At 10:03 a.m. on June 4, Mike Burton of Slade Mortgage Group got some jaw-dropping news via e-mail: The Division of Banks was ordering him – and 86 other brokers and lenders – to cease business immediately for failing to get a required surety bond.

“I was floored, to say the least,” he said. Not only did he have the $75,000 surety bond, he said he’d given the original bond to a state inspector back in January and considered the matter closed.

He’s not sure what happened to the original he handed over, but the upshot was he needed to get off that list – and fast.

Jesse Mason, a broker who said he also had all his paperwork in order, said as soon as Natick-based Mason Mortgage showed up on the list, his phone started ringing. It was other brokers – trying to buy his leads and equipment, even to convince him that his business was crumbling and he should give up and come work for them.

Mason, Burton and 11 others have since gotten squared with the Division of Banks, but they say the cease-and-desist orders have seriously rocked the boat.

Mad Scramble

The division publicized the list of 87 cease-and-desists for companies doing business in Massachusetts, based both locally and in far-flung states. Many of those companies failed to get the bonds by the Dec. 31 due date because they’re no longer in business, but others have had to hustle to fix the problem.

Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, had said the Division of Banks had done its part to notify mortgage brokers and lenders of the requirements, and a division spokesman said companies had received multiple notices regarding the new requirements.

Since the original order, at least 13 operational companies have had the cease-and-desist orders lifted, according to the spokesman, who added that four others have submitted bonds but have information outstanding. He said that in general, some shuttered businesses got on the list because they were unaware they had to submit the orders to the division; others were unaware they had to get surety bonds in the first place; others are just out of business.

Did The Dog Eat It?

When contacted by Banker & Tradesman, many lenders and brokers said they landed on the list because of an accident of paperwork – in some cases, they’d sent in copies of their bonds instead of the required original.

After getting the e-mail, Burton immediately got on the phone with his bond insurer, got a faxed copy, got it notarized, and drove from his business in Falmouth to One South Station in Boston, where he dropped it off. He was only on the list for four hours – but he says it was too late to stop some damage to his reputation.

“I had received phone calls from lenders, other mortgage brokers and Realtors – people asking, ‘Mike, what the hell’s going on?’” he said.

Since then, he’s bought advertisements and tried to reassure associates and customers he’s in business and all is well.

Mason was also shocked to get the notice in his inbox.

“I ran around like a chicken with my head cut off at the end of December to get everything right [with my bond],” he said. “To say it caught me out of left field would be a bit of an understatement.”

Mason said his insurance company and bond company assured him they sent in the required paperwork on time, but the Division of Banks said that paperwork never came in. Mason was also quickly off the list, but he’s still galled by the hit to his business and the ongoing solicitations from competitors.

With interest rates inching upward, this is a busy time for brokers – as a one-man operation, Mason couldn’t be around at the end of the week to handle prospective customers who wanted to take advantage of the low interest rates before they disappeared. That use of time is hard to calculate in dollars, he said, but it’s definitely costly.

While Burton said he doesn’t blame the division, Mason expressed frustration over not getting any advance warning. A simple phone call on Wednesday – before Thursday’s announcement – would have prevented the whole mess, he said.

“I’m just disappointed it’s been a reactionary thing.”