DOB: First Magnus, Settlement Agreement

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IN THE MATTER OF:

FIRST MAGNUS FINANCIAL
CORPORATION, FIRST MAGNUS
FINANCIAL CORPORATION
d/b/a CHARTER FUNDING AND
d/b/a STARWIN MORTGAGE
SERVICES

    ("First Magnus")

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SETTLEMENT AGREEMENT        

WHEREAS, on September 21, 2007, the Banking Commissioner (“Commissioner”), acting pursuant to Sections 36a-52, 36a-494 and 36a-517 of the Connecticut General Statutes, as amended by Public Act 07-91, and Section 36a-50(a) of the Connecticut General Statutes, issued a Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (collectively “Order”) against First Magnus, which Order is incorporated herein by reference;

WHEREAS, the Order alleges that as of August 17, 2007, First Magnus, a first and secondary mortgage licensee in Connecticut, in violation of Section 36a-758 of the Connecticut General Statutes had failed to fund two loans secured by a first or secondary mortgage on real property located in Connecticut that had been executed;

WHEREAS, the Order alleges that as of August 17, 2007, First Magnus in violation of Section 36a-758a(a) of the Connecticut General Statutes had failed to transfer to the account of its attorney loan proceeds for 14 loans, including refinancings, to be secured by a mortgage on real property located in Connecticut at the scheduled date and time for the closing of such loans or, in the case of refinancings, by the disbursement date;

WHEREAS, the Order alleges that as of August 17, 2007, First Magnus had failed to close at least 276 loans to be secured by a first or secondary mortgage on real property located in Connecticut, and close or fund at least 22,922 loans to be secured by a first or secondary mortgage on real property located in states other than Connecticut, for which it had issued commitments, which constitutes a failure to perform an agreement with borrowers within the meaning of Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes;

WHEREAS, effective August 16, 2007, First Magnus surrendered each of its 14 licenses (Nos. 9795, 15938, 16893, 18969, 19344, 17109, 19874, 19877, 15209, 19372, 15211, 17111, 14970 and 20145) as a first mortgage lender/broker under Part I(A) of Chapter 668 of the Connecticut General Statutes, and each of its 14 licenses (Nos. 9796, 15939, 16894, 18970, 19345, 17110, 19875, 19878, 15210, 19373, 15212, 17112, 14971 and 20146) as a secondary mortgage lender/broker under Part I(B) of Chapter 668 of the Connecticut General Statutes;

WHEREAS, on August 21, 2007, First Magnus filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Arizona (“Bankruptcy Court”) (Case No. 4-07-bk-01578-JMM) (“Bankruptcy Proceeding”);

WHEREAS, on September 24, 2007, the Order was sent by registered mail, return receipt requested, to First Magnus (Registered Mail No. RB027866567US);

WHEREAS, on October 1, 2007, First Magnus received the Order;

WHEREAS, on October 3, 2007, First Magnus requested a hearing on the Order, which hearing is currently scheduled to commence on February 28, 2008;

WHEREAS, Section 4-177(c) of the Connecticut General Statutes and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by agreed settlement, unless precluded by law;

WHEREAS, First Magnus and the Commissioner now desire to resolve the matters alleged in the Order;

WHEREAS, with respect to the allegations contained in the Order, First Magnus agrees to waive any rights to a hearing pursuant to Section 36a-52 of the 2008 Supplement to the General Statutes and Section 36a-50(a) of the Connecticut General Statutes; proceedings before a presiding officer; a proposed final decision by a presiding officer; a final decision by the Commissioner; all post-hearing procedures; and waives the right to seek judicial review or otherwise challenge or contest the validity of this Settlement Agreement;

WHEREAS, upon the entry of this Settlement Agreement and approval by the Bankruptcy Court, this matter will be resolved and the Commissioner will not take any future enforcement action against First Magnus based upon the allegations contained in the Order;

AND WHEREAS, First Magnus, through its execution of this Settlement Agreement, acknowledges the allegations of the Commissioner in the Order, without admitting or denying them.
 
NOW THEREFORE, the Commissioner and First Magnus enter into this Settlement Agreement as follows:

1. First Magnus shall cease and desist from violating Section 36a-758 of the 2008 Supplement to the General Statutes and Section 36a-758a(a) of the Connecticut General Statutes and failing to perform any agreement with borrowers;
2. First Magnus shall pay the Department of Banking Ten Thousand Dollars ($10,000) as reimbursement for investigative costs and, with respect to payment thereof, the Commissioner shall have an allowed claim in the sum of Ten Thousand Dollars ($10,000), which claim shall be subordinate in priority and payment to the allowed claims of First Magnus’ general unsecured creditors in the Bankruptcy Proceeding, and shall be paid in accordance with the Bankruptcy Code, Rules of Bankruptcy Procedure, Local Rules of Bankruptcy Procedure and Order of the Bankruptcy Court;
3. Entry of this Settlement Agreement by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against First Magnus based upon a violation of this Settlement Agreement or the matters underlying its entry without approval of the Bankruptcy Court, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by First Magnus and reflected herein are subsequently discovered to be untrue;
4. In the event that the Bankruptcy Court fails to approve this Settlement Agreement, nothing herein shall be construed as a waiver by First Magnus of its right to pursue administrative remedies in any proceedings commenced by the Commissioner, including any and all rights to an administrative hearing, as well as any and all rights to appeal such administrative proceedings;
5. In the event that the Bankruptcy Court fails to approve this Settlement Agreement, the Commissioner shall retain the right to take all enforcement actions the Commissioner considers appropriate;
6. This Settlement Agreement shall not preclude either party from asserting any rights or pursuing any remedies in the event that the Commissioner commences any proceedings against First Magnus for acts or omissions not specifically addressed in this Settlement Agreement, or for acts and omissions that do not arise from the facts or transactions addressed herein; and
7. This Settlement Agreement shall become final upon approval of the Bankruptcy Court.

IN WITNESS WHEREOF, the parties have caused this Settlement Agreement to be executed by each of them or their duly authorized representatives on the dates hereinafter subscribed.


Dated at Hartford, Connecticut
this 24th day of March 2008.               ________/s/_________
                                                      Howard F. Pitkin
                                                      Banking Commissioner



I, Gary K. Malis, state on behalf of First Magnus Financial Corporation that I have read the foregoing Settlement Agreement; that I know and fully understand its contents; that I am authorized to execute this Settlement Agreement on behalf of First Magnus Financial Corporation; and that First Magnus Financial Corporation agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein.
                                            

                                            By:  ________/s/_________
                                                   Name:
                                                   Title:  CFO
                                                   First Magnus Financial Corporation


State of:  Arizona

County of:  Pima


On this the 27th day of February 2008, before me, Kimberly Jane Waters, the undersigned officer, personally appeared Gary K. Malis, who acknowledged himself to be the CFO of First Magnus Financial Corporation, a corporation, and that he, as such CFO, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as CFO.

In witness whereof I hereunto set my hand.


                                         ________/s/_________
                                         Notary Public / Commissioner of the Superior Court
                                         Date Commission Expires:  11/29/10


Administrative Orders and Settlements