Department of Banking and Insurance Announces Multistate Settlement with Taylor, Bean & Whitaker Mortgage Corporation

Trenton, NJ – June 22, 2009 – (RealEstateRama) – The New Jersey Department of Banking and Insurance (DOBI) today announced a major multistate settlement with Taylor, Bean & Whitaker Mortgage Corporation (TBW) regarding its mortgage lending practices for so-called “nontraditional” loans made in 2006.  This agreement will result in a detailed review of TBW’s nontraditional loan exceptions, implementation of a robust modification program to assist struggling homeowners, and the payment of $9 million to assist the states in their oversight of mortgage origination practices. 

The settlement between TBW and 14 State mortgage regulators follows a coordinated multistate examination of TBW to specifically determine compliance with laws and regulations pertaining to the origination of nontraditional mortgage loans.  These products, also referred to as “alternative,” or “exotic” mortgage loans, include “interest-only” mortgages, “payment option” adjustable-rate mortgages, and stated income loans.  The examination determined significant weaknesses in TBW’s operations in 2006, relative to its underwriting standards, compliance and risk management practices, and internal control procedures.  Alleged practices included the multiple submissions of loan applications through automated underwriting programs resulting in altered income and asset information for prospective borrowers in order to qualify applicants for mortgage loans.  Concern over these practices led TBW to stop offering nontraditional mortgages in early 2007 and to make other changes to its internal control processes.

“Today’s sweeping agreement will benefit New Jersey consumers,” said DOBI Commissioner Steven M. Goldman. “We recognize that Taylor, Bean & Whitaker has taken steps in the past two years to place strict controls on their origination process, underwriting standards, and internal control procedures. This Agreement places such strict controls within a critically important regulatory enforcement framework, and will continue to help Garden State consumers in the future.”

“The multistate examination has already returned $103,000 in refunds to New Jersey consumers,” said Division of Banking Director Terry McEwen. “This settlement will continue to help consumers throughout the state who have done business with TBW.”

The major provisions of the settlement agreed to by TBW and the 14 State mortgage regulators include the following:

• The implementation of a loan modification program for loans held in TBW’s investment portfolio that will conform with the “Making Home Affordable” program released by the U.S. Department of the Treasury.  TBW will also make reasonable efforts to secure any required third party consents in order to modify mortgage loans currently serviced.

• The hiring of an independent firm, to be approved by the state mortgage regulators, to review TBW’s nontraditional mortgage loans originated from 2006 to 2007 to determine whether additional reimbursement to consumers is warranted.

• The implementation of a comprehensive compliance program, to be reviewed and approved by the state mortgage regulators, to ensure compliance with applicable laws, regulations, and rules governing the conduct and operation of its mortgage business in each of the states.

• The payment of $9 million by TBW to assist the states in their oversight of mortgage origination practices.  Half of the settlement amount will be apportioned equally to the 14 jurisdictions that completed the multistate examination.  The remaining monies will be provided to the Nationwide Mortgage Licensing System (NMLS) and dedicated to its ongoing development and maintenance costs.  The NMLS was developed by state banking and mortgage regulators starting in 2003 to create an online, centralized database of mortgage companies and mortgage loan originators. The goals of the NMLS, which launched on January 2, 2008, are to create greater transparency and protection for consumers, detect and reduce mortgage fraud, and streamline licensing requirements both for regulators and the mortgage industry.

As part of the agreement, TBW will reach out to impacted consumers who qualify for the Making Home Affordable program.  Under the Making Home Affordable program, the following mortgages are eligible for a loan modification:

• The mortgage is for the consumer’s primary residence;

• The amount owed on the first mortgage is equal to or less than $729,750;

• The mortgage was closed before January 1, 2009;

• The homeowner’s payment on their first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) is more than 31% of their current gross income; and

• The homeowner is having trouble paying their mortgage (for example, a significant increase in their mortgage payment or reduction in their income since they got their current loan, or they have suffered a hardship, like medical bills, which has increased their expenses).

Consumers can go the web site established by the Treasury Department at www.makinghomeaffordable.gov, to check on their eligibility for a loan modification.

Based in Ocala, FL, TBW is currently one of the 10 largest wholesale mortgage lenders in the United States.  According to Home Mortgage Disclosure Act data, TBW originated 215,880 traditional and nontraditional mortgage loans nationally between 2006 and 2007.  During this period, TBW originated 2,369 mortgage loans in New Jersey.

The 14 State mortgage regulators included in this settlement are the Arizona Department of Financial Institutions; the District of Columbia Department of Insurance, Securities and Banking;  the Florida Office of Financial Regulation; the Georgia Department of Banking and Finance; the Idaho Department of Finance; the Illinois Department of Financial Professional Regulation-Division of Banking; the Louisiana Office of Financial Institutions; the Maryland Office of Financial Regulation; the Massachusetts Division of Banks, the Mississippi Department of Banking and Consumer Finance; the New Jersey Department of Banking and Insurance; the North Carolina Office of the Commissioner of Banks; the Pennsylvania Department of Banking; and the Vermont Department of Banking, Insurance, Securities and Health Care Administration.

Persons wishing more information on loan modification may visit the Treasury Department at www.makinghomeaffordable.gov, and persons wishing more information on the settlement may visit NJDOBI’s website at http://www.njdobi.org, and may contact TBW through: 

Melissa Spata
315 NE 14th Street     
Ocala, FL 34470         
Office: (352) 671-0178
Fax: (352) 690-0878
mspata (at) taylorbean (dot) com