When New Hampshire regulators were given loan files for a routine examination of a mortgage brokerage, they became suspicious about missing documents. With a little more work, they found the missing documents in a shredding bin and reconstructed them only to find altered documents on loans from that state and from Massachusetts. In addition to fining the broker $400,000, they alerted Massachusetts regulators — who then took their own actions.
The New Hampshire Banking Department has entered into a consent order with The Mortgage Specialists Inc. Also listed in the order were the company’s owner Michael Gill and its compliance officer Lisa Tracy.
In a staff petition dated July 23, the state said it conducted a routine examination of 20 loan files. The files, which were located at a nearby storage facility, took the company four hours to retrieve and were missing required documents — which were subsequently found in a shredding bin.
The state said the respondents “professed ignorance regarding the reason why staff had taken essential documents out of the file before giving the file to department examiners and clearly intended those documents for destruction.” A further review of the shredded documents indicated the use of doctored photocopied borrower signatures on five files.
The state also alleged that two shredded broker fee agreements had been altered after being signed by the customers. A number of other documents were allegedly altered.
One loan was cited where the borrower had applied for a 30-year fully amortized loan but wound up closing on a balloon-payment loan — even though the borrower signed no documents indicating a balloon payment was involved.
A copy of the unsigned consent order, however, indicated the Plaistow, N.H.-based company confirmed that no altered documents had been used to obtain mortgages from any wholesale lenders.
The order calls for $400,000 in penalties, including $150,000 paid to the National Mortgage Licensing System and $150,000 paid to the New Hampshire Housing Finance Authority. It also calls for an independent auditing firm to review files processed from Aug. 1, 2007, through the date of the audit within 120 days of the order. Subsequent audits will also be required for three years.
New Hampshire’s actions follow a July 31 cease-and-desist order from Massachusetts’ Commissioner of Banks in which that state said an examination found The Mortgage Specialists falsified asset and income information on three residential loan transactions.
The state said it was alerted by New Hampshire regulators about the altered signatures on the shredded documents.
On one stated-income loan, a borrower that earned just $17,699 annually had $87,036 listed as income on a loan application and $99,036 listed on a subsequent application, according to Massachusetts.
The Massachusetts order calls for The Mortgage Specialists to stop brokering any further loans in the state and find another qualified broker to take over its pending pipeline.
In re the Matter of: State of New Hampshire Banking Department, Petitioner, and The Mortgage Specialists Inc. Michael Gill, Lisa Tracy, jean Duerr, and David Caillouette, Respondents
Case No.: 08-223
In the Matter of the Commonwealth of Massachusetts Commissioner of Banks and The Mortgage Specialists Inc., Plaistow, New Hampshire
Docket No. 2008-015 Mortgage Broker License No(s): MB0413 et al., July 31, 2008
