DOB: Ideal Mortgage Bankers Ltd - Final Decision

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IN THE MATTER OF:

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

    ("Respondent")

 
 
 
 
 
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FINDINGS OF FACT,

CONCLUSIONS OF LAW

AND

ORDER

FINDINGS OF FACT

 1.   Ideal Mortgage Bankers, Ltd. d/b/a Lending Key (“Respondent”) is a New York corporation with its main office at 520 Broadhollow Road, Suite 100E, Melville, New York  11747-2799 (Ex. 1).
 
 2. Respondent is licensed by the Commissioner as a mortgage lender (License No. 13843) under Part I of Chapter 668 of the Connecticut General Statutes.  Section 36a-485(14) defines “mortgage lender” as:  “a person engaged in the business of making residential mortgage loans in such person’s own name utilizing such person’s own funds or by funding loans through a warehouse agreement, table funding agreement or similar agreement.”
 
 3. On October 21, 2009, the Banking Commissioner (the “Commissioner”), acting pursuant to Sections 36a-50(a), 36a-51(a), 36a-52(a), and Sections 36a-485 to 36a-534c, inclusive, of the Connecticut General Statutes, issued a 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 (collectively, the “Notice”) against Respondent (Ex. 1).
 
 4. The Notice alleged that 1) from October 20, 2008 to August 21, 2009, Respondent entered into agreements with at least seven Connecticut borrowers pursuant to which the Respondent agreed to fund residential mortgage loans secured by first mortgages on residential property located in Connecticut; 2) from October 16, 2008 to August 27, 2009, Respondent paid the loan proceeds for the seven residential mortgage loans to the settlement agents on the date specified for disbursement in the HUD-1 settlement statements for those loans; 3) the settlement agents failed to pay the loan proceeds in accordance with the HUD-1 settlement statement instructions and 4) Respondent failed to have adequate internal controls in place to ensure that settlement agents funded the loans in accordance with HUD-1 settlement statements and agreements that Respondent entered into with borrowers.  The Notice further alleged that Respondent’s 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 showed that the Respondent lacked “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” for purposes of Section 36a-489(a)(1) of the Connecticut General Statutes.  The Notice concluded that, based upon the above allegations, a basis for revocation existed under 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. 
 
 5. The Notice also alleged that Respondent’s failure to ensure that the settlement agents funded the loans in accordance with the HUD-1 settlement statements and the agreements that Respondent entered into with at least seven Connecticut borrowers constituted 1) 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; 2) grounds for license revocation under 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; 3) grounds for the issuance of an order to cease and desist under 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-52(a) of the Connecticut General Statutes; and 4) grounds for imposing a civil penalty under Section 36a-494(b) of the Connecticut General Statutes, as amended, and Section 36a-50(a) of the Connecticut General Statutes.
 
 6. The Notice stated that on October 1, 2009, the Consumer Credit Division of the Department had issued a letter pursuant to Section 4-182(c) of the Connecticut General Statutes giving Respondent an opportunity to show compliance with all lawful requirements for retention of its mortgage lender license in Connecticut and that Respondent had replied to that letter on October 14, 2009.
 
 7. The Notice was sent by registered mail, return receipt requested (Article Number RB028036739US) to Respondent on October 21, 2009 (Ex. 1).
 
 8. The Notice was faxed to Respondent at 631-944-6081 on October 21, 2009 (Ex. 2).
 
 9. On October 28, 2009, the PS Form 3811, Domestic Return Receipt (Green Card) accompanying the registered mailing of the Notice was received by the State of Connecticut Department of Banking (the “Department”) from the United States Postal Service (Ex. 1).  The Green Card bore a signature evidencing delivery of the Notice.
   
 10. According to United States Postal Service tracking data retrieved on October 28, 2009, the Notice was delivered to the Respondent on October 26, 2009 at 12:53 pm (Ex. 1).
   
 11. On November 2, 2009, Attorneys James R. Byrne and David J. Wiese of the law firm of Hinckley, Allen & Snyder, LLP, 20 Church Street, Hartford, Connecticut 06103-1221 entered an Appearance and requested a hearing on behalf of Respondent (Ex. 3)  The Department received the mailed version of the Appearance form on November 3, 2009 (Ex. 3).
  
 12. On November 6, 2009, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer (the “Hearing Notification”) (Ex. 4) pursuant to Sections 36a-50(a), 36a-51(a), 36a-51(b), 36a-52(a) and 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies.  The Hearing Notification stated that a written request for a hearing had been received by the Department on November 2, 2009.  The Hearing Notification scheduled the hearing for December 1, 2009 at 10 a.m. at the Department of Banking, and appointed Cynthia Antanaitis as Hearing Officer (Ex. 4).  The Hearing Notification also stated that the attorney representing the Department would be Principal Attorney Doniel Kitt (Ex. 4).
 
 13. The Hearing Notification included a Certification by a Department paralegal stating that, on November 9, 2009, the paralegal had caused the original Hearing Notification in the matter of “Allied Financial Services, LLC” [sic] to be sent by first class mail to David J. Wiese, Esq. and James R. Byrne, Esq. of Hinckley, Allen & Snyder, LLP. (Ex. 4).
 
 14. On November 30, 2009, the Hearing Officer e-mailed Attorney David Wiese and Attorney Doniel Kitt confirming a telephone conference call held with them on November 30, 2009.  During that conference call, the hearing originally scheduled for December 1, 2009 was continued to January 13, 2010 by mutual agreement of counsel to the Respondent and counsel to the Department (Ex. 5).
 
 15.  On November 30, 2009, the United States Department of Housing and Urban Development (“HUD”), through its Mortgagee Review Board, issued a letter to Michael Primeau, president of the Respondent, stating that HUD had permanently withdrawn the HUD/FHA approval of the Respondent pursuant to 12 U.S.C. § 1708(c) and 24 C.F.R. § 25.5(e) (Ex. 9).
 
 16. On November 30, 2009, HUD issued a letter to Michael Primeau, president and CEO of Respondent, stating that Government National Mortgage Association (“Ginnie Mae”) was defaulting and terminating Respondent as an issuer in Ginnie Mae's mortgage-backed securities program and would be terminating Respondent's ability to continue servicing Ginnie Mae securities (Ex. 8).  HUD faxed the letter to the attention of “Helene DeCillis for Michael Primeau” on November 30, 2009 (Ex. 8).
  
 17. Marlene Mannix is Assistant Director of the Department’s Consumer Credit Division (tr. p. 8).
  
 18. Helene DeCillis is the Chief Operating Officer of the Respondent (tr. p. 9).
 
 19. On January 11, 2010, at 2:35 p.m., Marlene Mannix e-mailed Helene DeCillis stating, “I left a message on your voicemail earlier today regarding the upcoming hearing that is scheduled with us for Wednesday, January 13, 2010.  If you would kindly advise whether someone from the company is planning on attending or if that is not a viable option at this point in time.”  (Ex. 6)
 
 20. On January 11, 2010, Marlene Mannix e-mailed Helene Decillis stating, “In furtherance to my inquiry below, I would also be interested in learning if the company is willing to withdraw its request for a hearing.”  (Ex. 6)
 
 21. On January 11, 2010 at 4:34 p.m., Helene Decillis e-mailed Marlene Mannix, stating, “I have not heard from the owner of the company, Michael Primeau since the first week of December.  Additionally, I was unaware of the hearing scheduled for this week.  That being said I have no plans to attend.”  (Ex. 6)
 
 22. On January 12, 2010 at 8:50 a.m., Attorney Doniel Kitt forwarded to the Hearing Officer the January 11, 2010 e-mailed communications between Marlene Mannix and Helene Decillis.  In his e-mail to the Hearing Officer, Attorney Kitt stated, “This is the latest information we have.”  (Ex. 10).
 
 23. On January 12, 2009 at 10:22 a.m., the Hearing Officer e-mailed Helene Decillis, with a cc to Attorney Kitt.  The Hearing Officer stated in her e-mail “The purpose of this e-mail is to advise Ideal Mortgage that, since its hearing request has not been withdrawn (and since there is a possibility that Mr. Primeau or another representative of the company will attend the hearing), the proceeding will go forward tomorrow.  If Ideal Mortgage fails to appear, a default may be entered.  Should there be any change in status, please contact me immediately.”  (Ex. 10)
 
 24. On Wednesday, January 13, 2009, a hearing was held at the Department of Banking (tr. p. 4).
 
 25. Respondent did not withdraw its November 2, 2009 request for a hearing (tr. p. 10).
 
 26. Neither Respondent nor its legal counsel appeared at the hearing (tr. p. 10).
 
 27. During the hearing, Attorney Doniel Kitt stated that, on Tuesday, January 12, 2010, he had spoken to Attorney Wiese who informed Attorney Kitt that “their services to the firm was [sic] put on hold, and that they would not be representing the company at this hearing.” (tr. p. 7)
 
 28. During the hearing, when questioned concerning the impact on borrowers of the settlement company's failure to fund loans in a timely fashion, Marlene Mannix testified that, “The borrowers actually closed the loan with the respondent, where the respondent failed to pay off the borrower's previous obligations -- previous mortgages -- often times a first and second mortgage -- causing the previous mortgagee to send default notices, maybe a foreclosure threat to the consumer.  The consumer was adversely impacted by those events for the time, until the Department got involved and prompted the company and brought it to their attention, and prompted the respondent to make good on and pay off those previous obligations.” (tr. pp. 13-14)
  
 29. No evidence was presented at the hearing concerning the Respondent’s compliance or lack of compliance with the Commissioner’s October 21, 2009 Temporary Order to Cease and Desist, particularly the directive to provide the Commissioner with updated financial statements and to reimburse each Connecticut borrower the amount necessary to put the borrower in the same position as if the borrower had received funds in accordance with HUD-1 settlement statements and agreements that Respondent entered into with each borrower.
  
 30. During the hearing, Marlene Mannix testified that, to her knowledge and based upon Exhibits 8 and 9 as well as communications between her Division and the New York State Banking Department, the Respondent was no longer in business.

CONCLUSIONS OF LAW

1.    The Commissioner has jurisdiction over the licensing and regulation of persons engaged in the business of residential mortgage lending pursuant to 1) Part I of Chapter 668 of the Connecticut General Statutes, Sections 36a-485 to 36a-534c, inclusive, “Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators”; and 2) Sections 9 and 19 to 21, inclusive, of Public Act 09-209.
 
2.   The October 21, 2009 Notice issued by the Commissioner comported with the requirements of Section 4-177(b) of Chapter 54 of the Connecticut General Statutes.
 
3.    The Commissioner complied with the requirements of Section 4-182(c) of Chapter 54 of the Connecticut General Statutes.
 
4.    The October 21, 2009 Notice complied with the notice requirements of Sections 36a-50(a) [civil penalty], 36a-51(a) [revocation proceeding] and 36a-52(a) [cease and desist order] of the Connecticut General Statutes.
  
5.   Notwithstanding the error on the Certification page of the November 6, 2009 Hearing Notification, the Respondent received notice that the hearing had been continued to January 13, 2010, as evidenced by the Hearing Officer’s November 30, 2009 conference call with counsel to the Respondent and the Department and reflected in the Hearing Officer’s confirming e-mail of November 30, 2009 (Ex. 5)
   
6.    Section 4-177(c) of Chapter 54 of the Connecticut General Statutes provides, in part, that:  “Unless precluded by law, a contested case may be resolved by . . . the default of a party.”
   
7.    Section 36a-51 of the Connecticut General Statutes provides, in part, that:

(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 . . (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 . . . 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.”  (Emphasis supplied)

8.    The express terms of Section 36a-51(a) of the Connecticut General Statutes require that the Commissioner revoke the Respondent’s mortgage lender license given the Respondent’s failure to appear at the hearing.
 
9.    Subject to a respondent’s right to request a hearing on the matters alleged, Section 36a-52(a) of the Connecticut General Statutes authorizes the Commissioner to issue a cease and desist order where 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, or any regulation, rule or order adopted or issued thereunder . . . . ” Section 36a-52(a) also provides, in part, that:  “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.”   (Emphasis added)
 
10.    The express terms of Section 36a-52(a) of the Connecticut General Statutes require that the Commissioner issue a cease and desist order against the Respondent given the Respondent’s failure to appear at the hearing.
   
11.    Subject to a respondent’s right to request a hearing on the matters alleged, Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to issue a notice of intent to impose a civil penalty of up to $100,000 per violation where 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, or any regulation, rule or order adopted or issued thereunder . . . . "

Subdivisions (2) and (3) of subsection (a) of Section 36a-50 provide that:

(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, regulation, rule or order, 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.  (3) Each action undertaken by the commissioner under this subsection shall be in accordance with chapter 54.”  (Emphasis added)

12.    Section 36a-1-31(b) of the Regulations of Connecticut State Agencies provides that:  “When a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted.  Without further proceedings or notice to the party, the presiding officer shall submit to the commissioner a proposed final decision containing the relief sought in the notice, provided the presiding officer may, if deemed necessary, receive evidence from the department, as part of the record, concerning the appropriateness of the amount of any civil penalty, fine or restitution sought in the notice.  The commissioner shall issue a final decision in accordance with section 4-180 of the Connecticut General Statutes and section 36a-1-52 of the Regulations of Connecticut State Agencies.”
 
13.    In accordance with Section 36a-1-31(b) of the Regulations of Connecticut State Agencies, the factual and legal allegations against the Respondent which were contained in the Notice are deemed admitted and adopted in the Findings of Fact and Conclusions of Law herein contained.
 
14.    Accordingly, the Hearing Officer, deeming it necessary, received evidence from the Department as part of the record solely concerning the appropriateness of the $500,000 civil penalty sought in the Notice.
 
15.    The Commissioner finds that Respondent violated Section 36a-494(b) of the Connecticut General Statutes by failing to perform agreements with borrowers in that Respondent failed to ensure that the settlement agents funded borrower loans in accordance with the HUD-1 settlement statements and the agreements that Respondent entered into with at least seven Connecticut borrowers.
   
16.   The Commissioner finds that, in light of the Respondent’s violation of Section 36a-494(b) of the Connecticut General Statutes, the facts require the imposition of a fine against Respondent.  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).  Although the Commissioner finds that the imposition of a fine is warranted, based upon the testimony and exhibits presented at the hearing and the matters alleged in the Notice, the facts do not require the imposition of the maximum fine against Respondent.

ORDER

Having read the record, I hereby ORDER, pursuant to Sections 36a-50(a), 36a-51(a), 36a-52(a), and 36a-494(a)(1) of the Connecticut General Statutes that:
 
1.    The Respondent’s license to engage in the business of making mortgage loans in Connecticut is hereby REVOKED;
  
2.    Respondent shall CEASE AND DESIST from failing to perform any agreement with borrowers;
   
3.    A civil penalty of one hundred thousand dollars ($100,000) shall be imposed against Ideal Mortgage Bankers, Ltd. d/b/a Lending Key, such civil penalty 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;
 
4.    In accordance with Section 36a-52(b) of the Connecticut General Statutes, the Temporary Order to Cease and Desist contained in the Notice shall no longer be in effect upon entry of the Permanent Order to Cease and Desist herein contained; and
   
5.    This Order shall become effective when mailed.



So ordered at Hartford, Connecticut     ______/s/___________ 
this 2nd day of February, 2010. Howard F. Pitkin 
  Banking Commissioner


This Order was sent by certified mail,
return receipt requested, to Respondent
and to Respondent’s last known
counsel of record on 2/2/10.


Ideal Mortgage Bankers, Ltd. d/b/a Lending Key
520 Broadhollow Road - Suite 100E
Melville, New York  11747-2799
Certified Mail No. 7008 1140 0002 4974 3459

James R. Byrne, Esq.
David J. Wiese, Esq.
Hinckley, Allen & Snyder, LLP
20 Church Street
Hartford, Connecticut  06103-1221
Certified Mail No. 7008 1140 0002 4974 3466


Administrative Orders and Settlements