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The Commissioner of Banks (Commissioner) having determined that MORTGAGE SECURITY, INC. (Mortgage Security or the Corporation), located at 31 Teaticket Highway, Suite 2-7, East Falmouth, Massachusetts, 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) and chapter 255F, section 8(b).
FINDINGS OF FACT
A. REGULATORY BACKGROUND
i. Substantial Non-Compliance with the Terms of a Consent Order
Mortgage Security shall establish, implement and maintain procedures to ensure that the Corporation maintains and uses all loan documents in the Corporation's books and records in a manner sufficient to evidence compliance with applicable state and federal statutes and regulations, in accordance with the record keeping requirements specified by Massachusetts General Laws, chapter 255E, section 8, and the Division's regulations 209 CMR 42.09 and 209 CMR 48.03.
(c) Mortgage Security shall conduct on-going, periodic reviews of document filing and retention procedures, and its compliance thereto, to ensure its books, records, and accounts are maintained in a manner sufficient to evidence compliance with applicable federal and state laws, rules and regulations. At a minimum, such reviews shall be conducted on a quarterly basis.
(d) Mortgage Security shall provide adequate training to all applicable staff persons of Mortgage Security who have form completion and/or document filing and retention responsibilities, to ensure proper implementation and execution of the revised policies and procedures adopted by the Corporation under this Paragraph of the Consent Order.
(e) Mortgage Security shall establish, implement, and maintain procedures to ensure the full cooperation of Mortgage Security employees with the Division during all future examinations of the Corporation, which shall necessarily provide for the Division's access, within 72 hours of an official request, to any requested books, records, accounts, and any other additional, relevant materials, under the provisions of Massachusetts General Laws chapter 255E, section 8.
Mortgage Security shall establish, implement, and maintain procedures to ensure that the Corporation files all quarterly reports and annual reports on a timely basis pursuant to the Division's regulation 209 CMR 42.09(4) and M.G.L. c. 255E, section 8, respectively. It is understood that beginning with the first calendar quarter of 2011, the Nationwide Mortgage Licensing System Call Report ("Call Report") will replace the Massachusetts quarterly report. The quarterly reporting requirement will be satisfied by completing and submitting the Call Report within prescribed timeframes.
B. CONSUMER COMPLAINTS
C. DIVISION’S INVESTIGATION
i. Engaging in Unauthorized Activity
A person shall not directly or indirectly engage in the commonwealth in the business of a third party loan servicer without registering with the commissioner.
a. Engaging in Unfair and Unconscionable Servicing Activity
A third party loan servicer may not use unfair or unconscionable means in servicing any loan. Without limiting the general application of the foregoing, the following conduct is a violation of 209 CMR 18.21:
(1) Knowingly misapplying or recklessly applying loan payments to the outstanding balance of a loan.
(2) Knowingly misapplying or recklessly applying payments to escrow accounts.
Timely payments. (1) If the terms of any federally related mortgage loan require the borrower to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the deadline to avoid a penalty.
(l) System of recordkeeping. (1) Each servicer shall keep records, which may involve electronic storage, microfiche storage, or any method of computerized storage, so long as the information is easily retrievable, reflecting the servicer's handling of each borrower's escrow account. The servicer's records shall include, but not be limited to, the payment of amounts into and from the escrow account and the submission of initial and annual escrow account statements to the borrower.
ii. Failure to Maintain Books and Records
A licensee shall keep and use such business records in such form and at such location as said commissioner shall, by regulation, determine, which shall enable said commissioner to determine whether such licensee is complying with the provisions of this chapter and any rules or regulations promulgated hereunder by said commissioner and any other law, rule or regulation applicable to the conduct of the business for which it is licensed under this chapter.
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.
iii. Failure to Notify the Division of a Significant Event and Failure to Update NMLS Record Regarding the Occurrence of a Significant Event
A licensee shall notify the Commissioner immediately, and in writing within one business day, of the occurrence of...
(f) Suspension or termination of the Licensee's status as an approved seller or seller/servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association or an investor approved under 209 CMR 42.11A(1)(a).
iv. Employee Oversight
An Applicant shall demonstrate to the Commissioner's satisfaction that the Applicant, and its applicable officers and employees, possess the necessary educational and business experience to engage in the business of a mortgage lender.
v. Late Charges
In no event, in assessing a penalty because of the delinquency in making all or any part of a periodic payment under a mortgage note, shall the penalty or late charge exceed 3 per cent of the amount of principal and interest overdue, and in calculating the penalty or late charge, any amount of the periodic payment representing estimated tax payments required by the terms of the mortgage note or deed shall not be included.
vi. Failure to File Annual and Quarterly Reports
In addition to the reports required by law, a Licensee shall make such other statements and reports to the Commissioner as he or she may require from time to time. The Commissioner may require regular quarterly reports and may furnish blank forms for all such statements or reports, required by 209 CMR 42.09.
By March 31, each Licensee shall file an annual report with the Commissioner in such form as the Commissioner shall prescribe for the preceding calendar year. The annual report shall be in writing, subscribed by the Licensee under the pains and penalty of perjury.
CONCLUSIONS OF LAW
ORDER TO CEASE AND DESIST
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 30th day of April, 2013
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts