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East Coast Mortgage Group LLC and Christopher M Bain - Order
July 11, 2011
This administrative matter came on for hearing June 3, 2011. Petitioner, the staff of the Bureau of Consumer Credit Protection, alleges that East Coast Mortgage Group, LLC (hereinafter ?East Coast?) and Christopher M. Bain (hereinafter ?Bain?) violated various provisions of the Maine Consumer Credit Code relating to the conduct of loan brokers.
East Coast is a licensed loan broker, and Bain is a state-licensed or -registered originator for the company, as well as being the company?s president.
This controversy arises from the planned purchase of a house, outbuildings and property in Lisbon, Maine by Jeremy and Sarah Allen. The Allens hired East Coast and Bain to arrange for financing for that property.
For the reasons set forth below, I am ordering a remedy that requires supervision of the activities of East Coast and/or Bain for the next 12 months, since I find that East Coast and Bain did not meet the duties and standards of care required by the Code, specifically by failing to follow the reasonable instructions of the borrower and by failing to use reasonable care and diligence, both in violation of 9-A MRS section 10-303-A.
Relevant facts
Arranging a loan for the purchase by the Allens of the Lisbon property posed many challenges. The property was not a traditional home with a house, garage and a small amount of land. Rather, it consisted, according to the listing, of a ?5 to 6 bedroom, 2 bath home on 24 acres with 2000 feet of water frontage [and included a] deck, pool, sauna [and a] hot tub ?.? Further, the sale included ?6 buildings, 2-car garage, camp, workshop, boat house and 1996 mobile [home].?
Testimony received during the hearing indicated that the secondary market, whose investors prefer ?vanilla? houses for their portfolios, would not favorably consider several aspects of the property, including the pool (considered a ?feature of luxury? improper for certain secondary market purchasers or guarantors) as well as the possible existence of plumbing, drains or outlets for appliances found on one of the outbuildings.
The Lisbon property was a REO, or ?real estate owned,? property, with title held by a bank following foreclosure of the property as the result of a previous owner?s default on a mortgage loan.
Further complicating the financing picture was the credit history of the purchasers, which apparently included a bankruptcy in the distant past, as well as a dispute between Mr. Allen and his current mortgage holder which resulted either in a lack of reporting of mortgage payments onto the consumer?s credit report, or an indication that such payments were late.
The purchaser had first gone to one loan broker, who had referred him to Bain. Bain had a reputation for being able to obtain financing in difficult or unusual cases. For that reputation, Bain was able to charge commensurate fees; in this case he stood to receive $5,488 in compensation.
The Allens were very eager to close the deal, and looking at the property?s listing history it?s no surprise why. The property was originally offered at $540,000, then at $499,000, but when a deal was finally inked on this property the agreed-upon price was $159,500.
The evidence indicates that the Allens satisfactorily conveyed their desire for a speedy closing to East Coast and Bain. However, Bain?s actions (or in this case, his inactions) did not match the Allens? need for promptness and follow-through. Bain took funds to pay for an appraisal, but then seemed unable to explain why he did not have an appraisal done (it was not until the hearing that he discussed his strategy of waiting until he thought the conditions were right, and until the appraiser was the right person to assign maximum value to the property and to minimize the impact of features such as the pool or appliance-ready outbuildings).
The hearing featured compelling testimony by the purchaser?s realtor, Tim Dunham, who stated that he had been involved in approximately 600 closings during his 11-year career. Dunham testified that he had never seen a case in which so many calls, text messages and e-mails to Bain from the various parties involved in the transaction resulted in little or no response from the broker.
For whatever reasons, Bain seemed unable to focus the necessary resources and attention to this case, within the time frame required by the purchaser and the other parties. He signed the purchasers to a loan broker contract on November 3, 2010; took a check for $450 for the appraisal on that day, and issued a good faith estimate (based on an earlier, lower offer amount of $151,429). About a month later, in early December, the seller and buyer reached agreement on the higher offer of $159,500. However, it?s not entirely clear what, if anything, Bain did for the purchasers in December (between offers), or in January, or in February.
Likewise, Bain seemed to adopt an approach of non-responsiveness when the consumers first complained to the Bureau of Consumer Credit Protection, and when the Bureau?s staff attorney, Eric Wright, suggested that the consumers? funds be returned in full since no appraisal had ever been conducted. Rather than recognizing that he had not fulfilled his obligations to the consumers, refunding the money and moving on, Bain advanced a theory, unsupported in contract or law, that he had a 60-day period within which to comply with the directive.
Whatever the real reasons for Bain?s inaction in either finding a loan for the borrowers or negotiating his way out of the contract and refunding their appraisal fee, Bain did not come forward with those reasons, either to the parties in December, January, February, March or April, or during the hearing itself. In one of the few, rare e-mails sent to the borrowers in early January, he suggested that he was busy with other clients, and that he chose not to spend time on the Allens? case when there were other clients whose purchases were more complete and it was not fair to make them wait. Many professionals get into difficulty when they take on too many clients, and that may be the instance here, but it does not provide an excuse for Bain?s inactions.
As set forth below, this Order requires East Coast and Bain to refund all monies received from the borrowers; present a plan for supervision to the Bureau within 45 days; comply with that supervisory plan for the 12 months following its effective date; and pay a moderate penalty and costs of the hearing to the Bureau. However, it does not suspend East Coast?s loan broker license, nor does it revoke Bain?s mortgage loan originator license, for the reasons that evidence presented in the case did not prove violations to the extent or nature that call for that result. The case was complicated by an unconventional property, a purchaser with some credit issues to be resolved, and a tight time frame. The case did not involve outright thievery, or excessively more than the amount of puffery, half-truths, exaggerations and over-reactions that accompany many complex real estate transactions. The purchaser and the purchaser?s broker kept certain minor details about the terms or timing of the transaction from Bain, trying to keep Bain?s feet to the fire in terms of meeting his obligations. The evidence did not provide a clear answer to the question whether Bain did or did not understand in November that a purchase and sale contract had or had not yet been signed by all parties. The fact that the seller was a bank, selling a foreclosed party, may have added to the case?s complexity.
In the end, however, this is the type of complexity that lets loan brokers earn their pay. It?s up to them to move a case forward, or withdraw if they find that they cannot help the consumer. In this case, Bain and East Coast accepted the job, referred by another broker, with the knowledge that if likely presented challenges. Yet it appears that the lure of the potential commission resulted in Bain remaining on the case, yet not accomplishing sufficient results, for several months after he should have negotiated a withdrawal of his employment from this file.
Based on the foregoing, it is hereby ORDERED:
1) Within 45 days of this Order, East Coast Mortgage Group, LLC and Christopher M. Bain, individually or collectively, shall submit to the Hearing Officer a plan of supervision. At a minimum, the plan shall identify a sponsor to whom East Coast and Bain must report each month, and who in turn will report to the Hearing Officer every 60 days, on each consumer client or file accepted by East Coast and/or Bain, individually or collectively, and each consumer case worked on, including the number and names of loan broker clients, time frames for obtaining loans or otherwise meeting the obligations of the loan broker contracts, and progress made on each case during the time periods involved. The plan submitted to the Hearing Officer must state the identity of the sponsor, must contain a signed acknowledgement by that sponsor indicating a willing to serve in that capacity, and must propose a format for reporting to the sponsor monthly, as well as the format of the 60-day reporting to the Hearing Officer.
2) East Coast and Bain shall refund any monies to the Allens that were received from the Allens and that have not already been refunded.
3) East Coast and Bain shall pay a civil penalty of $300 to the Bureau, payable to ?Treasurer, State of Maine.?
4) Separately, East Coast and Bain shall contribute toward the costs of this hearing, in the amount of $300, payable to the Bureau of Consumer Credit Protection.
5) Subject to the right to appeal, below, provisions #1 though #4, above, must be completed within 45 days of the date of this Order. Failure to comply with these required steps will result in a finding of contempt, as well as further proceedings and appropriate penalties, which may include suspension or revocation of East Coast?s and Bain?s professional licenses.
| Date: July 07, 2011 | /s/William N. Lund |
| William N. Lund | |
| Hearing Officer |
NOTICE OF APPEAL RIGHTS
Either party may appeal this Order by filing a petition for review in the Superior Court within 30 days of receipt of this Order pursuant to 5 M.R.S. ?? 11001-11008. If the Order is not appealed, it shall become binding on the parties at the end of the 30-day period.
| Date: July 07, 2011 | /s/William N. Lund |
| William N. Lund | |
| Hearing Officer |