DOB: Cross Country Lenders, LLC, Order to Cease and Desist and Order Imposing Civil Penalty

* * * * * * * * * * * * * * * * * *

IN THE MATTER OF:

CROSS COUNTRY LENDERS, LLC

    ("Cross Country")

* * * * * * * * * * * * * * * * * *

*
*
*
*
*
*
*
*
*
ORDER TO CEASE AND DESIST
 
AND

ORDER IMPOSING CIVIL PENALTY



I.  PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534a, inclusive, of the Connecticut General Statutes, “Mortgage Lenders, Brokers and Originators”;
 
WHEREAS, the Commissioner, through the Consumer Credit Division of the Department of Banking, conducted an investigation of the activities of Cross Country, pursuant to the authority granted by Section 36a-17 of the Connecticut General Statutes, to determine if it had violated, was violating or was about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner;
 
WHEREAS, on July 8, 2008, Cross Country surrendered its mortgage correspondent lender licenses;
 
WHEREAS, on July 14, 2008, the Commissioner, acting pursuant to Section 36a-494(a) of the 2008 Supplement to the General Statutes, as amended by Public Acts 07-91, 07-156 and 08-176, Section 36a-51 of the 2008 Supplement of the General Statutes and Section 4-182(c) of the Connecticut General Statutes, issued an Order of Summary Suspension, Notice of Intent to Revoke Mortgage Correspondent Licenses and Notice of Right to Hearing (collectively “Summary Suspension Notice”) against Cross Country, which Summary Suspension Notice is incorporated herein by reference;
 
WHEREAS, on July 14, 2008, the Summary Suspension Notice was sent by registered mail, return receipt requested, to Cross Country (Registered Mail Nos. RB028034450US and RB028034463US);
 
WHEREAS, on August 4, 2008, the Summary Suspension Notice sent to Cross Country was returned to the Department marked “Returned to Sender - Unclaimed”;
 
WHEREAS, on August 13, 2008, the Summary Suspension Notice sent to Cross Country was returned to the Department marked “RTS” and “MLNA”;
 
WHEREAS, on August 5, 2008, the Commissioner, acting pursuant to Section 36a-494(b) of the 2008 Supplement to the General Statutes, as amended by Public Acts 07-91, 07-156 and 08-176, Section 36a-52(a) of the 2008 Supplement to the General Statutes and Section 36a-50(a) of the Connecticut General Statutes, issued a Withdrawal of Order of Summary Suspension, Withdrawal of Notice of Intent to Revoke Mortgage Correspondent Licenses, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (collectively “Notice”) against Cross Country, which Notice is incorporated herein by reference;
 
WHEREAS, on August 5, 2008, the Notice was sent by registered mail, return receipt requested, to Cross Country (Registered Mail Nos. RB028034914US and RB028034928US);
 
WHEREAS, on August 8, 2008, Cross Country received the Notice;
 
WHEREAS, the Notice provided Cross Country with the opportunity for a hearing and stated that if a hearing was not requested within 14 days of its receipt, the Commissioner intended to:  (1) issue an order that Cross Country cease and desist from violating Section 36a-488 of the 2008 Supplement to the General Statutes, as amended by Public Acts 07-91, 07-156 and 08-176, Section 36a-486(b) of the 2008 Supplement to the General Statutes, Section 36a-65(c)(6) of the Connecticut General Statutes, as amended by Public Act 08-176, and Section 36a-17(d) of the Connecticut General Statutes; and (2) impose a civil penalty upon Cross Country not to exceed Three Hundred Twenty-five Thousand Dollars ($325,000);
 
WHEREAS, the Commissioner alleged in the Notice that Cross Country’s failure to maintain a minimum tangible net worth of $25,000 constitutes a violation of Section 36a-488 of the 2008 Supplement to the General Statutes, as amended, and forms the basis to issue an order to cease and desist against Cross Country pursuant to Section 36a-52(a) of the 2008 Supplement to the General Statutes, and to impose a civil penalty against Cross Country pursuant to Section 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, the Commissioner alleged in the Notice that Cross Country’s employment or retention of at least 25 originators absent registration constitutes a violation of Section 36a-486(b) of the 2008 Supplement to the General Statutes, and forms the basis to issue an order to cease and desist against Cross Country pursuant to Section 36a-52(a) of the 2008 Supplement to the General Statutes, and to impose a civil penalty against Cross Country pursuant to Section 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, the Commissioner alleged in the Notice that Cross Country’s failure to pay the cost of an examination constitutes a violation of Section 36a-65(c)(6) of the Connecticut General Statutes, as amended, and forms the basis to issue an order to cease and desist against Cross Country pursuant to Section 36a-52(a) of the 2008 Supplement to the General Statutes, and to impose a civil penalty against Cross Country pursuant to Section 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, the Commissioner alleged in the Notice that Cross Country’s failure to respond to the Report of Examination constitutes a violation of Section 36a-17(d) of the Connecticut General Statutes, and forms the basis to issue an order to cease and desist against Cross Country pursuant to Section 36a-52(a) of the 2008 Supplement to the General Statutes, and to impose a civil penalty against Cross Country pursuant to Section 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, Section 36a-488 of the 2008 Supplement to the General Statutes, as amended, provides, in pertinent part, that “(a) (1) [t]he commissioner shall not issue . . . a mortgage correspondent lender license . . . to any person unless such person meets the following tangible net worth . . . requirements, as applicable:  (A) . . . the minimum tangible net worth requirement for a mortgage correspondent lender . . . shall be (i) prior to March 2, 2009, twenty-five thousand dollars . . . .
 
(2)  Each licensee shall maintain the net worth required by this subsection and shall promptly notify the commissioner if such licensee’s net worth falls below the net worth required by this subsection”;
 
WHEREAS, Section 36a-486(b) of the 2008 Supplement to the General Statutes provides, in pertinent part, that “[n]o licensee shall employ or retain an originator without first registering such originator under sections 36a-485 to 36a-498a, inclusive, provided such registration shall not be required for any originator who is registered by such licensee under sections 36a-510 to 36a-524, inclusive”;
 
WHEREAS, Section 36a-65(c)(6) of the Connecticut General Statutes, as amended, provides, in pertinent part, that “[a] licensee under section 36a-489 . . . shall pay to the commissioner the actual cost of any examination of the licensee, as such cost is determined by the commissioner”;
 
WHEREAS, Section 36a-17(d) of the Connecticut General Statutes provides, in pertinent part, that “[a]ny person who is the subject of any .  . . examination . . . shall . . . cooperate with the commissioner”;
 
WHEREAS, Section 36a-52(a) of the 2008 Supplement to the General Statutes provides, in pertinent part, that “[i]f a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice, unless the person fails to appear at the hearing.  After the hearing, the commissioner shall determine whether an order to cease and desist should be issued against the person named in the notice.  If the person . . . fails to appear at the hearing, the commissioner shall issue an order to cease and desist against the person.  No such order shall be issued except in accordance with the provisions of chapter 54”;
 
WHEREAS, Section 36a-50(a)(2) of the Connecticut General Statutes provides, in pertinent part, that “[i]f a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless such person fails to appear at the hearing.  After the hearing, if the commissioner finds that the person has violated any such provision, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by law, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.  If such person . . . fails to appear at the hearing, the commissioner may, as the facts require, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person”;
 
WHEREAS, on August 19, 2008, Stephen M. Kindseth, Esq., filed an Appearance and Request for Hearing dated August 19, 2008, on behalf of Cross Country;
 
WHEREAS, on August 21, 2008, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer which appointed Attorney Paul A. Bobruff as Hearing Officer and stated that the hearing would be held on October 15, 2008, at 9 a.m., at the Department of Banking;
 
WHEREAS, on October 15, 2008, Attorney Nirja Savill represented the Department of Banking at the hearing;
 
WHEREAS, on October 15, 2008, Cross Country failed to appear at the hearing;
 
AND WHEREAS, Section 36a-1-31(b) of the Regulations of Connecticut State Agencies provides, in pertinent part, that “[w]hen a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted.”


II.  FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. The facts as set forth in paragraphs 1 through 9, inclusive, of Section II of the Notice shall constitute findings of fact within the meaning of Section 4-180(c) of the Connecticut General Statutes, and the conclusions set forth in paragraphs 1 through 4, inclusive, of Section IV of the Notice shall constitute conclusions of law within the meaning of Section 4-180(c) of the Connecticut General Statutes and Section 36a-1-52 of the Regulations of Connecticut State Agencies.
2.

The Commissioner finds that Cross Country has engaged in acts or conduct which, pursuant to Section 36a-52(a) of the 2008 Supplement to the General Statutes, forms the basis to issue an order to cease and desist against Cross Country.

3.
The Commissioner finds that Cross Country has engaged in acts or conduct which, pursuant to Section 36a-50(a) of the Connecticut General Statutes, forms the basis to issue an order imposing a civil penalty against Cross Country.  The Notice provided Cross Country with the opportunity for a hearing and stated that the Commissioner intended to impose a civil penalty upon Cross Country not to exceed Three Hundred Twenty-five Thousand Dollars ($325,000).  Pursuant to Section 36a-1-31(b) of the Regulations of Connecticut State Agencies, the allegations in the Notice are deemed admitted due to Cross Country’s failure to appear at the scheduled hearing.  The record establishes that Cross Country violated Section 36a-488 of the 2008 Supplement to the General Statutes, as amended, Section 36a-486(b) of the 2008 Supplement to the General Statutes, Section 36a-65(c)(6) of the Connecticut General Statutes, as amended, and Section 36a-17(d) of the Connecticut General Statutes, which forms the basis to impose a civil penalty against Cross Country pursuant to 36a-50(a) of the Connecticut General Statutes.  Section 36a-50(a)(2) of the Connecticut General Statutes provides, in pertinent part, that “[i]f such person . . . fails to appear at the hearing, the commissioner may, as the facts require, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.”  The Connecticut Supreme Court has stated that “[t]he assessment of civil penalties is a fact-specific and broadly discretionary determination.”  Rocque v. Light Sources, Inc., 275 Conn. 420, 450 (2005).
 
In this case, Cross Country’s actions included failing to maintain a minimum tangible net worth of $25,000 in violation of Section 36a-488 of the 2008 Supplement to the General Statutes, as amended, employing or retaining at least 25 originators absent registration in violation of Section 36a-486(b) of the 2008 Supplement to the General Statutes, failing to pay the cost of an examination in violation of Section 36a-65(c)(6) of the Connecticut General Statutes, as amended, and failing to respond to the Report of Examination in violation of Section 36a-17(d) of the Connecticut General Statutes.  There were no mitigating factors regarding Cross Country’s statutory violations that justify a lesser sanction in this case.  Consequently, the Commissioner finds that, based upon the nature of Cross Country’s statutory violations, the facts require the imposition of a civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes in the amount of:  One Hundred Thousand Dollars ($100,000) for one violation of Section 36a-488 of the 2008 Supplement to the General Statutes, as amended; Twenty-five Thousand Dollars ($25,000) for employing or retaining at least 25 originators absent registration in violation of Section 36a-486(b) of the 2008 Supplement to the General Statutes; One Hundred Thousand Dollars ($100,000) for one violation of Section 36a-65(c)(6) of the Connecticut General Statutes, as amended; and One Hundred Thousand Dollars ($100,000) for one violation of Section 36a-17(d) of the Connecticut General Statutes.
4.
The Commissioner finds that the Notice was given in compliance with Section 36a-52 of the 2008 Supplement to the General Statutes and Sections 36a-50(a) and 4-177 of the Connecticut General Statutes.
 

III.  ORDER
 
Having read the record, I hereby ORDER, pursuant to Section 36a-494(b) of the 2008 Supplement to the General Statutes, as amended, Section 36a-52(a) of the 2008 Supplement to the General Statutes, and Section 36a-50(a)(2) of the Connecticut General Statutes, that:
 
1. Cross Country Lenders, LLC, CEASE AND DESIST from violating Section 36a-488 of the 2008 Supplement to the General Statutes, as amended, Section 36a-486(b) of the 2008 Supplement to the General Statutes, Section 36a-65(c)(6) of the Connecticut General Statutes, as amended, and Section 36a-17(d) of the Connecticut General Statutes;
2.

A CIVIL PENALTY of Three Hundred Twenty-five Thousand Dollars ($325,000) be imposed against Cross Country Lenders LLC, to be remitted to the Department of Banking by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than 45 days from the date this Order is mailed; and

3. This Order shall become effective when mailed.
 
 

Dated at Hartford, Connecticut
this 6th day of November 2008.               ________/s/_________
                                                         Howard F. Pitkin
                                                         Banking Commissioner

This Order was mail by certified mail,
return receipt requested, to the attorney
for Cross Country Lenders, LLC,
on November 7, 2008.


Stephen M. Kindseth, Esq.        Certified Mail No. 7099 3400 0009 0180 2833
Zeisler & Zeisler, P.C.
P. O. Box 3186
Bridgeport, CT 06605-0186


Administrative Orders and Settlements