconsideration.

Attachment 3: Electronic mail correspondence from the Division to American Lending.

Exhibit 9: American Lending's Request to Excuse Appearance at the Administrative Hearing.

Exhibit 10: American Lending's Motion to Submit the Case on Documents on File.

The Division has requested that the Commissioner make a final decision addressing the following matters:

For a final Agency decision revoking American Lending's Massachusetts mortgage broker and mortgage lender license numbers MC5051 and MC5253;
For a final Agency decision ordering American Lending to pay a late fee assessed against the Respondent in the amount of $9,750 for the late filing of the Mortgage Lender/Mortgage Broker Annual Report for the period ending December 31, 2008;
For a final Agency decision awarding temporary and preliminary injunctive relief, and any other ancillary relief, as may be necessary to protect the public interest during the pendency of this matter;
For a final Agency decision in favor of the Division and against American Lending for each Charge set forth in the Order to Show Cause;
For a final Agency decision ordering American Lending to cease and desist from transacting business in Massachusetts as a mortgage broker and mortgage lender;
For a final Agency decision ordering American Lending to immediately place any pending residential mortgage loan applications and related files, if it has not already done so in accordance with the provisions of the Temporary Order, with an independent, licensed Massachusetts mortgage lender or other qualified lender in Massachusetts, with no costs to the applicant; and
For costs and fees of the Division's investigation of this matter.

American Lending has maintained that the relief requested by the Division is unwarranted because of the business turmoil that American Lending has endured, a lack of notification from the Division of the changes in regulations requiring a surety bond and furthermore that American Lending had offered to surrender its licenses in the final weeks of 2008 that would have made the regulatory action issued by the Division unnecessary.

THEREFORE, based upon the Motions and all Documents previously filed and the arguments of the parties and counsel, the Commissioner makes the following Findings of Fact and Conclusions:

FINDINGS OF FACT

On June 4, 2009, the Division issued a Temporary Order to Cease and Desist, Docket number 2009-088 ("Temporary Order") against American Lending based upon: (Exhibit 1).
1. American Lending's failure to obtain, maintain and file a surety bond pursuant to the requirements of the Division's regulation 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a);
2. The Respondent's failure to file financial statements pursuant to the requirements of the Division's regulation 209 CMR 42.03(2)(b)(3) and 209 CMR 42.06(2)(b)(3); and
3. The Respondent's failure to file an annual report for calendar year 2008 pursuant to the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.10.
The Temporary Order afforded American Lending the right to request a hearing within twenty days (20) from the effective date of the Temporary Order. The hearing would be granted only upon a written request and if no such request was received the Temporary Order would become permanent. The Division alleges that American Lending did not request a hearing or respond to the Temporary Order which became permanent on June 25, 2009.
On November 19, 2009, the Division issued a notice to American Lending whereby the Respondent would be granted ten (10) days to file a surety bond and have the Permanent Order reconsidered by the Division.
The Division alleges that American Lending failed to respond to the November 19, 2009 correspondence and as a result on December 14, 2009, the Division issued an Order to Show Cause and Notice of a Right to a Hearing ("Order to Show Cause") against American Lending which re-alleged the charges outlined in the Temporary Order. (Exhibit 2).
American Lending filed a request for a hearing on or about December 30, 2009, and filed a response to the Order to Show Cause on or about January 8, 2010. Respondent's counsel filed a Notice of Appearance on April 23, 2010. (Exhibit 3 and Exhibit 4).
By a letter dated July 7, 2010, the Administrative Hearings Department received notification from the Petitioner that efforts to settle the matter prior to the initiation of a formal administrative hearing had been unsuccessful and requested that a formal hearing be scheduled.
A Notice of Hearing was forwarded to all parties on July 14, 2010, and notified the parties that an Administrative Hearing ("Hearing") had been scheduled for July 28, 2010. The Notice of Hearing required all parties to confirm their attendance via telephone.
On July 23, 2010, the Administrative Hearings Department contacted the Respondent's counsel to confirm American Lending's attendance at the July 28, 2010 Hearing as a telephone confirmation of attendance had not been received. American Lending's counsel indicated that the Respondent was unable to attend the Hearing in person. As a result, American Lending filed a Request to Appear by Telephone which was subsequently granted and notification was sent to all parties on July 26, 2010. (Exhibit 5).
On July 28, 2010, prior to the initiation of the Hearing which was conducted via teleconference, the Administrative Hearing Officer inquired as to whether the parties had attempted to settle the matter. The Division's counsel stated that efforts to settle the matter prior to its request to schedule an administrative hearing had been unsuccessful.
Upon the initiation of the Hearing, it became evident that Respondent's counsel had not reviewed correspondence sent by the Division beginning September 10, 2007, through April 30, 2009, to all licensed mortgage lenders and mortgage brokers, including American Lending, relating to the requirement that the licensees obtain a surety bond pursuant to amendments to the Division's regulations which became effective as of December 31, 2008. The Temporary Order which is incorporated into this Final Order outlined at least four notices that were sent by the Division to the Respondent regarding the surety bond matter. American Lending through its counsel also disputed certain findings of facts alleged in both the Temporary Order and the Order to Show Cause relating to the necessity of the maintenance of a surety bond. Respondent's counsel maintained that as a licensed mortgage lender and mortgage broker, American Lending was not required to maintain both a surety bond and a minimum net worth, a position that the Division disputed.
During the July 28, 2010 Hearing, Respondent's counsel also raised an argument related to the request by the Division that American Lending be ordered to pay an administrative penalty of the $9,750 for the late filing of the Respondent's 2008 Annual Report. American Lending maintained that the administrative penalty should be waived due to the business turmoil that American Lending had endured, and further stated that American Lending had no funds with which to pay the administrative penalty.
As the Respondent's counsel did not have the opportunity to review correspondence between the Division and American Lending prior to the July 28, 2010 Hearing, the Administrative Hearing Officer determined that the Hearing would be suspended and rescheduled after American Lending's counsel had the opportunity to review all correspondence between the parties and had submitted a written motion supporting its position.
American Lending was ordered to file a motion supporting its argument that there was justifiable cause for waiving the administrative penalty. Both parties were notified that upon review of the motion filed by the Respondent and any cross motions filed by the Petitioner, a determination would be made as to when the Hearing would be rescheduled, as it appeared as though the Respondent's counsel would need some time to review the regulations and statutes that were applicable to American Lending in the Commonwealth.
On August 24, 2010, the Administrative Hearing Officer forwarded a Notice of Hearing to both parties advising them that a Hearing was necessary to resolve the pending matter as both parties had filed several motions subsequent to the July 28, 2010 Hearing. The August 24, 2010 notice scheduled the Hearing for September 20, 2010. The Notice of Hearing ordered both parties to confirm their attendance with the Hearing Officer by September 7, 2010, and file a witness list by September 14, 2010. American Lending failed to comply with the Administrative Hearing Officer's order to both confirm attendance and submit a witness list within the time frames imposed.
On September 15, 2010, American Lending through counsel filed a Request to Excuse Appearance at the Hearing. Respondent's counsel was contacted by the Administrative Hearings Department to request a clarification of the September 15, 2010 request filed by the Respondent. American Lending notified the Administrative Hearing Department that a Request to Submit the Case on the Documents on File would be filed imminently.
The Request to Submit the Case on the Documents was filed on September 17, 2010. As the Request was filed on the last business day before the scheduled Hearing, a brief Hearing was conducted on September 20, 2010, only to confirm that the Petitioner had received the Request filed by the Respondent and had no formal objection to a Final Order and Decision being made on the Motions and Documents previously filed by both parties. The Petitioner raised no objection to the Respondent's Motion. (Exhibit 9 and Exhibit 10).
CONCLUSION
The Division is an agency of the Commonwealth of Massachusetts and was created pursuant to Massachusetts General Laws chapter 26, section 1. Through the Commissioner, the Division 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, and applicable regulations found at 209 CMR 42.00 et seq., which are administered by the Commissioner.
Massachusetts General Laws chapter 255E, section 6 provides that the Commissioner may suspend or revoke a licensed mortgage lender or mortgage brokers license if there has been a violation of the chapter or any rule or regulation adopted thereunder, or any other law applicable to the conduct of its business.
Failure to File Annual Report and Imposition of Administrative Penalty
Massachusetts General Laws chapter 255E, section 8 requires all licensees to file an annual report within a time frame prescribed by the Commissioner. The Division's regulation 209 CMR 42.10 requires all mortgage lenders and mortgage brokers to file an annual report with the Commissioner in such form as the Commissioner shall prescribe for the previous calendar year, by March 31.
Massachusetts General Laws chapter 255E, section 8 also states that a licensee that neglects to file an annual report within fifteen days of notice directing the same shall pay to the commonwealth fifty dollars for each day that the action continues unless it is due to justifiable cause and not due to willful neglect.
General Laws chapter 255E, section 8 states in part:
Each licensee shall annually, on or before a date determined by the commissioner, file a report with the commissioner containing such information as said commissioner may require concerning the business and operations conducted by the licensee in the commonwealth during the preceding calendar year. A licensee neglecting to file such report or failing to amend the same within fifteen days of notice from said commissioner directing the same shall, unless such neglect or failure is due to justifiable cause and not due to willful neglect, pay to the commonwealth fifty dollars for each day during which such neglect or failure continues.
The Division's regulation at 209 CMR 42.10 states:
By March 31, each Licensee shall file an annual report with the Commissioner in such form as the Commissioner shall prescribe for the preceding calendar year. The annual report shall be in writing, subscribed by the Licensee under the pains and penalty of perjury.
The Division has alleged that American Lending failed to file an Annual Report for calendar year 2008, by March 31, 2009, despite notices that were forwarded to American Lending on October 30, 2008 and February 20, 2009 and additional notifications that were sent to the Respondent by the issuance of both the Temporary Order and Order to Show Cause. The Division contends that American Lending filed an annual report on or about October 12, 2009 and has requested that American Lending be ordered to pay $9,750 pursuant to the provisions of General Laws chapter 255E, section 8 for the late filing of the annual report.
American Lending has argued that the late filing fee of $9,750 should be waived due to justifiable cause because American Lending is currently in business turmoil. American Lending also alleges that it offered not to renew its mortgage lender and mortgage broker license in the last few weeks of 2008. American Lending maintains that based on a conversation that the Respondent had with the Division's staff, the Corporation believed that any discipline as a result of the delay would be waived. The Division disputed this position in its response by stating that there was never an indication that the late filing of an Annual Report would have "no regulatory repercussions." (Exhibit 6, Exhibit 7 and Exhibit 10).
American Lending's response to the Division's response filed on August 12, 2010 included three attachments; an October 14, 2010 letter to the Division, a November 12, 2009 letter from the Division to American Lending denying its request for reconsideration of the penalty; and an e-mail sent by the Division's licensing department to American Lending on September 25, 2009. (Exhibit 8).
A review of the Motions and Documents on the record does not substantiate American Lending's argument that justifiable cause for waiving the penalty does in fact exist. The basis of American Lending's argument is that the Division "erred in imposing a strict liability and completely ignored mitigating factors." American Lending has maintained that as it is currently in business turmoil, the administrative penalty imposed should be waived. General Laws chapter 255E, section 8 provides that an administrative penalty for failure file a report shall be imposed unless the licensed entity neglects to file a report due to justifiable cause and not willful neglect. A review of the documents and filings, including the licensing history, indicates that American Lending was notified of the March 31, 2009, deadline for filing the Annual Report on at least two separate occasions prior to the issuance of the Temporary Order and Order to Show Cause. The Division's Temporary Order alleges that correspondence sent on October 30, 2008, and February 20, 2009, to American Lending notified the Respondent that a $50.00 per day late fee would be incurred for a late filing. Additionally, American Lending's argument that it offered to surrender its mortgage lender and mortgage broker license thereby deeming the administrative penalty and regulatory action unnecessary is irrelevant, as the information reflected on the Annual Report would be for its volume of business for calendar year 2008, a time in which American Lending maintained a license in the Commonwealth.
A review of the Respondent's licensing history available through the Nationwide Mortgage Licensing System ("NMLS") and provided by the Division in its response, indicates that on December 30, 2008, a representative of American Lending formally requested a renewal of the Respondent's mortgage lender and mortgage broker license through NMLS. This is contrary to the Respondent's position that it offered not to renew its license "in the final weeks of 2008." The Respondent's license renewal was subsequently approved on April 21, 2009. An October 14, 2009 letter sent by the President of American Lending that was an attachment to both parties' filings (Exhibit 7, Attachment 2 and Exhibit 8, Attachment 1) further states that the Respondent was in contact with the Division's licensing department and had requested a surrender of the licenses around March 3, 2009. However the same letter acknowledged that American Lending had not formally requested the surrender of licenses through NMLS. Additionally, American Lending would have been aware of the April 21, 2009, renewal approval through NMLS, yet according to information submitted on the record, the Respondent made no attempt to request a surrender of its mortgage lender and mortgage broker licenses at that time.
American Lending's Written Argument filed on August 5, 2010, states that American Lending had ceased operating in the Commonwealth after December 2008, a statement that was disputed by the Division in a Response filed by the Division which included publically available registry of deeds records that identify the Respondent as the mortgage lender of record during calendar year 2009. In a response filed by American Lending's counsel on August 12, 2010, the Respondent argued that the mortgage documents recorded at the registry of deeds that identified American Lending as the mortgage lender of record were merely "renewal[s] of previously underwritten loans." It is unclear what Respondent's counsel defines as a "renewal of a previously underwritten loan" other than to assume that counsel in fact meant to indicate that the mortgage loans were refinances, which would support the Division's contention that the Respondent was engaged in the business of a mortgage lender pursuant to the provisions of General Laws chapter 255E, section 2.
Surety Bond Requirement
The Division's regulation at 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a) requires all licensed mortgage lenders and mortgage brokers to obtain a surety bond as a condition of licensure.
The Division's regulation at 209 CMR 42.03(2)(a) applicable to mortgage lenders states in part:
License Requirements. An Applicant shall be required to submit detailed information supporting the following general requirements:

a bond in a sum to be based on the amount of the Applicant's aggregate mortgage loans, as determined by the Commissioner, but in no event shall the sum of the bond be less than $100,000, up to a maximum of $500,000…
The Division's regulation at 209 CMR 42.06(2)(a) applicable to mortgage brokers states in part:
License Requirements. An Applicant shall be required to submit detailed information supporting the following general requirements:

a bond of $75,000 in such form and with such sureties as may be approved by the Commissioner...
The Division alleges that amendments to the regulation at 209 CMR 42.00 et seq.,implementing the requirement of a surety bond for the maintenance of a license, followed a public hearing that was held on July 10, 2007, and a subsequent 10 day comment period. The Division forwarded all licensed mortgage lenders and mortgage brokers a notification letter on or about September 10, 2007 advising them of the requirement and notifying them that a bond would have to be secured by December 31, 2008. The Division also alleges that at least three additional notices were mailed to all licensees, including American Lending. A notice was sent or about October 30, 2008 reiterating the December 31, 2008 deadline; a letter was sent on or about February 20, 2009 providing instructions to licensees that required them to mail a notarized surety bond by March 31, 2009; and an additional notice was sent around April 30, 2009 that provided all licensees with additional time in which to comply with the Division's regulations and required all licensees to obtain and provide evidence of a bond by May 15, 2009.
American Lending maintains that it failed to secure a bond because: the Corporation was allegedly relying on a "prior law that required either a net worth of $100,000 or a surety bond;" that there was a lack of notice from the Division of the changes in the regulations that would require the maintenance of a bond; and that the Division was aware of the fact that "insurance companies were not underwriting any bond applications," a statement that the Division disputed by maintaining that it had no such knowledge and that "the vast majority of mortgage companies were able to secure the corporate bonds as required." American Lending also alleges that it offered not to renew its mortgage lender and mortgage broker license in the last few weeks of 2008, and the Division was at fault for renewing a license application without the necessary bond. (Exhibit 6, Exhibit 7 and Exhibit 10).
A review of the Motions and Documents on the record indicate that the argument that the Respondent was relying on a previous statute is unfounded and clearly contrary to the Respondent's written statements to the Division. The NMLS system requires all licensees seeking renewal of their mortgage lender and mortgage broker license to complete a "renewals attestation form" signed by a representative of the licensee under oath. The license renewal history that was provided by the Division indicates that American Lending submitted request for renewal of the Corporation's license on or about December 30, 2008. An authorized representative of American Lending would have had to complete the attestation form that states in part: "As part of this request for license/registration renewal, I swear and affirm to the following: The licensee is in compliance with any surety bond (or approved alternative) requirements(s) of the jurisdiction(s) being request to renew its license/registration."
An October 14, 2009 letter submitted by American Lending as an attachment to its August 12, 2010 filing during this hearing (Exhibit 8, Attachment 1 ) was sent to the Division by the President of American Lending that stated the Corporation was having great difficulty in securing bond coverage and that the Corporation's bond had been cancelled on March 3, 2009. The record also reflects that American Lending was notified on at least four separate occasions, of the surety bond requirement. Correspondence was sent to all licensed mortgage lenders and mortgage brokers by the Division on September 10, 2007, October 30, 2008, February 20, 2009 and April 30, 2009.
The October 14, 2009 correspondence from the Respondent, further states that American Lending was in contact with the Division's licensing department and had requested a surrender of the license around March 3, 2009, however the letter acknowledged that the request was not formally requested through NMLS, and American Lending group did not follow up, a statement that contradicts the Respondent's Written Argument filed on August 5, 2010 which states that the Corporation offered to not renew the license in the last few weeks of 2008. American Lending also would have been aware of the April 21, 2009 renewal approval through NMLS and according to information submitted on the record, the Respondent did not thereafter file a request to surrender its license.
The Respondent's Written Argument filed on August 5, 2010 indicated that since American Lending had ceased operating in the Commonwealth after December 2008 a surety bond would not have been necessary, a statement that is disputed by the Division in a Response filed by the Petitioner which included publically available registry of deeds records that identify the Respondent as the mortgage lender of record during calendar year 2009.
ORDER AND DECISION
American Lending's mortgage lender and mortgage broker license numbers MC5051 and MC5253 are hereby permanently revoked for violations of General Laws chapter 255E, section 8, the Division's regulations at 209 CMR 42.10, 209 CMR 42.03(2)(a) and 209 CMR 42.06(2)(a). Therefore, American Lending is ordered to cease and desist from transacting business in Massachusetts as a mortgage lender and mortgage broker.
American Lending is hereby ordered to pay an Administrative Penalty in the amount of $9,750 for the late filing of an Annual Report for calendar year 2008 pursuant to the provisions of General Laws chapter 255E, section 8.
American Lending is ordered to immediately place any pending residential mortgage loan applications and related files with an independent licensed mortgage lender or other qualified lender in Massachusetts, with no costs to the applicant.
The Division's request for costs and fees for the investigation of this matter is hereby denied.
This Final Decision and Order may be appealed by filing a written petition for judicial review within thirty (30) days after entry of this Final Order and Decision, pursuant to Massachusetts General Laws chapter 30A, sections 14 and 15.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 18TH day of November, 2010

By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts

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