Temporary Order to Cease and Desist  First Magnus Financial Corporation

Date:	08/17/2007
Organization:	Division of Banks
Docket Number:	2007-025
Location:	Tuscon, AZ

First Magnus Financial Corporation, Tuscon, AZ - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE BROKER
LICENSING
Docket No. 2007-025

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

In the Matter of
FIRST MAGNUS FINANCIAL CORPORATION
Tucson, Arizona
Mortgage Company License No(s). MC1896, et al.
 

The Commissioner of Banks ("Commissioner') having determined that FIRST MAGNUS FINANCIAL CORPORATION., ("First Magnus Financial" or the "Corporation"), located at 603 North Wilmot Road ,Tucson, Arizona 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. First Magnus Financial is, and at all relevant times, has been a foreign corporation conducting business in the Commonwealth of Massachusetts. First Magnus Financial's main office is located at 603 North Wilmot Road, Tucson, Arizona.
3. First Magnus Financial 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 to First Magnus Financial to engage in the business of a mortgage lender and mortgage broker in Massachusetts on or about September 7, 2001, with license no. MC1896
4. First Magnus Financial maintains additional office locations from which the Corporation conducts the mortgage lender and mortgage broker business. According to records maintained on file with the Division, First Magnus Financial currently possesses seven (7) additional mortgage lender and mortgage broker licenses from the Commissioner for locations operated both in Massachusetts as well as outside the Commonwealth.
5. On Thursday, August 16, 2007, the Division was notified via an e-mail sent by the Iowa Division of Banking that First Magnus Financial ceased funding Residential Mortgage Loans as of Thursday, August 16, 2007. In the e-mail, the Iowa Division of Banking included a forwarded, undated, e-mail from the management team of First Magnus Financial that had evidently been sent to First Magnus employees and associates.
6. The e-mail message referenced in Paragraph 5 states in part: "First Magnus has been forced to stop accepting new loan applications or funding loans effective today."
7. The Division reviewed the web site maintained by First Magnus Financial at www.firstmagnus.com which, as of an exact date that is unknown to the Division but at least as of Thursday, August 16, 2007, confirmed the representations made in the e-mail referenced in Paragraph 5. A copy of the notice which appeared on First Magnus Financial's Web site as of Thursday August 16, 2007 is attached as Exhibit 1. The notice stated, in part:
   
   "In light of the collapse of the secondary mortgage market, First Magnus [Financial] will not fund any future mortgage loans, and is no longer…funding any mortgage loans previously originated and not yet funded"
    
8. The Division's regulation at 209 CMR 42.13(2) states:

   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.

9. First Magnus Financial did not provide prior notice to the Division that the Corporation was ceasing operations.
10. On Friday, August 17, 2007, a licensed Massachusetts mortgage broker ("Mortgage Broker") notified the Division that First Magnus Financial had failed to timely disburse loan proceeds in a mortgage refinance loan transaction involving a residential property in Massachusetts which the Mortgage Broker had placed with First Magnus Financial. The Mortgage Broker informed the Division that the loan had closed on August 14, 2007 and was scheduled to fund on August 17, 2007.
11. Based upon information and belief, the loan referenced in Paragraph 10 has not yet funded as of the effective date of this Temporary Order.

    CONCLUSIONS OF LAW

12. Based upon the information contained in Paragraphs 1 through 11, First Magnus Financial's acts or practices of contracting with consumer(s), through the underwriting and subsequent execution of mortgage loan closing documents relating to Massachusetts residential property, and thereafter failing to fund the mortgage loan(s) may constitute unfair and/or deceptive acts or practices in violation of Massachusetts General Laws chapter 93A, section 2.
13. Based upon the information contained in Paragraphs 1 through 11, due to the delay in funding contractual mortgage loan obligations First Magnus Financial has harmed a consumer, mortgage broker, and other parties in at least one residential mortgage loan transaction in the Commonwealth by engaging in acts or practices which may be unfair and/or deceptive in violation of Massachusetts General Laws chapter 93A, section 2.
14. Based upon the information contained in Paragraphs 1 through 11, by contracting to originate mortgage loan(s) that First Magnus Financial did not have sufficient warehouse funds available to fund, or any other available alternative source of funds, First Magnus Financial has engaged in unsafe or unsound practices in violation of the Division's regulation 209 CMR 42.04(2)(b)3.
15. Based upon the information contained in Paragraphs 1 through 11, First Magnus Financial failed to provide the Commissioner with thirty days prior written notice of the Corporation's intention to cease business operations in violation of 209 CMR 42.13(2).
16. Based upon the information contained in Paragraphs 1 through 11, First Magnus Financial 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).
17. Based upon the information contained in Paragraphs 1 through 11, the Commissioner has determined that:
    1. First Magnus Financial 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 First Magnus Financial.
18. Based upon the information contained in Paragraphs 1 through 11, had the facts and conditions found therein existed at the time of First Magnus Financial'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 11 present sufficient grounds for the revocation of First Magnus Financial's mortgage lender and mortgage broker license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 209 CMR 42.04(2)(b).

    ORDER TO CEASE AND DESIST

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

19. ORDERED that First Magnus Financial and any and all officers, directors, employees, or agents operating on behalf of First Magnus Financial, 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, First Magnus Financial 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.
20. IT IS FURTHER ORDERED that First Magnus Financial, 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.
21. IT IS FURTHER ORDERED that First Magnus Financial shall immediately place with one or more qualified broker(s) or lender(s), with no loss to applicants, the following: (a) First Magnus Financial's entire portfolio of Massachusetts residential mortgage loans which were closed by First Magnus Financial, and remain unfunded as of the issuance of this Temporary Order; and (b) First Magnus Financial'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 First Magnus Financial, as well as any application which was approved by First Magnus Financial, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by First Magnus Financial. In the event that no such placement can be made, First Magnus Financial 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. First Magnus Financial shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
22. IT IS FURTHER ORDERED that in any instance in which First Magnus Financial failed to fund a closed loan and in which the consumer, prior to the effective date of this Temporary Order, obtained funding through an alternate lender, First Magnus Financial shall reimburse each consumer the amount necessary to put the consumer in the same position as if First Magnus Financial had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
23. IT IS FURTHER ORDERED that First Magnus Financial 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, First Magnus Financial 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 First Magnus Financial 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 First Magnus Financial 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, First Magnus Financial 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 First Magnus Financial 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, First Magnus Financial shall provide the Commissioner with an updated, written status report of the mortgage loan applications identified above under subparagraphs 23(a) and 23(b). The form of the status report shall follow the format of the initial submission under subparagraphs 23(a) and 23(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 First Magnus Financial, or withdrawn by the applicant(s); and
    4. Within one (1) day of the effective date of this TEMPORARY ORDER, First Magnus Financial shall submit to the Commissioner First Magnus Financial'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 shall indicate First Magnus Financial's cash position at each of its depository banks as well as First Magnus Financial's bank account numbers.
24. IT IS FURTHER ORDERED that First Magnus Financial shall not pay or declare a dividend, nor otherwise authorize or execute any financial transaction, either singular or structured, in excess of two hundred and fifty thousand dollars ($250,000.00), except for wages and salaries paid to employees, contractors, officers, or other members of First Magnus Financial's management in the normal course of their business, without the prior written approval of the Commissioner. Upon the effective date of this Temporary Order, First Magnus Financial shall implement or revise its practices and procedures, as necessary, to ensure that their financial books and records are accurately maintained, in a manner illustrating compliance with the provisions of this Paragraph, and available for review by the Division's examiners upon request.
25. IT IS FURTHER ORDERED that First Magnus Financial 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(s) and or mortgage broker(s) pursuant to Paragraph 21 of this TEMPORARY ORDER, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in First Magnus Financial's books and records and shall be available to the Commissioner, in their entirety, upon request.
26. 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.
27. 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 First Magnus Financial 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 17th day of August, 2007.

By: Steven L. Antonakes
Commissioner of Banks