Temporary Order to Cease and Desist International Business Financial, LLC and Tsui Cheng, Individually

Date:	10/18/2012
Organization:	Division of Banks
Docket Number:	2012-016
Location:	Boston, MA

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International Business Financial, LLC, Boston, MA and Tsui Cheng, Individually - Temporary Cease and Desist, Order to Show Cause

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE LENDER AND
MORTGAGE LOAN ORIGINATOR
LICENSING
Docket No. 2012-016

FINDINGS OF FACT AND
TEMPORARY ORDER TO
CEASE AND DESIST
&
ORDER TO SHOW CAUSE

In the Matter of
INTERNATIONAL BUSINESS FINANCIAL, LLC
Mortgage Lender License No. ML136515
Boston, Massachusetts

and

TSUI CHENG, individually
Mortgage Loan Originator License No. MLO9332

The Commissioner of Banks ("Commissioner") having determined that INTERNATIONAL BUSINESS FINANCIAL, LLC ("IBF" or the "Company"), located at 128 Lincoln Street, Room 110, Boston, Massachusetts, and TSUI CHENG has engaged in, or is engaging in, or is 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 & ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (collectively referred to as the "Order") pursuant to General Laws chapter 255E, section 7(b) and chapter 255F, section 11(a).

I. FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

A. FINDINGS OF FACT AND REGULATORY BACKGROUND

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 in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2 and its implementing regulation 209 CMR 42.00 et seq.
The Division 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.
IBF is, and at all relevant times has been, a Massachusetts limited liability company doing business in the Commonwealth. IBF’s main office is located at 128 Lincoln Street, Room 110, Boston, Massachusetts.
IBF is licensed by the Commissioner as a mortgage lender under Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner initially issued a mortgage lender license, license number ML3318, to IBF to engage in the business of a mortgage lender in Massachusetts on or about May 22, 2009. License number ML3318 authorized IBF to conduct its mortgage lender business from the Company's main office only. The Company’s license number was changed to ML136515 as of January 5, 2011.
Tsui Cheng, is, and at all relevant times has been, the manager and sole member of IBF.
Tsui Cheng 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 on the Nationwide Multi-State Licensing System (NMLS), the Commissioner issued Tsui Cheng a mortgage loan originator license, license number MLO9332 on or about May 29, 2008.
Massachusetts General Laws chapter 255E, section 8 states, in part, that:
The commissioner shall inspect a licensee's 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, the commissioner or a representative of the commissioner shall have access to the offices and place of business, books, accounts, papers, records and files of all such licensees.
The Division’s regulation at 209 CMR 48.06(2) as made applicable to the Company by 209 CMR 42.09(1) states, in part, that:
Failure of a Licensee to keep its books and records in accordance with 209 CMR 48.00 et seq. may result in suspension or revocation of the license under the authority contained in the specific statute applicable to the Licensee.
On Wednesday, February 15, 2012, pursuant to Massachusetts General Laws chapter 255E, section 8, the Division commenced an examination of IBF’s books and records at its main office for the purpose of assessing the Company’s level of compliance with applicable Massachusetts statutes and regulations governing the conduct of those engaged in the business of a mortgage lender in the Commonwealth.
Upon arrival at IBF’s main office, examiners found it locked. The Division’s examiners observed that the Company’s office contained a desk, a computer, a telephone and a box which appeared to be filled with loan files. The Division’s examiners then attempted to contact Tsui Cheng by calling the Company’s main phone number. No person answered the phone at that time.
The Division’s examiners then stopped at an office adjacent to IBF’s main office location to inquire about the whereabouts of Tsui Cheng, the examiners were informed that Tsui Cheng is out of the country. A representative of the adjacent office further stated that he believed Tsui Cheng was no longer conducting the mortgage business and intended to surrender her mortgage lender license.
On February 15, 2012, the Division’s examiners attempted to contact Tsui Cheng via e-mail and by telephone. The Division’s examiners left Tsui Cheng a voicemail requesting further information.
On February 17, 2012, the Division’s examiners received an e-mail from the representative of the adjacent office stating that he had communicated with Tsui Cheng, and she is still traveling but will shortly have Internet access to respond to the examiners’ request for more information.
On February 21, 2012, Tsui Cheng responded to the Division’s examiners’ February 15, 2012 e-mail and stated that she was "away". On March 27, 2012, Tsui Cheng submitted another e-mail to the Division stating again that she was "away", and that she decided to close down her business and surrender her mortgage lender license through the NMLS.
The Division’s examiners responded to Tsui Cheng’s e-mail stating that a determination of the quality and content of Massachusetts loan files would be needed prior to surrendering her license. The Division’s examiners further stated that a limited scope examination would be conducted, which would include a small sample of files. Additionally, the examiners inquired upon the status of in-process loan files, the accessibility of closed loan files, and if a loan list was available.
On March 24, 2012, Tsui Cheng requested a surrender of IBF’s mortgage lender license through the NMLS. The surrender request was not approved by the Division as the examination is ongoing.
On March 29, 2012, Tsui Cheng responded to the Division’s examiners email referenced in Paragraph 15 by asking for an exception to fulfilling the examiner’s requests for documents. Tsui Cheng explained that due to the fact she was out of the country, she is unable to access her office data and has limited internet access.
On March 29, 2012, the Division’s examiners responded to Tsui Cheng and inquired about the status of the loan files observed by the examiners during the initial visitation to IBF’s main office.
Tsui Cheng responded on April 2, 2012 asking for additional time, and on April 12, 2012, a box containing 31 original loan files appeared at the Division’s Boston office.
The Division’s examiners conducted an initial review of the 31 loan files submitted to the Division. The examiners’ review revealed many potential serious violations of Massachusetts and federal laws and regulations.
Books and records reviewed by the Division’s examiners during the review revealed that IBF failed to provide the Division’s examiners with full access to IBF’s books, accounts, records and files to permit an inspection of such records. Using the 2011 and 2010 annual report number for total loans, there are 91 complete loan files that remain unaccounted for.
On April 24, 2012, after completing the loan file review, the Division’s examiners e-mailed Tsui Cheng expressing concern with the findings of the initial loan review. Additionally, the Division’s examiners inquired regarding the number of loans reported on the annual report and the amount of files provided during the examination. As there appeared to be missing loan files, the Division’s examiners inquired as to the location of the additional files, and whether they could be accessed electronically.
As of the effective date of this Order, the Division has not received any further responses from Tsui Cheng.
B. CONCLUSIONS OF LAW
Based upon the information contained in Paragraphs 1 through 23, IBF 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 in violation of Massachusetts General Laws chapter 255E, section 4 and the Division’s regulation 209 CMR 42.03(2).
Based upon the information contained in Paragraphs 1 through 23, Tsui Cheng, as sole owner and managing member of IBF 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 she 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).
Based upon the information contained in Paragraphs 1 through 23, by failing to keep and use the Company’s books and records in a manner which would allow the Commissioner to determine whether IBF was complying with applicable state and federal laws and regulations, IBF has violated Massachusetts General Laws chapter 255E, section 8 and the Division’s regulations 209 CMR 48.03 and 209 CMR 42.09(1).
Based upon the information contained in Paragraphs 1 through 23, by failing to keep and use the Company’s books and records in a manner that allows the Commissioner to determine whether IBF was complying with applicable state and federal laws and regulations, Tsui Cheng, as owner and sole managing member of IBF, has violated General Laws chapter 255E, section 8 and the Division’s regulations 209 CMR 48.03 and 209 CMR 41.10(1).
Based upon the information contained in Paragraphs 1 through 23, the Commissioner has determined that:
1. IBF 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 lender including, but not limited to, the provisions of the Division’s regulations at 209 CMR 42.00 et seq.; and
2. Tsui Cheng, has engaged in, is engaging in, or is about to engage in, acts or practices which warrant the belief that she 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 IBF and Tsui Cheng.
Based upon the information contained in Paragraphs 1 through 23, had the facts and conditions found therein existed at the time of IBF’s original mortgage lender 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 23, present sufficient grounds for the revocation of IBF’s mortgage lender license pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division’s regulation at 209 CMR 42.04(2)(b).
Based upon the information contained in Paragraphs 1 through 23, had the facts and conditions found therein existed at the time of Tsui Cheng’s original mortgage loan originator 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 23, present sufficient grounds for the revocation of Tsui Cheng’s mortgage loan originator license pursuant to Massachusetts General Laws chapter 255F, section 4 and the Division's regulation 209 CMR 41.05.
ORDER TO CEASE AND DESIST

After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
ORDERED that IBF and any and all officers, members, managers, employees, independent contractors, or agents operating on behalf of IBF, and their successors or assigns, shall immediately cease engaging in the activities of: (a) a mortgage lender, 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, IBF 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.
IT IS FURTHER ORDERED that Tsui Cheng 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, Tsui Cheng 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.
IT IS FURTHER ORDERED that IBF 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.
IT IS FURTHER ORDERED that IBF 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 is understood that "no loss to the applicant" shall mean that any loan which was closed by IBF, as well as any application which was approved by IBF, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by IBF. In the event that no such placement can be made, IBF 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; and IBF shall refund all applicants any additional costs incurred by the affected applicants as a result of the Company’s transfer of applications. IBF shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s) as appropriate.
IT IS FURTHER ORDERED that IBF shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Company’s pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall be submitted to the Commissioner within five (5) days of the effective date of this Temporary Order and shall include all information on file, regarding the Company’s open application list, including but not necessarily limited to, the following:
The names of all individuals from whom IBF 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 Company’s submitted loans.
IBF 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 34 of this Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in IBF’s books and records and shall be available to the Commissioner, in their entirety, upon request.
IT IS FURTHER ORDERED that IBF shall submit to the Commissioner a copy of each of the books, records, and files which were requested during the Division’s examination on February 15, 2012, as set forth in Paragraph 22 of this Order, and which IBF has failed to provide to the Division as of the issuance of this Order.
IT IS FURTHER ORDERED that IBF shall immediately secure all records, files, and documents ("Records") pertaining to the Company. IBF 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.
IT IS FURTHER ORDERED that this 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 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 of Banks pursuant to the 2012 examination.
IT IS FURTHER ORDERED that this 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 General Laws chapter 30A.
II. ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING

A. VIOLATIONS

NOW, THEREFORE, based upon the Findings of Fact set forth above, the Division hereby sets forth the following Charges against IBF and Tsui Cheng.
The Division hereby re-alleges and incorporates by reference the Findings of Fact presented in Paragraphs 1 through 23 of the Order as though fully set forth.
The Division hereby re-alleges and incorporates by reference the Conclusions of Law presented in Paragraphs 24 through 30 of the Order as though individually set forth as separate Charges providing the basis of this Order to Show Cause.
B. ORDER TO SHOW CAUSE
WHEREAS, finding it necessary and appropriate and in the public interest, and consistent with the purposes of the laws governing mortgage lenders and loan originators in the Commonwealth;
IT IS HEREBY ORDERED that IBF shall show cause why the Company’s mortgage lender license, ML136515 should not be revoked pursuant to General Laws chapter 255E, section 6.
IT IS HEREBY ORDERED that Tsui Cheng shall show cause why her mortgage loan originator license, MLO 9332 should not be revoked pursuant to General Laws chapter 255F, section 4.
C. PRAYER FOR RELIEF
WHEREFORE, the Division, by and through the Commissioner, prays for a final decision as follows:
1. for a final Agency decision in favor of the Division and against IBF and Tsui Cheng for each Charge set forth in this Order;
2. For a final Agency decision revoking IBF’s mortgage lender license, number ML136515 to conduct business as a mortgage lender in Massachusetts;
3. For a final Agency decision revoking Tsui Cheng’s mortgage loan originator license, number MLO9332 to conduct business as a mortgage loan originator in Massachusetts;
4. For a final Agency decision ordering IBF to cease and desist from transacting business in Massachusetts as a mortgage lender;
5. For a final Agency decision ordering IBF to immediately place any pending residential mortgage loan applications and related files, if it has not already done so in accordance with the provisions of this Order, with qualified mortgage lender(s) or mortgage lender(s), with no costs to the applicant;
6. For costs and fees of the Division’s investigation of this matter; and
7. For such additional equitable relief as the Presiding Officer may deem just and proper.
D. NOTICE OF RIGHT TO A HEARING
IBF and Tsui Chang are required to file an Answer or otherwise respond to the Charges contained in this Order within twenty-one (21) days of its effective date, pursuant to the Standard Adjudicatory Rules of Practices and Procedures, 801 C.M.R. 1.09 (6)(e). If IBF and/or Tsui Chang fail to respond to this Order within the twenty-one (21) day period, the Temporary Order to Cease and Desist shall become permanent and final until it is modified or vacated by the Commissioner. Failure to file an Answer may also result in a default judgment against IBF and Tsui Chang in the matter of the revocation of the Company’s mortgage lender license, and in the matter of the revocation of Tsui Chang’s mortgage loan originator license. The Answer, and any subsequent filings that are made in conjunction with this proceeding, shall be directed to the Division, with a copy to Prosecuting Counsel.
1. All papers filed with the Division shall be addressed to the attention of:
  Administrative Hearings Officer
  Division of Banks
  1000 Washington Street, 10^th Floor
  Boston, Massachusetts 02118
  
  Prosecuting Counsel for this matter is:
  Nicole Palumbo
  Division of Banks
  1000 Washington Street, 10^th Floor
  Boston, Massachusetts 02118
You are further advised that IBF and Tsui Chang have the right to be represented by counsel or other representative, to call and examine witnesses, to introduce exhibits, to cross-examine witnesses who testify against IBF and Tsui Chang and to present oral arguments. The hearing will be held at a date and time to be determined and will be conducted according to Massachusetts General Laws, chapter 30A, sections 10 and 11, and the Standard Adjudicatory Rules of Practice and Procedure, 801 C.M.R. 1.01 and 1.03.
IBF or Tsui Chang may examine any and all Division records relative to this case prior to the date of the hearing, during normal business hours, at the office of the Prosecuting Counsel. If you elect to undertake such an examination, please contact the Prosecuting Counsel, Nicole Palumbo at 617-956-1500 x673 in advance to schedule a time that is mutually convenient.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 18th day of October, 2012

By:
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts

See Final Order and Decision entered on February 19, 2013.

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