According to the state Division of Banks, Quotemearate.com took at least one mortgage application from an unlicensed office at 15 North Beason St. (above) in Boston’s Allston neighborhood.
The Massachusetts Division of Banks last week issued a cease-and-desist order to Quotemearate.com, a Texas-based mortgage lender that regulators say operated both licensed and unlicensed offices in the Bay State. The firm abruptly closed up shop not only in Massachusetts but nationwide the same day the DOB order was delivered.
DOB officials would not say how many pending applications from Bay State borrowers may be affected by the sudden closing. The cease-and-desist order did instruct the company to pass pending mortgages on to other licensed lenders.
Before the order was issued, 508 mortgage applications were taken and 333 loans were closed from a total of 27 unlicensed office locations in Massachusetts, according to DOB examination records from 2005. Nine of the unlicensed offices had license applications pending with the agency.
According to the DOB, Quotemearate.com is the fifth mortgage company that has been caught operating without a license in the state this year.
The cease-and-desist order was issued to Houston-based Quotemearate.com on Monday for conducting business in unlicensed offices, employing unlicensed contractors and a pattern of unlawful fee practices, among other violations that were discovered during a regularly scheduled examination by regulators. The company was ordered to place fees collected from Massachusetts borrowers into escrow accounts as well as to restructure policies concerning the collection of fees under Massachusetts law.
However, the lender, which had 21 licensed locations in the Bay State, seems to have closed last Monday, announcing its plans to employees then. In a letter dated March 27, Chris Miller, vice president of branch operations at Quotemearate, formally told associates that the company was closing that day.
“With the deepest of hearts, Quotemearate.com Inc. regrets to inform you we have begun the process of closing our operations. We have taken great pride in delivering to each and every one of you the strongest branch affiliate program in the country over the years. The constant change in industry coupled with the lack of performance of the Banking Division proved too great in the end. These financial strains have caused Quotemearate.com Inc. to lose significant amounts of capital over the past few months. We have exhausted all possible solutions over the past few months but none were able to overcome these challenges,” wrote Miller. “We will continue to update everyone over the next couple of days with regards to procedures going forward. Many of you have existing pipelines [mortgages in progress] and those will be addressed on Monday. Members of our remaining staff will be contacting you going forward in addition to providing you with an updated payroll schedule.”
Phone calls to Miller at the Quotemearate headquarters were not returned.
Unlike Massachusetts, Texas does not require mortgage companies to provide advance notice to regulators before shutting their doors. They are, however, expected to inform the Texas Department of Savings and Mortgage Lending within days of stopping operations, said Danny Payne, Texas commissioner of savings and mortgage lending.
Last week, Payne had not received official notice that the company was no longer in business, but that does seem to be what has happened, he said.
The Texas commissioner sent examiners to the headquarters where the doors are looked and all operations appear to be shut down. The company’s Web site also is no longer up and running, as well. Payne said he has left messages for the company president, but they have not been returned. He said he did speak with a woman who said she had been employed by Quotemearate at the time of closing. Payne asked her to have Quotemearate’s attorney’s contact him, but was awaiting contact at Banker & Tradesman press time on Friday.
“It appears to be a quick decision. This just happened quite suddenly. We are still looking to get some answers. The closure of that company impacted a lot of clients,” Payne said. “We are telling loan officers to close with investors directly. Our first priority is that no consumers are harmed with existing loans.”
While the Massachusetts cease-and-desist order cited Quotemearate for moving or closing some local offices without notifying the DOB, it is unclear whether the mortgage firm notified the agency before closing down all its offices last week.
Payne said the company has never been in any sort of trouble with Texas regulators, which makes the situation even more confusing.
Final Exam
But in Massachusetts, the lengthy cease-and-desist order offers details into several aspects of the business that were not in compliance with industry standards.
Although Massachusetts Commissioner of Banks Massachusetts Commissioner of Banks Steven L. Antonakes has said the DOB is taking a more investigative approach to fighting predatory lending through its exams, the Quotemearate investigation was not part of that initiative. Joseph A. Leonard Jr., deputy commissioner and general council for the regulatory agency, said it was a routine examination where examiners realized the problems with Quotemearate.
“It’s an example of the division doing its on-site examinations and finding things out of line,” he said.
Interoffice correspondence viewed by examiners was the first indication that Quotemearate was conducting business at more locations than they were licensed for, said Leonard.
More than 100 examiners comb through the records of financial institutions, searching for red flags, wrongdoing and illegal business practices. The DOB follows a schedule and most institutions are aware of routine examinations approximately 10 to 30 days before it is conducted. Cracking down on mortgage companies that chose not to comply with Massachusetts laws takes time and effort. Spotting the problems means searching file after file “the old-fashioned way,” Leonard said. “It’s general examination procedures. It’s what the examiners on site actually see.”
If the DOB is aware or suspects a problem, exams can take place sooner than they are scheduled, he said. However, that was not the case with Quotemearate, where the events leading up to the cease-and-desist order began with a routine sampling of mortgage loan files, from which examiners started to identify problems. The extent possible violations are not yet fully known to the DOB, which is still looking into the matter, he said.
Four months ago, Waltham-based Cornerstone Mortgage acquired one of the Quatemearate offices in Salem. It purchased a customer database from Quotemearate and decided to keep the existing phone number. Michael Meyer, president of Cornerstone, said that he since has gotten a few calls at the number from “disgruntled” Quotemearate customers.
He said his company has gotten some business through adopting the database keeping the old Quotemearate phone number, but it was really the office location that he was interested acquiring.
“We will do a better job” with customers than Quotemearate, he said.
Meyer said he was not surprised to learn that Quotemearate has closed or that the cease-and-desist order had been issued. Although Meyer said his company has never run into any hot water during exams, he and others in the profession feel regulators are stepping up the level of scrutiny. He said local regulators seem to be really looking for and cracking down on mortgage companies that don’t play be the rules.
“It seems to be just over the past eight months to a year that they seem to be [becoming even more] diligent,” he said. “I can see that they seem to be much more watchful now.”
