Temporary Order to Cease and Desist  Alliance Mortgage Banking Corp. dba Alliance Capital

Date:	08/02/2007
Organization:	Division of Banks
Docket Number:	2007-021
Location:	Levittown, NY

Alliance Mortgage Banking Corp., d/b/a Alliance Capital, Levittown, NY - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2007-021

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

In the Matter of
ALLIANCE MORTGAGE BANKING CORP. D/B/A ALLIANCE CAPITAL
Levittown, New York

Mortgage Lender and Mortgage Broker
License Nos. MC3965; MC3966

The Commissioner of Banks ("Commissioner") having determined that ALLIANCE MORTGAGE BANKING CORP. D/B/A ALLIANCE CAPITAL, ("Alliance Mortgage" or the "Corporation"), located at 3601 Hempstead Turnpike, Suite 305, Levittown, New York has engaged in, or is engaging in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255E and applicable regulations found at 209 CMR 42.00 et seq., hereby issues the following FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST ("Temporary Order") pursuant to General Laws chapter 255E, section 7(b).

FINDINGS OF FACT

1. The Division of Banks ("Division"), through the Commissioner, 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, section 2.
2. Alliance Mortgage is, and at all relevant times has been, a foreign corporation conducting business in the Commonwealth of Massachusetts. Alliance Mortgage's main office is located at 3601 Hempstead Turnpike, Suite 305, Levittown, New York.
3. Alliance Mortgage is licensed by the Commissioner as a mortgage lender and mortgage broker under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, on or about June 10, 2005 the Commissioner issued mortgage company licenses to Alliance Mortgage to engage in the business of a mortgage lender and mortgage broker in Massachusetts at 3601 Hempstead Turnpike, Suite 305, Levittown, New York and at 2735 Buffalo Road, Rochester, New York (with license numbers MC3965 and MC3966, respectively).

   A. Failure to Fund Loans

4. On or about June 22, 2007, pursuant to verbal discussions with state regulators from New Jersey and New York, the Division became aware that Alliance Mortgage had allegedly failed to timely disburse loan proceeds in residential mortgage loan transactions in both New Jersey and New York.
5. On or about June 22, 2007, pursuant to verbal discussions with state regulators from New Hampshire and New York, the Division became aware that Alliance Mortgage had allegedly drafted and delivered several checks to both borrowers and settlement agents in New Hampshire and New York that had failed to clear due to insufficient funds being maintained in the account from which such checks had been drawn.

   B. Failure to Provide Notification of Regulatory Actions Entered in Other States

6. On Thursday, June 28, 2007, the Division became aware that the New York State Banking Department ("New York Banking Department") suspended Alliance Mortgage's mortgage banker license on Wednesday, June 27, 2007, due to the corporation's failure to fund residential mortgage loans in the state of New York. The Division became aware of the suspension via an email sent by the New York Banking Department to other state banking regulators on June 28, 2007 ("New York Banking Department email").
7. According to the State of New York Banking Department Weekly Bulletin of June 29, 2007 (the "Bulletin"), Alliance Mortgage "failed to disburse loan proceeds on loans closed on New York properties, a violation of Part 38.7(a)(8) of the General Regulations of the Banking Board." According to the Bulletin, Alliance Mortgage's mortgage banker's license has been suspended and a hearing for revocation will be scheduled.
8. In the New York Banking Department email, the New York Banking Department noted that the action referenced in Paragraph 6 of this Temporary Order "was taken at this early stage because of [Alliance Mortgage's] lack of responsiveness to inquiries." Such inquiries were made pursuant to the New York Banking Department's authority to conduct examinations of its licensed mortgage bankers.
9. The Division's regulation at 209 CMR 42.12(1)(c) states, in part:
   1. A Licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of any of the following significant developments: . . . (c) Receiving notification of the institution of license . . . suspension or revocation procedures, or other formal or informal regulatory action, in any state against the Licensee, and the reasons thereof.
10. As of the effective date of this TEMPORARY ORDER, the Division has not received notification from Alliance Mortgage of the occurrence of the events referenced above in Paragraphs 6 through 8 of this TEMPORARY ORDER.

    C. Impairment of Lender Lines of Credit Used to Fund Alliance Mortgage's Lending Operations

11. According to the New York Banking Department email, a lending institution suspended Alliance Mortgage's warehouse line of credit "during the first week of June 2007."
12. A line of credit used by a mortgage lender enables the entity to fund mortgage loans prior to selling them to an investor. Without access to its lines of credit, and in the absence of the mortgage lender independently maintaining sufficient reserves and liquidity positions on its books to fund such loans, the mortgage lender would be unable to meet its funding commitments, negating its ability to meet contractual obligations to fund mortgage loans.
13. The Division's regulation at 209 CMR 42.12(1)(e) states, in part:
    1. A Licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of any of the following significant developments: . . . (e) Expiration, termination or default, technical or otherwise, of any existing line of credit or warehouse credit agreement.
14. As of the effective date of this TEMPORARY ORDER, the Division has not received notification from Alliance Mortgage of the occurrence of the event referenced above in Paragraph 11 of this TEMPORARY ORDER.

    CONCLUSIONS OF LAW

15. Based upon the information contained in Paragraphs 1 through 14, by contracting to originate mortgage loan(s) that Alliance Mortgage did not have sufficient warehouse funds available to fund, or any other available alternative source of funds, Alliance Mortgage has engaged in unsafe or unsound practices in violation of the Division's regulation 209 CMR 42.04(2)(b)(3).
16. Based upon the information contained in Paragraphs 1 through 14, Alliance Mortgage failed to notify the Commissioner in writing, within one business day, that on June 27, 2007, the New York Banking Department suspended the Corporation's mortgage banking license, in violation of 209 CMR 42.12(1)(c).
17. Based upon the information contained in Paragraphs 1 through 14, Alliance Mortgage failed to notify the Commissioner within one business day of the expiration, termination, or default, technical or otherwise, of at least one existing line of credit or warehouse credit agreement, in violation of the Division's regulation 209 CMR 42.12(1)(e).
18. Based upon the information contained in Paragraphs 1 through 14, Alliance Mortgage has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255E, section 4 and the Division's regulation 209 CMR 42.03(2)(c) and 209 CMR 42.06(2)(c).
19. Based upon the information contained in Paragraphs 1 through 14, the Commissioner has determined that:
    1. Alliance Mortgage is engaging in, has engaged in, or is about to engage in, acts or practices which warrant the belief that it is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a mortgage lender and mortgage broker including, but not limited to, the provisions of the Division's regulations at 209 CMR 42.00 et seq.; and
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Alliance Mortgage.
20. Based upon the information contained in Paragraphs 1 through 14, had the facts and conditions found therein existed at the time of Alliance Mortgage's original mortgage lender and mortgage broker licenses application, the Commissioner would have been warranted in refusing to issue such license. Further, the facts and conditions set forth in Paragraphs 1 through 14 present sufficient grounds for the revocation of Alliance Mortgage's mortgage lender and mortgage broker licenses pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b) and 209 CMR 42.07(2)(b).

    ORDER TO CEASE AND DESIST

    After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

21. ORDERED that Alliance Mortgage and any and all, officers, directors, employees, independent contractors, or agents operating on behalf of Alliance Mortgage, and their successors or assigns, shall immediately cease engaging in the activities of a mortgage lender and mortgage broker, as defined under Massachusetts General Laws chapter 255E, section 1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this TEMPORARY ORDER. Therefore, Alliance Mortgage is ordered to immediately cease soliciting or accepting, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in Massachusetts.
22. IT IS FURTHER ORDERED that Alliance Mortgage, shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan applications in a separate escrow account maintained at a federally insured bank.
23. IT IS FURTHER ORDERED that Alliance Mortgage shall immediately place with one or more qualified broker(s) or lender(s), as appropriate based on the status of the application and with no loss to applicants, all of its pending Massachusetts residential mortgage loan applications. It being understood that "no loss to the applicant" shall mean that any loan which may have been closed by Alliance Mortgage and remains unfunded, as well as any pending application which has been approved by the Corporation but has not yet closed, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Alliance Mortgage. In the event that no such placement can be made, Alliance Mortgage shall either independently fund the mortgage loan under such terms and conditions or buy down the mortgage loan offered by the lender so that the applicant does not incur a loss as a result of such placement. Alliance Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
24. IT IS FURTHER ORDERED that in any instance in which Alliance Mortgage failed to fund a loan closed by the Corporation and in which the consumer, prior to the effective date of this TEMPORARY ORDER, obtained funding through an alternate lender, the Corporation shall reimburse each consumer the amount necessary to put the consumer in the same position as if Alliance Mortgage had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
25. IT IS FURTHER ORDERED that Alliance Mortgage shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Corporation's pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall include all information on file regarding the Corporation's Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:
    1. Within one (1) day of the effective date of this TEMPORARY ORDER, Alliance Mortgage shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation's portfolio of mortgage loans that were closed by Alliance Mortgage prior to the effective date of this TEMPORARY ORDER, but remain as yet unfunded. Such information shall include, but is not limited to, the following: The names of all individuals from whom Alliance Mortgage processed an application and closed the residential mortgage loan, but failed to fund; the applicants' addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; the loan terms; the current funding status; the actual closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with the Corporation's submitted loans;
    2. As soon as possible, but not later than five (5) days after the effective date of this TEMPORARY ORDER, Alliance Mortgage shall submit to the Commissioner all information on file as of the date of submission regarding the Corporation's pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom Alliance Mortgage has accepted an application for a residential mortgage loan; the applicants' addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; rate lock status; the amount of each loan; application status (i.e. filed, submitted to lenders, cleared to close, etc.); loan terms, if approved; scheduled closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender or broker with whom each application will be placed. The record should include telephone numbers of contact persons at each lender or broker who is familiar with the Corporation's submitted loans;
    3. On the last business day of each subsequent week after the effective date of this TEMPORARY ORDER, Alliance Mortgage shall provide the Commissioner with an updated, written status report of the mortgage loan applications identified above under subparagraphs 25(a) and 25(b). The form of the status report shall follow the format of the initial submission under subparagraphs 25(a) and 25(b) and shall indicate the final disposition of the loan application and include the final terms under which each approved loan is closed. The reporting requirement shall continue until each of the approved applications is placed with a lender and funded, funded by Alliance Mortgage, or withdrawn by the applicant(s); and
    4. Within one (1) day of the effective date of this TEMPORARY ORDER, Alliance Mortgage shall submit to the Commissioner Alliance Mortgage's balance sheet and year-to-date income statement, prepared as of the date of submission, and attested by a duly authorized officer of the Corporation. The balance sheet should indicate Alliance Mortgage's cash position at each of its depository banks as well as Alliance Mortgage's bank account numbers.
26. IT IS FURTHER ORDERED that Alliance Mortgage shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender pursuant to Paragraph 23 of this TEMPORARY ORDER, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in the Corporation's books and records and shall be available to the Commissioner, in their entirety, upon request.
27. IT IS FURTHER ORDERED that this TEMPORARY ORDER shall become effective immediately and shall remain in effect unless set aside, limited, or suspended by the Commissioner or upon court order after review under Massachusetts General Laws chapter 30A.
28. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such TEMPORARY ORDER shall become permanent and final only upon receipt of a written request for such a hearing from Alliance Mortgage within twenty (20) days of the effective date of this TEMPORARY ORDER. If no hearing is requested within this twenty (20) day period, this TEMPORARY ORDER shall become permanent and final until it is modified or vacated by the Commissioner.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 2nd day of August, 2007.

By: Steven L. Antonakes
Commissioner of Banks