EXECEUTIVE SUMMARY TO MULTI-STATE MORTGAGE COMMITTEE

ABC Loans, Inc.

Michael Gomez, EIC MI

Introduction

The MMC scheduled the examination of ABC Loans, Inc.to begin November 16, 2009, with an approximate onsite examination date of January 25, 2010. The multi-state examination team is comprised of MI (EIC), AK, AR, AZ, CT, DC, GA, IA, ID, IL, KY, LA, MA, MD, ME, MS,NC, ND, NH, NJ, NM, OH, OR, PA, RI, TX, VT, WA, WV, and WY. The period under examination is November 1, 2007 through October 31, 2009. This Executive Summary is intended to be an overview and status synopsis for the MMC.

Background

ABC Loans, Inc.is a large mortgage origination institution headquartered in Nowhere, Michiganand doing business in all 50 states. ABC Loans, Inc. is a wholly owned subsidiary of Amalgamated Holdings Inc. The company originates conventional and government insured first mortgages, home equity loans and lines of credit to borrowers through the internet and its call centers. Initial information received from ABC Loans, Inc.indicates that the company has originated 173,143 residential mortgage loans for $35,336,349,229for the period of November 1, 2007 to October 31, 2009. Audited financial statements as disclosed in NMLS reflects the company’s financial position as of July 31, 2009:

Assets$918,129,510.00

Liabilities 665,553,094.00

Shareholder Equity$252,576,416.00

Net Revenues$611,585,212.00

ABC Loans, Inc.reported a net gain for the period ending July 31, 2009of$210,295,352.

ABC Loans, Inc. has been in business since 1985. Current senior management consists of Markus Orilio, Chairman of the Board and Principal, William Dunderhaven, CEO and Paul Klein, President & COO. The EIC’s primary examination contact is Mary Enfluenza, Director of Consumer Compliance.

Issues

Responses to the State Compliance forms identified a number of issues and apparent violations. These are primarily related to filings, unlicensed activity, record keeping and disclosure violations. A detailed listing of the state reported issues is included in the summary.

Current Status

Initial contact with the company came on November 13, 2009. The Initial Information Request was sent to the company November 30, 2009, with response dates beginning December 11, 2009. A second information request is tentatively to be sent on December 14, 2009, with a required response date of January 8, 2010.

Examination Team

The MMC examination team consists of 43 examiners assigned from the 30 participating states. There are currently 15 states that will be on-site and 13 that will be off-site. There are two states (AR, ME) that will be participating in name only and will not be sending any examiners. The EIC held its first team meeting onDecember 1, 2009 and expects to hold meetings on a regular basis as needed until the start of the onsite examination.

STATE COMPLIANCE FORM RESPONSES

Violations/Issues:

  • Unregistered loan originator activity.
  • Deficiencies in continuing education for registered loan originators.
  • Failure to provide timely notice to Department of repurchases demands.
  • Record keeping requirements (state law).
  • Missing GFEs and inaccurate GFEs.
  • Upcharge for third party settlement services.
  • Improperly disclose fees.
  • Failed to provide Settlement Cost Booklet.
  • Unauthorized fees and charges on Secondary Mortgage Loans.
  • Violations of state statue for charging discount fees without the proper disclosures.
  • Fee terminology on the disclosure forms.
  • Post license.
  • Possible influence in the appraiser’s opinion of value (New Hampshire).
  • Advertisements that did not comply with provisions with TILA and Regulation Z regarding triggering terms.
  • Failure to have loan originator to sign application.
  • Licensing issue with the state.
  • No commitment letters, no highpoint/high rate letters, non-permitted fees on 2nd mortgage loans, non-complaint privacy policy. (Vermont)
  • Charged and disclosed discount points higher than necessary to buy down the loan interest rate.
  • Failed to provide timely initial variable rate disclosures.
  • Title insurance was not itemized.
  • The right to appeal contained the wrong language.
  • The availability of credit report was missing the correct language.

Administrative Actions:

  • Iowa-the company permitted 68 individuals to act as mortgage bankers prior to being licensed. On September 17, 2009, company agreed to a Combined Statement of Charges and Consent Order of $9,000.
  • Illinois- pursuing legal case against company for unregistered loan originator practice and continuing education deficiencies as discovered in the last exam. Settlement negotiations are under way.
  • Pennsylvania- fine of $1,000 issued to company for failure to file an annual report, but was waived, as the report was sent back to company for correction.
  • Vermont- no commitment letters, no highpoint/high rate letters, non-permitted fees on 2nd mortgage loans, non-complaint privacy policy. Company refunds 96M.
  • Washington- Company failed to respond satisfactory to Departments report of examination (2007). Company agreed to make refunds to borrowers injured as a result of its lending practices. Company reported to the Department that it had implemented a new loan pricing method and related disclosures for new loans with interest rates locked on or after February 2, 2009. The new loan pricing method will supposedly prevent borrowers from being charged points/fees that do not reduce the interest rate.

Types of Complaints:

  • Failure to close mortgage.
  • Promises made on commitment but not delivered at closing.
  • Consumer wanting deposit monies back after the loan was withdrawn or denied. The company was found to be within its right to maintain deposit.
  • Borrower dissatisfied with the manner in which the loan was processed.
  • Loan servicing problems.
  • Fee dispute.
  • Charging of application fees for new and refinanced loans that also included lock in fees. Complaints were closed and deemed resolved.
  • Upfront application fees not being refunded.
  • Five hundred dollar advance deposit from borrowers. Consumers have complained that the money was due back or incorrectly charged to third party services made on behalf of the consumer.

Updated Summary as of January 21, 2010

Below is a list of items that have taken place since the initial summary.

  • The on-site date was changed from January 25, 2010 to February 22.
  • There will be approximately 30 states involved, 10 on-site, 18 off-site, 2 name only.
  • There are approximately 45 examiners involved, 19 examiners on-site throughout the 2 week period.
  • We updated the First Day Letter (FDL).
  • We updated the Second Request Letter.
  • Had on going communication with ABC regarding the examination process.
  • Had a conference call with ABC & Chuck Cross to discuss delaying the on-site portion to February.
  • Received and reviewed letter sent from ABC requesting delaying the on-site to February.
  • On December 15 met with ABC to discuss time frame extension.
  • Had a conference call with MMC to discuss ABCs request. It was decided to grant the request and the new on-site date was set (February 22, 2010).
  • Revised the FDL to reflect new dates.
  • Sent revised FDL to ABC and requested written acceptance of date changes.
  • Sent revised FDL to theStates.
  • On December 23 received first shipment of information from ABC. The information was on time as required.
  • Developed state contact spreadsheet for mailings from ABC to the states.
  • Developed travel guide and sent it out for those states that will be on-site.
  • Sent email out to the states requesting volunteers to review various parts of the FDL.
  • On January 5, 2010, loan logs were sent out by ABC to the various states.
  • Loan log selections coming back to the E.I.C have been forwarded to ABC.
  • January 15, 2010, met with ABC to develop a program to track all incoming and outgoing request.
  • Finalized the Second Request Letter and delivered it to ABC on January 15, 2010.

Updated Summary as of March 18, 2010

  • Loan logs were sent by ABC to the states on January 11.
  • Loan logs were due back from states to EIC on or before January 18
  • On January 21, had conference call with the MMC to update them on the status of the exam.
  • On January 21, had conference call with the states to discuss exam procedures on-site procedures.
  • On February 1, Sections 2-5 of the FDL was due back from ABC. Information was received ABC.
  • On February 8, second request information was due back. Information was received from ABC.
  • On February 16, went to ABC to test tracking program.
  • On February 19, loan log selections were sent to the states conducting off-site examinations.
  • On February 22, on-site portion of the examination began. There were a total 9 states and 16 examiners that participated on the on-site portion.
  • Had periodic discussions with on-site states to discuss exam issues.
  • On March 4, states were sent an email notifying them that exam finding were due back to the EIC by March 26.
  • On March 5, on-site portion end for the states.
  • On March 12,Michigan examiners wrapped up on-site portion.
  • On March 16, states were sent a template of the exam for guidance in completing the findings portion.
  • On March 18, conference call with MMC.
  • On March 18, conference call with the states to discuss exam findings.