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IN THE MATTER OF:

REF MORTGAGE CAPITAL INC.
NMLS # 1424304
("REF Mortgage Capital")

ROBERT ERNEST FIALA
NMLS # 70963
("Fiala")

     (Collectively, "Respondents")

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FINDINGS OF FACT,
CONCLUSIONS OF LAW
AND ORDER


                     

I.  INTRODUCTION

The above-referenced matter was initiated upon charges brought by Jorge L. Perez, Banking Commissioner (“Commissioner”), to:  (i) revoke REF Mortgage Capital’s mortgage broker license in Connecticut; (ii) revoke Fiala’s mortgage loan originator license in Connecticut; (iii) issue an order to cease and desist against Respondents; and (iv) impose a civil penalty on Respondents.  On August 28, 2017, the Commissioner issued an Order of Summary Suspension, Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Broker License, Notice of Intent to Revoke Mortgage Loan Originator License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against Respondents (collectively, “Order”), which alleged various violations of the General Statutes of Connecticut under the Commissioner’s jurisdiction.  On August 29, 2017, the Order was sent by certified mail, return receipt requested to Respondents.  On September 13, 2017, Respondents, through counsel, requested a hearing on the Order.

After due notice, a hearing was held at the Department of Banking (“Department”) over six days:  October 23rd and 24th, 2017; November 6th and 20th, 2017; and December 14th and 15th, 2017.  The hearing was conducted in accordance with Chapter 54 of the General Statutes of Connecticut, the “Uniform Administrative Procedure Act”, and the Department’s contested case regulations, Sections 36a-1-19 to 36a-1-57, inclusive, of the Regulations of Connecticut State Agencies.   


II.  FINDINGS OF FACT

A.  Procedural Findings

1. The Commissioner issued an Order of Summary Suspension, Temporary Order to Cease and Desist, Notice of Intent to Revoke Mortgage Broker License, Notice of Intent to Revoke Mortgage Loan Originator License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against Respondents on August 28, 2017 (collectively, “Order”).  On August 29, 2017, the Order was sent by certified mail, return receipt requested to Respondents.  (Transcript of October 23, 2017 (“Tr. 1”) at 9; Hearing Officer’s (“H.O.”) Ex. 1.)1  The Order summarily suspended REF Mortgage Capital’s license to act as a mortgage broker in Connecticut pending proceedings for revocation.  (Tr. 1 at 40-41; H.O. Ex. 1; Division’s (“Div.”) Ex. 1.)  The Order also summarily suspended Fiala’s license to engage in the business of a mortgage loan originator in Connecticut pending proceedings for revocation.  (H.O. Ex. 1.)
2. On September 13, 2017, the Department received an Appearance and Request for Hearing from Wendy Bernard, Esq., The Bernard Law Group, on behalf of Respondents.  (Tr. 1 at 9-10; H.O. Exs. 1 and 2.)
3. On September 29, 2017, the Commissioner appointed Attorney Paul A. Bobruff as Hearing Officer in the matter.  (Tr. 1 at 9; H.O. Ex. 1.)
4. Attorneys John Mosychuk and Stacey Serrano appeared on behalf of the Department.  (Tr. 1 at 5-6.)
5. Attorney Wendy Bernard appeared on behalf of Respondents.  (Tr. 1 at 5.)
6.
On October 23, 2017, the Department orally amended the Order, without objection from Respondents’ counsel, adding subparagraph 10(k) to include the loan file of M.D. as one of the loan files that the Department alleged had been fraudulently altered by Respondents.  (Tr. 1 at 137-142; Div. Exs. 9 and 10.)

B. Registrants

7. REF Mortgage Capital is a Connecticut corporation located at 112 Southbury Road, Roxbury, Connecticut 06783 (Tr. 1 at 41-43 and 50-51; Div. Exs. 1 and 3.)
8. REF Mortgage Capital was licensed on the Nationwide Multistate Licensing System and Registry (“NMLS”), through the Commissioner, to act as a mortgage broker in Connecticut.  REF Mortgage Capital’s NMLS number is 1424304.  REF Mortgage Capital first became licensed to act as a mortgage broker in Connecticut on January 20, 2016.  (Tr. 1 at 40-42; Transcript of December 14, 2017 (“Tr. 5”) at 86; H.O. Ex. 1; Div. Ex. 1.)
9. Fiala has been REF Mortgage Capital’s owner, President, qualified individual, control person, and only licensed mortgage loan originator since REF Mortgage Capital first became licensed as a mortgage broker.  REF Mortgage Capital never had any other employees other than Fiala.  (Tr. 1 at 44-50, 52-55, 61, 99, 106-107 and 125; Div. Exs. 1, 2, and 7.)
10. Fiala is licensed by the Department as a mortgage loan originator in Connecticut.  Fiala’s NMLS number is 70963.  (Tr. 1 at 46, 48, 52, 54-56, 58-59 and 61; Transcript of November 20, 2017 (“Tr. 4”) at 13-15; Div. Exs. 1, 2, 4, 7 and 139.)
11. Fiala’s duties and responsibilities as a mortgage loan originator included collecting information for borrowers’ loan applications, including, but not limited to uniform residential loan applications.  Fiala gathered documentation required for the application process that lenders would use to verify the information contained in the applications and submitted that documentation to lenders.  (Tr. 1 at 52-53.)
12. REF Mortgage Capital’s office is located at Fiala’s residence and Fiala is the qualified individual for the office.  (Tr. 1 at 49, 55-58, 93-95, 99, and 110; Tr. 5 at 95; Div. Exs. 1, 2 and 7.)
13.
REF Mortgage Capital’s books and records were located at Fiala’s residence.  Fiala is the custodian of REF Mortgage Capital’s books and records.  (Tr. 1 at 50-51 and 55-58; Div. Exs. 1 and 3.)
14.  Fiala has worked in the mortgage industry for thirty years.  (Tr. 1 at 53; Tr. 5 at 81.)
15.
From July 1993 through January 2016, Fiala was employed by a mortgage broker and was registered or licensed with the Department, and during this time typically took mortgage loan applications in person and had clients sign those documents and he would bring them to the mortgage broker’s office to have them processed.  (Tr. 4 at 13; Tr. 5 at 87; Div. Ex. 139.)
16. Fiala was employed as a branch manager for approximately 5 years in a branch location where Fiala was the only employee.  Branch managers are responsible for overseeing loan originators working out of that branch and overseeing the origination process as loans are put through the pipeline.  (Tr. 4 at 14; Tr. 5 at 81; Div. Ex. 139.)
17.  A branch manager has to have at least three years in the previous five years in the mortgage origination industry to make sure the experience is relevant and is expected to be knowledgeable about the mortgage industry and practices and what is acceptable as far as mortgage origination fees.  (Tr. 4 at 14.)
18.  Fiala completed all federal continuing education requirements for a mortgage loan originator for the years 2011 through 2016, including the federal ethics requirement.  Fiala also completed the continuing education requirements that Connecticut implemented for a mortgage loan originator for 2015 and 2016.  (Tr. 1 at 61-83; Div. Ex. 5.)
19. 
Fiala also satisfied the Federal and New York pre-licensing education requirements for licensure in 2010 in order to remain licensed after the enactment of the SAFE ACT, including, the federal ethics requirement.  (Tr. 1 at 84-88; Div. Ex. 5.)
C.  Lenders

20. Parkside Lending, LLC (“Parkside”) is a wholesale mortgage bank that does business through mortgage brokers.  (Transcript of November 6, 2017 (“Tr. 3”) at 11.)
21. REF Mortgage Capital and Fiala executed a Broker Agreement with Parkside on April 12, 2016 (“Broker Agreement”), and brokered loans for Parkside.  (Tr. 3 at 11 and 18-19; Div. Ex. 135.)
22. Article 1.02 c of the Broker Agreement states that “all information contained in the documents submitted to Lender is true and correct and has not been altered or modified by Broker”.  (Tr. 3 at 92-93; Div. Ex. 135.)
23. Article 2.03 b of the Broker Agreement states that “[b]roker used commercially reasonable and industry acceptable methods to verify that all such information is true, accurate and complete and that the Broker has not omitted any material information.  Broker further represents, warrants and covenants that it has no adverse information or documentation concerning any borrower which it has not communicated to Lender and that all documents and instruments prepared or submitted by Broker in connection with each such Loan will be valid and genuine in every respect.”  (Tr. 3 at 40-41; Div. Ex. 135.)
24. Mortgage brokers such as REF Mortgage Capital submitted documents electronically to Parkside by uploading the documents to Parkside’s broker portal.  Parkside relies on the documents submitted through the portal to be accurate and genuine.  (Tr. 3 at 26-27.)
25. Fiala also brokered a mortgage loan for Provident Funding.  (Tr. 4 at 10-12; Div. Exs. 9, 10 and 138.)
26. REF Mortgage Capital submitted loan application documents to mortgage lenders by scanning documents and uploading them into the lender’s portal.  (Tr. 5 at 97.)
27. It is important for the date on any loan document to be accurate because there are regulations that require other documents to be delivered within a certain number of days of certain documents being delivered or documents being delivered within a certain number of days prior to something happening.  If the lender cannot rely on the dates, the lender cannot rely on the compliance of the loan process with applicable law.  (Tr. 3 at 30.)
28.
It is important the borrower’s signature on documentation included in a loan file be genuine so the lender is confident that the borrower is attesting to the information in the application.  (Tr. 3 at 31.)

D.  Examination

29. On or about July 10, 2017, the Department’s Consumer Credit Division (“Division”) advised REF Mortgage Capital, through Fiala, that it was going to perform an examination on August 8, 2017, into its mortgage brokerage activities for the period between January 20, 2016, until July 31, 2017, and enclosed a Uniform Manager’s Questionnaire to be completed by the licensee.  The Division sent letter to REF Mortgage Capital, through Fiala to explain the examination process.  (Tr. 1 at 89-96 and 98; Tr. 4 at 25; Div. Exs. 5 and 6.)
30. The Division selected REF Mortgage Capital for review, in part, because it had not previously performed an examination of the company since it only recently became licensed in early 2016.  (Tr. 1 at 89-96 and 98; Div. Ex. 6.)
31. Fiala provided responses to the Uniform Manager’s Questionnaire on behalf of REF Mortgage Capital and indicated that REF Mortgage Capital’s loan files are imaged and would be provided to examiners by thumb drive.  (Tr. 1. at 98-101 and 105; Div. Ex. 7.)
32.
REF Mortgage Capital had paper loan files and electronic loan files.  (Tr. 1 at 102.)
33. In accordance with its advance notice to REF Mortgage Capital, on August 8 and 9, 2017, the Division conducted an on-site examination of REF Mortgage Capital at the company’s office located in Roxbury, Connecticut (“Examination”).  (Tr. 1 at 57, 107-108 and 125-126.)
34. Three examiners performed the Examination.  (Tr. 1 at 97 and 108.)
35. On August 8, 2017, the examiners requested that Fiala provide both REF Mortgage Capital’s paper files as well as the digital files that had been offered to the examiners.  (Tr. 1 at 108.)
36. Fiala provided a flash drive containing digital files and the individual paper loan files for the files the examiners requested.  (Tr. 1 at 111.)
37. During the Examination, the Division asked REF Mortgage Capital to produce all of the closed loan files that it had acted as a mortgage broker for since the date it became licensed.  REF Mortgage Capital produced the loan files for 15 such files, 14 of which were funded and one that was not.  (Tr. 1 at 113; Div. Ex. 8.)
38. The Examination revealed some discrepancies between the digital copy on the thumb drive and the paper files.  (Tr. 1 at 119.)
39. The examiners reviewing the paper loan files noticed irregularities, including the use of correction fluid and/or correction tape over dates and other areas on documents, and signatures that were taped on to a document.  (Tr. 1 at 112-113.)
40. The Division took possession of 15 physical loan files in order to continue the review at the Department’s offices because of the irregularities that the examiners had found.  (Tr. 1 at 113-127; Div. Ex. 8.)
41. The Division reviewed the 15 loan files that REF Mortgage Capital produced.  (Tr. 1 at 113, 115-119 and 121.)
42. As the only licensed mortgage loan originator sponsored by REF Mortgage Capital, Fiala was the mortgage loan originator on each of the 15 mortgage loan files.  (Tr. 1 at 52, 61 and 106-108; Div. Ex. 7.)
43. REF Mortgage Capital does not and did not employ, retain or otherwise engage the services of any loan processors, secretaries or other personnel to assist in the brokering of the 15 mortgage loans.  (Tr. 1 at 61 and 106-107; Tr. 4 at 81; Div. Ex. 7.)
44.
REF Mortgage Capital never had any other employees other than Fiala and Fiala was the only individual with access to REF Mortgage Capital’s mortgage loan files. (Tr. 1 at 61 and 106-108; Tr. 4 at 81; Div. Ex. 7.)
E.  Loan Files of REF Mortgage Capital
1.  Loan File of M.D., Loan Number 9526060031

45. In the loan file of M.D., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to cover information on Form 4506-T Request for Transcript of Tax Return.  Specifically, item number 5 states “[i]f the transcript or tax information is to be mailed to a third party (such as a mortgage company), enter the third party’s name, address and telephone number.”  The response to item number 5, which listed the name “REF Mortgage Capital Inc.” and REF Mortgage Capital’s address, is covered over with correction fluid and/or correction tape and was not replaced.  (Tr. 1 at 142-147 and 178; Div. Ex. 9.)
46.
Respondents’ alterations that are visible on Div. Ex. 9 are not visible on the copy of the Form 4506-T Request for Transcript of Tax Return provided to the lender and the lender was not aware of the alterations.  (Tr. 1 at 142-147, 153 and 178; Tr. 4 at 10-12; Div. Exs. 9 and 10.)
2.  Loan File of J.C., Loan Number W160780686

47. In the loan file of J.C., The Uniform Residential Loan Application contained three different versions of the page numbered 4 of 5 of The Uniform Residential Loan Application.  (Tr. 1 at 162-167; Div. Ex. 12.)
48. The first page numbered 4 of 5 of The Uniform Residential Loan Application has the signature of the borrower J.C. dated 9/6/16, an undated signature of his co-borrower and was not signed by Fiala.  (Tr.1 at 165-166; Div. Ex. 12.)
49. The second page numbered 4 of 5 of The Uniform Residential Loan Application has the signatures of J.C., his co-borrower and Fiala all dated 9/6/16.  The second page numbered 4 of 5 of The Uniform Residential Loan Application contained in J.C.’s loan file also had different amounts listed in the details of Transaction than the first and third pages numbered 4 of 5.  (Tr. 1 at 166; Tr. 3 at 36; Div. Ex. 12.)
50. The third page numbered 4 of 5 of The Uniform Residential Loan Application contains the signature of the borrower J.C. dated 9/6/16.  There is also an undated signature in the box for the co-borrower signature on the third page numbered 4 of 5 that purports to be the signature of the co-borrower, but appears to differ from the co-borrower’s signatures on the first and second pages numbered 4 of 5.  Fiala did not sign the third page numbered 4 of 5 of The Uniform Residential Loan Application.   (Tr. 1 at 166-168 and 181-183; Div. Exs. 12 and 14-17.)
51. If a lender received a loan application with multiple versions of the same page with different information on it, the different versions would raise issues of the genuineness of the borrowers’ signatures and loan application and the lender would not know which one was true and correct.  (Tr. 3 at 35-37; Div. Ex. 12.)
52. The Division received and reviewed a copy of Parkside’s loan file for J.C., but the Division did not introduce it into evidence during the hearing.  The record does not establish that Parkside received multiple versions of the page numbered 4 of 5 of The Uniform Residential Loan Application for J.C.  (Tr. 1 at 169-172 and 177-180; Tr. 3 at 35-37; Div. Ex. 13.)
53. The Division contacted J.C. and his co-borrower and provided them with the three different pages numbered 4 of 5 of the Uniform Residential Loan Application contained in J.C.’s loan file for their review.  (Tr. 185-191; Div. Ex. 15.)
54. The co-borrower responded in an e-mail that “some of her signatures do not look right.”  The co-borrower never stated which, if any, of the signatures were not her signatures.  (Tr. 193-194; Div. Ex. 17.)
55.
The Order alleged “[i]n the loan file of J.C., Fiala (1) copied J.C.’s signature from one document on at least one other document; and (2) signed the borrower’s signature himself onto at least one document.”  The record does not establish that Fiala copied or signed J.C.’s or the co-borrower’s signatures himself on any document in the loan file of J.C.  (Tr. 1 at 162-167 and 185-189; Tr. 5 at 125-126; H.O. Ex. 1; Div. Exs. 12 and 14-17).

3.  Loan File of L.K., Loan Number W160577312

56.
The Order alleged that Fiala signed the borrowers’ signatures himself onto at least one document in the loan file of L.K.  The Division’s Associate Financial Examiner testified that there was no issue with the borrowers’ signatures on any document in L.K.’s loan file.  L.K. testified that she and the co-borrower signed all the documents and that she was aware of all the information that appeared on the documents.  In the loan file of L.K., Fiala did not sign either of the borrower’s signatures himself on any document.  (Tr. 1 at 195-209; Transcript of October 24, 2017 (“Tr. 2”) at 92-121; Tr. 5 at 126; H.O. Ex. 1; Div. Exs. 18 and 19.)

4.  Loan File of D.L., Loan Number W161289908
a.  Uniform Residential Loan Application

57. The Uniform Residential Loan Application of D.L. and a co-borrower contained in REF Mortgage Capital’s loan file of D.L. had correction fluid and/or correction tape on the dates next to the borrowers’ and Fiala’s signatures.  Fiala used correction fluid and/or correction tape on the dates next to the borrowers’ and his signatures to change the dates from 1/5/17 to 1/9/17 on forms that had been signed.  (Tr. 1 at 214-219 and 223; Div. Ex. 20.)
58. REF Mortgage Capital’s loan file of D.L. also contained a copy of the Uniform Residential Loan Application on which the correction fluid and/or correction tape on Div. Ex. 20 was not visible.  (Tr.1 at 220-221 and 223; Div. Ex. 21.)
59.
The correction fluid and/or correction tape that appeared on the Div. Ex. 20 revealing that wet ink dates had been changed was not visible on the Uniform Residential Loan Application provided to the lender by REF Mortgage Capital.  (Tr. 1 at 220-228; Div. Ex. 22.)
b.  Form 4506-T Request for Transcript of Tax Return

60. In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Form 4506-T Request for Transcript of Tax Return from 1/5/17 to 1/9/17.  (Tr. 1 at 229-235; Tr. 3 at 37-38; Div. Ex. 23.)
61.
The alterations Fiala made to Div. Ex. 23 were not visible on the copy of the Form 4506-T Request for Transcript of Tax Return that Respondents provided to the lender and the
lender was not aware of the alterations.  (Tr. 1 at 232-235; Tr. 3 at 37-38; Div. Ex. 24.)

c.  Authorization for the Social Security Administration (SSA)
To Release Social Security Number (SSN) Verification
62.

In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Authorization for Social Security Administration (SSA) To Release Social Security Number (SSN) Verification form from 1/5/17 to 1/9/17. There is no initial or acknowledgement of the borrower that the date was changed. (Tr. 1 at 235-241; Div. Ex. 25.)

63.

The correction fluid and/or correction tape was not visible on the Authorization for Social Security Administration (SSA) To Release Social Security Number (SSN) Verification form that Respondents’ submitted to the lender.  (Tr. 1 239-241; Div. Ex. 26.)


d.  Agreement Concerning Non-Refundability of Advance Fee

64.

In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the information in two of the boxes on the Agreement Concerning Non-Refundability of Advance Fee form from “N/A” to add an Appraisal fee of $475 and a Credit Report fee of $42 on this form.  (Tr. 1 at 242-255; Tr. 2 at 9-14; Tr. 3 at 38-39; Div. Ex. 27.)

65.

The addition of the fees on the Agreement Concerning Non-Refundability of Advance Fee form was done after the borrowers signed the document.  There are no initials or acknowledgements of the borrowers that the fees were changed.  (Tr. 1 at 243-255; Tr. 2 at 9-14; Tr. 3 at 38-40; Div. Ex. 27.)

66.

REF Mortgage Capital’s loan file of D.L. also contained copy of the Agreement Concerning Non-Refundability of Advance Fee on which the alterations to the document are not visible.  (Tr. 1 at 252-254; Tr. 2 at 10; Div. Ex. 28.)

67.

The correction fluid and/or correction tape that appeared on the original document of D.L. revealing that fees had been added after the document had been signed was not visible on the on the Agreement Concerning Non-Refundability of Advance Fee provided to the lender by REF Mortgage Capital.  (Tr. 1 at 243-248; Tr. 2 at 9-14; Tr. 3 at 38-40; Div. Ex. 29.)

68.

The lender was not aware that these documents were altered or modified in any respect and Respondents failed to disclose all relevant or pertinent information in connection with the submission of loan files to the lender.  (Tr. 3 at 41-44.)

69.

The date an Agreement Concerning Non-Refundability of Advance Fee form is signed and fees are disclosed may determine whether a borrower can request a refund for any of the fees listed on the form.  (Tr. Vol. 1 at 243-244.)


e.  Borrower’s Certification and Authorization

70.

In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on Borrower’s Certification and Authorization from 1/5/17 to 1/9/17.  There are no initials or acknowledgements of the borrowers that the date was changed.  (Tr. 2 at 15-23; Div. Ex. 30.)

71.

The alterations are not visible on the copy of the Borrower’s Certification and Authorization provided to the lender. (Tr. 2 at 19-23; Div. Ex. 32.)


f.  Evidence of Joint Application

72.

In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Evidence of Joint Application from 1/5/17 to 1/9/17.  There are no initials or acknowledgements of the borrowers that the dates were changed.  (Tr. 2 at 19-27; Div. Ex. 33.)

73.
The alterations are not visible on the copy of the Evidence of Joint Application provided to the lender.  (Tr. 2 at 27-29; Div. Ex. 34.)
g.  Affiliated Business Arrangement Disclosure Statement Notice

74.
In the loan file of D.L., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Affiliated Business Arrangement Disclosure Statement Notice from 1/5/17 to 1/9/17.  There are no initials or acknowledgements of the borrowers that the date was changed. (Tr. 2 at 29-32; Div. Ex. 35.)

h.  Signatures

75.
The Order alleged that Fiala “signed the borrower’s signature himself onto at least one document” in the loan file of D.L.  The Division’s Associate Financial Examiner did not testify that Faila signed any of the borrowers’ signatures on any document in D.L.’s loan file.  In the loan file of D.L., Fiala did not sign either of the borrower’s signatures himself on any document.  (Tr. 1 at 214-215, 217-218, 231, 237-238, 244-246 and 249-250; Tr. 2 at 17, 21, 28 and 31-32; H.O. Ex. 1; Div. Exs. 20, 23, 25, 27, 30, 32, 33 and 35.)

5.  Loan file of G.L., Loan Number W161289908

76.
The Order alleged that Fiala signed the borrower’s signature himself onto at least one document in the loan file of G.L.  G.L. testified that she signed Exs. 128 through 131.  Fiala did not sign G.L.’s signature himself on any document in the loan file of G.L.  (Tr. 2 at 42, 44-47, 52 and 86-87; Tr. 5 at 127; H.O. Ex. 1; Div. Exs. 128-131.)
6.  Loan File of D.S., Loan Number W161087542
a.  Form 4506-T Request for Transcript of Tax Return

77. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape, to cover information on Form 4506-T Request for Transcript of Tax Return.  Specifically, Fiala used correction fluid and/or correction tape to change the dates on Form 4506-T Request for Transcript of Tax Return from 9-26-16 to 10-31-16.  (Tr. 2 at 124-125; Div. Ex. 36.)
78. Number 5 of the Form 4506-T Request for Transcript of Tax Return asks if the transcript or third party (such as a mortgage company) is to be mailed to a third party, to enter the third party’s name, address and telephone number.  The original response to this question was covered with correction fluid and/or correction tape and replaced with a different company and its identifying information.  The correction fluid and/or correction tape that appears on the original was not visible on a copy of the document.  (Tr. 2 at 125-126; Div. Ex. 36.)
79. The correction fluid and/or correction tape was not visible on the copy of Form 4506-T Request for Transcript of Tax Return that REF Mortgage Capital provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 129-132; Div. Ex. 37.)
80.
The date on an application is important to determine dates/time frame when the broker or lender is required to make certain required disclosures.  (Tr. Vol 2 at 138.)

b.  Uniform Residential Loan Application

81. The Uniform Residential Loan Application contained in REF Mortgage Capital’s loan file of D.S. had correction fluid and/or correction tape on the dates next to the borrowers’ signatures.  Fiala used the correction fluid and/or correction tape to change the dates on the form that had been signed from 9-26-16 to 10-31-16.  Div. Ex. 38 is missing page 6, which includes a place for the signature of the Loan Originator along with the date signed.  There are no initials or acknowledgements of the borrowers that the dates were changed on Div. Ex. 38.  (Tr. 2 at 133-139; Div. Ex. 38.)
82.
The correction fluid and/or correction tape that appeared on the original Uniform Residential Loan Application of D.S. revealing that the original dates of the signatures had been changed were not visible on the Uniform Residential Loan Application provided to the lender by REF Mortgage Capital and the lender was not aware of the alterations.  (Tr. 2 at 139-143; Div. Ex. 39.)

c.  Agreement Concerning Non-Refundability of Advance Fee

83. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the information in two of the boxes on the Agreement Concerning Non-Refundability of Advance Fee form from “N/A” to add an Appraisal fee of $465 and a Credit Report fee of $45 on this form.  (Tr. 2 at 144-150; Div. Ex. 40.)
84. The Agreement Concerning Non-Refundability of Advance Fee was signed by both borrowers and Fiala with the appraisal fee and credit report fee both listed as N/A, without a date indicating when the document was signed.  (Tr. 2 at 144-150; Div. Ex. 40.)
85. The addition of the fees was done after the borrowers signed the document.  There are no initials or acknowledgements of the borrowers that the fees or dates were changed.  (Tr. 2 at 144-150; Div. Ex. 40.)
86.
The alterations are not visible on the copy of the Agreement Concerning Non-Refundability of Advance Fee provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 150-153; Div. Ex. 41.)

d.  Borrower’s Identity-of-Interest Certification

87. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Borrower’s Identity-of-Interest Certification from 9-26-16 to 10-31-16.  There is no initial or acknowledgement of the borrower that the date was changed.  (Tr. 2 at 153-158; Div. Ex. 42.)
88.
The alterations are not visible on the copy of the Borrower’s Identity-of-Interest Certification provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 159-161; Div. Ex. 43.)

e.  Appraisal Notice

89. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Appraisal Notice from 9-26-16 to 10-31-16 to appear as though it had been signed at a later date.  There are no initials or acknowledgements of either borrower that the date was changed.  (Tr. 2 at 176-178; Div. Ex. 44.)
90.
The alterations are not visible on the copy of the Appraisal Notice provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 178-182; Div. Ex. 45.)

f.  Federal Equal Credit Opportunity Act Notice

91. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Federal Equal Credit Opportunity Act Notice from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the date was changed.  (Tr. 2 at 182-183; Div. Ex. 46.)
92.
The alterations are not visible on the copy of the Federal Equal Credit Opportunity Act Notice provided to the lender and the lender was not aware of the alterations. (Tr. 2 at 184; Div. Ex. 47.)

g.  Evidence of Joint Application

93. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Evidence of Joint Application from 9-26-16 to 10-31-16 to appear as though it had been signed at a later date.  There are no initials or acknowledgements of the borrowers that the dates were changed.  (Tr. 2 at 184-186; Div. Ex. 48.)
94.
The alterations are not visible on the copy of the Evidence of Joint Application provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 186-187; Div. Ex. 49.)

h.  Important Notice to Homebuyers

95. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Important Notice to Homebuyers from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 187-190; Div. Ex. 50.)
96.
The alterations are not visible on the copy of the Important Notice to Homebuyers provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 189-192; Div. Ex. 51.)


i.  Informed Consumer Choice Disclosure Notice

97. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Informed Consumer Choice Disclosure Notice from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 192-194; Div. Ex. 52.)
98.
The alterations are not visible on the copy of the Informed Consumer Choice Disclosure Notice provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 194; Div. Ex. 53.)

j.  HUD Appraised Value Disclosure

99. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the HUD Appraised Value Disclosure from 9-26-16 to 10-31-16. There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 194-196; Div. Ex. 54.)
100.
The alterations are not visible on the copy of the HUD Appraised Value Disclosure provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 196-197; Div. Ex. 55.)

k.  FHA Amendatory Clause
101. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the FHA Amendatory Clause from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 197-199; Div. Ex. 56.)
102.
The alterations are not visible on the copy of the FHA Amendatory Clause provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 199; Div. Ex. 57.)


l.  USA Patriot Act Important Information about
Procedures for Opening a New Account

103. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the USA Patriot Act Important Information about Procedures for Opening a New Account from 9-26-16 to 10-31-16. There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 200-201; Div. Ex. 58.)
104.
The alterations are not visible on the copy of the USA Patriot Act Important Information about Procedures for Opening a New Account provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 201-202; Div. Ex. 59.)

m.  Loan Options Certification
(Truth-in-Lending Act Anti-Steering Safe Harbor)

105. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Loan Options Certification (Truth-in-Lending Act Anti-Steering Safe Harbor) from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 202-204 and 206; Div. Ex. 60.)
106.
The alterations are not visible on the copy of the Loan Options Certification (Truth-in-Lending Act Anti-Steering Safe Harbor) provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 204-206; Div. Ex. 61.)

n.  Notice to Homeowner
Assumption of HUD/FHA Insured Mortgages
Release of Personal Liability

107. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Notice to Homeowner Assumption of HUD/FHA Insured Mortgages Release of Personal Liability from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 206-207; Div. Ex. 62.)
108.
The alterations are not visible on the copy of the Notice to Homeowner Assumption of HUD/FHA Insured Mortgages Release of Personal Liability provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 208-209; Div. Ex. 63.)

o.  Authorization for the Social Security Administration (SSA)
To Release Social Security Number (SSN) Verification


109. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the name and address of the company that was authorized to receive the verifications of both borrower’s names and social security numbers and to change the dates on both of their Authorization for the Social Security Administration (SSA) To Release Social Security Number (SSN) Verification from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that alterations were made.  (Tr. 2 at 210-212 and 216-220; Div. Exs. 64 and 66.)
110. The alterations are not visible on either of the copies of the Authorization for Social Security Administration (SSA) To Release Social Security Number (SSN) Verification provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 212-216; Div. Exs. 65 and 67.)
111.
The consent on the Authorization for Social Security Administration (SSA) To Release Social Security Number (SSN) Verification form is valid for 90 days from the date it was signed.  (Tr. 2 at 214-216 and 220-221; Div. Exs. 64 and 67.)

p.  Settlement Services Provider List

112.
In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Settlement Services Provider List from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 223-224; Div. Ex. 68.)

q.  HUD/VA Addendum to Uniform Residential Loan Application

113. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the HUD/VA Addendum to Uniform Residential Loan Application from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 227-231; Div. Ex. 69.)
114.
In the loan file of D.S., Fiala certified on HUD/VA Addendum to Uniform Residential Loan Application Part II – Lender’s Certification 21. E that the Uniform Residential Loan Application and this Addendum were signed by the borrower after all sections were completed.  Fiala signed as Officer of Lender.  (Tr. 2 at 228-229; Div. Ex. 69.)

r.  Direct Endorsement Approval for a HUD/FHA-Insured Mortgage

115. In the loan file of D.S., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Direct Endorsement Approval for a HUD/FHA-Insured Mortgage from 9-26-16 to 10-31-16.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 231-233; Div. Ex. 70.)
116. Fiala certified that he had personally reviewed the mortgage loan documents.  (Tr. 2 at 234; Div. Ex. 70.)
117.
The Order alleged, in part, that “[i]n the loan file of D.S., Fiala (1) signed D.S.’s signature himself onto at least one document, or alternatively, copied and pasted D.S.’s signature from one document no less than one other document . . . .”  Fiala did not sign either of the borrower’s signatures himself on any document or copy and paste either of the borrower’s signatures on any document in the loan file of D.S.  (Tr. 2 at 124-125, 136, 147, 154-155, 176-178, 185, 188, 193, 195-196, 198, 200, 203, 206-207, 210, 218, 223-224, 230 and 232; H.O. Ex. 1; Div. Exs. 36, 38, 40, 42, 44, 46, 48, 50, 52, 54, 56, 58, 60, 62, 64, 66, 68 and 70.)


7.  Loan File of W.P., Loan Number W170394443
a.  Evidence of Joint Application

118. In the loan file of W.P., REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Evidence of Joint Application.  There are no initials or acknowledgements of either borrower that the dates were changed.  (Tr. 2 at 236-238; Div. Ex. 71.)
119.
The alterations are not visible on the copy of the Evidence of Joint Application provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 238-240; Div. Ex. 72.)

b.  Residential Mortgage Credit Score Disclosure Exception Notice

120. In the loan file of W.P, REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Residential Mortgage Credit Score Disclosure Exception Notice for the borrower.  There are no initials or acknowledgements of the borrower that the dates were changed.  (Tr. 2 at 240-247; Div. Ex. 73.)
121. The alterations are not visible on the copy of the Residential Mortgage Credit Score Disclosure Exception Notice for the borrower provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 245-247; Div. Ex. 74.)
122. In the loan file of W.P, REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the dates on the Residential Mortgage Credit Score Disclosure Exception Notice for the co-borrower.  There are no initials or acknowledgements of the co-borrower that the dates were changed.  (Tr. 2 at 247-250; Div. Ex. 75.)
123. The alterations are not visible on the copy of the Residential Mortgage Credit Score Disclosure Exception Notice for the co-borrower provided to the lender and the lender was not aware of the alterations.  (Tr. 2 at 250-253; Div. Ex. 76.)
124.
The Order alleged, in part, “[i]n the loan file of W.P., Fiala . . . (2) signed W.P.’s signature himself onto at least one document.”  Fiala did not sign either of the borrower’s signatures himself on any document in the loan file of W.P.  (Tr. 2 at 236-237, 244 and 248-250; H.O. Ex. 1; Div. Exs. 71, 73 and 75.)

8.  Loan file of K.B., Loan Number W170191910
a.  Letter of Explanation

125. In the loan file of K.B., Fiala received an e-mail sent by K.B. to Fiala on March 4, 2017, which was a letter of explanation for the lender concerning a credit inquiry from Quicken Loans that appeared on the K.B.’s credit report to satisfy a condition from the lender questioning the credit inquiry.  Fiala printed the e-mail sent by K.B.  Fiala subsequently copied and taped the borrower’s signature from another document onto the e-mail.  Fiala also added a handwritten explanation and a date of 03/08/2017 to the e-mail.  The substance of the information that Fiala added to the letter of explanation was provided to Fiala by K.B. and was accurate.   (Tr. 2 at 254- 260; Tr. 3 at 33-35; Tr. 5 at 45; Div. Ex. 77.)
126. K.B. never added the additional explanation, signed and/or dated Div. Ex. 77.  K.B. was not aware that Fiala had copied and taped her signature on the letter of explanation at the time Fiala submitted the letter to the lender.  Neither Fiala nor K.B. informed the lender that Fiala would be submitting altered documents to the lender.  (Tr. 5 at 45-46, and 49; Div. Ex. 77.)
127. The lender would rely on the fact that the borrower had signed the letter of explanation provided to the lender.  (Tr. 2 at 255-256; Tr. 3 at 34-35.)
128. Fiala also corrected the spelling of the name of the entity related to the credit inquiry.  (Tr. 5 at 49-51.)
129. The alterations Fiala made are not visible on the copy of the letter of explanation provided to the lender.  The lender did not know that the borrower did not sign the letter of explanation and that Fiala had cut and taped the borrower’s signature onto the letter and copied it and sent it to the lender on the borrower’s behalf.  (Tr. 2 at 265-268; Tr. 5 at 46-47; Div. Ex. 79.)
130.
The lender would not have knowingly accepted a letter of explanation that contained a cut and taped signature on the letter.  (Tr. 3 at 31 and 35; Div. Ex. 79.)

b.  Second Letter of Explanation

131. Fiala received a second e-mail sent by K.B. on March 4, 2017, which was a second letter of explanation for the lender concerning the borrower’s current address and rent payment.  (Tr. 3 at 145-146; Div. Ex. 81.)
132. The second letter of explanation that K.B. e-mailed to Fiala does not contain K.B.’s signature or a handwritten date.  (Tr. 3 at 145-146; Tr. 5 at 65; Div. Ex. 81.)
133. Fiala added K.B.’s signature and a handwritten date of 3/8/2017 onto the e-mail.  The correction fluid and/or correction tape that Fiala used to cover the addition of K.B.’s signature is still visible on Div. Ex. 81.  (Tr. at 146-148; Div. Ex. 82.)
134. There was a third version of the second letter of explanation in the loan file of K.B. on which Fiala’s alterations are not visible.  (Tr. 3 at 148-149; Tr. 5 at 67-68; Div. Ex. 83.)
135.
The lender would rely on the signed letter of explanation provided by the borrower.  (Tr. 2 at 255-256 and Tr. 3 at 34-35.)

9.  Loan File of K.P., Loan Number W17045705
a.  Credit Score Disclosure

136. The loan file of K.P. contained a credit score disclosure for K.P.’s co-borrower that had a copy of the co-borrower’s signature and a date that was applied to the document in wet ink at some point after the co-borrower signed the document.  (Tr. 3 at 155; Div. Ex. 88.)
137. The difference between the signature and the date visible on Div. Ex. 88 are not visible on the copy that REF Mortgage Capital, through Fiala, provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 155-156; Div. Ex. 89.)
138. The loan file of K.P. contained a second credit score disclosure for K.P.’s co-borrower that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the co-borrower signed the document.  (Tr. 3 at 156-157; Div. Ex. 90.)
139.
The difference between the signature and the date visible on Div. Ex. 88 are not visible on the copy that REF Mortgage Capital, through Fiala, provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 158; Div. Ex. 91.)

b.  Uniform Residential Loan Application

140. The loan file of K.P. contained a Uniform Residential Loan Application that had a copy of the co-borrower’s signatures and initials and Fiala’s signature, and dates that were applied in wet ink at some point after the co-borrower had signed and initialed the document, and Fiala had signed the document.  (Tr. 3 at 159-161; Div. Ex. 92.)
141. The difference between the co-borrower’s signatures and initials and the date visible on Div. Ex. 92 are not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 161-163; Div. Ex. 93.)
142. The loan file of K.P. contained a Uniform Residential Loan Application that had a copy of K.P’s signatures and initials and Fiala’s signature, and dates that were applied in wet ink at some point after K.P had signed and initialed the document, and Fiala had signed the document.  (Tr. 3 at 164-167; Div. Ex. 94.)
143. The difference between K.P.’s signatures and initials and the dates visible on Div. Ex. 94 are not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 167-169; Div. Ex. 95.)
144.
The significance of a date corresponding to a mortgage loan application is that it starts the clock for the time requirements for state and federal laws and regulations in order for the borrower’s loan file to be compliant and determine whether disclosures were provided in a timely fashion.  (Tr. 3 at 163.)

c.  Affiliated Business Arrangement Disclosure of Statement Notice

145. The loan file of K.P. contained an Affiliated Business Arrangement Disclosure of Statement Notice that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the borrower had signed the document.  (Tr. 3 at 170-172; Div. Ex. 96.)
146.
The difference between the co-borrower’s signature and the date visible on Div. Ex. 96 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 172-173; Div. Ex. 97.)


d.  Federal Equal Credit Opportunity Act Notice

147. The loan file of K.P. contained a Federal Equal Credit Opportunity Act Notice that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the co-borrower had signed the document.  (Tr. 3 at 173; Div. Ex. 98.)
148.
The difference between the co-borrower’s signature and the date visible on Div. Ex. 98 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 173-174; Div. Ex. 99.)

e.  Notice to Connecticut Mortgage Applicants

149. The loan file of K.P. contained a Notice to Connecticut Mortgage Applicants that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the co-borrower had signed the document.  (Tr. 3 at 174-176; Div. Ex. 100.)
150.
The difference between the co-borrower’s signature and the date visible on Div. Ex. 100 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 176-177; Div. Ex. 101.)

f.  Appraisal Notice

151. The loan file of K.P. contained an Appraisal Notice that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the co-borrower had signed the document.  (Tr. 3 at 177-178; Div. Ex. 102.)
152. The difference between the co-borrower’s signature and the date visible on Div. Ex. 102 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 178-179; Div. Ex. 103.)
153.
The Appraisal Notice is a Connecticut requirement pursuant to Section 36a-755(c) of the General Statutes of Connecticut.  (Tr. 3 at 177; Div. Exs. 102 and 103.)

g.  Federal Equal Credit Opportunity Act Notice

154. The loan file of K.P. contained a Federal Equal Credit Opportunity Act Notice that had a copy of K.P’s signature and a date that was applied in wet ink at some point after K.P. had signed the document.  (Tr. 3 at 179-180, Div. Ex. 104.)
155.
The difference between K.P.’s signature and the date visible on Div. Ex. 104 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 180-181; Div. Ex. 105.)


h.  Notice to Connecticut Mortgage Applicants

156. The loan file of K.P. contained a Notice to Connecticut Mortgage that had a copy of K.P.’s signature and a date that was applied in wet ink at some point after K.Ps had signed the document.  (Tr. 3 at 181-182; Div. Ex. 106.)
157.
The difference between K.P.’s signature and the date visible on Div. Ex. 106 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 182-183, Div. Ex. 107.)

i.  Appraisal Notice

158. The loan file of K.P. contained an Appraisal Notice that had a copy of K.P.’s signature and a date that was applied in wet ink at some point after K.P. had signed the document.  (Tr. 3 at 183; Div. Ex. 108.)
159.
The difference between K.P.’s signature and the date visible on Div. Ex. 108 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 184; Div. Ex. 109.)

j.  Notice of Required Flood Insurance Determination
and Related Notice Information

160. The loan file of K.P. contained a Notice of Required Flood Insurance Determination and Related Notice Information that had a copy of K.P.’s signature and a date that was applied in wet ink at some point after K.P. had signed the document.  (Tr. 3 at 184; Div. Ex. 110.)
161. The difference between the signature and the date visible on Div. Ex. 110 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 186; Div. Ex. 111.)
162. The loan file of K.P. contained a Notice of Required Flood Insurance Determination and Related Notice Information that had a copy of the co-borrower’s signature and a date was applied in wet ink at some point after the co-borrower had signed the document.  (Tr. 3 at 187; Div. Ex. 112.)
163.
The difference between the signature and the date visible on Div. Ex. 112 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 187-188; Div. Ex. 113.)

k.  Agreement Concerning Non-Refundability of Advance Fee

164. The loan file of K.P. contained an Agreement Concerning Non-Refundability of Advance Fee that had a copy of the applicants’ signatures and Fiala’s signature and dates that were applied in wet ink at some point after the applicants and Fiala had signed the document.  (Tr. 3 at 188-191; Div. Ex. 114.)
165.
The difference between the applicants’ signatures, Fiala’s signature and the date visible on Div. Ex. 114 are not visible on the copy provided to the lender and the lender was not aware that the dates were applied in wet ink at some point after the document was copied.  (Tr. 3 at 191-192; Div. Ex. 115.)

l.  The Borrower’s Certification and Authorization

166. The loan file of K.P. contained a Borrower’s Certification and Authorization that had a copy of the co-borrower’s signature and a date that was applied in wet ink at some point after the co-borrower had signed the document.  (Tr. 3 at 192-195; Div. Ex. 116.)
167. The difference between the co-borrower’s signature and the date visible on Div. Ex. 116 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 195; Div. Ex. 117.)
168. The loan file of K.P. contained a Borrower’s Certification and Authorization that had a copy of K.P’s signature and a date that was applied in wet ink at some point after the borrower had signed the document.  (Tr. 3 at 195; Div. Ex. 118.)
169.
The difference between the borrower’s signature and the date visible on Div. Ex. 118 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 197-198; Div. Ex. 119.)

m.  Affiliated Business Arrangement Disclosure Statement Notice

170. The loan file of K.P. contained an Affiliated Business Arrangement Disclosure Statement Notice that had a copy of K.P.’s signature and a date that was applied in wet ink at some point after K.P. had signed the document. (Tr. 3 at 198-199; Div. Ex. 120.)
171.
The difference between the signature and the date visible on Div. Ex. 120 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 199-200; Div. Ex. 121.)

n.  Form 4506-T Request for Transcript of Tax Return

172. The loan file of K.P., contained a Form 4506-T Request for Transcript of Tax Return that had a copy of K.P.’s and K.P.’s spouse’s signatures, and a date that was applied in wet ink at some point after the document was signed by K.P. and K.P.’s spouse.  (Tr. 3 at 200-202; Div. Ex. 122.)
173.
The difference between the signatures and the date visible on Div. Ex. 122 is not visible on the copy provided to the lender and the lender was not aware that the date was applied in wet ink at some point after the document was copied.  (Tr. 3 at 200-202; Div. Ex. 123.)

o.  Agreement Concerning Non-Refundability of Advance Fee

174. The Agreement Concerning Non-Refundability of Advance Fee in the loan file of K.P. contained a copy of the applicants’ signatures and Fiala’s signature.  REF Mortgage Capital, through Fiala, used correction fluid and/or correction tape to change the information in the boxes on the borrowers’ Agreement Concerning Non-Refundability of Advance Fee from “N/A” to add an Appraisal fee of $625 and Credit Report fee of $21.43.  (Tr. 3 at 203-206; Tr. 4 at 5-6; Div. Ex. 124.)
175. The Agreement Concerning Non-Refundability of Advance Fee was signed by both borrowers and Fiala with the appraisal fee and credit report fee both listed as N/A, without a date indicating when the document was signed.  There are no initials or acknowledgements of the borrowers that the fees were changed.  (Tr. 4 at 6; Div. Ex. 124.)
176. The difference between the fees and dates and the applicants’ signatures, visible on Div. Ex. 124 are not visible on the copy provided to the lender and the lender was not aware that the dates and fees were added after the applicants had signed the document.  (Tr. 4 at 6-7; Div. Ex. 125.)
177.
Respondents’ actions make it is impossible to know from reviewing the documents, when the document was signed by the applicants and the information the applicants received and/or agreed to, especially when it is related to the fees.  (Tr. 3 at 203-206; Div. Ex. 124.)

p.  Letter of Explanation

178. In the loan file of K.P., REF Mortgage Capital, through Fiala, copied and taped K.P.’s signature from one document onto a copy of a letter of explanation concerning the borrower’s mortgage loan and used correction fluid and/or correction tape to cover the lines that were visible from adding K.P.’s signature to the document.  (Tr. 4 at 8-10; Div. Ex. 126.)
179. The alterations Fiala made on Div. Ex. 126 are not visible on the copy of the letter of explanation provided to the lender.  The lender did not know that the borrower did not sign the letter of explanation and that Fiala had cut and taped the borrower’s signature onto the letter and copied it and sent it to the lender on the borrower’s behalf.  (Tr. 4 at 9-10; Div. Ex. 127.)
180.
The lender would not have knowingly accepted a letter of explanation that contained the cut out and taped signature on the letter.  (Tr. 3 at 31 and 35.)

10.  Loan File of P.S., Loan Number 9526080403

181.
In the loan file of P.S., Fiala did not sign the borrowers’ signature himself.  The co-borrower, who is the borrower’s wife, signed the borrower’s signature on Respondents’ Exs. 12 and 13, without Fiala’s knowledge.  (Transcript of December 15, 2017 (“Tr. 6”) at 26-28; Respondents (“Resp.”) Exs. 12 and 13.)

11.  Loan File of C.V., Loan Number W170292428

182.
The Division effectively removed the allegations in the Order regarding the loan file of C.V. and did not introduce any evidence or attempt to establish any violations relating to the loan file of C.V.


F.  Broker Agreement and Modification of Loan Documents

183. REF Mortgage Capital and Fiala failed to comply with provision Section 1.02 c of the Broker Agreement requiring that all information contained in the documents submitted to lender is true and correct and has not been altered or modified by broker.  (Tr. 3 at 92-93; Div. Ex. 135.)
184. REF Mortgage Capital and Fiala failed to comply with provision 2.03 of its Broker Agreement with the lender regarding the accuracy, validity and genuineness of the documents prepared or submitted by the broker in connection with each loan.  (Tr. 3 at 40-41; Div. Ex. 135.)
185. Parkside did not know that some documents submitted by REF Mortgage Capital had been altered by Fiala.  The alterations included dates, numbers and/or borrowers’ signatures.  (Tr. 3 at 42.)
186. Parkside would not have knowingly accepted a document in a loan file:  (i) that had been altered with correction fluid and/or correction tape and redated; (ii) in which a date next to a borrower’s signature had been altered with correction fluid and/or correction tape and redated; (iii) in which a field had been altered with correction fluid and/or correction tape and revised or amended; and (iv) in which signatures had been cut from another document and copied and pasted onto the submitted document.  (Tr. 3 at 27-40 and 129-131; Div. Ex. 137.)
187. There is no documentation in any of the borrowers’ loan files that authorizes Respondents to modify or otherwise alter documents.  The borrowers did not provide Respondents with power of attorney to authorize changes to any borrower’s loan file.  (Tr. 3 at 126.)
188. Even if a borrower had given Respondents authorization to modify or otherwise alter documents, if the modifications and/or alterations are contrary to the Broker Agreement there could still be intent to deceive the lender.  (Tr. 3 at 117-118.)
189. Parkside considers it deceptive and dishonest for a mortgage broker to submit any document without disclosing that it had altered:  (i) a document with correction fluid and/or correction tape and redated the document; (ii) a date next to a borrower’s signature with correction fluid and/or correction tape and redated the document; (iii) a field in the document with correction fluid and/or correction tape and revised or amended the document; and (iv) a document by cutting signatures from another document and copying pasting onto the submitted document.  (Tr. 3 at 27-40 and 126-127.)
190. Dates are critical in the mortgage application process.  There are many required disclosures in the mortgage application process.  It is important that dates on loan documents be accurate because of timing requirements for disclosures required under federal and state laws.  If the lender cannot rely on the dates on the loan documents, the lender cannot be sure that the loan process complies with applicable law.  (Tr. 1 at 214-216; Tr. 2 at 135-138; Tr. 3 at 30 and 132-133.)
191. The Department has not alleged the Fiala changed the employment information or history of any borrower, or engaged in straw buyers, substituting one party for another on a loan transaction, or any form of identity theft or fraudulent applicant connected with a mortgage transaction.  (Tr. 4 at 58-60.)


CONCLUSIONS OF LAW 
Jurisdiction and Procedure
“[D]ue process [in the administrative hearing context] requires that the notice given must . . . fairly indicate the legal theory under which such facts are claimed to constitute a violation of the law. . . . [T]he fundamental reason for the requirement of notice is to advise all affected parties of their opportunity to be heard and to be apprised of the relief sought. . . . [N]otice of a hearing is not required to contain an accurate forecast of the precise action which will be taken on the subject matter referred to in the notice.  It is adequate if it fairly and sufficiently apprises those who may be affected of the nature and character of the action proposed, so as to make possible intelligent preparation for participation in the hearing . . . .
Due process in the administrative context is prescribed by the . . . [Uniform Administrative Procedure Act].  General Statutes § 4-177 (b) requires that notice of a contested hearing include the following:  (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 statutes and regulations involved; and (4) a short and plain statement of the matters asserted.”  (Citations omitted; internal quotation marks omitted.)  Spitz v. Bd. of Examiners of Psychologists, 127 Conn. App. 108, 117-18, 12 A.3d 1080 (2011)
The Commissioner is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534c, inclusive, of the General Statutes of Connecticut, “Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators”.  The Commissioner’s broad regulatory authority includes the power to impose civil penalties pursuant to Section 36a-50(a) of the General Statutes of Connecticut; revoke mortgage broker and/or mortgage loan originator licenses pursuant to Sections 36a-51 and 36a-494 of the General Statutes of Connecticut; and issue orders to cease and desist pursuant to Section 36a-52 of the General Statutes of Connecticut.  While the Order did not include every specific issue alleged by the Division during the hearing regarding every document in REF Mortgage Capital’s loan files, the Order did indicate the legal authority and jurisdiction under which the hearing was to be held, referenced the particular sections of the statutes and regulations involved and included a short and plain statement of the matters asserted.  Thus, the Order provided adequate information to Respondents to prepare a defense.  The Order issued by the Commissioner comported with the requirements of Section 4-177(b) of the General Statutes of Connecticut.
The Order complied with the notice requirements of Sections 36a-50(a) [civil penalty], 36a-51 [revocation] and 36a-52 [cease and desist order] of the General Statutes of Connecticut.
Section 36a-50(a) of the General Statutes of Connecticut provides, in pertinent part, that:
(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 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.
Section 36a-51 of the General Statutes of Connecticut provides, in pertinent 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.  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 suspended or revoked except in accordance with the provisions of chapter 54.
Section 36a-52(a) of the General Statutes of Connecticut 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.

Standard of Evidence
The applicable standard of proof in Connecticut administrative cases, including those involving fraud and severe sanctions, is the preponderance of the evidence standard.  Goldstar Medical Services v. Department of Social Services, 288 Conn. 790, 819 (2008).  “[I]t is the exclusive province of the trier of fact to make determinations of credibility, crediting some, all, or none of a given witness’ testimony. . . .  [A]n agency [is not] required to use in any particular fashion any of the materials presented to it as long as the conduct of the hearing is fundamentally fair.”  Id. at 830 (internal citations omitted).
“Review of an administrative agency decision requires a court to determine whether there is substantial evidence in the administrative record to support the agency’s findings of basic fact and whether the conclusions drawn from those facts are reasonable.”  Id. at 833.  “An administrative finding is supported by substantial evidence if the record affords a substantial basis of fact from which the fact in issue can be reasonably inferred.”  Id.  “[T]here is no distinction between direct and circumstantial evidence so far as probative force is concerned. . . .  In fact, circumstantial evidence may be more certain, satisfying and persuasive than direct evidence.”  Id. at 834 (internal citations omitted).


Violations of Sections 36a-498e(1), 36a-498e(2), 36a-53b(1) and 36a-53b(3)
Section 36a-498e of the General Statutes of Connecticut provides, in pertinent part, that:
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:
(1)  Directly or indirectly employ any scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person; [or]
(2)  Engage in any unfair or deceptive practice toward any person[.]
Section 36a-53b of the General Statutes of Connecticut provides, in pertinent part, that:
No person shall, in connection with any activity subject to the jurisdiction of the commissioner:  (1) Employ any device, scheme or artifice to defraud . . . or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
The Department has alleged that REF Mortgage Capital’s alteration of loan file documents, through Fiala, and Fiala’s alteration of loan file documents constitutes (i) directly or indirectly employing a scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person, in violation of Section 36a-498e(1) of the General Statutes of Connecticut, and (ii) engaging in an unfair or deceptive practice, in violation of Section 36a-498e(2) of the General Statutes of Connecticut.
The Department has also alleged that REF Mortgage Capital’s alteration of loan file documents, through Fiala, and Fiala’s alteration of loan file documents, constitutes (i) employing a scheme, device or artifice to defraud, in violation of Section 36a-53b(1) of the General Statutes of Connecticut, and (ii) 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(3) of the General Statutes of Connecticut.
The record establishes that Respondents altered loan file documents in REF Mortgage Capital loan files originated by Fiala.  The alteration of these loan file documents constitutes directly or indirectly employing a scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person, in violation of Section 36a-498e(1) of the General Statutes of Connecticut, and engaging in an unfair or deceptive practice, in violation of Section 36a-498e(2) of the General Statutes of Connecticut.
Respondents altered REF Mortgage Capital loan file documents to mislead lenders regarding:  (i) when or if borrowers signed documents; (ii) the fees that had been disclosed to borrowers; and (iii) which entities were authorized by borrowers to receive certain documents.  Fiala used correction fluid and/or correction tape and copies of documents to conceal his alterations to the documents.  There are no initials or acknowledgements of Fiala’s alterations of the documents by any of the borrowers on any of the documents and the lenders were not aware of Fiala’s alterations.
In the loan file of K.B., Fiala cut and taped the signature of K.B. to two unsigned letters of explanation and in the loan file of K.P. Fiala cut and taped K.P’s signature to an unsigned letter of explanation.  Fiala used correction fluid and/or correction tape to make copies of the documents he submitted to lenders so that it would appear that the borrowers had signed the documents.

In the loan files of D.L., D.S., and W.P., Fiala altered documents previously signed by borrowers by covering dates on the documents with correction fluid and/or correction tape and adding new dates.  In the loan file of K.P., Fiala also applied dates to undated forms that borrowers previously signed.  Fiala’s alteration or insertion of dates was never acknowledged by the borrowers on these documents, making it impossible to know when the mortgage-related documents had been signed.
In the loan files of D.L., D.S., and K.P., Fiala used correction fluid and/or correction tape to change the information in two of the boxes on the Agreement Concerning Non-Refundability of Advance Fee form from “N/A” to add an Appraisal fee and a Credit Report fee.  There is no initial or acknowledgement by the borrowers of Fiala’s additions to the form.  The correction fluid and/or correction tape was not visible on the form REF Mortgage Capital provided to the lender and the lender was not aware of these alterations or modifications.
In the loan file of M.D., Fiala used correction fluid and/or correction tape on Form 4506-T Request for Transcript of Tax Return to cover the name of the entity granted permission to receive the tax transcript.
In the loan file of D.S., Fiala used correction fluid and/or correction tape on Form 4506-T Request for Transcript of Tax Return to cover the name of the entity granted permission to receive the tax transcript and replace it with the name of a different entity.  Fiala also used correction fluid and/or correction tape to change the date on the form.
In the loan file of D.L., Fiala used correction fluid and/or correction tape to change the dates on the Form 4506-T Request for Transcript of Tax Return; and in the loan file of K.P., Fiala added a date to the Form 4506-T Request for Transcript of Tax Return after it had been signed.
Respondents’ actions, as described above, deceived the lenders and violated the Broker Agreement with Parkside.  The record establishes that Fiala altered documents contained in REF Mortgage Capital’s loan files and these documents were false because they purported to be signed and/or dated by the borrowers when Fiala had added borrowers’ signatures and/or dates to the documents.  In addition, Fiala changed or added information to documents after borrowers had signed the documents.  The borrowers did not acknowledge Fiala’s alterations.  Fiala took actions to conceal his alterations from the lenders and the alterations were not apparent to the lenders because they were not visible on the documents Respondents provided to the lenders.
Mortgage brokers and mortgage loan originators may not sign a borrower’s name, affix a borrower’s name to a mortgage loan application or mortgage loan document on behalf of a borrower, or have a borrower sign an incomplete mortgage loan application or mortgage loan document.  Respondents’ actions made the loan documents unreliable because the alterations made it impossible to know what information was on the documents at the time they were signed, when the documents were signed by borrowers and in some instances whether the borrowers had signed the documents.  Respondents’ actions also made it uncertain whether fees were disclosed and when the disclosure documents were signed in the loan files of three borrowers.  Lenders must be able to rely on the accuracy of dates on loan documents because of timing requirements for disclosures required under federal and state laws and to ensure that the loan process complies with applicable law.  Parkside would not have knowingly accepted a document that had been altered with correction fluid and/or correction tape.  Respondents’ alterations of documents previously signed by borrowers were not visible on the copies of documents Respondents provided to lenders.
The risk of harm resulting from the alteration of mortgage loan documents by a licensee in support of a mortgage loan cannot be understated.  Such a practice undermines not only the integrity of the altered document(s) and associated mortgage loan, but also the integrity of the mortgage loan industry Respondents serve.  Whether or not the Fiala had permission from an individual to affix that person’s name to the documents at issue in this proceeding, a conclusion unsupported by the evidence, is immaterial to a determination as to whether Fiala’s actions constitute violations of Sections 36a-498e(1), 36a-498e(2), 36a-53b(1) and 36a-53b(3) of the General Statutes of Connecticut.
In addition, whether or not the substance of the information set forth in the documents that contained altered signatures was accurate is not germane to a determination as to whether Fiala’s conduct caused the lender to rely on the authenticity of what was in fact an altered document.  Additionally, Respondents’ retention of some altered documents does not negate the fact that his actions caused the lender to rely on his false or deceptive representations concerning the file documentation.
Based on the foregoing, Respondents’ actions constitute (i) directly or indirectly employing a scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person, in violation of Section 36a-498e(1) of the General Statutes of Connecticut, and (ii) engaging in an unfair or deceptive practice, in violation of Section 36a-498e(2) of the General Statutes of Connecticut.  Such violations constitute sufficient grounds to revoke REF Mortgage Capital’s mortgage broker license in Connecticut pursuant to Sections 36a-494(a)(1)(B) and 36a-494(a)(1)(C) of the General Statutes of Connecticut and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.  Such violations also constitute sufficient grounds to revoke Fiala’s mortgage loan originator license in Connecticut pursuant to Section 36a-494(a)(2) of the General Statutes of Connecticut and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.
The record also establishes that Respondents’ alterations of loan file documents constitute (i) employing a scheme, device or artifice to defraud, in violation of Section 36a-53b(1) of the General Statutes of Connecticut, and (ii) 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(3) of the General Statutes of Connecticut.  Such violations constitute sufficient grounds to revoke REF Mortgage Capital’s mortgage broker license in Connecticut pursuant to Sections 36a-494(a)(1)(B) and 36a-494(a)(1)(C) of the General Statutes of Connecticut and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.  Such violations also constitute sufficient grounds to revoke Fiala’s mortgage loan originator license in Connecticut pursuant to Section 36a-494(a)(2) of the General Statutes of Connecticut and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.

Licensing Standards
Significance of the SAFE Act and its Impact on State Law and this Case
The federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”) was enacted by Congress in 2008, 12 U.S.C. § 5101 et seq., P.L. 110-289, Title V.  Section 5101 of the SAFE Act expressed a Congressional purpose to increase uniformity, reduce regulatory burdens, enhance consumer protection and reduce fraud in the mortgage lending industry.  The SAFE Act required that each state enact legislation regulating mortgage loan originators that was consistent with standards set forth in the SAFE Act.  Section 5107 of the SAFE Act provided that states failing to enact consistent legislation risked losing the ability to regulate individual mortgage loan originators in favor of the U.S. Department of Housing and Urban Development (“HUD”).

Section 5104(b) of the SAFE Act stated, in part, that:
The minimum standards for licensing and registration as a State-licensed loan originator shall include the following . . . (3) The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the loan originator will operate honestly, fairly, and efficiently within the purposes of this chapter.
In prescribing minimum standards for state license renewal, Section 5105 of the SAFE Act required that loan originators continue to meet the minimum standards for issuance of the license.
On August 29, 2011, the U.S. Department of Housing and Urban Development adopted final rules to implement the SAFE Act.  Section 3400.105 of those rules stated that:
For an individual to be eligible for a loan originator license required under § 3400.103(a) and (d), a State must require and find, at a minimum, that an individual:  (2)(c) Has demonstrated financial responsibility, character, and general fitness, such as to command the confidence of the community and to warrant a determination that the loan originator will operate honestly, fairly, and efficiently, under reasonable standards established by the individual State.
(Emphasis supplied.)
In addition, the Conference of State Bank Supervisors (“CSBS”) and the American Association of Residential Mortgage Regulators (“AARMR”) developed a Model State Law, ultimately approved by HUD, to implement the SAFE Act.  Section 60 of the Model State Law2  set forth the following recommended state language:
The Commissioner shall not issue a mortgage loan originator license unless the Commissioner makes at a minimum the following findings . . . (3) The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this Act.
Connecticut Public Act No. 09-209, An Act Concerning Implementation of the S.A.F.E. Mortgage Licensing Act, the Emergency Mortgage Assistance Program, Foreclosure Procedures and Technical Revisions to the Banking Statutes, was enacted in 2009.  The legislation amended Section 36a-489 of the General Statutes of Connecticut, among other provisions, to implement the SAFE Act (see OLR Bill Analysis for SSB 948, File 909, as amended by House “A” and Senate “A”).  The Connecticut amendments to Section 36a-489 mirrored the Model Law that had been approved by HUD.

Both the SAFE Act and its Connecticut analogue underscore the need to determine if Respondents meet the standard for licensing in the mortgage industry.
Therefore, the Commissioner must determine whether the character and general fitness of REF Mortgage Capital and Fiala as the control person and qualified individual of REF Mortgage Capital and Fiala as a mortgage loan originator, are such as to command the confidence of the community and to warrant a determination that REF Mortgage Capital and Fiala will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the General Statutes of Connecticut.

Revocation of Mortgage Broker and Mortgage Loan Originator Licenses
Section 36a-494 of the General Statutes of Connecticut provides, in pertinent part, that:
(a)(1) The commissioner may . . .revoke . . . any mortgage . . . mortgage broker 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 . . . with supervisory authority, trustee, employee or agent of such licensee has done any of the following: . . . (B) committed any fraud, misappropriated funds or 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[.]
(2)  The commissioner may . . . revoke . . . any mortgage loan originator 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 has committed any fraud, misappropriated funds, misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose any of the material particulars of any residential mortgage loan transaction or has violated any of the provisions of this title . . . or any other law or regulation applicable to the conduct of such licensee’s business.

(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 . . . (2) any person is, was, or would be a cause of the violation of any such provisions . . . due to an act or omission such person knew or should have known would contribute to such violation, or (3) any licensee has . . . committed any fraud . . . or 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(a)(1) of the General Statutes of Connecticut provides, in pertinent part, that:
The commissioner shall not issue an initial license for a . . . mortgage broker 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 . . . 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-498f, inclusive, 36a-534a and 36a-534b . . . .  If the commissioner fails to make such findings, the commissioner shall not issue a license[.]
Section 36a-489(b)(1) of the General Statutes of Connecticut provides, in pertinent part, that:
The commissioner shall not issue an initial license for a mortgage loan originator . . . unless the commissioner, at a minimum, finds that the applicant has . . . (C) demonstrated . . . character and general fitness so as to command the confidence of the community and to warrant a determination that the mortgage loan originator . . . will operate honestly, fairly and efficiently within the purposes of sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b[.]
The Department has alleged that REF Mortgage Capital’s conduct, through Fiala, renders the Commissioner unable to continue to find that REF Mortgage Capital, its control person and the qualified individual having supervisory authority demonstrate the character and general fitness such as to command the confidence of the community and to warrant a determination that REF Mortgage Capital will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the General Statutes of Connecticut.  Such failure would be sufficient grounds for the Commissioner to deny an application for a mortgage broker license pursuant to Section 36a-489(a)(1)(C) of the General Statutes of Connecticut, and would be sufficient grounds for the Commissioner to revoke REF Mortgage Capital’s mortgage broker license in Connecticut pursuant to Section 36a-494(a)(1) and subsections (a) and (b) of Section 36a-51 of the of the General Statutes of Connecticut.
The Department has also alleged that Fiala’s conduct renders the Commissioner unable to continue to find that Fiala demonstrates character and general fitness so as to command the confidence of the community and to warrant a determination that Fiala will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the General Statutes of Connecticut.  Such failure would be sufficient grounds for the Commissioner to deny an application for a mortgage loan originator license pursuant to Section 36a-489(b)(1)(C) of the General Statutes of Connecticut, and would be sufficient grounds for the Commissioner to revoke Fiala’s mortgage loan originator license in Connecticut pursuant to Section 36a-494(a)(2) and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.
The Department’s allegations against Respondents included (i) altering borrowers’ signatures by physically or digitally cutting them from one document and taping or digitally pasting them onto other documents to make copies of the documents appear as originals or that the borrowers had signed or executed documents when they had not; and (ii) altering dates on documents with correction fluid and/or correction tape to make it appear as though mortgage-related documents had been timely given to borrowers when they had not, or inserting dates onto documents submitted to Respondents from borrowers that had no dates.
Section 36a-494(a) of the General Statutes of Connecticut authorizes the Commissioner to revoke a license if the licensee’s conduct ceases to meet the licensing standards.  As previously discussed, the record establishes that Respondents repeatedly altered loan file documents in REF Mortgage Capital loan files originated by Fiala.
Fiala claims that Respondents’ retention of Fiala’s alterations of documents in the loan files indicates that he did not have intent to defraud, and that the information in the documents regarding the borrowers was accurate.  Respondents’ claim that there was no harm done to the public or lenders because the loans were issued and the lenders are being paid.  Respondents attempt to minimize the significance of Fiala’s conduct by pointing out that there was no falsification of the employment information or history of any borrowers and Respondents did not utilize straw buyers or substitute one party for another in a loan transaction.  Fiala stated that he did not know that borrowers should acknowledge changes on their documents and that he made changes in front of the borrowers.  Fiala also contended that he only used correction tape on a document to correct a document that was incorrect before borrowers signed the document and that he made changes to the documents in the borrowers’ presence.  Respondents assert that Respondents’ conduct does not constitute grounds for license revocation.
The record does not support Fiala’s assertions.  Fiala added signatures to documents, added dates to documents that the borrowers had signed without dates, and added fees to documents.  While the borrowers who testified or provided written statements on behalf of Fiala are supportive of Fiala, they do not indicate that Fiala altered documents in their presence or that they acknowledged Fiala’s alterations.  The record does not establish that the borrowers were present or authorized these changes before the documents were provided to the lenders.
Fiala claims that he only made a mistake with a signature on a single loan document by sending a scanned copy of a truthful and honest letter of explanation to a lender.  He acknowledges writing an explanation provided over the phone from K.B. and affixing the borrower’s signature to it and that he did not consider it fraudulent.  Fiala claims that K.B. asked him to affix her signature.  Fiala also claims that he did not understand that his actions constituted mortgage fraud and asserts that he knows now that it is inappropriate to cut and paste a signature on a document even if the borrower knows or directs you to do it.  He indicated that he has learned from this situation, that the Department should monitor him and that he can demonstrate that he has learned from this proceeding.
The record establishes that the borrower gave Fiala the information he wrote on the document and provided to the lender in the borrower’s letter of explanation.  However, the borrower did not know that Fiala had affixed her signature on the letter of explanation until after the document was submitted to the lender.  In addition, Fiala took steps to disguise the fact that he had cut and taped the borrower’s signature through his use of correction fluid and/or correction tape.  While Fiala acknowledged cutting and taping one signature on one document, there were two other instances where Fiala added borrower’s signatures to documents that he submitted to lenders appear as though a borrower had signed or executed the document.  Fiala added a borrower’s signature to a second letter of explanation in the loan file of K.B and to a letter of explanation in the loan file of K.P.  Even if Fiala had kept all of the documents that he had altered by cutting and taping a borrower’s signature onto, he did not disclose his actions to the lender.  Therefore, Fiala’s actions were deceptive.
The authenticity of the documentation in the loan file in a mortgage loan transaction is critical to ensure the validity and accuracy of the information and documents upon which the lender is making its decision the loan and that the loan complies with federal and state law.  In a mortgage loan transaction, knowing when documents have been executed and disclosures have been made is critical to the loan process.  Respondents’ methods for handling and altering documents and actions to conceal their alterations from lenders without any acknowledgement by the borrowers of Fiala’s alterations is significant and speaks to Respondents’ character and how Respondents operate as a mortgage broker and mortgage loan originator.  Respondents’ actions constitute more than just recycling documents or using old school methods such as using correction fluid and/or correction tape.  Respondents’ actions resulted in (i) documents being submitted to lenders that had not been signed by the borrower; (ii) documents that the lender could not rely on regarding when the documents were signed by the borrower; and (iii) documents that lender could not rely on regarding whether information was disclosed in the documents when a borrower signed them.  The authenticity of the documents in the loan file is essential to protect the interests of the lender, borrower and general public.  Respondents’ actions are a threat to the business and reputation of the lender, because Respondents’ conduct could undermine the integrity of the process and could result in the loss of loan customers Fiala intended for the lender to rely on the signatures that he cut and pasted.  While the loans were issued to the borrowers, there is still harm done to the integrity of the lending process.
Accordingly, for the reasons discussed above based upon the record the Commissioner is unable to continue to find that REF Mortgage Capital, its control person and the qualified individual having supervisory authority (Fiala) demonstrate the character and general fitness such as to command the confidence of the community and to warrant a determination that REF Mortgage Capital will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the General Statutes of Connecticut.  Such finding constitutes sufficient grounds for the Commissioner to deny an application for a mortgage broker license pursuant to Section 36a-489(a)(1)(C) of the General Statutes of Connecticut and therefore constitutes sufficient grounds for the Commissioner to revoke REF Mortgage Capital’s mortgage broker license in Connecticut pursuant to Section 36a-494(a)(1) and subsections (a) and (b) of Section 36a-51 of the of the General Statutes of Connecticut.
Based upon the record the Commissioner is also unable to continue to find that Fiala demonstrates character and general fitness so as to command the confidence of the community and to warrant a determination that Fiala will operate honestly, fairly and efficiently within the purposes of Sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the General Statutes of Connecticut.  Such failure would be sufficient grounds for the Commissioner to deny an application for a mortgage loan originator license pursuant to Section 36a-489(b)(1)(C) of the General Statutes of Connecticut and therefore constitutes sufficient grounds for the Commissioner to revoke Fiala’s mortgage loan originator license in Connecticut pursuant to Section 36a-494(a)(2) and subsections (a) and (b) of Section 36a-51 of the General Statutes of Connecticut.

Imposition of Civil Penalty pursuant to Section 36a-50(a)
Subject to a respondent’s right to request a hearing on the matters alleged, Section 36a-50(a) of the General Statutes of Connecticut authorizes the Commissioner to issue a notice of intent to impose a civil penalty of up to One Hundred Thousand Dollars ($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.
The legislature delegated the regulation of the mortgage industry to the Commissioner.  See Part I of Chapter 668, Sections 36a-485 to 36a-534c, inclusive, of the General Statutes of Connecticut, “Mortgage Lenders, Correspondent Lenders, Brokers and Loan Originators”.  The regulatory framework includes measures that protect borrowers, lenders and others from conduct that would defraud or mislead and prohibits unfair and deceptive practices.

Section 36a-50(a) of the General Statutes of Connecticut gives the Commissioner discretion to order a civil penalty not exceeding One Hundred Thousand Dollars ($100,000) per violation upon any person who has violated a law within the jurisdiction of the Commissioner.  The Division stated that it is seeking a civil penalty of One Hundred Thousand Dollars ($100,000) or a significant civil penalty be imposed upon each Respondent which it alleged represents only a portion of the millions of dollars of loans for which Fiala was the mortgage loan originator.  The Division asserted that Respondents improperly altered dozens, upon dozens of sensitive mortgage loan documents, cutting corners in order to close loans and that Respondents intended to deceive other actors in the mortgage industry by using unfair or deceptive practice and requested a significant civil monetary penalty upon both Respondents.
The imposition of a civil penalty upon both Respondents is warranted based upon the record and the matters alleged in the Notice.  Lenders and borrowers must be able to rely on documents submitted by mortgage brokers and mortgage loan originators.  The alteration of documents by mortgage brokers and mortgage loan originators will be deterred through the imposition of a civil penalty upon Respondents.  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).
In considering the amount of a civil penalty, it is significant that REF Mortgage Capital’s license to act as a mortgage broker in Connecticut and Fiala’s license to act as a mortgage loan originator in Connecticut are both being revoked, so there is no ability of Respondents to continue their operation regardless of the amount of the civil penalty.  Another consideration is that in the approximately one and a half years REF Mortgage Capital was licensed as a mortgage broker, Fiala was the mortgage loan originator on a total of 15 mortgage loan files and Respondents received only a small economic benefit from their actions.
While the Division has not established that Fiala signed any of the borrowers’ signatures himself, the record establishes that Fiala altered three documents by cutting and pasting signatures onto documents.  The borrowers provided the information in the letters of explanation to Fiala, but Fiala affixed the borrowers’ signatures that appeared on the altered letters of explanation.
Fiala failed to disclose to the lender that he had altered the loan documents and the lender relied on his false or deceptive representations concerning the documentation.  The only borrower who testified regarding the addition of her signature to the letter of explanation indicated that she was not aware of Fiala’s actions until after it had been submitted to the lender.  Even if such permission had been given, it would not negate the fact that it is the lender that Fiala deceived.  Fiala also applied altered dates on documents and fees on disclosure documents without acknowledgement from borrowers that the documents had been altered.  Fiala’s alterations were not visible on the copies provided to the lender.
While it is acknowledged that Respondents did not falsify information related to the borrowers’ financial condition, such as income or assets, or attempt to use a straw buyer or sign any of the borrowers’ signatures himself, Fiala cut and taped a borrower’s signature at least three times onto documents the borrower did not sign, changed numerous dates on loan files and changed the amount of fees on disclosure documents in three loan files.
As noted above the Respondents’ alterations are significant and led to the proposed revocations, but as Respondents’ pointed out there was no falsification of the employment information or history of any borrower and Respondents did not utilize straw buyers or substitute one party for another in a loan transaction.  In addition, while the Division established a number of violations, it failed to establish that Fiala signed borrowers signatures himself as alleged in the Order.  Nevertheless, Fiala’s cutting and pasting signatures onto documents, adding dates to documents that the borrowers had previously signed and adding fees to documents without the borrowers being present deceived the lenders.  As stated above, Fiala took steps to conceal his actions from the lenders regarding cutting and pasting signatures on three documents.  While Respondents claim that there was no harm done to the public or lenders because the loans were issued and the lenders are being paid, as discussed above, Respondents actions were deceptive and there was harm to the integrity of the lending process.  The revocation of Respondents’ licenses and the imposition of a civil penalty will have a deterrent effect on other mortgage brokers and mortgage loan originators and ensure the fair and equitable treatment of the mortgage broker and mortgage loan originator community.
Respondents each committed at least one violation of Sections 36a-498e(1), 36a-498e(2), 36a-53b(1) and 36a-53b(3) of the General Statutes of Connecticut, which forms a basis for the imposition of a civil penalty upon Respondents pursuant to Sections 36a-494(b)(1), 36a-494(b)(2), 36a-494(b)(3) and 36a-50(a) of the General Statutes of Connecticut.

ORDER

Having read the record, I hereby ORDER, pursuant to Sections 36a-50, 36a-51, 36a-52, 36a-494(a) and 36a-517(a) of the General Statutes of Connecticut, that: 

1. The license of REF Mortgage Capital Inc. to act as a mortgage broker in Connecticut be REVOKED;
2. The license of Robert Ernest Fiala to act as a mortgage loan originator in Connecticut be REVOKED;
3.
REF Mortgage Capital Inc. CEASE AND DESIST from violating Sections 36a-498e(1), 36a-498e(2), 36a-53b(1) and 36a-53b(3) of the General Statutes of Connecticut.
4. Robert Ernest Fiala CEASE AND DESIST from violating 36a-498e(1), 36a-498e(2), 36a-53b(1) and 36a-53b(3) of the General Statutes of Connecticut;
5. A CIVIL PENALTY of Twenty Thousand Dollars ($20,000) be imposed upon REF Mortgage Capital Inc., to be remitted to the Department by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than ninety (90) days from the date the Order is mailed;
6. A CIVIL PENALTY of Twenty Thousand Dollars ($20,000) be imposed upon Robert Ernest Fiala, to be remitted to the Department by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than ninety (90) days from the date the Order is mailed; and
7. The Order shall become effective when mailed.

Dated at Hartford, Connecticut
this 11th day of June 2018.                   ________/s/_________
                                                        Jorge L. Perez
                                                        Banking Commissioner


This Order was sent by certified mail, return
receipt requested, to Wendy Bernard, Esq., and
hand-delivered to Stacey Serrano, Staff Attorney,
State of Connecticut Department of Banking
on June 11, 2018.


Wendy Bernard, Esq.                 Certified Mail No. 7013 3020 0000 4226 6745
The Bernard Law Group
984 Southford Road
Middlebury, Connecticut 06762


ENDNOTES
Parenthetical references to Transcript (“Tr.”) pages reflect where relevant testimony was given or an exhibit (“Ex.”) was entered into the hearing record by the Hearing Officer (“H.O. Ex.”), Division (“Div. Ex.”) or Respondents (“Resp. Ex.”).
2
http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_19674.pdf

Administrative Orders and Settlements