Temporary Order to Cease and Desist  Community Mortgage Services, Inc.

Date:	05/13/2015
Organization:	Division of Banks
Docket Number:	2015-009
Location:	Lowell, MA

Community Mortgage Services, Inc.

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER AND
MORTGAGE LOAN ORIGINATOR
LICENSING
Docket No. 2015-009

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST

In the Matter of

COMMUNITY MORTGAGE SERVICES, INC.
Mortgage Broker Licensed No. MB4853
Lowell, Massachusetts

and

VICTOR VUTHY VANG, Individually
Mortgage Loan Originator License No. MLO9098

The Commissioner of Banks (Commissioner) having determined that COMMUNITY MORTGAGE SERVICES, INC., (Community or the Corporation), located at 1075 Westford Street, Lowell, Massachusetts and VICTOR VUTHY VANG (Victor Vang) have engaged in, or are engaging in, or are about to engage in, acts or practices constituting violations of Massachusetts General Laws chapters 255E and 255F, and applicable regulations found at 209 CMR 42.00 and 209 CMR 41.00 et seq., hereby issues the following FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST (Temporary Order) pursuant to Massachusetts General Laws chapter 255E, section 7(b) and chapter 255F, section 11(a). 

I. Findings of Fact and Regulatory Background

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 broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2 and its implementing regulation 209 CMR 42.00 et seq.
2. The Division also has jurisdiction over the licensing and regulation of persons engaged in the business of a mortgage loan originator in Massachusetts pursuant to Massachusetts General Laws chapter 255F, section 2 and its implementing regulation 209 CMR 41.00 et seq.
3. Community is, and, at all relevant times, has been, a corporation doing business in the Commonwealth.  Community’s main office is located at 1075 Westford Street, Unit 109, Lowell, Massachusetts.
4. Community is licensed as a mortgage broker under Massachusetts General Laws chapter 255E, section 2 with license number MB4853.  According to records maintained on file with the Division, and as recorded on the Nationwide Multi-State Licensing System and Registry (NMLS), the Commissioner initially issued a mortgage broker license to the Corporation on or about June 23, 2006.
5. Victor Vang, is, and at all relevant times has been, the President and sole owner of Community.
6. Victor Vang is licensed by the Commissioner as a mortgage loan originator under Massachusetts General Laws chapter 255F, section 2.  According to records maintained on file with the Division, and as recorded in the NMLS, the Division issued Victor Vang a mortgage loan originator license, license number MLO9098 on or about, September 18, 2008.
7. Pursuant to Massachusetts General Laws chapter 255E, section 8, the Division is authorized to inspect the books, accounts, papers, records and files of mortgage brokers transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws chapter 255E and any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a mortgage broker.
8. On April 15, 2015, pursuant to the authority granted under Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination of the books, accounts, papers, records and files maintained by Community to evaluate the Corporation's compliance with the laws and regulations applicable to the conduct of a mortgage broker in Massachusetts (2015 examination).
9. During the course of the 2015 examination, the Division’s examiners discovered that mortgage loan related documents had been manipulated by using “correction tape" to obscure information related to the loan underwriting and approval process as set forth below.  The 2015 examination also revealed that mortgage loan related documents had been altered and borrower’s signatures were cut from various sources and pasted/taped to mortgage loan documents, including, but not limited to, loan applications and mortgage loan disclosures. 

   A. Prohibited Practices; Unfair or Deceptive Acts or Practices

   i. Alteration and/or Manipulation of Mortgage Loan Related Documents

10. The Division’s regulation 209 CMR 42.12A(7) which is applicable to mortgage brokers states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to sign a consumer's name to a mortgage loan application or mortgage loan documents on behalf of a consumer.

11. The Division’s regulation 209 CMR 42.12A(19) which is applicable to mortgage brokers states:

    It is a prohibited act or practice for a mortgage broker or a mortgage lender to engage in conduct prohibited under 209 CMR 41.10.

12. The Division’s regulation 209 CMR 42.12A(20) which is applicable to mortgage brokers states:

    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.

13. Massachusetts General Laws chapter 93A, section 2(a) states:

    Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

14. The Attorney General’s regulation 940 CMR 8.06(1) states, in part:

    It is an unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact if the representation or statement is false or misleading or has the tendency or capacity to be misleading.

15. Massachusetts General Laws chapter 255F, section 15, which is applicable to mortgage loan originators states, in pertinent part:

    It shall be a violation of this chapter for any person to: (a) directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person; (b) engage in any unfair or deceptive practice toward any person.

16. The Division’s regulation 209 CMR 41.10(1), which is applicable to mortgage loan originators states:

     It is a prohibited act or practice for a Mortgage Loan Originator to engage in conduct prohibited under 209 CMR 42.12A.

17. The Division’s regulation 209 CMR 41.10(8), which is applicable to mortgage loan originators states:

    It is a prohibited act or practice for a Mortgage Loan Originator to directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.

18. The Division’s regulation 209 CMR 41.10(9), which is applicable to mortgage loan originators states:

    It is a prohibited act or practice for a Mortgage Loan Originator to engage in any unfair or deceptive practice toward any person.

19. The Division’s regulation 209 CMR 41.10(21), which is applicable to mortgage loan originators states:

    A violation of 209 CMR 41.10 shall constitute grounds for the issuance of a cease and desist order or for license suspension, revocation, or refusal to renew under M.G.L. c. 255F, § 11(a); shall constitute grounds for a civil assessment under M.G.L. c. 255F, § 11(b); and shall constitute grounds for a Prohibition Notice under M.G.L. c. 255F, §11(d).

20. During the course of the 2015 examination, the Division’s examiners became aware of alterations made to loan disclosures.  The examiners identified two loan disclosures, which had been completed in wet ink; however, the borrower’s signatures were copied onto the documents.
21. Based upon concerns related to the discovery of the altered mortgage loan disclosures, the Division’s examiners expanded the scope of the 2015 examination and requested that the Corporation produce additional loan files for the Division’s review.  The Division’s examiners discovered that in multiple loan files, additional documents had been manipulated and correction tape had been utilized to change fees and other pertinent information.  In addition, the Division’s examiners discovered further alterations including altered borrower signatures. 
22. Based on the foregoing, the Division’s examiners attempted to review all documentation contained in the Corporation’s shred bins. Community’s representatives notified the Division’s examiners that the Corporation did not have immediate access to the documents in the shred bins as a third party provider serviced the shred bins.  As a result, on April 27, 2015, the Division’s examiners sealed the shred bins and returned on April 29, 2015, at which time, the shred bin provider granted the Division’s examiners access to the shred bins.
23. A review of the documentation recovered in Community’s shred bins and loan files , revealed that Community had been engaging in prohibited acts and practices relative to Massachusetts residential mortgage loan transactions, including but not limited to: fabricating mortgage loan related documents by reproducing and affixing signatures from previously received correspondence onto mortgage loan related documents; utilizing correction tape to alter fees, the identity of mortgage loan originators, dates, and borrower information on mortgage loan documents provided to prospective borrowers; and forging or reproducing borrowers’ signatures on mortgage loan documents required by the lender to process loan applications.
24. Examples of loan documents which were altered include:
    1. Borrower A:
       1. A review of Borrower A’s loan file revealed that the Corporation used correction tape on the loan application to alter the date the borrower signed the loan application. 
       2. A review of the 4506-T form revealed that the Corporation had used correction tape to modify the borrower’s home address and co-borrower’s name.  In addition, the date which the Loan Origination and Compensation Agreement was provided had been altered with correction tape and the interest rate on the Lender’s Anti-Steering Loan Options Disclosure had been altered using correction tape.
       3. While reviewing the Lender’s Anti-Steering Loan Options Disclosure, Massachusetts License Disclosure, and loan application, the Division’s examiners became aware that the Corporation was “cutting and pasting” the co-borrowers signature, onto loan related documents, as the signature appeared to be identical on all documents.
       4. While reviewing the Loan Origination and Compensation Agreement, the Division’s examiners discovered that the loan originator’s name, signature and borrowers’ addresses were handwritten in ink on a photocopied document, giving the appearance that borrowers’ previously signed an agreement containing different information.    
    2. Borrower B:
       1. During the initial loan file review, the Division’s examiners reviewed Borrower B’s loan file, but did not discover any altered mortgage loan documents.
       2. Upon review of the documents in the shred bins, the Division’s examiners discovered that the Corporation cut and pasted Borrower B’s signature from the initial Anti-Steering Loan Options disclosure and pasted it to a new Anti-Steering Loan Options disclosure which contained different and less favorable terms for Borrower B, than the initial Anti-Steering Loan Options disclosure. 
       3. A review of additional documents in the shred bins revealed that the Corporation cut and pasted the “Information for Government Monitoring Purposes” section of the loan application which contained mortgage loan origination information, including, the loan originator’s signature and the borrower’s signature onto revised versions of pages 3 and 4 of Borrower B’s loan application.  Additionally, the Division’s examiners determined that the Corporation appeared to have been practicing reproducing Borrower B’s signature on the backside of the Borrower’s Certification and Authorization Disclosure in an attempt to replicate Borrower B’s signature on various loan documents. 
    3. Borrower C:
       1. Upon review of documents contained in the shred bins, the Division’s examiners discovered that the Corporation had used correction tape on the loan application to change the identity of the mortgage loan originator from Victor Vang to Amanda Vu, a licensed mortgage loan originator acting on behalf of Community.  The Corporation had also cut and pasted the signature portion of the loan application to conceal the Corporation’s use of correction tape. 
    4. Borrower D:
       1. During the file review of in-process loans, the Division’s examiners reviewed Borrower D’s loan file which identified Victor Vang as the mortgage loan originator.
       2. Upon review of the documents contained in the shred bins, the Division’s examiners discovered that the Corporation had cut and pasted Borrower D’s signature onto the Loan Origination and Compensation Agreement, Loan Application Disclosure and Broker Compensation Acknowledgement and Agreement.
25. Upon information and belief, the manipulated documents as described in the above referenced Paragraph 24 were submitted and relied on by the mortgage lenders to which the mortgage loans were brokered by Community.
26. Community knew or should have known that the mortgage lender or financial institution to which the mortgage loan applications were brokered by Community would rely upon the above referenced documentation in underwriting the mortgage loan.
27. Upon information and belief, Community has submitted fabricated and altered documentation to mortgage lenders relative to Massachusetts residential mortgage loan applications, which were brokered by Community.  It is unknown how many Massachusetts consumers have been affected by Community’s lack of compliance with Massachusetts rules and regulations, or if the practice is continuing to date.

    B. Other Violations

28. In addition to the findings specifically set forth in this Temporary Order, a Report of Examination to be provided to Community describes other violations of applicable state and federal laws and regulations governing the conduct of those engaged in the business of a mortgage broker in the Commonwealth, which are incorporated by reference herein. 

    II. CONCLUSIONS OF LAW

29. Based upon the information contained in Paragraphs 1 through 28, Community has failed to demonstrate the 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 as a mortgage broker, in violation of Massachusetts General Laws chapter 255E, section 4 and the Division’s regulation 209 CMR 42.06(2).
30. Based upon the information contained in Paragraphs 1 through 28, Victor Vang, as the sole owner of Community, has failed to demonstrate and maintain the financial responsibility, character, reputation, integrity, and general fitness such as to command the confidence of the community and to warrant a determination that he will operate honestly, fairly, soundly and efficiently in the public interest, as a mortgage loan originator in violation of Massachusetts General Laws chapter 255F, section 4 and the Division's regulation 209 CMR 41.04(2)(d).
31. Based upon the information contained in Paragraphs 1 through 28, by signing consumers’ names to mortgage loan documents on behalf of consumers, Community, under the sole ownership and direction of Victor Vang, has violated the Division’s regulation 209 CMR 42.12A(7).
32. Based upon the information contained in Paragraphs 1 through 28, by manipulating loan documents, cutting and pasting signatures to affix them on mortgage loan documents, and altering mortgage loan documents using correction tape, Community, under the sole ownership and direction of Victor Vang employed  a scheme, device, or artifice, or permitted a scheme, device, or artifice to be employed, to defraud or mislead lenders and/or defraud any person in violation of Massachusetts General Laws chapter 93A, section 2(a), the Attorney General’s regulation 940 CMR 8.06(1), and the Division’s regulations 209 CMR 209 CMR 42.12A (7) and 209 CMR 42.12A (19).
33. Based upon the information contained in Paragraphs 1 through 28, by manipulating loan documents, cutting and pasting signatures to affix them on mortgage loan documents, and altering mortgage loan documents using correction tape, Victor Vang  as the sole owner of Community, has employed  a scheme, device, or artifice, or permitted a scheme, device, or artifice to be employed, to defraud or mislead lenders and/or defraud any person in violation of Massachusetts General Laws chapter 255F, section 15, Massachusetts General Laws chapter 93A, section 2(a), and the Division’s regulations 209 CMR 41.10(1), 209 CMR 41.10(8) and 209 CMR 41.10(9).
34. Based upon the information contained in Paragraphs 1 through 28, the public interest will be harmed by delay in issuing a Temporary Order against Community and Victor Vang, under Massachusetts General Laws chapter 255E, section 7(b) and Massachusetts General Laws chapter 255F, section 11(a) because, it is unknown how many other consumers have been affected or will be affected by Community and Victor Vang’s practices.  The Division continues to investigate the extent of consumer harm inflicted by Community and Victor Vang’s actions but given the severity of consumer harm incurred the Division has cause to believe that the public interest will be harmed by a delay in issuing this Temporary Order pending the completion of the Division’s 2015 examination.
35. Based upon the information contained in Paragraphs 1 through 28, the Commissioner has determined that:
    1. Community has engaged in, is engaging 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 broker including, but not limited to, the provisions of the Division’s regulations at 209 CMR 42.00 et seq.; 
    2. Victor Vang, has engaged in, is engaging in, or is about to engage in, acts or practices which warrant the belief that he is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a mortgage loan originator including, but not limited to, the provisions of the Division's regulations at 209 CMR 41.00 et seq.;
    3. The public interest will be irreparably harmed by delay in issuing an Order to cease and desist to Community and Victor Vang.
36. Based upon the information contained in Paragraphs 1 through 28, had the facts and conditions found therein existed at the time of Community’s original mortgage broker license application, the Commissioner would have been warranted in refusing to issue such license pursuant to Massachusetts General Laws chapter 255E, section 4 and the Division’s regulation at 209 CMR 42.07(2)(b).  Further, the facts and conditions set forth in Paragraphs 1 through 28 present sufficient grounds for the revocation of Community’s mortgage broker license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulations at, 209 CMR 42.12A(20).
37. Based upon the information contained in Paragraphs 1 through 28, had the facts and conditions found therein existed at the time of Victor Vang’s original mortgage loan originator license application, the Commissioner would have been warranted in refusing to issue such license pursuant to Massachusetts General Laws chapter 255F, section 4  and the Division’s regulation 209 CMR 41.05.  Further, the facts and conditions set forth in Paragraphs 1 through 28 present sufficient grounds for the revocation of Victor Vang’s mortgage loan originator license pursuant to Massachusetts General Laws chapter 255F, section 11 and the Division's regulations at 209 CMR 41.10(21).

    III. ORDER TO CEASE AND DESIST

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

38. ORDERED that Community and any and all officers, members, managers, employees, independent contractors, or agents operating on behalf of Community, and their successors or assigns, shall immediately cease engaging in the activities of:  (a) a mortgage broker, as those activities are defined under Massachusetts General Laws chapter 255E, section 1, and (b) a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts, not otherwise expressly permitted by the terms of this Temporary Order.  Therefore, Community 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.
39. IT IS FURTHER ORDERED that Victor Vang shall immediately cease engaging in the activities of a mortgage loan originator, as those activities are defined under Massachusetts General Laws chapter 255F, section 1, relative to any residential property in Massachusetts.  Therefore, Victor Vang is ordered to immediately cease soliciting, accepting, or further originating, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in Massachusetts.
40. IT IS FURTHER ORDERED that Community 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.
41. IT IS FURTHER ORDERED that Community shall 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.  Community shall obtain the prior approval of the Commissioner before placing such applications to the qualified broker(s) or lender(s).
42. IT IS FURTHER ORDERED that Community 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 be submitted to the Commissioner within two (2) days of the effective date of this Temporary Order and shall include all information on file, regarding the Corporation’s open application list, including but not necessarily limited to, the following:

    The names of all individuals from whom Community has accepted an application for a residential mortgage loan; the applicants’ addresses and telephone numbers; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; application status (i.e. filed,  cleared to close, etc.); scheduled closing dates; loan terms, if approved; the loan purpose (i.e. purchase or refinance);  rate lock status; and a list identifying the applicable broker or lender with whom the applicants’ application was placed.  The latter list should include telephone numbers of contact persons familiar with the Corporation’s submitted loans.

43. Community shall immediately secure all pending residential mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender(s) and or mortgage broker(s) pursuant to Paragraph 41 of this Temporary Order a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Community’s books and records and shall be available to the Commissioner, in their entirety, upon request.
44. IT IS FURTHER ORDERED that Community shall immediately secure all records, files, and documents (Records) pertaining to the Corporation.  Community is prohibited from destroying, altering, and/or modifying any of the referenced Records.  The Records shall be available to the Commissioner in their entirety upon request.
45. IT IS FURTHER ORDERED that Community shall submit payment of all costs associated with the 2015 examination of the aforementioned matter as set forth in the relevant invoice to be issued to after the completion of the 2015 examination.  The payment shall be made payable to the "Commonwealth of Massachusetts" and mailed to Division of Banks, Commonwealth of Massachusetts, 1000 Washington Street, 10^th Floor, Boston Massachusetts 02118-6400 within 30 days of receipt of the invoice.
46. 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.
47. IT IS FURTHER ORDERED that this Temporary Order shall not be construed as approving any act, practice, or conduct not specifically set forth herein which was, is, or may be in violation of relevant state or federal laws and regulations.  The findings, conclusions and required action set forth in this Temporary Order are in addition to, and not in lieu of, any findings, conclusions, and corrective action which may be set forth in the Report, prepared by the Division pursuant to the 2015 examination.
48. 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 Community and Victor Vang 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.

 ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 13th day of May, 2015

David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts