Temporary Order to Cease and Desist  Dana Capital Group, Inc.

Date:	05/24/2007
Organization:	Division of Banks
Docket Number:	2007-017
Location:	Irvine, CA

Dana Capital Group, Inc., Irvine, CA - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER LICENSING
Docket No. 2007-017

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

In the Matter of
DANA CAPITAL GROUP, INC
Irvine, California

Mortgage Company License No(s). MC1525, et al.

The Commissioner of Banks ("Commissioner") having determined that Dana Capital Group, Inc., ("Dana Capital" or the "Corporation"), located at 8001 Irvine Center Drive, Suite 1200, Irvine, California, 92618 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. Dana Capital is, and at all relevant times, has been a foreign Corporation conducting business in the Commonwealth of Massachusetts. Dana Capital's main office is located at 8001 Irvine Center Drive, Suite 1200, Irvine, California.
3. Dana Capital 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, the Commissioner initially issued a mortgage company license, license number MC1525, to Dana Capital to engage in the business of a mortgage lender and mortgage broker on or about August 17, 2004. License number MC1525 authorized Dana Capital to conduct the mortgage company business from the Corporation's main office located at 8001 Irvine Center Drive, Suite 1200, Irvine, California.
4. According to information on record with the Division, Dana H. Smith is an officer, Chairman of the Board of Directors, and sole owner of Dana Capital.
5. Dana Capital maintains two additional office locations from which the Corporation conducts its mortgage lender and mortgage broker business relative to Massachusetts residential property.
6. Dana Capital maintains a licensed office location at 17011 Beach Boulevard, Suite 111, Huntington Beach, California 92647 from which the Corporation conducts its mortgage lender and mortgage broker business. According to records maintained on file with the Division, the Commissioner issued a mortgage company license to Dana Capital for that location on or about August 29, 2006.
7. Dana Capital maintains a licensed office location at 4693 MacArthur Court, 11 ^th Floor, Newport Beach, California 92660 from which the Corporation conducts its mortgage lender and mortgage broker business. According to records maintained on file with the Division, the Commissioner issued a mortgage company license to Dana Capital for that location on October 26, 2006.
    
   1. Failure to Demonstrate the Financial Responsibility, Character, Reputation, Integrity, and General Fitness to Maintain a Mortgage Company License
8. On Tuesday, March 27, 2007, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination of Dana Capital's books and records in order to assess the Corporation's level of compliance with applicable Massachusetts statutes and the Division's regulations governing the conduct of those engaged in the business of a mortgage lender and mortgage broker in the Commonwealth.
9. On Monday, April 23, 2007, upon completion of the examination, the Division's examiner conducted an exit interview via teleconference with, Amanda L. Smith, the compliance director and designated representative of Dana Capital.
10. At no time during the exit interview did Dana Capital notify the Division of the Corporation's intention of winding down the Corporation, an event which reportedly took place approximately seven (7) days subsequent to the exit interview.
11. On or about Monday, May 6, 2007, the Division became aware, through published reports, that Dana Capital was winding down its operations and had ceased conducting business through its main office as of April 30, 2007.
12. On Tuesday, May 7, 2007, the Division attempted to place several calls to Dana Capital's main office located at 8001 Irvine Center Drive, Suite 1200, Irvine, California to determine the accuracy of the information reported regarding Dana Capital's dissolution, however representatives of Dana Capital were unavailable throughout the day.
13. On Tuesday, May 7, 2007, the Division was able to contact Mark J. Quinn, the individual designated by Dana Capital as the Branch Manager of the Huntington Beach, California office. Mr. Quinn informed the Division that Dana Capital was no longer operating and had initiated a winding down process of its operations on or about Tuesday, May 1, 2007.
14. On Monday, May 14, 2007, the Division was able to contact Mr. Joseph Terrezas, the individual designated by Dana Capital as the Branch Manager of the Newport Beach, California office. Mr. Terrezas informed the Division that Dana Capital had ceased operations as of April 30, 2007.
15. The Division's regulation at 209 CMR 42.13(2) states:

    (2) Licensees shall provide thirty days prior written notice of any change or closing of a Massachusetts location to the Commissioner and shall contain such other information as the Commissioner may require.

16. On Monday, May 21, 2007, the Division was able to contact Dana Smith, and other representatives of Dana Capital, via a conference call (the "conference call"). According to Dana Smith, the Corporation had ceased operations on or around April 30, 2007.
     
    2. Failure to Provide Information Requested Pursuant to a Division Inspection of the Corporation
17. Massachusetts General Laws chapter 255E, section 8 states, in part, that:

    Each licensee shall, when directed by said commissioner, permit said commissioner or his duly authorized representative to inspect its relevant records and evidence of compliance with the provisions of this chapter or any rule or regulation issued hereunder and with any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter . . . . For the purposes of such inspection, said commissioner or his representative shall have access to the offices and place of business, books, accounts, papers, records and files of all such licensees.

18. The Division's regulation 209 CMR 42.09(4) states in part:

    (4)…A Licensee shall make such other statements and reports to the Commissioner as he or she may require from time to time…

19. During the conference call, representatives of Dana Capital indicated that Dana Capital, in conducting the licensed business, had operated a series of "net branches," so called, whereby branch operations, purported to be conducted on behalf of Dana Capital, were performed by individuals or entities which were neither controlled or owned by Dana Capital.
20. During the conference call, representatives of Dana Capital were unable to provide any specific information regarding loan applications which remained pending as of April 30, 2007, and stated that they were unable to ascertain what individual branch offices had done with the applications that each office had taken prior to the commencement of dissolution procedures by Dana Capital.
21. During the conference call, the representatives stated that, as a general rule, individual applications were taken, processed and closed through individual branch offices. Furthermore, the only time the main office located at 8001 Irvine Center Drive, Suite 1200, Irvine, California, would be aware of any activity that occurred at a branch would be after the loan had closed and funded at which time the main office would receive a check from the "title or closing company."
22. The Division's regulation 209 CMR 48.03(1) states in part:

    Each Licensee shall keep and use its books, records, and accounts in a manner which will allow the Commissioner to determine whether the Licensee is complying with the provisions of . . . General Laws chapter 255E and other provisions applicable to the conduct of the licensed business.

23. During the conference call, the representatives further stated that the Corporation had not been in contact with individual branches or their designated branch managers since the entering of dissolution procedures and were unaware of what was occurring at the individual branch offices. Furthermore, the Corporation could not identify the number and status of loan applications each individual branch may have taken prior to the dissolution of the Corporation.
24. During the conference call, Dana Capital stated that it was unable or unwilling to provide the Division with information regarding the location and status of any pending loan applications that each individual branch may have taken prior to the dissolution as there has been no communication with branch offices and their designated branch managers.
25. As a result of the aforementioned facts, the Division is unable to ascertain the current status of all pending loan applications and the extent of the harm, if any, to Massachusetts residential loan applicants.
26. During the conference call, Dana Capital was unable to provide access to or identify the specific location of all of the Corporation's books and records, specifically those relating to applications that may have recently been taken.
     
    3. Failure to Provide Notification of Regulatory Action Entered in Another State
27. On or about April 19, 2007, The State of New Jersey Department of Banking and Insurance (the "New Jersey Banking and Insurance Department") issued an Order to Cease and Desist and to Take Certain Actions & Order to Show Cause Why License Should Not be Revoked (the "New Jersey Order").
28. The Division's regulation at 209 CMR 42.12(1)(c) states, in part:

    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 . . . revocation procedures, or other formal or informal regulatory action, in any state against the Licensee, and the reasons thereof.

29. As of the effective date of this TEMPORARY ORDER, the Division has not received notification from Dana Capital of the issuance of the New Jersey Order against it by the New Jersey Banking and Insurance Department.

    CONCLUSIONS OF LAW

30. Based upon the information contained in Paragraphs 1 through 29, Dana Capital failed to provide the Commissioner with thirty days prior written notice of the Corporation's intention to cease business operations in violation of the Division's regulation 209 CMR 42.13(2).
31. Based upon the information contained in Paragraphs 1 through 29, Dana Capital has failed to provide the Division with information regarding the status of applications that may have been taken prior to the dissolution of the corporation in violation of General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09(4).
32. Based upon the information contained in Paragraphs 1 through 29, Dana Capital has failed to provide the Division with information regarding the location of its books and records, specifically those relating to any "pending loan applications," in violation of 209 CMR 48.03(1) relative to record keeping.
33. Based upon the information contained in Paragraphs 1 through 29, Dana Capital failed to notify the Commissioner in writing, within one business day, that on April 19, 2007, the New Jersey Banking and Insurance Department entered the New Jersey Order against Dana Capital, in violation of 209 CMR 42.12(1)(c).
34. Based upon the information contained in Paragraphs 1 through 29, Dana Capital 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).
35. Based upon the information contained in Paragraphs 1 through 29, the Commissioner has determined that:
    1. Dana Capital 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 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 Dana Capital.
36. Based upon the information contained in Paragraphs 1 through 29, had the facts and conditions found therein existed at the time of Dana Capital's original mortgage lender and mortgage broker license application, the Commissioner would have been warranted in refusing to issue such license. Further, the facts and conditions set forth in Paragraphs 1 through 29 present sufficient grounds for the revocation of Dana Capital 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:

37. ORDERED that Dana Capital and any and all officers, directors, employees, independent contractors, or agents operating on behalf of Dana Capital, 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, Dana Capital 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.
38. IT IS FURTHER ORDERED that Dana Capital, 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.
39. IT IS FURTHER ORDERED that Dana Capital shall immediately place with one or more qualified lender(s), with no loss to applicants, the following: (a) the Corporation's entire portfolio of Massachusetts residential mortgage loans which were closed by the Corporation, and remain unfunded as of the issuance of this Temporary Order; and (b) the Corporation's entire pending application list of Massachusetts residential mortgage loans. It being understood that "no loss to the applicant" shall mean that any loan which was closed by Dana Capital, as well as any application which was approved by the Corporation, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Dana Capital. In the event that no such placement can be made, Dana Capital 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. Dana Capital shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s).
40. IT IS FURTHER ORDERED that in any instance in which Dana Capital 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 Dana Capital had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
41. IT IS FURTHER ORDERED that Dana Capital 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, Dana Capital 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 Dana Capital 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 Dana Capital 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, Dana Capital shall submit to the Commissioner (i) 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 Dana Capital 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 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.
    3. On the last business day of each subsequent week after the effective date of this TEMPORARY ORDER, Dana Capital shall provide the Commissioner with an updated, written status report of the mortgage loan applications identified above under subparagraphs 41(a) and 41(b). The form of the status report shall follow the format of the initial submission under subparagraphs 41(a) and 41(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 Dana Capital, or withdrawn by the applicant(s).
42. IT IS FURTHER ORDERED that Dana Capital 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 39 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.
43. 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.
44. 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 Dana Capital 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 24th day of May, 2007.

By: Steven L. Antonakes
Commissioner of Banks