* * * * * * * * * * * * * * * * * * * * * * * IN THE MATTER OF: NETWORK CAPITAL * * * * * * * * * * * * * * * * * * * * * * * | * * * * * * * * * * * * * * * * * * * * * | TEMPORARY ORDER TO ORDER TO MAKE RESTITUTION NOTICE OF INTENT TO REVOKE NOTICE OF RIGHT TO HEARING |
I. LEGAL AUTHORITY AND JURISDICTION
The Banking Commissioner (“Commissioner”) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534c, inclusive, of the Connecticut General Statutes, “Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators”.
Pursuant to the authority granted by Section 36a-17 of the Connecticut General Statutes, as amended by Public Acts 14-7 and 14-89, the Commissioner, through the Consumer Credit Division (“Division”) of the Department of Banking, has examined 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, as amended, provides, in pertinent part, that:
The commissioner, in the commissioner’s discretion, may, subject to the provisions of section 36a-21 and the Freedom of Information Act, as defined in section 1-200, (1) 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, (2) require or permit any person to testify, produce a record or file a statement in writing, under oath, or otherwise as the commissioner determines, as to all the facts and circumstances concerning the matter to be investigated or about which an action or proceeding is pending . . . .
Section 36a-498f(a) of the Connecticut General Statutes provides, in pertinent part, that:
In addition to any authority provided under this title, the Banking Commissioner shall have the authority to conduct investigations and examinations as follows:
(1) For purposes of . . . general or specific inquiry or investigation to determine compliance with sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b, the commissioner may access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to: (A) Criminal, civil and administrative history information; (B) personal history and experience information including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the federal Fair Credit Reporting Act, 15 USC 1681a; and (C) any other documents, information or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of such documents, information or evidence.
Section 36a-52 of the Connecticut General Statutes provides, in pertinent part, that:
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.
Subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes provide, in pertinent part, that:
(a) The commissioner may . . . revoke or refuse to renew 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 or refuse to renew 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 or refusal to renew. 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 or refuse to renew the license. No such license shall be . . . revoked except in accordance with the provisions of chapter 54.
Section 36a-50 of the Connecticut General Statutes provides, in pertinent part, that:
(a)(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 not later than fourteen days after 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 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 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. . . .
(c) 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, in addition to any other remedy authorized by law, order such person to (1) make restitution of any sums shown to have been obtained in violation of any such provision . . . plus interest at the legal rate set forth in section 37-1. . . . After the commissioner issues such an order, the person named in the order may, not later than fourteen days after the receipt of such order, file a written request for a hearing. The order 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 hearing shall be held in accordance with the provisions of chapter 54.
Subsections (b) and (c) of Section 4-182 of the 2014 Supplement to the General Statutes provides, in pertinent part, that:
(b) When a licensee has made timely and sufficient application for the renewal of a license . . . , the existing license shall not expire until the application has been finally determined by the agency . . . .
(c) No revocation . . . of any license is lawful unless, prior to the institution of agency proceedings, the agency gave notice by mail to the licensee of facts or conduct which warrant the intended action and the specific provisions of the general statutes or of regulations adopted by the agency that authorize such intended action, and the licensee was given an opportunity to show compliance with all lawful requirements for the retention of the license. . . .
II. MATTERS ASSERTED
| 1. | Respondent is a Nevada corporation with its main office at 5 Park Plaza, #800, Irvine, California. |
| 2. | Respondent has been continuously licensed as a mortgage correspondent lender in Connecticut since February 2, 2007. |
| 3. | On November 21, 2013, Respondent requested renewal of its mortgage correspondent lender license on the Nationwide Mortgage Licensing System and Registry (“NMLS”) for the January 1, 2014 to December 31, 2014 licensing period. Respondent’s renewal request remains pending. |
| 4. | On September 10, 2013, the Commissioner, through the Division, initiated an examination of Respondent relating to Respondent’s business activity from January 1, 2010 to September 10, 2013 (“Examination”). |
| 5. | The Examination concluded on May 22, 2014. On June 30, 2014, an exit interview was conducted with Respondent by telephone, and the Division transmitted a letter (“Cover Letter”) enclosing the Report of Examination (“ROE”) to Respondent both by secure e-mail and by certified mail, return receipt requested (certified mail no. 70121010000172647315). |
| 6. | The secure e-mail was received by Respondent on June 30, 2014, and the Cover Letter and ROE sent by certified mail was received by Respondent on July 3, 2014. |
| 7. | The Cover Letter provided, in pertinent part, that: Pursuant to Section 4-182(c), you are being given an opportunity to show compliance with all lawful requirements for the retention of your mortgage correspondent lender license through your response to the items identified in this examination report. If the Commissioner finds such response to be insufficient, the Commissioner may issue a notice of intent to suspend, revoke or refuse to renew your mortgage correspondent lender license in this state pursuant to Sections 36a-494 and 36a-51 of the Connecticut General Statutes, or initiate such further proceedings as he deems appropriate. |
| 8. | The Cover Letter language cited in paragraph 7 above was repeated on page 1 of the ROE. |
| 9. | The Cover Letter required a written response to the items identified in the ROE by the close of business on July 11, 2014. |
| 10. | On July 11, 2014, Respondent filed its written response. Such response is insufficient to establish compliance with all lawful requirements for retention of Respondent’s mortgage correspondent lender license. |
| 11. | During the period of January 1, 2010 to September 10, 2013, Respondent refinanced at least two (2) Connecticut residential mortgage loans but failed to pay the loan proceeds to the mortgagor, the mortgagor’s attorney, the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor at the termination of each borrower’s right to rescind the loan transaction. |
| 12. | During the period of January 1, 2010 to September 10, 2013, Respondent refinanced at least twenty-two (22) Connecticut residential mortgage loans in which it failed to timely pay the loan proceeds to the mortgagor, the mortgagor’s attorney, the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor at the termination of each borrower’s right to rescind the loan transaction. |
| 13. | During the period of January 1, 2010 to September 10, 2013, Respondent began accruing the interest charges on at least eighteen (18) Connecticut residential mortgage loans before the loan proceeds were paid to the mortgagor, the mortgagor’s attorney, the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor at the termination of the borrower’s right to rescind the loan transaction. |
| 14. | During the period of January 1, 2010 to September 10, 2013, Respondent identified an individual as the mortgage loan originator on applications taken for at least twelve (12) Connecticut residential mortgage loans when such individual was not, in fact, the mortgage loan originator on those transactions. |
| 15. | The twelve (12) Connecticut residential mortgage loans described in paragraph 14 above were originated by eleven (11) different individuals who were not licensed at that time as mortgage loan originators in Connecticut. |
| 16. | None of the individuals described in paragraph 15 above were identified by Respondent as mortgage loan originators on the loan list submitted to the Division in connection with the Examination. |
| 17. | None of the individuals described in paragraph 15 above were identified by Respondent as mortgage loan originators on the required associated quarterly mortgage call reports. |
| 18. | Respondent admitted that, on at least four (4) occasions, employees other than the individual identified as the mortgage loan originator on the twelve (12) loans described in paragraph 14 above signed the identified mortgage loan originator’s name and sometimes backdated the loan documents. |
| 19. | The individual described in paragraph 14 above also serves as Respondent’s CEO and the qualified individual. Respondent reported to the Commissioner that this individual originated two hundred forty (240) Connecticut residential mortgage loans in the first quarter of 2011. |
| 20. | Of the twenty-two (22) Connecticut residential mortgage loans described in paragraph 12 above, Respondent added, in one case, income information, and in another case, credit inquiry information, to forms in two loan files after those forms had been signed by the borrower. |
| 21. | Of the twenty-two (22) Connecticut residential mortgage loans described in paragraph 12 above, three (3) loan files contained HUD-1s signed by Respondent’s settlement agent significantly after the date the borrower signed the same. Moreover, the date of the settlement agent’s signature is made to appear to be the same date as the borrower’s signature, when, in fact, it was not. |
| 22. | On March 10, 2014, the Division requested a copy of Respondent’s most recent audited financial statements. Respondent failed to provide the Commissioner, through the Division, with its 2013 audited financial statements during the course of the Examination; it provided the requested documents nearly three months later when it uploaded those documents onto NMLS on June 6, 2014. |
| 23. | In the last 20 months, Respondent has entered into consent orders or settlement agreements with the following regulators: the United States Department of Housing and Urban Development (February 2014); the State of Washington Department of Financial Institutions, Division of Consumer Services (September 2013); the Department of Business Oversight of the State of California (August 2013); the Commonwealth of Massachusetts Division of Banks (June 2013) (“Massachusetts Consent”); the Commonwealth of Virginia, ex. rel. State Corporation Commission (April 2013); and the State of New Hampshire Banking Department (November 2012). |
| 24. | The Massachusetts Consent, among other things, required corrective action by Respondent relating to alleged funding issues. On June 30, 2014, the Commonwealth of Massachusetts, Division of Banks issued an Order to Show Cause and Notice of Right to a Hearing against Respondent alleging, among other things, continued failure to adhere to Massachusetts law pertaining to funding requirements in violation of the MA Consent. Likewise, on June 30, 2014, the State of New Hampshire Banking Department issued a Notice of Order to Show Cause for License Revocation of Respondent Network Capital Funding Corporation’s New Hampshire Mortgage Banker License, alleging, among other things, failure to adhere to New Hampshire law pertaining to funding requirements. |
| 25. | Respondent knew Connecticut’s end of rescission period funding requirements since at least November 5, 2012. |
| 26. | Notwithstanding paragraph 25 above, on or after November 5, 2012, Respondent failed to timely pay loan proceeds on at least six (6) Connecticut residential mortgage loans. |
| 27. | Based on subsequent investigation conducted after the completion of the examination described in paragraphs 4 and 5 above, Respondent altered certain loan documents in connection with Connecticut residential mortgage loans during 2014. |
III. STATUTORY BASIS FOR ORDER TO MAKE RESTITUTION, REVOCATION
OR REFUSAL TO RENEW MORTGAGE CORRESPONDENT LENDER LICENSE,
ORDER TO CEASE AND DESIST AND IMPOSITION OF CIVIL PENALTY
Section 36a-494 of the Connecticut General Statutes provides, in pertinent part, that:
(a)(1) The commissioner may . . . revoke or refuse to renew any . . . mortgage correspondent 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-498f, inclusive, 36a-534a and 36a-534b, or if the commissioner finds that the licensee, any control person of the licensee, the qualified individual . . . , employee or agent of such licensee has done any of the following: . . . (B) . . . misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose any of the material particulars of any residential mortgage loan transaction . . . to anyone entitled to such information; (C) violated any of the provisions of this title or of any regulations adopted pursuant thereto, or any other law or regulation applicable to the conduct of its business; or (D) failed to perform any agreement with a licensee or a borrower . . . .
(b) Whenever it appears to the commissioner that (1) any person has violated, is violating or is about to violate any of the provisions of sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b, . . . or (3) any licensee has failed to perform any agreement with a borrower, . . . misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose any of the material particulars of any residential mortgage loan transaction . . . to anyone entitled to such information, the commissioner may take action against such person or licensee in accordance with sections 36a-50 and 36a-52.
Section 36a-489 of the Connecticut General Statutes provides, in pertinent part:
(a)(1) The commissioner shall not issue an initial license for a . . . mortgage correspondent lender . . . unless the commissioner, at a minimum, finds that: . . . (C) the applicant demonstrates that the . . . character and general fitness of the applicant, the control persons of the applicant and the qualified individual . . . 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-498f, inclusive, 36a-534a and 36a-534b . . . . If the commissioner fails to make such findings, the commissioner shall not issue a license . . . .
(2)(A) The minimum standards for license renewal for a . . . mortgage correspondent lender . . . shall include the following: (i) The applicant continues to meet the minimum standards under subdivision (1) of this subsection . . . .
At the time relevant to the examined transactions, Section 36a-758 of the Connecticut General Statutes provided, in pertinent part, that:
Any person who makes any first mortgage loan, as defined in section 36a-485, or any secondary mortgage loan, as defined in section 36a-485, shall, at the time of consummation of such loan or at the termination of any right to rescind the loan transaction under 12 CFR 226, as amended from time to time, whichever is later, pay the loan proceeds to the mortgagor, to the mortgagor’s attorney, to the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor, by a certified, bank treasurer’s or cashier’s check or by means of wire transfer.
Section 36a-758 of the Connecticut General Statutes, as amended by Public Act 14-7, provides, in pertinent part, that:
Any person who makes any first mortgage loan, as defined in section 36a-485, . . . or any secondary mortgage loan, as defined in section 36a-485, . . . shall, at the time of consummation of such loan or at the termination of any right to rescind the loan transaction under 12 CFR 1026, as amended from time to time, whichever is later, pay the loan proceeds to the mortgagor, to the mortgagor’s attorney, to the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor, by a certified, bank treasurer’s or cashier’s check or by means of wire transfer.
Both at the time relevant to examined transactions and today, Section 36a-498e of the Connecticut General Statutes prohibits a licensee from, among other things:
No person or individual who is required to be licensed and who is subject to sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b may: . . .
(2) Engage in any unfair or deceptive practice toward any person; . . . [or]
(10) Negligently make any false statement or knowingly and wilfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the system, as defined in section 36a-485, or in connection with any investigation conducted by the Banking Commissioner or another governmental agency . . . .
During the period of January 1, 2010 through September 30, 2011, Section 36a-53b of the Connecticut General Statutes prohibited, in pertinent part:
No licensee or registrant shall, in connection with the activity for which such person is licensed or registered: . . . (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
From October 1, 2011 to date, Section 36a-53b of the Connecticut General Statutes prohibits, in pertinent part:
No person shall, in connection with any activity subject to the jurisdiction of the commissioner: . . . (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
During the period of January 1, 2010 through September 30, 2012, Section 36a-485 of the Connecticut General Statutes provided, in pertinent part:
(15) “Mortgage loan originator” means an individual who for compensation or gain or with the expectation of compensation or gain (A) takes a residential mortgage loan application or (B) offers or negotiates terms of a residential mortgage loan. . . .
From October 1, 2012 and to date, Section 36a-485 of the Connecticut General Statutes provides, in pertinent part:
(18) “Mortgage loan originator” means an individual who for compensation or gain or with the expectation of compensation or gain, either for such individual or for the person employing or retaining such individual, (A) takes a residential mortgage loan application, or (B) offers or negotiates terms of a residential mortgage loan. . . .
During the period from January 1, 2010 to September 30, 2011, Section 36a-486(b)(1) of the Connecticut General Statutes provided, in pertinent part:
No person licensed as a . . . mortgage correspondent lender . . . shall engage the services of a mortgage loan originator unless such mortgage loan originator is licensed under section 36a-489. An individual, unless specifically exempted under subdivision (2) of this subsection, shall not engage in the business of a mortgage loan originator with respect to any dwelling, as defined in Section 103 of the Consumer Credit Protection Act, 15 USC 1602, located in this state without first obtaining and maintaining annually a license as a mortgage loan originator under section 36a-489. . . .
During the period from October 1, 2011 to September 30, 2012, Section 36a-486(b)(1) of the Connecticut General Statutes provided, in pertinent part:
No person licensed as a . . . mortgage correspondent lender. . . shall engage the services of a mortgage loan originator . . . unless such mortgage loan originator . . . is licensed under section 36a-489. An individual, unless specifically exempted under subdivision (2) of this subsection, shall not engage in the business of a mortgage loan originator on behalf of a licensee . . . with respect to any residential mortgage loan without first obtaining and maintaining annually a license as a mortgage loan originator under section 36a-489. . . .
During the period from October 1, 2012 to date, Section 36a-486(b)(1) of the Connecticut General Statutes provides, in pertinent part:
No person licensed as a . . . mortgage correspondent lender . . . shall engage the services of a mortgage loan originator . . . unless such mortgage loan originator . . . is licensed under section 36a-489. An individual, unless specifically exempted under subdivision (2) of this subsection, shall not engage in the business of a mortgage loan originator on behalf of a licensee . . . with respect to any residential mortgage loan without first obtaining and maintaining annually a license as a mortgage loan originator under section 36a-489. An individual, unless specifically exempted under subdivision (2) of this subsection, shall be deemed to be engaged in the business of a mortgage loan originator if such individual: (A) Acts as a mortgage loan originator in connection with any residential mortgage loan on behalf of a licensee . . . ; or (B) makes any representation to the public through advertising or other means of communication that such individual can or will act as a mortgage loan originator on behalf of a licensee . . . .
At all times relevant to the Examination and to date, Section 36a-53a of the Connecticut General Statutes provides, in pertinent part:
No person shall make or cause to be made . . . in any document filed with the commissioner or in any . . . examination under this title, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.
At all times relevant to the Examination and to date, subsections (c) and (d) of Section 36a-17 of the Connecticut General Statutes provide, in pertinent part, that:
(c) For the purpose of any . . . examination . . . under this title the commissioner may . . . require the production of any records which the commissioner deems relevant or material. . . .
(d) Any person who is the subject of any such . . . examination . . . shall make its records available to the commissioner in readable form; provide personnel and equipment necessary, including, but not limited to, assistance in the analysis of computer-generated records; provide copies or computer printouts of records when so requested; furnish unrestricted access to all areas of its principal place of business or wherever records may be located; and otherwise cooperate with the commissioner.
At all times relevant to the Examination and to date, Section 36a-498f(b) of the Connecticut General Statutes provides, in pertinent part, that:
Each licensee . . . subject to sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section including accounting compilations, information lists and data concerning loan transactions in a format prescribed by the commissioner or such other information the commissioner deems necessary to carry out the purposes of this section.
| 1. | Respondent’s failure to pay loan proceeds to the mortgagor, the mortgagor’s attorney, the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor in connection with at least two (2) Connecticut residential mortgage loans upon the termination of each borrower’s right to rescind the loan transaction, as more fully described in paragraph 11 of the Matters Asserted, constitutes a failure to pay the loan proceeds, in violation of Section 36a-758 of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Sections 36a-494(a)(1)(C) and 36a-494(a)(1)(D) 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 Sections 36a-494(b)(3) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(3) and 36a-50(a) of the Connecticut General Statutes. |
| 2. | Respondent’s failure to timely pay loan proceeds to the mortgagor, the mortgagor’s attorney, the mortgagee’s attorney or to any other person specified in any settlement statement, any written agreement between the mortgagor and the mortgagee or any written instruction of the mortgagor in connection with at least twenty-two (22) Connecticut residential mortgage loans at the termination of each borrower’s right to rescind the loan transaction, as more fully described in paragraph 12 of the Matters Asserted, constitutes a failure to timely pay the loan proceeds, in violation of Section 36a-758 of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Sections 36a-494(a)(1)(C) and 36a-494(a)(1)(D) 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 Sections 36a-494(b)(3) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(3) and 36a-50(a) of the Connecticut General Statutes. |
| 3. | Respondent’s accrual of interest charges on at least eighteen (18) Connecticut residential mortgage loans prior to payment of the loan proceeds, as more fully described in paragraph 13 of the Matters Asserted, constitutes engaging in an unfair or deceptive practice, in violation of Section 36a-498e(2) of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Section 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form the basis to issue an order to make restitution pursuant to Sections 36a-494(b)(1) and 36a-50(c) of the Connecticut General Statutes, to cease and desist pursuant to Sections 36a-494(b)(1) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(1) and 36a-50(a) of the Connecticut General Statutes. |
| 4. | Respondent’s engaging the services of at least eleven (11) mortgage loan originators who were not licensed in Connecticut in connection with at least twelve (12) Connecticut residential mortgage loans, as described more fully in paragraphs 14 and 15 of the Matters Asserted, constitutes violations of Section 36a-486(b)(1) of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Section 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form a basis to issue an order to cease and desist pursuant to Sections 36a-494(b)(1) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(1) and 36a-50(a) of the Connecticut General Statutes. |
| 5. | Respondent’s failure to disclose the true identity of the eleven (11) actual unlicensed mortgage loan originators on at least twelve (12) Connecticut residential mortgage loans, as more fully described in paragraphs 14 through 19, inclusive, of the Matters Asserted, constitutes an unfair or deceptive practice, in violation of Section 36a-498e(2) of the Connecticut General Statutes, and constitutes engaging in an act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in violation of Section 36a-53b of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Sections 36a-494(a)(1)(B) and 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form a basis to issue an order to cease and desist pursuant to Sections 36a-494(b)(1), 36a-494(b)(3) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(1), 36a-494(b)(3) and 36a-50(a) of the Connecticut General Statutes. |
| 6. | Respondent’s failure to disclose the true identity of the eleven (11) actual unlicensed mortgage loan originators on at least twelve (12) Connecticut residential mortgage loans in its submitted loan list and in mortgage call reports, as more fully described in paragraphs 14 through 19, inclusive, of the Matters Asserted, constitutes negligently making a false statement or knowingly and willfully making omissions of material facts in connection with information or reports filed with the Department and the system, in violation of Section 36a-498e(10) of the Connecticut General Statutes, and constitutes the making of statements in documents filed with the Commissioner or in connection with an examination, which were, at the time and in the light of the circumstances under which they were made, false or misleading in a material respect, in violation of Section 36a-53a of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Section 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form a basis to issue an order to cease and desist pursuant to Sections 36a-494(b)(1) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(1) and 36a-50(a) of the Connecticut General Statutes. |
| 7. | Respondent’s alteration of loan documents, as more fully described in paragraphs 18, 20 and 21 of the Matters Asserted, constitutes an unfair or deceptive practice, in violation of Section 36a-498e(2) of the Connecticut General Statutes, and constitutes engaging in an act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in violation of Section 36a-53b of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Sections 36a-494(a)(1)(B) and 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form a basis to issue an order to cease and desist pursuant to Sections 36a-494(b)(3) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(3) and 36a-50(a) of the Connecticut General Statutes. |
| 8. | Respondent’s failure to timely provide requested examination related information, as more fully described in paragraphs 1 through 5, inclusive, and paragraph 22 of the Matters Asserted, constitutes a failure to compile reports as directed by the Commissioner, in violation of Section 36a-498f(b) of the Connecticut General Statutes, and a failure to otherwise cooperate with the Commissioner, in violation of Section 36a-17(d) of the Connecticut General Statutes. Such violations constitute sufficient grounds to revoke or refuse to renew Respondent’s license pursuant to Section 36a-494(a)(1)(C) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and form the basis to issue an order to cease and desist pursuant to Sections 36a-494(b)(1) and 36a-52(a) of the Connecticut General Statutes, and to impose a civil penalty pursuant to Sections 36a-494(b)(1) and 36a-50(a) of the Connecticut General Statutes. |
| 9. | The conduct alleged in paragraphs 1 through 27, inclusive, of the Matters Asserted, whether or not they are determined to be violations as alleged in paragraphs 1 through 8, inclusive, above, renders the Commissioner unable to determine that Respondent, the control person and qualified individual demonstrate character and general fitness such as to command the confidence of the community and to warrant a determination that Respondent will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the Connecticut General Statutes. Such failure would be sufficient grounds for the Commissioner to deny an application for a mortgage correspondent lender license pursuant to Section 36a-489(a)(1)(C) of the Connecticut General Statutes, and would be sufficient grounds for the Commissioner to revoke or refuse to renew Respondent’s license pursuant to Section 36a-494(a)(1) and subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes. Such failure also causes Respondent to fail to meet minimum standards for license renewal, which constitutes sufficient grounds to refuse to renew Respondent’s license pursuant to Section 36a-489(a)(2)(A) of the Connecticut General Statutes. |
IV. FINDINGS AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST
The Commissioner finds that the public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from violating Section 36a-758 of the Connecticut General Statutes as set forth in paragraphs 1 and 2 of Section III of this Order, and to cease and desist from violating Section 36a-498e(2) of the Connecticut General Statutes as set forth in paragraphs 3 and 7 of Section III of this Order. This finding is based on Respondent’s apparent past pattern and practice of engaging in these activities, as more fully described in paragraphs 11 through 13, inclusive, and paragraphs 18, 20, 21, 25 and 26 of the Matters Asserted, coupled with the fact that Respondent appears to have engaged recently in similar conduct as evidenced by alleged violations of at least one Consent Order issued by a sister state, as more fully described in paragraph 24 of the Matters Asserted, and as evidenced by the conduct described in paragraph 27 of the Matters Asserted. Accordingly, no confidence can be had that self-imposed corrective or remedial action will suffice to protect Connecticut consumers.
V. TEMPORARY ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
NOTICE OF REVOKE OR REFUSE TO RENEW MORTGAGE CORRESPONDENT
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 to revoke or refuse to renew Respondent’s mortgage correspondent lender license pursuant to Sections 36a-494(a)(1), 36a-494(a)(1)(B), 36a-494(a)(1)(C), 36a-494(a)(1)(D), 36a-489(a)(2)(A) 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 Sections 36a-494(b)(1), 36a-494(b)(3) and 36a-52(a) of the Connecticut General Statutes, issue an order to make restitution pursuant to Sections 36a-494(b)(1) and 36a-50(c) of the Connecticut General Statutes, and to impose a civil penalty upon Respondent pursuant to Sections 36a-494(b)(1), 36a-494(b)(3) and 36a-50(a) of the Connecticut General Statutes;
AND WHEREAS, the Commissioner has made the finding required under Section 36a-52(b) 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 Network Capital Funding Corporation immediately CEASE AND DESIST from violating Sections 36a-758 and 36a-498e(2) of the Connecticut General Statutes, as more fully described in the Finding above. This Temporary Order to Cease and Desist shall become effective upon receipt by Network Capital Funding Corporation, 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 to Cease and Desist.
THE COMMISSIONER FURTHER ORDERS, pursuant to Sections 36a-17(a) and 36a-52(b) of the Connecticut General Statutes, that: Not later than fourteen (14) days from receipt of this Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke or Refuse to Renew Mortgage Correspondent 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, Network Capital Funding Corporation shall provide to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov:
| 1. | For the period commencing January 1, 2010 to present, a list of all individuals who were charged interest on Connecticut residential mortgage loans commencing on a date prior to the date the loan proceeds were disbursed and the amount of such interest. The list shall include, but shall not be limited to, all individuals identified on Exhibit A attached hereto. |
| 2. | For the period commencing January 1, 2010 to present, a list of all individuals whose existing residential mortgage loans were at a higher interest rate before the refinance, and a calculation that reflects the difference between the interest they paid at the higher rate and the interest they would have paid at the lower rate had the refinanced loan funded on time in accordance with Connecticut law. |
THE COMMISSIONER FURTHER ORDERS, pursuant to Section 36a-50(c) of the Connecticut General Statutes, that Network Capital Funding Corporation MAKE RESTITUTION of all sums obtained as a result of Network Capital Funding Corporation violating: (1) Section 36a-498e(2) of the Connecticut General Statutes, as alleged in paragraph 3 of Section III of this Order; and (2) Section 36a-758 of the Connecticut General Statutes, as alleged in paragraphs 1 and 2 of Section III of this Order. Such restitution shall include interest at the legal rate set forth in Section 37-1 of the Connecticut General Statutes. Specifically, the Commissioner ORDERS that: Not later than thirty (30) days from the date this Order to Make Restitution becomes permanent, Network Capital Funding Corporation shall:
| 1. | Repay any interest paid by borrowers on Connecticut residential mortgage loans prior to the date that the loan was disbursed, plus interest in accordance with Section 37-1 of the Connecticut General Statutes. |
| 2. | Repay the difference in interest paid by borrowers as a result of the failure to timely fund, plus interest in accordance with Section 37-1 of the Connecticut General Statutes. |
| 3. | Provide evidence of such repayments to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov. |
NOW THEREFORE, notice is hereby given to Respondent that the Commissioner intends to REVOKE OR REFUSE TO RENEW Respondent’s license to engage in the business of a mortgage correspondent lender in Connecticut, issue an order requiring Respondent to CEASE AND DESIST from violating Section 36a-758 of the Connecticut General Statutes, as amended, and Sections 36a-498e(2), 36a-486(b)(1), 36a-53b, 36a-498e(10), 36a-53a, 36a-498f(b) and 36a-17(d) of the Connecticut General Statutes, and impose a CIVIL PENALTY upon Respondent as set forth herein, subject to its 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 Respondent’s receipt of this Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke or Refuse to Renew Mortgage Correspondent 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 (c) of Section 36a-50, subsections (a) and (b) of Section 36a-51, and Section 36a-52(a) of the Connecticut General Statutes. This Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke or Refuse to Renew Mortgage Correspondent 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 “pro se”. 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 September 18, 2014, 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 or fails to appear at any hearing, the Order to Make Restitution shall remain in effect and become permanent against Respondent, and the Commissioner will issue an order revoking and refusing to renew Respondent’s license to engage in the business of a mortgage correspondent lender, ordering Respondent to cease and desist from violating Section 36a-758 of the Connecticut General Statutes, as amended, and Sections 36a-498e(2), 36a-486(b)(1), 36a-53b, 36a-498e(10), 36a-53a, 36a-498f(b) and 36a-17(d) of the Connecticut General Statutes, and may order a civil penalty in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation be imposed upon Respondent.
Dated at Hartford, Connecticut
this 17th day of July 2014. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 17th day of July 2014, the foregoing Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke or Refuse to Renew Mortgage Correspondent 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 email and FedEx to Network Capital Funding Corporation, Attention: Tri Nguyen, C.E.O., 5 Park Plaza, #800, Irvine, California 92614, FedEx tracking number 8696 4180 1238; and by email and first class mail to Respondent’s attorneys Norman H. Roos, Esq., and Edward J. Heath, Esq., Robinson & Cole, 280 Trumbull Street, Hartford, Connecticut 06103-3597.
________/s/_________
Stacey L. Valerio
Prosecuting Attorney