[June 06, 2009]

Mortgage companies dispute state's cease and desist orders

BOSTON, Jun 06, 2009 (The Daily News of Newburyport - McClatchy-Tribune Information Services via COMTEX) -- The Massachusetts Division of Banks issued cease and desist orders to 87 mortgage companies, forcing them to stop doing business in Massachusetts for failing to comply with new rules governing how they operate.

Among the companies hit were offices in Groveland and Georgetown.

But several local company officials disputed the veracity of the Division of Banks' claims that they violated the law.

In fact, one of those companies, Multi-State Mortgage in Groveland, has already had the cease and desist order lifted. Another, Starboard Mortgage of Georgetown, has been out of business for months, making the order moot, the company's founder said.

The owner of a third, MacWac Mortgage of Londonderry, N.H., said he was not notified until yesterday that there was a problem.

In September 2007, the division amended its regulations regarding the licensing of mortgage brokers and lenders. The new regulations require mortgage broker applicants to submit a bond in the amount of $75,000 and to submit financial statements annually that have been either audited or reviewed.

Mortgage lender applicants were required to submit a bond ranging from at least $100,000 to $500,000 and to file audited financial statements each year. The Division of Banks provided a transition for existing licensees until Dec. 31, 2008, to allow the companies time to obtain a bond.

Each of the 87 companies closed Thursday was required to submit its financial statements and evidence of a bond to the Division of Banks no later than March 31.

"The Division increased the financial requirements of licensees for a reason: to protect consumers," said Barbara Anthony, the undersecretary of the Office of Consumer Affairs and Business Regulation. "Having a bond in place ensures that if consumers are harmed, there is some residual value to seek redress in the event that no other form of restitution exists." George Manemanus, who owns Multi-State Mortgage in Groveland, said the cease and desist order against his company was temporary and that he had secured a bond by the Dec. 31 deadline and had sent a copy of the bond to the Division of Banks. When he contacted regulators Thursday, they told him he needed to send the original, which he did.

"I took it to them, and we got reinstated yesterday," he said. "But the damage is done." Publicity about the cease and desist orders was fairly widespread, with some online publications printing the entire list of companies that had received the orders.

Manemanus said the problem was created because the Division of Banks has started using an intermediary company, the National Mortgage Licensing System, to communicate with mortgage companies.

That quasi-government agency failed to pass on information from the Division of Banks that it needed the original bond instead of a copy.

The cease and desist order "was a shock to me. We're ethical, honest and compliant. ... But we're all squared away. We are back." Others aren't so lucky.

Rich McCarran, who with his wife Sheila owns MacWac Mortgage in Londonderry, N.H., said he had been working on getting another bond after his original insurance company stopped doing business in Massachusetts. He said notices from the NMLS were going to an old, Londonderry address, so he didn't even know that he was out of compliance.

"They give us two days to reply," said McCarran, adding that the NMLS is so cumbersome and complicated that many mortgage companies don't even know if they are in compliance.

"The whole situation has been muddled with NMLS," he said.

A third local company, Starboard Mortgage of Georgetown, hasn't sold any mortgages since January, said company founder Mike Quigley.

"The division is looking for a couple of reports that are due," he said. "Once those reports are received, the cease and desist won't go on my record. But since we're out of business, it's a moot point." He also slammed NMLS, calling it "the most time-consuming piece of junk that's ever been established to administer this type of thing. It has caused more problems for people. Reporting isn't being done because of this idiot system that is so cumbersome." To see more of The Daily News or to subscribe to the newspaper, go to http://www.newburyportnews.com/. Copyright (c) 2009, The Daily News of Newburyport, Mass. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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