DOB: Ideal Mortgage Bankers, Ltd. d/b/a Lending Key, Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Lender License, Issue Order to Cease and Desist, Impose Civil Penalty

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IN THE MATTER OF:

IDEAL MORTGAGE BANKERS, LTD.
d/b/a LENDING KEY

    ("Respondent")

 
 
 
 
 
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TEMPORARY ORDER TO
CEASE AND DESIST

NOTICE OF INTENT TO REVOKE
MORTGAGE LENDER LICENSE

NOTICE OF INTENT TO ISSUE
ORDER TO CEASE AND DESIST

NOTICE OF INTENT TO IMPOSE
CIVIL PENALTY

AND

NOTICE OF RIGHT TO HEARING

I. LEGAL AUTHORITY AND JURISDICTION

The Banking Commissioner (ďCommissionerĒ) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534c, inclusive, of the Connecticut General Statutes, ďMortgage Lenders, Correspondent Lenders, Brokers and Loan OriginatorsĒ, and Sections 9 and 19 to 21, inclusive, of Public Act 09-209.
 
Pursuant to the authority granted by Section 36a-17 of the Connecticut General Statutes, the Commissioner, through the Consumer Credit Division (ďDivisionĒ) of the Department of Banking, has investigated the activities of Respondent to determine if it has violated, is violating or is about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner.
 
Section 36a-17(a) of the Connecticut General Statutes provides:

The commissioner, in the commissionerís discretion, may make such public or private investigations or examinations within or outside this state, concerning any person subject to the jurisdiction of the commissioner, as the commissioner deems necessary to carry out the duties of the commissioner. 

Subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes provides, in pertinent part:

(a)  The commissioner may . . . revoke . . . any license issued by the commissioner under any provision of the general statutes by sending a notice to the licensee by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the licensee on the earlier of the date of actual receipt or seven days after mailing or sending.  Any such notice shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . involved; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that the licensee may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice. . . .

(b)  If 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 licensee fails to appear at the hearing.  After the hearing, the commissioner shall . . . revoke . . . the license for any reason set forth in the applicable licensing provisions of the general statutes if the commissioner finds sufficient grounds exist for such . . . revocation . . . .  If the licensee does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner shall . . . revoke . . . the license.  No such license shall be . . . revoked except in accordance with the provisions of chapter 54.

Section 36a-52 of the Connecticut General Statutes provides, in pertinent part:

(a)  Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the person on the earlier of the date of actual receipt, or seven days after mailing or sending.  Any such notice shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . alleged to have been violated; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.  If 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 does not request a hearing within the time specified in the notice or 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.

(b)  If the commissioner finds that the public welfare requires immediate action, the commissioner may incorporate a finding to that effect in the notice sent in accordance with subsection (a) of this section and issue a temporary order requiring the person to cease and desist from the activity which constitutes such alleged violation and to take or refrain from taking such action as in the opinion of the commissioner will effectuate the purposes of this section.  Such temporary order shall become effective on receipt and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in the notice.

Section 36a-50(a) of the Connecticut General Statutes provides, in pertinent part:

(1)  Whenever the commissioner finds as the result of an investigation that any person has violated any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt.  The notice shall be deemed received by the person on the earlier of the date of actual receipt or seven days after mailing or sending.  Any such notice shall include:  (A) A statement of the time, place, and nature of the hearing; (B) a statement of the legal authority and jurisdiction under which the hearing is to be held; (C) a reference to the particular sections of the general statutes . . . alleged to have been violated; (D) a short and plain statement of the matters asserted; (E) the maximum penalty that may be imposed for such violation; and (F) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.

(2)  If 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 commissionerís 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 does not request a hearing within the time specified in the notice or 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.

(3)  Each action undertaken by the commissioner under this subsection shall be in accordance with the provisions of chapter 54.


II.  MATTERS ASSERTED

1.
Respondent is a New York corporation with its main office at 520 Broadhollow Road, Suite 100E, Melville, New York.
2.
Respondent currently holds a mortgage lender license in Connecticut (No. 13843) under Part I of Chapter 668 of the Connecticut General Statutes.
3.
During the period from October 20, 2008 to August 21, 2009, Respondent entered into agreements with at least seven (7) Connecticut borrowers in which it agreed to fund residential mortgage loans secured by first mortgages on residential property located in Connecticut.
4.
During the period from October 16, 2008 to August 27, 2009, Respondent paid the loan proceeds for the seven (7) residential mortgage loans referred to in paragraph 3 above to the settlement agents on the date specified for disbursement in the HUD-1 settlement statements for such loans.
5.
The settlement agents referred to in paragraph 4 above failed to pay the loan proceeds in accordance with the instructions in the HUD-1 settlement statements.
6.
Respondent failed to have adequate internal controls in place to ensure that the settlement agents funded the loans in accordance with HUD-1 settlement statements and agreements Respondent entered into with borrowers.
7. On October 1, 2009, pursuant to Section 4-182(c) of the Connecticut General Statutes, the Division sent a letter to Respondent giving Respondent an opportunity to show compliance with all lawful requirements for retention of its mortgage lender license in Connecticut.
8. On October 14, 2009, Respondent submitted a response to the Divisionís October 1, 2009 letter.


III.  STATUTORY BASIS FOR REVOCATION OF
MORTGAGE LENDER LICENSE, ORDER TO CEASE AND DESIST
AND IMPOSITION OF CIVIL PENALTY

Section 36a-489(a)(1) of the Connecticut General Statutes, as amended by Public Acts 09-207, 09-208 and 09-209, provides, in pertinent part:

The commissioner shall not issue an initial license for a mortgage lender . . . unless the commissioner, at a minimum, finds that:  . . . (C) the applicant demonstrates that the financial responsibility, character and general fitness of the applicant, the control persons of the applicant and the qualified individual or branch manager having supervisory authority over the office for which the license is sought are such as to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b, . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209] . . . .  If the commissioner fails to make such findings, the commissioner shall not issue a license, and shall notify the applicant of the denial and the reasons for such denial.

Section 36a-494(a)(1) of the Connecticut General Statutes, as amended by Public Act 09-209, provides, in pertinent part:

(a) (1)  The commissioner may . . . revoke . . . any mortgage lender . . . license or take any other action, in accordance with the provisions of section 36a-51, for any reason which would be sufficient grounds for the commissioner to deny an application for such license under sections 36a-485 to 36a-498c, inclusive, . . . sections 36a-534a and 36a-534b . . . and sections 9 and 19 to 21, inclusive, of . . . [public act 09-209], or if the commissioner finds that the licensee, any control person of the licensee, the qualified individual or branch manager with supervisory authority, trustee, employee or agent of such licensee has done any of the following:  . . . (D) failed to perform any agreement with a licensee or a borrower.

Section 36a-494(b) of the Connecticut General Statutes, as amended by Public Act 09-209, provides, in pertinent part:

Whenever it appears to the commissioner that . . . any licensee has failed to perform any agreement with a borrower, . . . the commissioner may take action against such person or licensee in accordance with sections 36a-50 and 36a-52.

1.
Respondentís failure to have adequate internal controls in place to ensure that settlement agents funded loans in accordance with HUD-1 settlement statements and agreements that Respondent entered into with borrowers, as more fully described in paragraphs 3 to 6, inclusive, of the Matters Asserted, is conduct that illustrates that Respondent lacks financial responsibility, character and general fitness such as to command the confidence of the community and to warrant belief that Respondent will not operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498c, inclusive, of the Connecticut General Statutes, Sections 36a-534a and 36a-534b of the Connecticut General Statutes, and Sections 9 and 19 to 21, inclusive, of Public Act 09-209, and would constitute a basis to deny Respondentís application for licensure under Section 36a-489(a)(1) of the Connecticut General Statutes, as amended, which constitutes grounds for the Commissioner to revoke Respondentís license as a mortgage lender in Connecticut pursuant to Section 36a-494(a)(1) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes.
2.
Respondentís failure to ensure that the settlement agents funded the loans in accordance with the HUD-1 settlement statements and the agreements that Respondent had entered into with at least seven (7) Connecticut borrowers, as more fully described in paragraphs 3 to 6, inclusive, of the Matters Asserted, constitutes a failure to perform an agreement with borrowers within the meaning of Sections 36a-494(a)(1)(D) and 36a-494(b) of the Connecticut General Statutes, as amended.  Such conduct constitutes grounds for the Commissioner to revoke Respondentís mortgage lender license pursuant to Section 36a-494(a)(1)(D) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and forms the basis to issue an order to cease and desist pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-50(a) of the Connecticut General Statutes.  Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation.  The Commissioner intends to impose a civil penalty upon Respondent not to exceed Five Hundred Thousand Dollars ($500,000), subject to Respondentís right to a hearing on the allegations set forth above.
 

IV.  FINDING AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST

The Commissioner finds that public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from failing to perform agreements with borrowers pursuant to Section 36a-52(b) of the Connecticut General Statutes, in that the affected borrowers were financially harmed by Respondentís failure to perform agreements with borrowers and additional persons may be financially harmed by such failures.


V.  TEMPORARY ORDER TO CEASE AND DESIST, NOTICE OF INTENT
TO REVOKE MORTGAGE LENDER LICENSE, NOTICE OF INTENT
TO ISSUE ORDER TO CEASE AND DESIST, NOTICE OF INTENT
TO IMPOSE CIVIL PENALTY AND NOTICE OF RIGHT TO HEARING

WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct which constitutes sufficient grounds for the Commissioner to revoke Respondentís mortgage lender license in Connecticut pursuant to Sections 36a-494(a)(1) and 36a-494(a)(1)(D) of the Connecticut General Statutes, as amended, and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and forms a basis to issue an order to cease and desist against Respondent pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes and to impose a civil penalty against Respondent for each violation pursuant to Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-50(a) of the Connecticut General Statutes.
 
THE COMMISSIONER THEREFORE ORDERS, pursuant to the authority granted in Section 36a-52(b) of the Connecticut General Statutes, that Ideal Mortgage Bankers, Ltd. d/b/a Lending Key immediately CEASE AND DESIST from failing to perform agreements with borrowers.  This Temporary Order shall become effective upon receipt by Ideal Mortgage Bankers, Ltd. d/b/a Lending Key, and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in this Temporary Order.
 
THE COMMISSIONER FURTHER ORDERS, pursuant to Section 36a-52(b) of the Connecticut General Statutes, that:

1.
Upon the effective date of this Temporary Order, Respondent, and any and all officers, members, managers, qualified individuals or branch managers with supervisory authority at any office of Respondent, employees, independent contractors or agents operating on behalf of Respondent and their successors or assigns, shall immediately cease and desist from accepting applications and soliciting or advertising for its wholesale or retail businesses in Connecticut or to Connecticut consumers.
2.
Respondent submit to Alan J. Cicchetti, Deputy Commissioner, by e-mail at alan.cicchetti@ct.gov, within the time frames specified below, a detailed record, prepared as of the date of submission, the following:
 
(a)
As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, all information on file regarding Respondentís residential mortgage loans that were closed by Respondent in Connecticut since October 1, 2008.  Such information shall include, but is not limited to, the following:

(i)
the names of all individuals for whom Respondent has processed an application and closed the residential mortgage loan;
(ii)
the applicantsí addresses and telephone numbers;
(iii)
the loan number;
(iv)
the amount of all prepaid loan fees submitted by the customer;
(v)
the amount of each loan;
(vi) the loan terms;
(vii) the current funding status;
(viii) the actual closing dates, dates of scheduled disbursements, and dates of actual disbursements;
(ix) copies, front and back, of all disbursement checks and copies of all wire confirmations evidencing that each loan has been disbursed in accordance with the HUD-1 settlement statement and agreement Respondent entered into with borrowers;
(x) the name and telephone numbers of any mortgage broker who originated the loan, as applicable;
(xi) the loan purpose (i.e., purchase or refinance);
(xii) the name and telephone numbers of the applicable lender with whom each application will be placed; and
(xiii) the name, address and telephone numbers of each settlement or closing agent.
(b)
As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, all information on file regarding Respondentís pipeline of pending mortgage loan applications in Connecticut.  Such information shall include, but not limited to, the following:
 
(i)
the names of all individuals from whom Respondent has accepted an application for a residential mortgage loan and the dates of each such application;
(ii)
the applicantsí addresses and telephone numbers; the loan number;
(iii)
the amount of all prepaid loan fees submitted by the customer;
(iv)
rate lock status;
(v)
the amount of each loan;
(vi) application status (i.e., filed, submitted to lenders, cleared to close, etc.);
(vii) loan terms, if approved;
(viii) scheduled closing dates; the loan purpose (i.e., purchase or refinance); and
(ix) identification of the applicable lender with whom each application will be placed; and
(c)
Daily, by 5 p.m. Eastern Standard Time after the effective date of this Temporary Order, an updated, written status report of the mortgage loan applications identified above under subparagraphs 2(a) and 2(b).  The status report shall include the categories of information required under subparagraphs 2(a) and 2(b), and shall indicate the final disposition of each loan application.  The reporting requirement shall continue until each of the approved applications is funded in accordance with the HUD-1 settlement statements and agreements Respondent entered into with borrowers.
3.
As soon as possible, but not later than five (5) days after the effective date of this Temporary Order, Respondent shall submit to the Division a balance sheet and year-to-date income statement, prepared as of the date of submission, and attested to by a duly authorized officer of Respondent.  The balance sheet should indicate bank account numbers as well as Respondentís cash position at each of its depository banks.  Such balance sheet and income statement shall be submitted to Alan J. Cicchetti, Deputy Commissioner, by e-mail at alan.cicchetti@ct.gov.
4.
Respondent shall reimburse each Connecticut borrower the amount necessary to put the borrower in the same position as if the borrower had received the funds in accordance with HUD-1 settlement statements and agreements that Respondent entered into with each borrower.  Further, Respondent shall ensure that the borrowerís credit has not been adversely affected and to the extent that it has been adversely affected, take the necessary steps to restore such credit rating to the status it would have been if disbursements were made in accordance with the HUD-1 settlement statements and agreements that Respondent entered into with such borrower.
5.
Upon the effective date of this Temporary Order, Respondent shall provide to the Commissioner contact information for an employee of Respondent that Department of Banking employees may contact with questions as well as contact information for an employee of Respondent that consumers and mortgage brokers may contact with questions.  Such contact information shall be submitted to Alan J. Cicchetti, Deputy Commissioner, by e-mail at alan.cicchetti@ct.gov.
6.
Nothing in this Temporary Order shall prevent Respondent from selling or assigning a residential mortgage loan to another entity, servicing closed mortgage loans or engaging in other activity not prohibited by Sections 36a-485 to 36a-498c, inclusive, Sections 36a-534a and 36a-534b of the Connecticut General Statutes, Sections 9 and 19 to 21, inclusive, of Public Act 09-209 or this Temporary Order.

FURTHER, notice is hereby given to Respondent that the Commissioner intends to REVOKE Respondentís license to engage in the business of making mortgage loans in Connecticut, issue an order requiring Respondent to CEASE AND DESIST from failing to perform any agreement with borrowers, and impose a CIVIL PENALTY upon Respondent as set forth herein, subject to Respondentís right to a hearing on the allegations set forth above.
 
A hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, Consumer Credit Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following its receipt of this Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Lender License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing as set forth in subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes and Sections 36a-52(a) and 36a-50(a) of the Connecticut General Statutes.  This Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Lender License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing shall be deemed received on the earlier of the date of actual receipt, or seven days after mailing or sending.  The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address.  If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as ďpro seĒ.  Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a hearing officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies.  If a hearing is requested, the hearing will be held on December 1, 2009, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
 
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes, unless Respondent fails to appear at the requested hearing.  At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
 
If Respondent does not request a hearing within the time prescribed, the Commissioner will issue an order revoking Respondentís license to engage in the business of making mortgage loans in Connecticut, issue an order that Respondent cease and desist from failing to perform agreements with borrowers, and may order a civil penalty in an amount not to exceed Five Hundred Thousand Dollars ($500,000) be imposed upon Respondent.


So ordered at Hartford, Connecticut
this 21st day of October 2009.                      ________/s/_________
                                                               Howard F. Pitkin
                                                               Banking Commissioner



CERTIFICATION

I hereby certify that on this 21st day of October 2009, the foregoing Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Lender License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing was sent by registered mail, return receipt requested, to Michael Glennon Primeau, CEO/President, Ideal Mortgage Bankers, Ltd. d/b/a Lending Key, 520 Broadhollow Road, Suite 100E, Melville, New York 11747, registered mail no. RB0280367397US; and via facsimile to 631-944-6081.

                                                              ________/s/_________
                                                              Doniel Kitt
                                                              Prosecuting Attorney


Administrative Orders and Settlements