Mortgage broker to repay clients

A Norwood mortgage brokerage will pay 148 consumers $2,000 each for promising them low mortgage rates last summer they never received, state officials said yesterday.

A judgment in Suffolk Superior Court requires Mortgage One Financial Corp., operated by Robert G. Tucker, to pay nearly $300,000 in restitution to settle allegations it misled consumers with "rate locks."

A rate lock is a mortgage firm's promise that a specified rate can be locked in for the time it takes a mortgage to close, usually several weeks.

Mortgage One is a broker. It's illegal in Massachusetts for a broker to issue rate locks. Only a lender can do that.

Attempts to reach Tucker and his attorney were unsuccessful.

Confusion about what constitutes a rate lock and an unexpected spike in mortgage rates last summer resulted in nearly 300 consumers complaining to the Massachusetts Division of Banks last year.

In response, the division issued cease-and-desist orders against several firms, including one in August against Mortgage One.

The division also drafted new regulations that aim to establish clearer rate-lock standards. These regulations become permanent today.

New regulations seek to prevent what happened to Diana Bass and many other consumers. Bass and her husband had successfully refinanced the mortgage on their Lynnfield home with Mortgage One before but had trouble when they attempted to refinance again last year when rates were near historic lows.

When rates rose unexpectedly off those lows, many homeowners scrambled to refinance. Bass thought she had locked in a 4.75 percent rate, below her existing 5.25 percent rate. Refinancing at the lower rate, she estimated, would save $8,000 over the life of the loan.

"I kept calling for a closing date, and they kept pushing it out," Bass said. "Then they stopped returning calls."

One frequent scenario last summer was that consumers who thought they had rate locks stopped shopping around with other mortgage companies. By the time these consumers learned their rate lock wouldn't be honored, rates had risen to the point that it often no longer made sense to refinance.

Bass said of the settlement against Mortgage One, "I'm glad they won't be able to hurt anyone else."

New regulations require a written rate-lock document to specify the rate agreed to, the loan amount, the duration of the rate lock, and any points or fees. Also, initial paperwork between a consumer and a broker requires a disclosure that a broker cannot originate loans or guarantee rates.

Meanwhile, the judgment against Mortgage One prohibits the firm and its employees from working in the mortgage business in Massachusetts for two years.

"This mortgage broker made promises he couldn't keep," Attorney General Thomas F. Reilly said in a statement.

Added Massachusetts Commissioner of Banks Steven L. Antonakes, "The division will continue to take swift action against any company that does not honor rate-lock commitments or misleads consumers."

Chris Reidy can be reached at reidy@globe.com.