Temporary Order to Cease and Desist  Old Commonwealth Mortgage, LLC

Date:	03/13/2007
Organization:	Division of Banks
Docket Number:	2007-010
Location:	Garden City, NY

Old Commonwealth Mortgage, LLC, Garden City, NY - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2007-010

FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST

In the Matter of
OLD COMMONWEALTH MORTGAGE, LLC
and NEAL ELBAUM, individually
Garden City, New York

Mortgage Broker License No. MB4074

The Commissioner of Banks ("Commissioner") having determined that OLD COMMONWEALTH MORTGAGE, LLC and NEAL ELBAUM (collectively, "Old Commonwealth Mortgage" or the "Company"), located at 377 Oak Street, Suite 410, Garden City, New York 11530 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 broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
2. Old Commonwealth Mortgage is, and at all relevant times, has been a Company doing business in the Commonwealth of Massachusetts. Old Commonwealth Mortgage engages in the business of a mortgage broker at 377 Oak Street, Suite 410, Garden City, New York 11530.
3. Old Commonwealth Mortgage is licensed by the Commissioner as a mortgage broker as required by Massachusetts General Laws chapter 255E, section 2. According to records maintained on file with the Division, the Commissioner issued Old Commonwealth Mortgage's initial license to engage in the business of a mortgage broker in Massachusetts on or about August 30, 2005.
4. Neal Elbaum is the president, owner, and sole member of Old Commonwealth Mortgage.
5. On April 7, 2006, Mr. Elbaum was charged with the following violations of the New York State Penal Law: Commercial Bribing in the First Degree, a Class E Felony; Unlawful Duplication of Computer Related Material, a Class E Felony; Unlawful Possession of Personal Identification Information in the Third Degree, a Class A Misdemeanor (collectively, the "Charges").
6. According to information provided by the District Attorney's Office, Nassau County, New York, the charges against Mr. Elbaum resulted from Mr. Elbaum's alleged theft of proprietary information from Old Merchants Mortgage, Inc., Lake Success, New York ("Old Merchants Mortgage").
7. According to information published by the District Attorney's Office, Nassau County, New York and information on file with the Division, Mr. Elbaum was formerly employed by Old Merchants Mortgage before organizing and operating Old Commonwealth Mortgage.
8. By letter dated April 17, 2006, Old Commonwealth Mortgage, through its attorney, provided written notice to the Division that Mr. Elbaum had been arrested and that the above Charges had been entered against him by the District Attorney's Office, Nassau County, New York.
9. On December 6, 2006, upon the entering of a guilty plea by Mr. Elbaum to the felony Charge of 'Unlawful Duplication of Computer Related Material', the Nassua County Superior Court sentenced Mr. Elbaum.
10. By letter dated December 28, 2006, Mr. Elbaum notified the Division that he had pled guilty to the above Charge and, pursuant to the terms of said plea, had been convicted of 'Unlawful Duplication of Computer Materials', in violation of New York Penal Law Section 156.30(1), a Class E Felony. The Division notes that although the letter was dated December 28, 2006, the letter was not received by the Division until February 7, 2007.
11. The Division's regulation at 209 CMR 42.12(2) states, in part:
    2. A Licensee shall notify the Commissioner immediately, and in writing within five business days, of the occurrence of any of the following significant developments: . . . (b) Criminal felony indictment or conviction of any of the Licensee's officers, directors, principal stockholders, or affiliates.

12. A Short Form Order issued on May 25, 2006, by the Supreme Court, State of New York, County of Nassau, document Index No: 011808/2005 in the matter of Old Merchants Mortgage Inc. d/b/a Old Merchants Mortgage Bankers against Old Commonwealth Mortgage, LLC and Neal Elbaum, individually, indicates that Old Merchants Mortgage was granted summary judgment against Old Commonwealth Mortgage and Neal Elbaum for breach of contract. Specifically, Old Merchants Mortgage presented a prima facie case that Old Commonwealth Mortgage and Mr. Elbaum violated a clause of the employment and compensation agreement by which Old Commonwealth Mortgage and Mr. Elbaum agreed not to interfere with the business of Old Merchants Mortgage for one year post employment and Old Commonwealth Mortgage and Mr. Elbaum did not oppose the motion for summary judgment.
13. A Short Form Order issued on May 31, 2006, by the Supreme Court, State of New York, County of Nassau, document Index No: 011808/2005 in the matter of Old Merchants Mortgage Inc. d/b/a Old Merchants Mortgage Bankers against Old Commonwealth Mortgage, LLC and Neal Elbaum, individually, indicates that Old Commonwealth Mortgage and Mr. Elbaum, individually, were found in civil contempt for the violation of a July 27, 2005 show cause order restraining Old Commonwealth Mortgage and Mr. Elbaum from accessing and otherwise using proprietary data belonging to Old Merchants Mortgage.

    CONCLUSIONS OF LAW

14. Based upon the information contained in Paragraphs 1 through 13, by engaging in activity which resulted in a felony conviction of 'Unlawful Duplication of Computer Materials', Neal Elbaum, individually, has engaged in criminal activity related to the operation of the licensed mortgage broker business.
15. Based upon the information contained in Paragraphs 1 through 13, by engaging in activity which resulted in a felony conviction of 'Unlawful Duplication of Computer Materials', Old Commonwealth Mortgage and Neal Elbaum, individually, have 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 42.06(2)(c).
16. Based upon the information contained in Paragraphs 1 through 13, by notifying the Division on February 7, 2007, by a letter dated December 28, 2006, that Mr. Elbaum entered a guilty plea and was thereby convicted of the above Charge on December 6, 2006, Old Commonwealth Mortgage failed to notify the Commissioner in writing, within five business days, that Neal Elbaum was convicted of a criminal felony, in violation of 209 CMR 42.12(2).
17. Based upon the information contained in Paragraphs 1 through 13, the Commissioner has determined that:
    1. Old Commonwealth Mortgage, and Neal Elbaum, individually, have engaged in, or are about to engage in, acts or practices which warrant the belief that the licensed business is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a 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 Old Commonwealth Mortgage.
18. A Certificate of Relief from Disabilities issued by the Nassau County Superior Court, State of New York pursuant to Article 23 of the New York State Correction Law does not preclude the Division from relying upon the felony conviction referenced above when exercising its discretionary power to suspend or revoke a mortgage broker license.
19. Based upon the information contained in Paragraphs 1 through 13, had the facts and conditions found therein existed at the time of Old Commonwealth Mortgage's original mortgage broker license application, the Commissioner would have been warranted in refusing to issue such license. The facts and conditions set forth in Paragraphs 1 through 13 present sufficient grounds for the revocation of Old Commonwealth Mortgage's mortgage lender license number MB4074 pursuant to Massachusetts General Laws chapter 255E, section 6 and the Division's regulation at 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:

20. ORDERED that Neal Elbaum, individually, and Old Commonwealth Mortgage, and any and all employees, independent contractors, or agents operating on behalf of the Company, and their successors or assigns, shall immediately cease engaging in the activities of a 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, Neal Elbaum, individually, and Old Commonwealth Mortgage are ordered to immediately cease soliciting or accepting, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in Massachusetts.
21. IT IS FURTHER ORDERED that Old Commonwealth Mortgage 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.
22. IT IS FURTHER ORDERED that Old Commonwealth Mortgage 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. Old Commonwealth Mortgage shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s) or broker(s).
23. IT IS FURTHER ORDERED that Old Commonwealth Mortgage 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:
    1. All information on file as of the date of submission regarding Old Commonwealth Mortgage's open application list as a mortgage broker, including but not limited to, the following: The names of all individuals from whom Old Commonwealth Mortgage 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 Company's submitted loans.
24. IT IS FURTHER ORDERED that Old Commonwealth Mortgage shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage broker or lender pursuant to Paragraph 22 of this TEMPORARY ORDER, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in the Company's books and records and shall be available to the Commissioner, in their entirety, upon request.
25. IT IS FURTHER ORDERED that to the extent that the Company is unable to comply with any provisions contained in Paragraphs 22 through 24 of this TEMPORARY ORDER due to the seizure of records in the execution of a search warrant in the matter which gave rise to the Charges, Old Commonwealth Mortgage shall immediately notify the Division of the Company's inability to comply with such provision and the specific circumstances thereof. Such notice shall provide contact information for the department and/or party that currently possesses the relevant records.
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 Old Commonwealth Mortgage 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 13th day of March, 2007.

By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts