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The Commissioner of Banks ("Commissioner") having determined that LUCNER CHARLES d/b/a MASS FINANCIAL MORTGAGE COMPANY ("Lucner Charles" or Mass Financial Mortgage"), located at 1601 Blue Hill Avenue, Mattapan, Massachusetts 02126 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 & ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (collectively referred to as the "ORDER") pursuant to General Laws chapter 255E sections 6 and 7(b).
I. FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST
A. REGULATORY BACKGROUND AND FINDINGS OF FACT
The 2004 Examination/Inspection
The 2007 Examination/Inspection
General Laws chapter 255E, section 8, the Division commenced an examination/inspection (the "2007 examination/inspection") of the books, accounts, papers, records, and files maintained by Lucner Charles to evaluate his compliance with: (1) the laws, regulations, and regulatory bulletins applicable to the conduct of the mortgage broker business in Massachusetts and (2) the provisions of the Memorandum.
(i) Substantial Non-Compliance with the Terms of a Memorandum of Understanding
Failure to comply with the provisions of this MEMORANDUM, as determined by the Commissioner, shall constitute grounds for license revocation or other regulatory action under General Laws chapter 255E, section 6 and the Division's regulation, 209 CMR 42.00, et seq.
(a) Failure to Properly Disclose Points and Fees
Lucner Charles shall immediately establish, implement, and maintain procedures to ensure that all broker fees, loan fees, points, or similar fees collected by the Company as compensation for administrative costs incurred in originating the mortgage loan are not charged to consumers except to the extent that such fees or points have been properly disclosed to the consumers by Mass Financial Mortgage, in writing, prior to the closing of the mortgage loan in accordance with Massachusetts General Laws chapter 183, section 63. While this MEMORANDUM is in effect, compliance with this Section shall require that all broker fees, loan fees, points, or similar fees collected by the Company as compensation for administrative costs incurred in originating the mortgage loan be disclosed to the consumer, in writing, at least seventy two (72) hours prior to the closing of the mortgage loan.
A mortgagee, or a mortgage lender or mortgage broker as defined in section one of chapter two hundred and fifty-five E, shall not charge a loan fee, finder's fee, points, so-called, or similar fees in a mortgage transaction involving residential property located in the commonwealth of four or less units and occupied in whole or in part by the mortgagor, except to the extent that such fees or points have been previously disclosed to the mortgagor in writing. . . A mortgagor shall not be obligated to pay fees or points which have not been previously disclosed as required herein.
(b) Frustrating the Division's Efforts to Conduct the Mandated Examination/Inspection
In not less than thirty (30) days and not more than one hundred eighty (180) days from the effective date of this MEMORANDUM, the Division shall conduct an examination/inspection of Mass Financial Mortgage, at Mass Financial Mortgage's expense, which shall include, but not be limited to, a review of all Massachusetts residential mortgage loans originated by Mass Financial Mortgage since March 1, 2003 in order to identify any mortgage loan transactions in which the amount paid by the consumer as an origination fee, mortgage broker fee, or similar fee, as recorded on the settlement agreement, exceeded the amount disclosed to the consumer, in writing, for such fees prior to the date on which the loan closing occurred. It being understood that any violations of General Laws chapter 183, section 63 relative to the charging of points and fees may require Lucner Charles to reimburse consumers for any undisclosed, or underdisclosed, points and fees charged by Lucner Charles.
(c) Failure to Submit Required Reports
On the thirtieth (30 th) day after the end of each calendar quarter following the date of this MEMORANDUM, beginning with the calendar quarter ending March 31, 2007, Mass Financial Mortgage shall submit to the Commissioner quarterly financial statements, prepared in accordance with generally accepted accounting principles, for such calendar quarter.
Nothing contained in this Section of this MEMORANDUM is intended to modify, limit, or otherwise release the duties and obligations imposed upon Mass Financial Mortgage to file with the Commissioner, on or before April 15 th of each calendar year, any reports required under Massachusetts General Laws chapter 255E, section 8.
Each licensee shall annually, on or before the fifteenth day of April, file a report with the commissioner containing such information as said commissioner may require concerning the business and operations during the preceding calendar year at each licensed place of business conducted by a licensee in the commonwealth.
On the thirtieth (30 th) day after the end of each calendar quarter following the date of this MEMORANDUM, beginning with the calendar quarter ended March 31, 2007, Mass Financial Mortgage shall furnish written progress reports to the Division, detailing the form, content and manner of any actions taken to address each Section of this MEMORANDUM, and shall describe, in detail, any other consumer compliance initiatives instituted during the calendar quarter to improve the compliance position of Mass Financial Mortgage, and the results thereof. Each progress report submitted to the Division pursuant to this Section of the MEMORANDUM shall be reviewed and signed by a duly authorized senior officer of Mass Financial Mortgage.
(d) Failure to Properly Maintain and Provide Access to Books and Records
Within thirty (30) days from the effective date of this MEMORANDUM, Mass Financial Mortgage shall establish, implement, and maintain written policies and procedures to ensure that Mass Financial Mortgage maintains all books, records, and accounts in accordance with the requirements of Massachusetts General Laws chapter 255E, section 8 and the Division's regulation 209 CMR 42.09. The policies and procedures are to include but are not limited to:
(b) Implementing procedures to ensure the full cooperation of all Mass Financial Mortgage employees with the Division during all future examinations of Mass Financial Mortgage which shall necessarily provide for complete and timely access to its books, records, accounts, and any other additional, relevant materials pursuant to the provisions of Massachusetts General Laws chapter 255E, section 8.
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 M.G.L. c. 255E and applicable state and federal laws and regulations. Each Licensee shall comply with the provisions of 209 CMR 48.00.
(b) The mortgage broker shall retain for a minimum of three years after a mortgage loan is made the following: the original loan origination and compensation agreement as set out in 209 CMR 42.16; a copy of the settlement statement; an account of fees received in connection with the loan; correspondence; papers or records relating to the loan; and such other documents as the Commissioner may require.
(e) Conducting Mortgage Broker Business Using an Unauthorized Name
Mass Financial Mortgage, when performing in the capacity of a mortgage broker in Massachusetts, shall at all times conduct business exclusively under the business name stated on its mortgage broker license as issued by the Commissioner.
[A]ny such business shall at all times be conducted in the name of the licensee as it appears on the license.
(f) Failure to Properly Complete Good Faith Estimates
Mass Financial Mortgage shall revise its procedures to ensure that all Good Faith Estimates provided to consumers are completed in accordance with, and within the time period specified, by the provisions of the Real Estate Settlement Procedures Act, 24 CFR Part 3500.7.
In the event an application is received by a mortgage broker who is not an exclusive agent of the lender, the mortgage broker must provide a good faith estimate within three days of receiving a loan application based on his or her knowledge of the range of costs.
If the disclosure is being made by a mortgage broker who is not an exclusive agent of the lender, the lender's name will not appear at the top of the form, but the following legend must appear:
This Good Faith Estimate is being provided by ________, a mortgage broker, and no lender has yet been obtained.
Any . . .fee or payment received by the mortgage broker from either the lender or the borrower arising from the initial funding transaction, including a servicing release premium or yield spread premium, is to be noted on the Good Faith Estimate and listed in the 800 series of the Settlement Statement.
(g) Failure to Remit Full Payment of Administrative Penalty
In consideration of the activities identified by the Division and detailed in the Report, Mass Financial Mortgage agrees to the following:
(a) Mass Financial Mortgage agrees to submit a payment in the amount of ten thousand dollars ($10,000.00) in satisfaction of an administrative penalty. The administrative penalty shall be satisfied as follows:
(h) Failure to Implement and Maintain Required Revised Procedures
Lucner Charles shall establish, implement, and maintain internal controls and loan review procedures to monitor Mass Financial Mortgage's compliance with (i) the revised policies and procedures implemented pursuant to the provisions of this MEMORANDUM and (ii) the relevant statutes, rules and regulations applicable to licensed mortgage brokers in Massachusetts. Such procedures and policies shall be designed to: (i) prevent the recurrence of the violations addressed in the Report and (ii) ensure that Lucner Charles books, records, and accounts relating to the mortgage broker business are maintained in accordance with the record keeping requirements of 209 CMR 42.09 and 209 CMR 48.00 et seq. and available for the Division's inspection
(ii.) Additional Compliance Violations
(a) Failure to Disclose Criminal Charges in a License Renewal Application
(b) Deceptive Practices
(c) Misleading Representations
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.
(d) Failure to Properly Complete and Timely Provide the Attorney General's Mortgage Broker Disclosure Form
It is an unfair or deceptive act or practice for a mortgage broker to fail to provide the . . . Attorney General's Mortgage Broker Disclosure Form (the "Form"). This Form shall be completed with as much information as is available at the time the Form must be provided pursuant to 940 CMR 8.05(5).
It is an unfair of deceptive act or practice for a mortgage broker to fail to provide or mail to the borrower legible copies of the . . .disclosures described in 940 CMR 8.05(1) . . ., no later than three business days after the earliest of the following events:
(e) Failure to Retain the Loan Origination and Compensation Agreement
It is a prohibited act or practice of a mortgage broker to fail to provide to the consumer at the time of application the loan origination and compensation agreement required under 209 CMR 42.16. The content of the agreement shall strictly conform to 209 CMR 42.16 and include signatures and dates by the consumer(s) and the mortgage broker.
Each mortgage broker . . . shall retain for a minimum of three years after a mortgage loan is made the following: the original loan origination and compensation agreement as set out in 209 CMR 42.16.
(f) Failure to Notify the Division of the Closing and Relocation of Licensed Office Locations
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.
B. CONCLUSIONS OF LAW
C. ORDER TO CEASE AND DESIST
After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
All information on file as of the date of submission regarding Lucner Charles's open application list including but not limited to, the following: The names of all individuals from whom Lucner Charles 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, submitted to lenders, cleared to close, etc.); scheduled closing dates; 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 Mass Financial Mortgage's submitted loans.
II. ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING
NOW, THEREFORE, based upon the Findings of Fact set forth above, the Division hereby sets forth the following Charges against Lucner Charles:
B. PRAYER FOR RELIEF
(1.) For a final Agency decision in favor of the Division and against Lucner Charles for each Charge set forth in this ORDER TO SHOW CAUSE;
(2.) For a final Agency decision revoking Lucner Charles's mortgage broker licenses, numbers MB2239 and MB3309 to conduct business as a mortgage broker in Massachusetts;
(3.) For a final Agency decision prohibiting Lucner Charles from applying for a mortgage lender or mortgage broker license under Massachusetts General Laws chapter 255E, section 2, or for any other license from the Commissioner, for a period of forty-eight (48) months from the effective date of the final Agency decision;
(4.) For costs and fees of the Division's investigation of this matter; and
(5.) For such additional equitable relief as the Presiding Officer may deem just and proper including, without limitation, an order directing Lucner Charles to issue the reimbursements as set forth in the ORDER.
C. NOTICE OF RIGHT TO A HEARING
All papers filed with the Division shall be addressed to the attention of:
Administrative Hearings Officer
Division of Banks
One South Station, 3 rd Floor
Boston, Massachusetts 02110
Prosecuting Counsel for this matter is:
Valerie M. Carbone, Esq.
Division of Banks
One South Station, 3 rd Floor
Boston, Massachusetts 02110
Dated at Boston, Massachusetts, this 5th day of November, 2007.
By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts