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The Mortgage Mall, Inc. - Settlement Agreement

State of New York Banking Department


In the Matter of

The Mortgage Mall Inc.

A Registered Mortgage Broker Pursuant to
Article XII-D of the New York Banking Law

SETTLEMENT AGREEMENT


This Settlement Agreement ("Agreement"), is made and entered into by and among The Mortgage Mall Inc. (“Mortgage Mall”) and The State of New York Banking Department (“Banking Department”), collectively (“the Settling Parties”) evidencing an agreement between the Settling Parties to resolve, without a hearing, the violations cited herein by Mortgage Mall of Part 38 of the General Regulations of the Banking Board, 3 N.Y.C.R.R. Part 38, and Section 226.24 of Regulation Z of the Truth in Lending Act, 12 C.F.R. Section 226.24, upon and subject to the terms and conditions hereof.

I. RECITALS

  1. Mortgage Mall, headquartered at 99 West Hawthorne Avenue, Suite 408, Valley Stream New York, 11580, was granted a registration by the Banking Department on May 29, 1997 to engage in the business of a mortgage broker pursuant to Article XII-D of the New York Banking Law (“Banking Law”).
  2. Section 44 of the Banking Law provides, in part, that the New York Superintendent of Banks (“Superintendent”) may, in a proceeding after notice and a hearing, require a registered mortgage broker to pay to the people of this State a penalty for a violation of the Banking Law and any regulation promulgated thereunder. 
  3. Part 38 Section 38.8 of the General Regulations of the Banking Board, provides that a mortgage broker may be subject to disciplinary action by the Banking Department for, among other things, violations of Article 12-D of the Banking Law, the regulations promulgated thereunder, or violations of state or federal law indicating that the entity is unfit to engage in the business of a mortgage broker.
  4. Mortgage Mall placed an advertisement for mortgage loans (the “Advertisement”) in the May 11, and June 1, 2007 edition of the Daily News newspaper, and in the May 22, 2007 edition of the New York Post newspaper, a copy of which is annexed as Exhibit A.

Advertised Payments

  1. The Advertisement prominently states three monthly payment amounts on mortgage loans of $ 333.00 per month on a $ 100,000 loan, $ 666.00 per month on a $ 200,000 loan, and $ 1, 332 per month on a $ 400,000 loan.  
  2. However, the advertisement fails to disclose the amount or percentage of down payment and the terms of repayment, including that the advertised low monthly payments are subject to increase and do not last over the life of the loan.   
  3. Accordingly, the Advertisement violates Regulation Z under the Truth in Lending Act, Section 226.24(c), which provides: any advertisement stating the amount of any payment shall also state certain specific terms, including the amount or percentage of down payment and the terms of repayment.  
  4. Additionally, the Advertisement violates the General Regulations of the Banking Board, Part 38.2(e) which provides that no mortgage broker shall fraudulently or deceitfully advertise a mortgage loan, or misrepresent the terms, conditions or charges incident to a mortgage loan in any advertisement therefor.

II. SETTLEMENT TERMS AND CONDITIONS

Mortgage Mall is willing to resolve the violations cited herein by entering into this Agreement and freely and voluntarily waives its right to a hearing under Banking Law Section 595 on such violations. Therefore, in consideration of the promises and covenants set forth herein, the Settling Parties agree, as follows:

  1. Mortgage Mall agrees to take all necessary steps to ensure its compliance with all applicable federal and state laws, regulations, and supervisory requirements relating to its mortgage business, including, but not limited to:  
    1. Complying with the requirements of the Federal Truth-In-Lending Act and Regulation Z , and Article 12-D of the Banking Law and Part 38 of the General Regulations of the Banking Board; and
    2. ensuring that its advertisements do not mislead consumers as to the terms and conditions of credit it is offering and that such advertisements disclose clearly and conspicuously the existence of material terms, conditions, and limitations relating to any advertised offer of credit; and
    3. ensuring that its advertised offers of credit are consistent with prudent lending practices, as reflected in the Banking Department’s May 25, 2007 Industry Letter on Mortgage Lending Standards and its June 30, 2007 Industry Letter on Subprime Mortgage Lending (collectively, the “Guidance Letters”) ; and
    4. ensuring that when it advertises a subprime mortgage product or a nontraditional mortgage product (such as an “interest only” mortgage where a borrower pays no loan principal for the first few years of the loan or a “payment option” adjustable-rate mortgage where a borrower has flexible payment options with the potential for negative amortization), it will provide clearly and conspicuously information about the costs, terms, features and risks of such loans; and
    5. ensuring that it will not advertise terms of credit using footnotes, asterisks, small print and color contrasts that materially contradict or modify the principal message(s) of its advertisements, and will disclose clearly and conspicuously all material information; and
    6. ensuring that when it advertises an introductory rate or monthly payment amount that may subsequently increase it will disclose clearly and conspicuously: (i) how long the introductory rate is in effect, (ii) the reset or adjustment period, (iii) the maximum reset rate (if there is one); and (iv) if the advertisement contains a monthly payment amount at an introductory start rate, it also will disclose the terms of repayment over the full term of the loan, including the maximum monthly payment amount at the fully indexed rate (taking into consideration the expiration of any negative amortization or interest rate caps, or if there is no interest rate cap, a rate equal to any applicable margin on the loan plus the highest value recorded during the prior ten years for the index used to calculate the interest rate) and any balloon payment. 
  2. Mortgage Mall agrees to develop appropriate written advertisement policies and procedures designed to ensure compliance with all applicable federal and state laws, regulations, supervisory requirements and the Guidance Letters.   The policies and procedures shall, at a minimum: (i) designate an individual responsible for monitoring compliance with all applicable federal and state laws, regulations, supervisory requirements and the Guidance Letters; and (ii) establish a training program to ensure that Mortgage Mall and its employees involved in preparing or approving advertisements understand all applicable federal and state laws, regulations, supervisory requirements and the Guidance Letters.
  3. Within ninety (90) days from the effective date of this Agreement, Mortgage Mall agrees to submit a draft of its advertisement policies and procedures to the Banking Department.
  4. Within one hundred twenty (120) days from the effective date of this Agreement, Mortgage Mall agrees to submit a copy of its final advertisement policies and procedures to the Banking Department together with a letter from an authorized officer of Mortgage Mall indicating his/her approval of such policies and procedures.  Mortgage Mall further agrees to provide copies of all advertisements run by it for the twelve (12) month period following the effective date of this Agreement.   
  5. Mortgage Mall agrees to pay a fine of $ 6,000 on the effective date of this Agreement.  Mortgage Mall further agrees that such payment will be made in immediately available funds in accordance with Banking Department payment instructions.

III. MISCELLANEOUS TERMS AND CONDITIONS

  1. The Settling Parties acknowledge that Mortgage Mall’s failure to  comply with any of the settlement terms and conditions of this Agreement may result in the Banking Department taking action to revoke Mortgage Mall’s registration to engage in the business of a mortgage broker under Article 12-D of the Banking Law. 
  2. The Settling Parties acknowledge that entering into this Agreement shall not bar, estop, or otherwise prevent the Superintendent, or any state, federal or local agency or department or any prosecutorial authority from taking any other action affecting Mortgage Mall, any of its current or former owners, officers, directors, employees, or insiders, or their successors or assigns with respect to the violations cited herein, or any other matter whether related or not to such violations.   
  3. This Agreement may not be altered, modified or changed unless in writing signed by the Superintendent or his designee.
  4. This Agreement shall be enforceable and remain in effect unless stayed or terminated in writing by the Superintendent or his designee.
  5. This effective date of this Agreement is the date on which it is executed by the Deputy Superintendent of Banks for Mortgage Banking.
  6. All written communications to the Banking Department regarding this Agreement should be sent as follows.

Attention:
Rholda L. Ricketts
Deputy Superintendent of Banks
Mortgage Banking Division
State of New York Banking Department
One State Street,
New York, New York 10004

  1. All written communications to Mortgage Mall regarding this Agreement should be sent as follows.  

Attention:
Mr. Steven Weiss
President
The Mortgage Mall Inc.
99 West Hawthorne Avenue
Valley Stream, New York 11580

  1. This Agreement is not confidential; therefore it is available to the public.  

WHEREFORE, the Settling Parties hereto have caused this Agreement to be executed.

By:_____________________
Steven Weiss
President
The Mortgage Mall Inc.
Dated:                                         

 

By:                                               
Rholda L. Ricketts
Deputy Superintendent of Banks
State of New York Banking Department
Dated:                                               

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