Cease-and-desist orders used to shut down two Lawrence mortgage companies that reportedly falsified applicants’ incomes were an important step to combating unfair lending practices, but more needs to be done in the future to stop predatory lending, industry experts said.

“I think this is just the tip of the iceberg,” said Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance.

The Massachusetts Division of Banks issued the orders to Diamond Mortgage Services, which has its headquarters in Taunton but operates a branch in Lawrence, and Synergy Mortgage Group, whose headquarters are located in Lawrence. The Associated Press reported that the two companies had offices in the same building.

The cease-and-desist order said Diamond Mortgage must surrender its license for the Lawrence operation and pay a $200,000 fine. It also said the company is not allowed to apply to open any new Massachusetts branches for two years.

The order issued to Synergy Mortgage, which was a temporary cease-and-desist order, said the company is to stop taking mortgage applications, and that it has 20 days from the day it was issued to request a hearing. The order otherwise will become permanent.

Practices like falsifying applicants’ incomes so they qualify for a mortgage, and other deceptive methods of operation, are widespread in the mortgage industry, especially in areas where much of the population lives on low or moderate incomes, Callahan said. The Division of Banks should be commended for its aggressive action in the case involving the two companies in Lawrence, he noted, but there are probably many more companies using similar practices.

“These types of actions do send the right signal,” Callahan said.

Juan Bonilla, a housing and credit counselor at Lawrence CommunityWorks, agreed that there are many more cases of such lending practices.

“I was surprised it was only these two [that were caught],” he said.

The DOB issues about a dozen cease-and-desist orders a year, according to David Cotney, the division’s chief operating officer. Falsification of income has not been a common reason for the orders to date, he said.

Bonilla has come across many people with stories about inflated closing costs or other unfair practices. Lawrence has one of the largest increases in foreclosure filings in the state, according to the AP. The city’s downtown is crammed with mortgage companies, Bonilla said, and residents there often do not think to go to banks when looking for a mortgage, or believe that a bank would grant them a mortgage. Some in the city – which is home to many immigrants – have language barriers or unverifiable incomes, which can make them easy targets for predatory lending.

“There’s just not enough education out there,” Bonilla said. “Everybody wants to own a home.”

But more needs to be done to fix the system in general, he said.

“The system itself needs to be changed,” Bonilla said. “Something needs to be done.”

‘Bad Apples’
The longer-term solution, Callahan said, is to pass a law like the Community Reinvestment Act – which shines a spotlight on banks’ and credit unions’ lending practices – with the objective of meeting an area’s credit needs. Such a law focusing on the mortgage industry would force mortgage companies to undergo the kind of scrutiny that banks and credit unions do.

“If there were greater oversight, you’d root out some of the bad apples,” Callahan said.

According to the Associated Press, the Division of Banks also ordered two other Lawrence firms – R&R Financial Services and Reyes Mortgage Co. – to stop brokering mortgages without state licenses. Fanny Rodriguez, the principal of R&R, worked at Diamond Mortgage until she was dismissed 18 months ago, Steven Newberger, president of Diamond Mortgage, told the AP.

Newberger said he closed the Lawrence branch last month after state regulators approached him with concerns and that he fired branch manager Edward J. Hammonds, who opened Synergy Mortgage shortly thereafter.

“They revealed some things to me that I found appalling,” Newberger said in an interview with the AP. “I had no choice but to stop it … a lot of things were done without my knowledge. That is why I severed the relationship. I couldn’t be responsible for somebody who wasn’t going to be responsible to me.”

Hammonds did not return several phone calls seeking comment from The Boston Globe, according to the AP, and calls placed to Synergy’s office went unanswered Thursday.