On April 20, 2017, the Massachusetts Division of Banks (DOB) issued Findings of Fact and a Temporary Order to Cease and Desist against a loan servicing company, alleging that the company engaged in residential mortgage loan servicing practices that violate state and federal laws, and failed to meet the requirements for a Massachusetts residential mortgage lender and debt collector.
These Findings and Order follow a limited-scope multi-state examination (“MMC Examination”), coordinated by the Multi-State Mortgage Committee (“MMC”), of the company’s activities during the period from January 1, 2013 to February 28, 2015. After finding violations of both state and federal laws and systemic operational limitations resulting in substantial harm to consumers, the MMC issued a written Report of Examination. In January 2016, the company submitted an Examination Response, which the Commissioner determined was deficient.
The MMC Examination findings showed that, as a loan servicer of federally related mortgage loans governed by the Real Estate Settlement Procedures Act’s Mortgage Servicing Rules (Regulation X), the company violated federal and state laws governing loss mitigation procedures. The Examination also found that company engaged in a pattern and practice of unsafe and unsound loan servicing by artificially inflating insurance premiums; sent transfer notices to borrowers less than 15 days before servicing transfers in violation of Regulation X, and deceptively back-dated the face of the notices; failed to make timely disbursements from escrow accounts and routinely sent borrowers inaccurate escrow statements; overcharged borrowers $6.2 million in 2014 for property inspections carried out by a vendor, exceeded the amounts that were contractually agreed upon; failed to communicate with successors in interest in violation of the Real Estate Settlement Procedures Act (RESPA); failed to timely reconcile consumer custodial accounts; failed to ensure an effective risk management program; and in one instance, failed to issue a satisfaction of a mortgage loan. The Examination also revealed that the company was not properly licensed in all jurisdictions in which it has been operating, including in Massachusetts.
Per the Temporary Order to Cease and Desist, the DOB requested a final decision that the company’s Massachusetts license to conduct business as a mortgage lender, debt collector, and residential mortgage loan servicer be revoked, and that the company cease and desist from transacting business in Massachusetts as a mortgage lender, debt collector, or loan servicer. The DOB further requested costs and fees of the DOB’s investigation and any additional equitable relief.