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Vanguard Funding LLC., Old name: Fidelity Borrowing Mortgage Bankers - Settlement Agreement

State of New York Banking Department


In the Matter of

Vanguard Funding LLC.,
Old name: Fidelity Borrowing Mortgage Bankers

A Licensed Mortgage Banker Pursuant to
Article XII-D of the New York Banking Law

SETTLEMENT AGREEMENT


This Settlement Agreement ("Agreement") is made and entered into by and between Fidelity Borrowing Mortgage Bankers (“Fidelity”) 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 Fidelity of Part 38 of the General Regulations of the Banking Board, 3 N.Y.C.R.R. Part 38, upon and subject to the terms and conditions hereof.

I. RECITALS

  1. Fidelity, headquartered at 400 Garden City Plaza, Garden City,  New York 11530, was granted a license by the Banking Department on April 11, 2006 to engage in the business of a mortgage banker pursuant to Article 12-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 licensed mortgage banker 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 banker 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 banker.
  4. In January 2007, Fidelity mailed solicitations to approximately 5,000 homeowners in the State of New York.  A copy of the solicitation is annexed as Exhibit A.
  5. The solicitation represented that a federal law enacted in 2004 effectively ended an FHA-HUD refund program and that homeowners with FHA insured mortgages needed to act immediately to claim refunds that could amount to several thousand dollars.
  6. The solicitation stated in relevant, part:
  7. Dear [Homeowner]

    Our records indicate that your mortgage is FHA insured.  As a result, through a little known program and for a short period of time, you are entitled to a reimbursement sent directly to you from the FHA.  There is no cost to you at all to claim this refund of approximately $ [X,000.00].  Except you MUST ACT IMMEDIATELY!

    When calling please refer to your reference number listed above.  By completing a conventional refinance loan with Fidelity Borrowing Mortgage Bankers, you may also be eligible to lower your current mortgage rate, consolidate debt or get cash back in addition to receiving your FHA-HUD refund.

  8. In fact, the federal law adopted in 2004 did not eliminate the FHA-HUD refund program, and there was no immediate deadline for submitting refund claims.  The solicitation was a ruse to induce homeowners to contact Fidelity to discuss refinancing their existing loans.
  9. By virtue of the foregoing, the solicitation violates the General Regulations of the Banking Board Part 38.2(e) which provides that no mortgage banker 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

Without admitting or denying the Department’s findings, Fidelity 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. Fidelity 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 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. not misrepresenting, directly or by implication, the availability of refunds, the reasons for homeowners to contact Fidelity, or the urgency with which homeowners need to respond to a Fidelity solicitation or advertisement.

  2. Fidelity agrees to develop appropriate written advertisement policies and procedures designed to ensure compliance with all applicable federal and state laws, regulations, supervisory requirements and guidances.   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 Fidelity and its employees involved in preparing or approving advertisements understand all applicable federal and state laws, regulations, supervisory requirements and relevant guidances.
  3. Within ninety (90) days from the effective date of this Agreement, Fidelity 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, Fidelity 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 Fidelity indicating his/her approval of such policies and procedures.  Fidelity 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. Fidelity agrees to pay a fine of $ 7,500 payable in 12 equal monthly installments as follows:

    • $625 upon execution of this Agreement
    • $625 each on or before 15th day of immediately following eleven months

    Fidelity further agrees that such payment will be made in immediately available funds in accordance with Banking Department payment instructions.

  6. III. MISCELLANEOUS TERMS AND CONDITIONS

  7. The Settling Parties acknowledge that Fidelity’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 Fidelity’s registration to engage in the business of a mortgage banker under Article 12-D of the Banking Law.
  8. 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 Fidelity, 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.
  9. This Agreement may not be altered, modified or changed unless in writing signed by the Superintendent or his designee.
  10. This Agreement shall be enforceable and remain in effect unless stayed or terminated in writing by the Superintendent or his designee.
  11. This effective date of this Agreement is the date on which it is executed by the Deputy Superintendent of Banks for Mortgage Banking.
  12. 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

  13. All written communications to Fidelity regarding this Agreement should be sent as follows.

    Attention:
    Brian S. Ofsie
    President
    Fidelity Borrowing Mortgage Bankers 
    400 Garden City Plaza, Suite 103
    Garden City, New York 11530

  14. 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: ___________________________
Brian S. Ofsie, President
Fidelity Borrowing Mortgage Bankers
Dated: _________________________

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

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