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Flaherty Funding Corporation - Settlement Agreement

State of New York Banking Department


In the Matter of

Flaherty Funding Corporation

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 Flaherty Funding Corp. (“Flaherty”) 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 Flaherty 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. Flaherty, headquartered at 2595 Brighton Henrietta Town Line Road, Rochester, NY 14623, was granted a license by the Banking Department on July 6, 2000 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 a February 9, 2005 examination it was disclosed that Flaherty collected fees without proper and timely disclosure to consumers and sent notices to borrowers informing that they should not mail back signed documents.
  5. As such, Flaherty violated the General Regulations of the Banking Board, Part 38.3 (b) (1) (i) which provides that In those instances in which the proceeds of the mortgage loan will be used to finance the acquisition of the dwelling and in all other residential mortgage loan transactions in which a commitment fee or points are paid or will be paid to the lender prior to closing, then prior to the taking of an application, applica­tion fee, credit report fee or property appraisal fee, every mortgage banker or exempt organization shall disclose in writing or via electronic media to each applicant for a mortgage loan: (i) the amount of the application fee, and the mortgage banker or exempt organization's good faith estimate of the credit report fee, property appraisal fee, the processing fee, if any, and the terms and conditions, if any, under which such fees may be refundable. In addition, no fee other than an application fee, credit report fee, property appraisal fee and lock-in fee shall be taken prior to the acceptance by an applicant of a commitment.
  6. As such, Flaherty violated the General Regulations of the Banking Board, Part 38.3(e) which provides that within 10 days of taking a telephone application or filling out a borrower’s worksheet and in any event prior to the taking of any fee, the applicant must be given two copies of the application or worksheet and of the appropriate disclosures for review by the applicant.  The applicant must also be provided with a stamped pre-addressed return envelope and a written request that the applicant sign and return one copy of the application and the disclosures to the mortgage broker, mortgage banker or exempt organization.  In those instances in which a worksheet and pre-application disclosures are provided to the applicant, the applicant need only sign and return the disclosures; and
  7. In a November 7, 2005 follow-up examination it was disclosed that several borrowers were charged credit report fees in excess of the actual cost.
  8. As such, Flaherty violated the General Regulations of the Banking Board, Part 38.3(b) (2) (ii) which provides that any amount collected in excess of the actual cost of the credit report fee must be returned at or prior to closing.

II. SETTLEMENT TERMS AND CONDITIONS

Without admitting or denying the Department’s findings, Flaherty 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. Flaherty 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 complying with the requirements of Article 12-D of the Banking Law, Part 410 of the Superintendent’s Regulations and Part 38 of the General Regulations of the Banking Board.
  2. Flaherty agrees to develop appropriate written compliance 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 Flaherty and its employees 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, Flaherty agrees to submit a draft of its compliance policies and procedures to the Banking Department.
  4. Within one hundred twenty (120) days from the effective date of this Agreement, Flaherty agrees to submit a copy of its final compliance policies and procedures to the Banking Department together with a letter from an authorized officer of Flaherty indicating his/her approval of such policies and procedures. 
  5. Flaherty agrees to pay a fine of $ 25,000 payable in twelve monthly installments as follows:

    $3,000 upon execution of this Agreement.
    $2,000 each on or before 15th day of immediately following eleven months.

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

    III. MISCELLANEOUS TERMS AND CONDITIONS

  7. The Settling Parties acknowledge that Flaherty’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 Flaherty’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 Flaherty, 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.

  13. 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

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

  15. Attention:
    Thomas J. Flaherty
    President
    Flaherty Funding Corp.
    2595 Brighton-Henrietta Town Line Rd.
    Rochester, NY  14623

  16. 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: ___________________________
Thomas J. Flaherty, President
Flaherty Funding Corp.
Dated: _________________________

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

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