Two licensed mortgage brokers in Lawrence have been shut down by the state for inflating the incomes of borrowers to help them qualify for home purchase loans, the Division of Banks said.

   The division issued cease-and-desist orders against Diamond Mortgage Services and Synergy Mortgage Group, both of which have offices in the same building.

   Diamond Mortgage agreed to close its Lawrence office, to not open any other office in the state for two years and pay a $200,000 fine. The order does not affect Diamond Mortgage's operations in Taunton, where the firm is based.

   Synergy Mortgage has 20 days to request a hearing to challenge the temporary cease-and-desist order, or it will become permanent.

   David Cotney, chief operating officer for the Division of Banks, said the two cease-and-desist orders were issued Friday, and The Boston Globe learned of the actions Tuesday. The Globe earlier had raised questions with the division about possible mortgage fraud in Lawrence.

   The division said the two brokers arranged loans they knew borrowers could not afford.

   State officials say Lawrence has had one of the largest surges in foreclosure filings in Massachusetts. Filings rose almost 180 percent between mid-2004 and mid-2006, according to ForeclosuresMass Corp., which tracks foreclosures in Land Court.

   Cotney said his division issues cease-and-desist orders against mortgage brokers about a half dozen times a year for violations of state lending laws, such as misleading advertising and excessive fees. More than 750 licensed mortgage brokers operate in the state.

   The Division of Banks also ordered two other Lawrence firms -- R&R Financial Services Inc. and Reyes Mortgage Co. -- to stop brokering mortgages without state licenses. Fanny Rodriguez, the principal of R&R, worked at Diamond Mortgage until she was dismissed 18 months ago, according to Steven Newberger, president of Diamond Mortgage.

   Newberger said he closed the Lawrence branch last month after state regulators approached him with concerns and that he fired Edward J. Hammonds as branch manager.

   "They revealed some things to me that I found appalling," said Newberger, who declined to be more specific. "I had no choice but to stop it. ... A lot of things were done without my knowledge. That is why I severed the relationship. I couldn't be responsible for somebody who wasn't going to be responsible to me."

   Hammonds, who opened Synergy Mortgage around Aug. 5, did not return several phone calls seeking comment from the Globe.