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Southern Star Mortgage Corp. - Settlement Agreement


In the Matter of

New York State Banking Department
Petitioner

Versus

Southern Star Mortgage Corp.
Respondent

Settlement Agreement


WHEREAS, Respondent is a licensed mortgage banker in the State of New York; and

WHEREAS, Respondent has violated provisions of Part 38 of the General Regulations of the Banking Board in that Respondent did not properly and adequately disclose material loan terms to consumers, and because of numerous discrepancies in its books and records; and

WHEREAS, in lieu of a hearing, Respondent has agreed to enter into a Settlement Agreement (“Agreement”) on the terms and conditions hereafter set forth.

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED:

THAT, Respondent shall pay to the New York State Banking Department a fine in the amount of $400,000.00 which shall be paid in interest free installments as follows:

Payment of such installments, or any part thereof, may be accelerated at the option of the Respondent.

IT IS FURTHERE STIPULATED AND AGREED:

THAT, CHARLES SHUSTERHOFF agrees to replace GARY SHUSTERHOFF as the qualifier and responsible person of Respondent and agrees to assume the duties of oversight and control of the day to day operations of Respondent’s business activities in New York for a period of two and one-half years from the date of execution of this Agreement; and

THAT, GARY SHUSTERHOFF for a two and one-half year period from the execution of this Agreement, agrees not to engage in the business of Respondent with regard to New York regulated activity including the following:

  1. GARY SHUSTERHOFF shall not originate, process or close residential mortgage loans secured by property located in the State of New York or otherwise participate in the origination, processing or closing of such loans, nor have access to the records relating to loans involving property located in New York except when such records are required and/or necessary for Gary Shusterhoff to negotiate contracts with secondary market investors and/or in furtherance of defending, negotiating and discussing secondary market transactions, including but not limited to buy-backs and indemnifications and/or negotiation and management of warehouse lines of credit. Such permitted activities of Gary Shusterhoff may be conducted at the main office Respondent.
  2. GARY SHUSTERHOFF shall not participate in any New York regulated business activity from any licensed location in New York or from any office maintained by Respondent in New York; nor shall Gary Shusterhoff maintain an office within, adjacent to or near any office maintained by Respondent in New York.
  3. GARY SHUSTERHOFF shall not have any contact with loan officers, branch managers, processing or underwriting personnel regarding the origination, processing or closing of loans secured by residential real property in the State of New York;
  4. GARY SHUSTERHOFF shall not have any contact with consumers on behalf of Respondent in the State of New York in connection with the origination, processing or closing of loans;

THAT, GARY SHUSTERHOFF shall provide the New York State Banking Department with the following information upon execution of this Agreement and shall provide the Department with any changes in such information during the pendency of this Agreement;

  1. All business addresses and telephone number in New York State, if any;
  2. Make, model and license plate number of all automobile(s), owned, leased or used by Gary Shusterhoff;
  3. The telephone numbers of all cell and other telephones used by Gary Shusterhoff;
  4. Home address;

THAT, GARY SHUSTERHOFF shall maintain the following records:

  1. All e-mails pertaining to any business matter of Respondent;
  2. A log of conversations with any representative of Respondent identifying the nature of the conversation;

THAT, except as otherwise provided herein, GARY SHUSTERHOFF shall be permitted to negotiate contracts with secondary market investors and shall be permitted to defend, negotiate and discuss secondary market transactions, including but not limited to buy-backs and indemnifications, with the investors and with Respondent’s personnel involved with secondary market transactions including those transactions involving financings within the State of New York;

THAT, GARY SHUSTERHOFF shall be permitted to negotiate and manage warehouse lines of credit including those involving Respondent’s financings within the state of New York;

THAT, GARY SHUSTERHOFF shall be permitted to draw salary and other compensation, maintain health insurance coverage through Respondent’s plan and participate in pension and other benefit plans;

THAT, the New York State Banking Department shall not in any way consider the foregoing restrictions to be a limitation on Gary Shusterhoff’s activities in any other State or jurisdiction outside of the State of New York;

THAT, GARY SHUSTERHOFF acknowledges that his failure to completely and timely pay the fine set forth above and/or to perform fully any obligation or fully abide by any limitation set forth in this Agreement regarding the origination, processing or closing of residential mortgage loans secured by property located in the State of New York, participation in New York regulated activity from any licensed location, or contact with Respondent’s loan officers, branch managers, processing or underwriting personnel or consumers regarding the origination, processing or closing of residential mortgage loans secured by properly located in the State of New York shall constitute a material breach of this Agreement and shall free the New York State Banking Department, at its option, to pursue any remedy that it deems appropriate under the circumstances including, but not limited to, the initiation of a hearing for revocation of Respondent’s license;

THAT, GARY SHUSTERHOFF acknowledges that his failure to perform fully any other obligation or fully abide by any limitation set forth in this Agreement, other than those set forth in the preceding paragraph, shall constitute a breach under this Agreement and, upon written notice to Respondent and Respondent’s failure to cure said breach within thirty (30) days, shall free the New York State Banking Department, at its option, to pursue any remedy that it deems appropriate under the circumstances including the imposition of a fine on Respondent;

THAT, the New York State Banking Department shall not seek to impose any administrative penalty on Gary Shusterhoff for any de minimus violation of this Agreement, determination of what constitutes such de minimus violation to be reasonably made solely by the New York State Banking Department;

THAT, the New York State Banking Department shall examine Respondent as of January 1, 2004, but having already examined loan files through September 30, 2004, remains free, at its option, to take any other action that it deems appropriate under the circumstances with regard to any matters arising on or after October 1, 2004; and

THAT, this Agreement is not a confidential document.

New York State Banking Department
______________________________
By: Rholda Ricketts
Deputy Superintendent

Dated:__________________. 

Southern Star Mortgage Corp.

________________________________
By: Gary Shusterhoff

Dated:__________________. 
Gary Shusterhoff, individually
________________________________
Dated:__________________. 

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