New York State Banking Department Issues Suspension Order Against American Home Mortgage
State of New York Banking Department
In the Matter of
AMERICAN HOME MORTGAGE CORP.,
Whereas, AMERICAN HOME MORTGAGE CORP., doing business as, AMERICAN HOME MORTGAGE (“American Home Mortgage,” or the “Company”) was granted a license on March 11, 1993, to engage in business as a mortgage banker pursuant to Article XII-D of the New York Banking Law (the “Banking Law”), and currently maintains a principal office at 538 Broadhollow Road, Melville, New York 11747;
Whereas, the New York State Banking Department (the “Department”), through the Superintendent, has jurisdiction over the licensing and regulation of entities engaged in the business of mortgage banking in New York pursuant to the Banking Law;
Whereas, on July 31, 2007, American Home Mortgage Investment Corp., issued a press release stating that it, including American Home Mortgage, was unable to fund its lending obligations totaling $300 million on July 30, 2007, and would not be able to fund approximately $450 to $500 million in loans on July 31, 2007;
Whereas, on July 31, 2007, the Department received consumer complaints indicating that American Home Mortgage failed, on one or more occasions, to fund loans when required, and in at least one instance cancelled a loan closing scheduled for July 31, 2007;
Whereas, on July 31, 2007, August 1, 2007 and August 2, 2007 , the Department contacted American Home Mortgage to obtain information regarding the following: (i) the Company’s current pipeline; (ii) the total volume and dollar amount of New York loans not funded when required; and (iii) the Company’s proposed plans for resolving its liquidity crisis.
Whereas, during the August 1, 2007 and August 2, 2007 discussion, the Department suggested that American Home Mortgage discontinue accepting applications for New York mortgage loans, and American Home Mortgage has not discontinued accepting such applications despite its deteriorating financial condition, and its inability to fund such New York mortgage loans;
Whereas, by failing to disburse loan funds in accordance with commitments to make mortgage loans accepted by applicants, American Home Mortgage has violated Part 38.7(a)(8) of the General Regulations of the Banking Board;
Whereas, by failing to disburse loan funds, American Home Mortgage, has failed to demonstrate the financial responsibility, experience, character, and general fitness sufficient to command the confidence of the community that the Company’s business will be operated honestly, fairly, and efficiently within the purpose of Article 12-D of the Banking Law;
Whereas, pursuant to Section 595(1)(a) of the Banking Law, the Superintendent may revoke a mortgage banker’s license after a determination that the mortgage banker, through a course of conduct, violated any provisions of Article 12-D of the Banking Law or any rule or regulation promulgated by the Banking Board, or any rule or regulation prescribed by the Superintendent under and within the authority of Article 12-D or of any law, rule or regulation of this state or the federal government.;
Whereas, pursuant to Section 595(1)(b) of the Banking Law, the Superintendent may revoke a mortgage banker’s license if a fact or condition exists which, if it had existed at the time of original application for such license or registration, would have warranted the Superintendent in refusing to issue such license;
Whereas, pursuant to Section 595(2) of the Banking Law, the Superintendent may, for good cause shown, or where there is substantial risk of public harm, suspend a mortgage banker’s license for a period not exceeding 30 days, pending investigation;
Whereas, pursuant to Section 595(5) of the Banking Law, the suspension of a mortgage banker license shall not impair or affect the obligation of any pre-existing lawful contract between American Home Mortgage and any person; and
Whereas, American Home Mortgage’s aforementioned actions constitute grounds for suspension and revocation of its license under Sections 595(1)(a) and (b), and 595(2).
NOW THEREFORE, the Superintendent hereby finds that: (i) American Home Mortgage has defaulted, and is likely, in the future, to default in performing its financial obligations to fund mortgage commitments; and (ii) the failure of American Home Mortgage to fund mortgage commitments has caused substantial public harm and the likely future failure of American Home Mortgage to fund mortgage commitments and the actions of American Home Mortgage in continuing to accept new mortgage applications are likely to cause substantial public harm. Consequently, the Superintendent hereby immediately suspends American Home Mortgage’s mortgage banker license for a period not exceeding 30 days from the date of this Order pending investigation. During such 30-day period, American Home Mortgage shall not solicit or accept mortgage applications. However, this suspension shall not prevent it from fulfilling its obligations under any contract entered into before the date of this Order. In the event American Home Mortgage is unable to fulfill any of its obligations then it shall provide immediate written notice to such loan applicant; provided, however, that such notice shall not absolve American Home Mortgage of any legal right a loan applicant might have against it.
Witness, my hand and official seal of the Banking Department at the City of New York, this 2nd day of August in the year 2007.
Rholda L. Ricketts
Deputy Superintendent of Banks