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The Commonwealth of Massachusetts Division of Banks (Division), by and through the Commissioner of Banks of the Commonwealth of Massachusetts (Commissioner), for its Order to Show Cause and Notice of Right to a Hearing (Order and Notice), alleges as follows:
JURISDICTION AND VENUE
FINDINGS OF FACT
A. Failure to Comply with the Terms of a Consent Order
Network Capital must maintain policies and procedures to ensure that, when acting in the capacity of a mortgage lender, the Corporation timely funds all mortgage loans in accordance with the Division's regulation 209 CMR 42.12A(16).
Network Capital must maintain policies and procedures to ensure that all loan files in the Corporation's books and records are maintained in a manner sufficient to evidence compliance with applicable state and federal statutes and regulations, in accordance with the record keeping requirements specified by the Division's regulations 209 CMR 42.09 and 209 CMR 48.03.
Network Capital must 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 ensure that in any transaction in which Network Capital is performing in a mortgage lender capacity, the burden is upon Network Capital, exclusively, to determine that the refinancing is in the borrower's interest.
Network Capital must maintain policies and procedures to ensure that the Corporation completes and submits NMLS Mortgage Call Reports within 45 days of the last day of each calendar quarter in accordance with prescribed filing deadlines and instructions.
Network Capital must comply with all laws and regulations applicable to its conducting the business of a mortgage lender, 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, which Network Capital has done by way of its preliminary response submitted to the Division.
Failure to comply with the terms of this Consent Order shall constitute grounds for license suspension and/or revocation, or other formal regulatory actions pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
B. Failure to Comply with Massachusetts Settlement and Funding Laws and Regulations
i. Failure to Timely Fund Loans
Except as otherwise provided in this section, in the case of any consumer credit transaction, including opening or increasing the credit limit for an open-end-credit plan, in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section…[Emphasis added].
It is a prohibited act or practice for a mortgage lender to contract with a consumer through the underwriting and subsequent execution of mortgage loan closing documents and thereafter fail to fund the mortgage loan.
A violation of 209 CMR 42.12A shall constitute grounds for the issuance of a cease and desist order under M.G.L. c. 255E, § 7; shall constitute grounds for license suspension or revocation under M.G.L. c. 255E, § 6 and shall constitute grounds for an administrative fine or penalty under M.G.L. c. 255E, §§ 11 and 12.
It is an unfair or deceptive act or practice for a lender to fail to disburse funds in accordance with any commitment or agreement with the borrower.
ii. Failure to Comply with the Good Funds Statute
C. Failure to Obtain Written Evidence of Borrower’s Right of Rescission
E. Prohibited Acts or Practices
It is a prohibited act or practice for a mortgage broker or mortgage lender to have a consumer sign a blank or incomplete mortgage loan application or mortgage loan documents.
F. Failure to File Required Financial Statements in a Timely Manner and Violation of Warehouse Line Covenants
G. Failure to Provide Notice of Significant Events
H. Filing Inaccurate Information with the Division
I. Refinancing in the Borrower’s Interest
A lender shall not knowingly make a home loan if the home loan pays off all or part of an existing home loan that was consummated within the prior 60 months or other debt of the borrower, unless the refinancing is in the borrower’s interest. The “borrower’s interest” standard shall be narrowly construed, and the burden is upon the lender to determine and to demonstrate that the refinancing is in the borrower’s interest.
A lender may request that a borrower acknowledge receipt of such a worksheet or other documentation; provided, however, a lender shall not shift the burden to the borrower to demonstrate that a home loan is in the borrowers' interest.
j. Failure to Maintain the Character, Reputation, Integrity and Fitness to Engage in the Business of a Mortgage Lender
K. Other Violations
NOW THEREFORE, the Division sets forth the following charges against Network Capital:
PRAYER FOR RELIEF
NOTICE OF RIGHT TO A HEARING
All papers filed with the Division shall be addressed to the attention of:
Administrative Hearings Officer
Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118
Prosecuting Counsel for this matter is:
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 30th day of June, 2014
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts