STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF BANKING AND FINANCE, DIVISION OF FINANCE, | ) ) | |
) | ||
Petitioner, | ) | |
) | ||
vs. | ) CASE | NO. 87-3299 |
) | 87-3300 | |
MID SOUTH MORTGAGE CORPORATION, | ) | 87-3301 |
CAROLYN G. STANLEY, individually | ) | |
and as Designated Principal | ) | |
Mortgage Broker of Mid South | ) | |
Mortgage Corporation; WILLIAM D. | ) | |
HUGHES, individually and as Former | ) | |
Designated Associated Broker of Mid | ) | |
South Mortgage Corporation; JOHN | ) | |
CHILDERS, individually and as | ) | |
President of Mid South Mortgage | ) | |
Corporation; JANIE CINCOTTA, | ) | |
individually and as Employee of | ) | |
Mid South Mortgage Corporation, | ) | |
) | ||
Respondents. | ) |
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was conducted in these cases on February 29, 1988, at Pensacola, Florida, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. At the hearing the Petitioner was represented by Paul C. Stadler, Jr., Esquire. The Respondents Mid South Mortgage Corporation, Carolyn G. Stanley, and John Childers were represented by John Childers. The Respondents William D. Hughes and Janie Cincotta participated in the hearing only as witnesses.
ISSUES AND INTRODUCTION
These administrative proceedings involve three related cases which were consolidated for purposes of proceedings before the Division of Administrative Hearings. DOAH Case No. 87-3299 began on or about May 13, 1987, with the issuance of an Administrative Complaint and Notice of Rights by the Department of Banking and Finance, Division of Finance (hereinafter "Department"), against Respondents Mid South Mortgage Corporation (hereinafter "Mid South"), Carolyn G. Stanley (hereinafter "Stanley"), William D. Hughes (hereinafter "Hughes"), John Childers (hereinafter "Childers"), and Janie Cincotta (hereinafter "Cincotta"). An Amended Administrative Complaint was filed later. The Amended Administrative Complaint charges the Respondents with nine counts of violations of the Mortgage Brokerage Act, Chapter 494, Florida Statutes.
In addition to the Administrative Complaint, on about May 13, 1987, the Department issued a Cease and Desist Order and Notice of Rights against Childers and Cincotta, which was docketed as DOAH 87-3300, and a second Cease and Desist Order and Notice of Rights against Mid South, which was docketed as DOAH Case No. 87-3301.
The Administrative Complaint in DOAH Case No. 87-3299 was never served on Cincotta. At the commencement of the formal hearing, the Department announced that it was not pursuing the Administrative Complaint against Cincotta. The Cease and Desist Order in Case No. 87-3300 was served on Cincotta. At the commencement of the formal hearing, Cincotta confirmed that she did not contest the Cease and Desist Order in Case No. 87-3300.
Prior to the formal hearing, Hughes and the Department entered into a stipulation for the disposition of all issues in DOAH Case No. 87-3299 that relate to Hughes.
Following the hearing in this case, a transcript of the proceedings at hearing was filed. Thereafter the Department filed proposed recommended orders in all three of these consolidated cases. The Respondents have not filed any proposed recommended orders. The Department's proposed recommended orders have been carefully considered during the formulation of this recommended order.
Specific rulings on all proposed findings of fact are contained in the appendix which is attached hereto.
FINDINGS OF FACT
Based on the exhibits received in evidence and on the testimony of the witnesses at the hearing, I make the following findings of fact.
Preliminary Factual Findings
Mid South is a corporation organized and existing under and by virtue of the laws of the State of Florida. Mid South has been and is conducting business in the State of Florida as a mortgage brokerage business pursuant to Chapter 494, Florida Statutes, having been issued license No. HB-592335611. Mid South has been and is conducting business in the State of Florida as a mortgage brokerage business at 1815 West 15th Street, Suite 8, Panama City, Florida 32407.
Persons Employed by Mid South
John Childers
From October 1983 until present, Childers has been employed at Mid South. Childers is President of Mid South and a 50 percent shareholder of Mid South. Childers is the chief executive officer in charge of running Mid South in Mississippi, Alabama, Georgia, Tennessee, and Florida.
Childers is not now, nor has he ever been, licensed pursuant to Chapter 494, Florida Statutes.
Although Childers explained to Carolyn G. Stanley, the designated Principal Mortgage Broker of Mid South, that she was in charge of the offices of Mid South, Childers assumed the responsibility of overseeing the mortgage brokerage business of Mid South, because Stanley did not have time to do so. In the event a borrower became angry because his interest rates were increased
above what was agreed to, it was Childers who would try to "work out a deal" with the borrower by reducing the points.
Ann King Beach
From on or about July 25, 1985, Ann King Beach was the Designated Principal Mortgage Broker of Mid South pursuant to Chapter 494, Florida Statutes, having license No. HB-16762. From on or about September 1, 1985, Ann King Beach ceased to be employed by Mid South.
Janie Cincotta
Cincotta was employed by Mid South in Pensacola, Florida, for two different periods of time. The first period of employment began on or about September 1985 and ended on or about February 1986. From on or about September 1985 through on or about February 1986, the Pensacola, Florida, office of Mid South was continuously open. Cincotta's second period of employment with Mid South began on or about October 1986 and ended on or about March 1987. From on or about the end of October 1986 to on or about March 1987, the Pensacola, Florida, office of Mid South was continuously open.
Cincotta's job responsibilities included the same responsibilities as those of Linda Banquicio, described below, and more. Cincotta would send out the verifications, work up the Good Faith Estimate, type the application, answer the telephone, and interview the applicants. Childers was aware of Cincotta's job responsibilities. Cincotta was compensated by Mid South. Cincotta was not licensed pursuant to Chapter 494, Florida Statutes.
William D. Hughes
From on or about September 19, 1985, the Mid South office at 692 Heinberg Street, Pensacola, Florida, was licensed pursuant to Chapter 494, Florida Statutes, having license No. HB-17159. From on or about September 19, 1985, William D. Hughes was designated as the broker in full charge, control, and supervision of the Pensacola, Florida, office of Mid South. Hughes terminated his employment with Mid South on or about April 15, 1986. On or about April 1, 1986, Hughes informed Childers that he was terminating his employment with Mid South. By letter dated September 2, 1986, Mid South notified the Department that Hughes was no longer employed by Mid South.
On or about October 14, 1986, Hughes filed an Application for Registration as a Branch Office for the Pensacola, Florida, location of Mid South. On or about December 15, 1986, Hughes became the Designated Associate Broker at the branch office of Mid South, having license No. HT-9017. Said branch office was assigned license No. HL-1724. On or about April 1, 1987, Hughes notified the Department that he had terminated his employment with Mid South.
Although Hughes became licensed with the Department as the Designated Associated Broker at the Pensacola, Florida, branch office of Mid South, he never actually worked there in that capacity. During the second period of Cincotta's employment, Childers knew that Hughes was not working at the Pensacola, Florida, office of Mid South.
At the end of October or the beginning of November 1986, Childers told Cincotta that if Hughes received a telephone call, she was to respond that Hughes was not in. Thereafter, Childers would return the telephone call for
Hughes. The reason for the foregoing instructions was to prevent Mid South from getting "into trouble," because Mid South did not have a licensed broker in the Pensacola, Florida, office of Mid South.
Hughes received commissions only on the loans that he brought into Mid South. Hughes did not receive a commission on any other mortgage loan that was processed through the Pensacola, Florida, office of Mid South and which was considered to be a "house loan." There appear to have been two types of house loans on which Hughes did not receive commissions during his employment at Mid South. The first type was mortgage loans referred to Mid South from Source Mortgage wherein Source Mortgage shared a brokerage fee with Mid South. The other type of house loan involved borrowers who sought the services of Mid South, but did not initiate the mortgage loan process through either Hughes or Source Mortgage.
Kenneth E. Boles
From on or about November 20, 1985, Kenneth E. Boles was designated Principal Mortgage Broker of Mid South pursuant to Chapter 494, Florida Statutes, having license No. HB- 17651. From on or about July 24, 1986, Kenneth
E. Boles ceased to be employed by Mid South.
Linda Banquicio
Linda Banquicio began working in the Pensacola, Florida, office of Mid South from on or about June 13, 1986, to on or about August 22, 1986. Banquicio was employed at Mid South to answer the telephone, type, inform borrowers of the interest rates, provide loan application forms to borrowers, assist borrowers in filling out the loan applications, type the verification forms to be mailed out, and fill in the estimated closing costs on the Good Faith Estimate. Childers was aware of Banquicio's job responsibilities. Banquicio was not licensed pursuant to Chapter 494, Florida Statutes.
Carolyn G. Stanley
From on or about January 13, 1986, Carolyn G. Stanley was designated as Principal Mortgage Broker of Mid South pursuant to Chapter 494, Florida Statutes, having license No. HB- 16762. Stanley was employed as Principal Mortgage Broker of Mid South in Panama City, Florida. As Principal Mortgage Broker of Mid South, Stanley did not take any action to oversee the offices of Mid South other than the Panama City, Florida, office where she was employed, because Childers had assumed that responsibi1ity. From on or about July 8, 1987, Stanley ceased to be employed by Mid South.
Harold J. Larrieu, Jr.
Harold J. Larrieu, Jr., filed an application to act as broker at the Pensacola, Florida, office of Mid South on or about August 25, 1986, but he withdrew his application on or about September 9, 1986.
Advertisements of Mid South
On April 27, May 4, 11, 18, and 25, 1986, Mid South advertised fixed rate financing in the Pensacola News Journal without stating the address of Mid South or that Mid South was a licensed mortgage broker. On June 29 and July 6, 13, 20, 27, and August 24, 1986, Mid South advertised fixed rate financing in the Pensacola News Journal.
Lock-ins
During Cincotta's second period of employment, it was the practice of Mid South to lock-in interest rates for a period of sixty days. However, few, if any, of the mortgage loans would close within that sixty-day lock-in period.
Excessive Charges
The following charges incurred are in excess of the costs disclosed to the following borrowers at the time Mid South accepted the application with respect to said borrowers:
Borrower/cost | Amount disclosed at time deposit or application | Amount |
description | accepted | charged |
Michael A. Adam Discount/Origination Fee $2,384.00 | 2,460.00 | |
Appraisal | 200.00 | 225.00 |
Title Insurance | 476.80 | 500.00 |
Doc. Preparation | 0 | 200.00 |
Intangible tax | 119.20 | 123.00 |
Doc. Stamps | 89.40 | 92.25 |
Insurance | 64.84 | 246.00 |
Thomas E. Almon Discount/Origination Fees | 4,200.00 | 4,900.00 |
Recording | 15.00 | 25.00 |
Survey | 100.00 | 125.00 |
Pest Inspection | 10.00 | 15.00 |
Copy Fee | 0 | 6.00 |
Doc. Preparation | 0 | 200.00 |
Jimmy M. Avera Title Insurance | 425.00 | 496.60 |
R.E. Tax | 217.87 | 293.16 |
Survey | 150.00 | 225.00 |
Exp. Mail | 0 | 24.75 |
ASMT | 0 | 5.00 |
Doc. Preparation | 0 | 200.00 |
Gloria F. Bates Survey | 200.00 | 375.00 |
Title Insurance | 650.00 | 736.00 |
Darrell R. Bond Appraisal | 200.00 | 250.00 |
Title Insurance | 326.00 | 381.00 |
Pest Inspection | 25.00 | 40.00 |
Doc. Preparation | 0 | 200.00 |
Fed. Express | 0 | 12.50 |
Long Distance | 0 | 10.00 |
Randy K. Burelson Hazard Insurance | 0 | 210.00 | |
Survey | 83.00 | 150.00 | |
David K. Bush Appraisal | 175.00 | 200.00 | |
Title Insurance | 320.00 | 325.00 | |
Survey | 75.00 | 90.00 | |
Pest Inspection | 35.00 | 40.00 | |
Doc. Preparation | 0 | 200.00 | |
City/County Tax | 0 | 30.00 | |
State Tax | 0 | 40.00 | |
James H. Cameron Survey | 150.00 | 525.00 | |
Doc. Preparation | 0 | 200.00 | |
Recording Fees | 27.00 | 509.00 | |
Sharon L. Cook Appraisal | 125.00 | 200.00 | |
Title Insurance | 320.00 | 400.00 | |
Thomas Elder Discount/Origin Fees | 1,662.50 | 1,805.00 | |
Hazard Insurance | 0 | 326.00 | |
Doc. Preparation | 0 | 200.00 | |
Willie C. Mixon PMI Insurance | 370.58 | 670.12 | |
Hazard Insurance | 0 | 186.00 | |
Doc. Preparation | 0 | 200.00 | |
John W. Whalen Survey | 100.00 | 200.00 | |
Betty A. Wilson Pest Inspection | 25.00 | 40.00 | |
Appraisal | 0 | 250.00 | |
Credit Report | 0 | 35.00 | |
Document | Preparation | Fees |
In addition to receiving brokerage fees, Mid South received a document preparation fee in the following amounts involving the below-noted borrowers although there is no documentation to indicate that the document preparation fee was disbursed to a third party.
Borrower | Amount |
Michael A. Adams | $200.00 |
Thomas Almon | 150.00 |
Jimmy M. Avera | 200.00 |
Gloria F. Bates | 150.00 |
Darrell R. Bond | 150.00 |
Randy K. Burelson | 200.00 |
David K. Bush | 150.00 |
James H. Cameron | 150.00 |
Sharon L. Cook | 150.00 |
Thomas Elder | 200.00 |
Edward E. Jackson | 200.00 |
Willie C. Mixon | 150.00 |
Russell O. Paul | 200.00 |
John D. Reeder | 150.00 |
John W. Whalen | 150.00 |
Betty A. Wilson | 150.00 |
In the following mortgage loan transactions brokered by Mid South, the Closing Statement failed to disclose the name of the broker or co-broker paid.
Borrower | Amount of brokerage | fee | Actual recipient of brokerage fee |
Michael A. Adams | $2,460.00 | Mid South | |
Thomas E. Almon | 4,900.00 | unknown | |
Jimmy M. Avera | 584.00 | Alabama Federal | |
1,168.00 | Alabama Federal | ||
Gloria F. Bates | 1,840.00 | First Southern Savings | |
1,840.00 | Mid South | ||
Darrell R. Bond | 816.00 | First Southern Savings | |
816.00 | Mid South | ||
David K. Bush | 400.00 | First Southern Savings | |
400.00 | Mid South | ||
James H. Cameron | 2,000.00 | First Southern Savings | |
200.00 | Mid South | ||
Sharon L. Cook | 800.00 | First Southern Savings | |
800.00 | Mid South | ||
Willie C. Mixon | 494.00 | Source Mortgage | |
1,482.35 | Mid South and First Southern Savings | ||
Russell O. Paul | 424.00 | unknown | |
424.00 | unknown | ||
John W. Whalen | 646.65 | First Southern Savings | |
646.65 | Mid South | ||
431.10 | Source Mortgage | ||
Betty A. Wilson | 1,088.00 | First Southern Savings | |
1,088.00 | Mid South | ||
Edwards | Transaction | ||
Robert Edwards is a contractor who does remodeling, renovations, and room additions on residences. Edwards located a residence, which was run down and had been abandoned for two years but was in a nice neighborhood and on a beautiful wooded lot. The purchase price of the house was $19,000. With
$10,000 to $15,000 of renovations put into the house, it could have been sold for approximately $45,000 at a profit of between $11,000 to $16,000.
On or about early June 1986, Edwards called Mid South to inquire about the possibility of borrowing enough money to purchase and renovate the house. During that telephone conversation, an unidentified employee of Mid South told Edwards that he would have to discuss his proposal with Childers, but if his credit checked out, it would take from two to four weeks to close the loan.
In early July 1986, Edwards met with Childers to discuss his proposal. At that meeting, Childers reviewed the proposal and "said he thought it would fly, that it was a good idea." Edwards thereupon filled out a credit application, was given a loan application to complete, and was told by Banquicio to sign a blank Good Faith Estimate.
Subsequent to the early July 1986 meeting, Edwards completed the paperwork and informed Banquicio that he did not want to obtain an appraisal before he had qualified for the loan. Thereafter, Banquicio informed Edwards that Childers had indicated that Edwards should have the appraisal done because the loan looked good. In reliance on the foregoing representation, Edwards had an appraisal done on the residence on August 26, 1986, at a cost of $250.
On or about September 3, 1986, Edwards went to the Pensacola, Florida, office of Mid South to seek assistance in obtaining his mortgage loan, at which time Stanley provided him his first completed Good Faith Estimate. At that time Stanley informed Edwards that all he had to do was wait for the closing and that Mid South would be getting in contact with him. However, contrary to Stanley's representation, Mid South never contacted him, so he began calling the Mobile, Alabama, office of Mid South, but was unable to speak to Childers. Shortly thereafter, the residence was sold to another purchaser, because Edwards had been unable to obtain his mortgage loan. At no time did Mid South inform Edwards that he did not make enough money to get the mortgage loan.
Suhrheinrich Transaction
During late June or early July 1986, Robert Suhrheinrich contacted Banquicio, an employee of Mid South, by telephone in order to apply for a mortgage loan. During the telephone conversation, Banquicio agreed to try to obtain a mortgage loan for Suhrheinrich. Prior to July 13, 1986, Suhrheinrich obtained a letter from Childers. The letter indicates that Suhrheinrich was eligible for a 15 year mortgage loan at an interest rate of 9 3/4 percent. Subsequent to receiving that letter, Suhrheinrich obtained from Mid South a Good Faith Estimate that indicated the interest rate was now 9 percent, a Request for Verification of Employment dated July 24, 1986, and a document entitled Loan Package Instructions, which states, in part, "If you have any questions regarding the information requested, please feel free to call John Childers at (904) 438-9760." During this period, Childers indicated to Suhrheinrich that he could obtain 90 percent loan to value.
Thereafter, sometime in October 1986, Childers contacted Suhrheinrich and indicated that the mortgage loan was ready to close, but that the interest rate was about 10 percent and that he could give Suhrheinrich a loan of only 80 percent to value. Prior to the conversation wherein Suhrheinrich was told that the loan was ready to close, Suhrheinrich was never informed that the interest rate might be changed from the 9 percent figure disclosed to him on the Good Faith Estimate, or that a 90 percent loan to value could note be obtained.
As a result of Mid South's increasing the interest rate to approximately 10 percent, Suhrheinrich did not obtain the mortgage loan because at that rate it did not pay to refinance his first and second mortgages. Further, the 80 percent loan to value offered by Mid South did not meet Suhrheinrich's needs. In reliance on the representation Mid South made to Suhrheinrich, he spent a total of $400 on an appraisal, survey, and termite inspection.
Ward Transaction
On or about August 3, 1986, Mary Ward contacted Banquicio, an employee of Mid South, by telephone and inquired about obtaining a mortgage loan. On or about August 21, 1986, pursuant to Banquicio's request, Ward went to the Pensacola, Florida, office of Mid South and filled out various documents in order to obtain the mortgage loan. During September 1986, Ward went to the Pensacola, Florida, office of Mid South to obtain her paperwork, because she had not been able to speak with Childers to find out whether she had been approved. Sitting in the office was an individual whom Banquicio identified as being Mid South's broker. Although Ward requested to speak to the individual identified as being Mid South's broker, Banquicio did not accommodate said request.
Meinscher Transaction
On or about August 18, 1986, Alacia Meinscher contacted Banquicio, an employee of Mid South, to obtain a mortgage loan. Banquicio agreed to attempt to obtain a mortgage loan for Meinscher. Meinscher filled out an application and, pursuant to Banquicio's request, signed a blank Good Faith Estimate. Approximately a week after filling out the application, Childers informed Meinscher the amount of the points that she would be charged and that the interest rate would be 9 3/4 percent. Childers and Banquicio informed Meinscher that it would take approximately twenty-one days for a determination as to whether Meinscher could obtain a mortgage loan. After waiting approximately sixty days for an indication from Mid South as to whether Meinscher could obtain a mortgage loan, Meinscher "gave up" on Mid South and went to another company.
Meyers Transaction
On or about October 10, 1986, Donald Meyers contacted Cincotta, an employee of Mid South, by telephone and inquired about the possibility of obtaining a $75,000 mortgage loan. During that conversation, Cincotta indicated that Mid South was offering an 8 1/2 percent fixed rate for thirty years. On or about October 28, 1986, Meyers met with Cincotta in the Pensacola, Florida, offices of Mid South and filled out a loan application form. At the October 28, 1986, meeting, Cincotta indicated that Mid South could obtain a mortgage loan for Meyers and she gave Meyers a Good Faith Estimate disclosing an interest rate of 8.5 percent and 2 points.
The interest rate on the Good Faith Estimate has since been altered to read 9.5, whereas it originally was 8.5 when the document was prepared.
At the October 28, 1986, meeting, Cincotta represented that, unless there was some unforeseen situation, the mortgage loan could close within 30 to
60 days. Cincotta locked in Meyers' mortgage loan for 60 days at 8 1/2 percent and 2 points. After the 60 day lock-in expired, Cincotta did not relock Meyers' rate, because the practice was that, once the loan had been submitted to
Childers, Childers handled the lock-ins if they expired. On or about November 1986, Meyers received a second Good Faith Estimate Which indicated an interest rate of 8.5 percent and 2 points.
On or about February 17, 1987, Meyers went to the offices of O. Gwen King for the closing. At the closing, the loan documents shows an interest rate of 9 1/2 percent with 2 1/2 points. At the closing, Meyers, by telephone, spoke to Childers who indicated that the loan of 8 1/2 percent plus 2 points was not available, but that he could lower the points on the 9 1/2 percent loan. After further discussions with Childers, Meyers left the February 17, 1987, meeting without closing.
On or about April 7, 1987, Meyers requested by letter that his loan file (including the loan application, credit report, and appraisal) be returned to him. Meyers never received a response to his letter of April 7, 1987. In reliance on the representation made to Meyers, he spent $225 on an appraisal.
Gillis Transaction
On or about November 10, 1986, James G. Gillis called Mid South about obtaining a mortgage loan and spoke with Cincotta, an employee of Mid South. On or about November 12, 1986, Gillis met with Cincotta who agreed to try to obtain a mortgage loan for Gillis. At the meeting with Cincotta on November 12, 1986, Gillis obtained a Good Faith Estimate which showed the interest rate to be 9 percent. Gillis declined to lock-in the 9 percent interest rate at that time, because Cincotta indicated her belief that the rates were coming down. Cincotta estimated that it would take between four and six weeks to close the mortgage loan.
The Advance Disclosure Statement-Fixed Rate Mortgage Loan dated December 29, 1986, which indicates an interest rate of 9 percent and 2 points, was blank when it was signed by Gillis. On or about January 7, 1987, Cincotta locked Gillis in at the rate of 8 1/4 percent and 2 points. Cincotta indicated to Gillis that he was locked in until the mortgage loan closed.
On or about March 24, 1987, Childers contacted Gill and indicated that he was ready to close at an interest rate of 8 3/4 percent and 3 points. In response, Gillis requested that he be given 8 1/4 percent with 2 points as agreed to on the Good Faith Estimate. On or about March 26, 1987, Childers and Gillis engaged in negotiations with regard to the mortgage loan but were unable to reach agreement. After the 60 days lock-in expired, Cincotta did not relock Gillis because the practice was that, once the loan had been submitted to Childers, Childers handled the lock-ins if they expired.
By letter dated April 7, 1987, Gillis requested return of his appraisal, survey, credit report, and pest inspection, but did not receive any of said documents back. In reliance on the representations made by Mid South, Gillis spent $225 on an appraisal, $30 on a pest inspection, and $80 on a maintenance agreement.
Mock Transaction
On or about early January 1987, Jewel and George Mock received a Rate Bulletin put out by Mid South dated January 2, 1987. The Rate Bulletin stated in part:
RATE FEES REMARKS
. . . ONE YEAR A.R.M.
15 Year 5.00 percent 2.00 + 1.00 Annual,
5 percent Life Cap
2.5 percent Margin NO NEGATIVE
In reliance on the Rate Bulletin, Mr. and Mrs. Mock, along with Gene Bogan, their realtor, went to the office of Mid South to obtain said A.R.M. loan on or about January 14, 1987, and spoke to Cincotta, an employee of Mid South. During the January 14, 1987, office visit, Cincotta agreed to attempt to obtain the A.R.M. loan for them. During the January 14, 1987, office visit, the Mocks were not told that the A.R.M. could become unavailable.
Subsequent to the January 14, 1987, office visit, Mr. and Mrs. Mock received a Regulation Z Disclosure Statement which indicated that the Annual Percentage Rate of their mortgage loan was 9.399 percent. Mrs. Mock contacted Cincotta about the 9.399 percent on the Disclosure Statement. In response, Cincotta indicated the form was just a "general disclosure." Although Mr. and Mrs. Mock signed and returned the Disclosure Statement, they still were under the impression that they had qualified for the A.R.M.
On or about February 1987, Bogan informed Mr. and Mrs. Mock that the loan on the Disclosure Statement was not the same as the loan that Mr. and Mrs. Mock had applied for. Rather than giving the Mocks the A.R.M., the Disclosure Statement was for a fixed rate of 8 3/4 percent G.E.M. loan. During February or March of 1987, Childers contacted Bogan and when Bogan insisted that the Mocks be given the loan they applied for, Childers responded, "Well, nobody can give you that." Childers further stated that the A.R.M. in the Rate Bulletin was a "misprint."
On or about February 1987, Childers contacted Mr. Mock to inform him that the loan Mid South was obtaining for him was better because "the initial payments would be equivalent to somewhat less than five percent," and tried to persuade Mr. Mock to take the G.E.M. loan that Mid South was actually offering. During March or April 1987, Cincotta confirmed to Mr. Mock that the A.R.M. was not available. The A.R.M. would have been a better mortgage than the G.E.M. loan that was actually offered because, among other things, it would more quickly reduce the principal amount of the mortgage debt.
In reliance on Mid South's representations that they were offering the A.R.M., Mr. and Mrs. Mock spent approximately $400 for brass fixtures, mirrors, and for having the rugs cleaned in the house they were seeking to purchase. Due to the failure of Mid South to give the Mocks the A.R.M., Bogan lost half of a
$7,000 commission.
CONCLUSIONS OF LAW
Based on the foregoing findings of fact and on the applicable legal principles, I make the following conclusions of law.
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sec. 120.57(1), Fla. Stat.
In administrative proceedings of this nature, the Department has the burden of proving its allegations by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). The nature of that burden is described as follows in Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983):
Clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
In the more recent case of Smith v. Dept. of Health and Rehabilitative Services,
522 So.2d 956 (Fla. 1st DCA 1988), the court quoted with approval the foregoing language from Slomowitz, and also noted:
"Clear and convincing evidence" is an intermediate standard of proof, more than the "preponderance of the evidence" standard used in most civil cases, and less than the "beyond a reasonable doubt" standard used in criminal cases. See State v. Graham, 240 So.2d 486 (Fla. 2d DCA 1970).
The conduct that forms the basis for these proceedings began in 1985 and continued until about April of 1987. Effective September 1, 1986, the Florida Legislature enacted significant amendments to Chapter 494, Florida Statutes. One of the more important aspects of the amendments is to give the Department the authority to fine a person who has violated the Mortgage Brokerage Act up to $5,000 for each offense. Compare Section 494.05, Florida Statutes (1985) with Section 494.052, Florida Statutes (1987). However, such fines may not be imposed for actions that occurred prior to the effective date of the amendments to the Mortgage Brokerage Act. See AAA Guaranteed Mortgage, Inc. v. Department of Banking and Finance, 517 So.2d 761 (Fla. 2d 1987).
Brokering Without a License
Sections 494.04(1), Florida Statutes (1985), and 4494.093(1), Florida Statutes (1987), provide that a person may not act as a mortgage broker in this state without a mortgage brokerage license. Section 494.092(3), Florida Statutes, states, with emphasis added:
"Mortgage broker" means any person not exempt under s. 494.03 who for compensation or gain,
or in the expectation of compensation or gain, either directly or indirectly makes, negotiates, acquires, sells, or arranges for or offers to make, negotiate, acquire, sell, or arrange for, a mortgage loan or mortgage loan commitment. This subsection shall not apply to transactions involving the sale or purchase of notes or bonds secured by mortgages which are subject to registration by the department.
The evidence is overwhelming that various persons employed by Mid South acted as mortgage brokers in this state without a license. Childers assumed the responsibility of overseeing the operations of Mid South and, accordingly, acted as the de facto Principal Mortgage Broker of Mid South, despite the fact that he knew that supervision of the various offices of Mid South was Stanley's responsibility. Furthermore, when interest rates were raised on prospective borrowers, thus breaching the prior agreements that Mid South had entered into, Childers would endeavor to renegotiate the terms of the mortgage loan. Specific examples of Childers' negotiating or offering to make mortgage loans directly with prospective borrowers include the Edwards transaction, the Suhrheinrich transaction, the Meinscher transaction, the Meyers transaction, the Gillis transaction, and the Mock transaction. In fact, mortgage loan documents supplied by Mid South encouraged borrowers to contact Childers.
Not only did Childers have direct contact with prospective borrowers as a mortgage broker, he also had indirect contact through unlicensed brokers such as Banquicio and Cincotta, because he was fully aware of their job responsibilities. Furthermore, Childers was aware that there were periods of time when there was no broker present in the Pensacola, Florida, office of Mid South. For example, although Hughes terminated his employment with Mid South on April 15, 1985, Banquicio continued to work at the Pensacola, Florida, office until August 22, 1986. During this entire period, Mid South continued to advertise mortgage loans in the Pensacola News Journal. Additionally, from October 1986 through April 1987, no broker was present at the Pensacola, Florida, office of Mid South, which fact Childers sought to cover up. Based upon the foregoing, the evidence is overwhelming that Childers directly and indirectly acted as a mortgage broker in this state without a license in violation of Section 494.04(1), Florida Statutes (1985), and 494.093(1), Florida Statutes (1987).
The foregoing course of conduct by Childers warrants the imposition of the most severe penalty authorized by the statute; namely an administrative fine against Childers in the amount of $5,000.00. (Childers does not have a license that can be suspended or revoked.)
Unlawful Compensation
Section 494.08(4)(b), Florida Statutes, makes it unlawful for any person to pay any commission, bonus, or fee to any unlicensed person in connection with arranging for, negotiating, selling, or purchasing a mortgage loan. Pursuant to Sections 494.05(1)(g) , Florida Statutes (1985), and 494.055(1)(q), Florida Statutes (1987), various enumerated disciplinary actions may be taken for violations of the Mortgage Brokerage Act.
As discussed above, Childers acted as an unlicensed mortgage broker on behalf of Mid South. The facts in this case also reveal that Cincotta and Banquicio acted as unlicensed mortgage brokers on behalf of Mid South by dealing with prospective clients and doing such things as informing them of the interest rates available, informing them as to closing costs, and entering into agreements to obtain mortgage loans for prospective clients. Childers, Cincotta, and Banquicio were all compensated by Mid South. Based upon the foregoing, Mid South has violated Section 494.08(4), Florida Statutes, and Section 494.05(1)(g), Florida Statutes (1985), with respect to Childers, Cincotta, and Banquicio. In addition, Mid South has further violated Section 494.08(4), Florida Statutes, and Section 494.055(1)(q), Florida Statutes (1987), with respect to Childers and Cincotta.
The foregoing course of conduct by Mid South warrants the imposition of the most severe penalty authorized by the statute; namely the revocation of Mid South's license pursuant to Section 494.05(2) and (3), Florida Statutes (1985), and Sections 494.052(1) and 494.055(2), Florida Statutes (1987), and the imposition of an administrative fine against Mid South in the amount of
$5,000.00.
Operating Office Without Broker
Sections 494.04(11), Florida Statutes (1985), and 494.0393(2), Florida Statutes (1987), provide that each brokerage office must be under the full charge, control, and supervision of a broker on a full-time basis. Pursuant to Sections 494.05(1)(g), Florida Statutes (1985), and 494.055(1)(q) , Florida Statutes (1987), various enumerated disciplinary actions may be taken for violations of the Mortgage Brokerage Act.
As found in the findings of fact, from approximately April 15, 1986, until August 22, 1986, and again from October 1986 through April 1987, the Pensacola, Florida, office of Mid South operated without having a broker in charge on a full-time basis in violation of Sections 494.04(11) and 494.05 (1)(g) , Florida Statutes (1985), and Sections 494.0393 (2) and 494.055(1)(q), Florida Statutes (1987). This course of conduct also warrants the revocation of Mid South's license and the imposition of an additional administrative fine against Mid South in the amount of $5,000.00.
Advertisements of Mid South
Rule 3D-40.010(2) and (4), Florida Administrative Code, provides that a mortgage broker must indicate in advertising said broker's office address and specify that it is a licensed mortgage broker.
As Mid South advertised on April 27, May 4, 11, 18, and 25, 1986, fixed rate financing without stating the address of Mid South or that Mid South was a licensed mortgage broker, Mid South has acted in violation of Rule 3D- 40.010(2) and (4), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes (1985). This violation provides yet a further basis for the revocation of Mid South's license, consistent with Section 494.05(2) and (3), Florida Statutes.
Excessive Charges
Section 494.08(5), Florida Statutes (1985), provides that no person shall accept an application for a mortgage loan without delivering to the borrower a statement in writing setting forth the total maximum costs to be
charged, incurred, or disbursed In connection with processing and closing the mortgage loan. As itemized in the findings of fact, on numerous occasions Mid South failed to set forth the maximum costs that a borrower would incur in obtaining a mortgage loan. Additionally, Mid South failed to disclose any costs to Edwards and Meinscher at the time their application was received.
Accordingly, Mid South has acted in violation of Sections 494.08(5) and 494.05(1)(g) , Florida Statutes (1985). This violation provides yet a further basis for the revocation of Mid South's license, consistent with Section 494.05(2) and (3), Florida Statutes (1985).
Document Preparation Fees
Rule 3D-40.008(1), Florida Administrative Code, provides that, in addition to fees or commissions provided for in Section 494.08(3), Florida Statutes, loan closing costs or expenses incidental to processing and closing the mortgage loan transaction may be charged and collected provided that they are supported by an actual expenditure Mid South often charged from $150.00 to
$200.00 for document preparation fees which were not disbursed to a third party in violation of Rule 3D-40.008(1), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes (1985). This violation provides yet a further basis for the revocation of Mid South's license, consistent with Section 494.05(2) and (3), Florida Statutes (1985).
Closing Statements
Rule 3D-40.008(10), Florida Administrative Code, provides that all brokerage fees to other brokers disbursed from the loan proceeds shown on the closing statement shall reflect the name of the broker or co-broker paid. Mid South often failed to disclose on Closing statements the broker and co-broker paid, in violation of Rule 3D-40.008(10), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes (1985). This violation provides yet a further basis for the revocation of Mid South's license, consistent with Section 494.05(2) and (3), Florida Statutes (1985).
Misrepresentation, Negligence, Incompetence
Section 494.05(2), Florida Statutes (1985), provides that a license may be revoked ". . . if the licensee demonstrates by a course of conduct negligence or incompetence in performing any act for which he is required to hold a license under this act. . ." Section 494.055(1)(b), Florida Statutes (1987), provides that misrepresentation, negligence, or incompetence in any mortgage financing transaction shall constitute grounds for disciplinary action pursuant to Section 494.052, Florida Statutes (1987).
In each of the transactions labeled in the bindings of fact as the Edwards transaction, the Suhrheinrich transaction, the Meinscher transaction, the Meyers transaction, the Gillis transaction, and the Mock transaction, Mid South engaged in misrepresentation, negligence, or incompetence in violation of Section 494.055(1)(b), Florida Statutes (1987). The repeated episodes of similar conduct are also sufficient to demonstrate a course of conduct of negligence or incompetence within the meaning of Section 494.05(2), Florida Statutes (1985). The facts also show that Childers was directly involved in at least some significant aspects of each of the six transactions mentioned above, and that his involvement in each transaction constituted misrepresentation, negligence, or incompetence in violation of Section 494.055(1)(b), Florida Statutes (1987). These violations warrant the imposition of an additional
$5,000.00 administrative fine against Childers and an additional $5,000.00
administrative fine against Mid South. These violations also constitute a further basis for the revocation of Mid South's license.
False Rate Bulletin
Section 497.08, Florida Statutes (1987), provides that no person shall advertise, print, display, publish, distribute, telecast, or broadcast or cause or permit to be advertised, printed, displayed, published, distributed, televised, or broadcast, in any manner, any statement or representation with regard to the rates, terms, or conditions pertaining to the making, negotiating, or sale of loans which is false, misleading, or deceptive. Mid South printed, or caused to be printed, a Rate Bulletin offering a 15 year A.R.M. beginning at a rate of 5 percent in violation of Section 494.08, Florida Statutes (1987), because said loan was not in fact available. Because the facts related to the offering of the 15 year A.R.M. form part of the basis for imposing the last above-mentioned administrative fine, it does not appear to be appropriate to impose an additional administrative fine based on this violation. This violation, is, however, further grounds for the revocation of Mid South's license.
Principal Broker
Pursuant to Section 494.055(3), Florida Statutes (1987), the principal mortgage broker shall be subject to the disciplinary actions specified In Section 494.052, Florida Statutes (1987), for violations of Section 494.055(1), Florida Statutes, by employees in the course of employment with the mortgage brokerage business. The principal mortgage broker shall only be subject to suspension or revocation for employee actions if there is a pattern of repeated violations by employees or the principal mortgage broker has knowledge of the violations. See also Dreyer v. Florida Real Estate Commission, 370 So.2d 95,
100 (Fla. 4th DCA 1979) (which states that the broker has a duty to supervise brokerage activity).
It is clear from the facts in this case that Stanley is subject to disciplinary action because of the pattern of repeated violations of the employees of Mid South and because of her knowledge that Childers had assumed the role of attempting to ensure that Mid South was in compliance with the Mortgage Brokerage Act. Stanley did not fulfill her obligation to supervise the mortgage brokerage business of Mid South as required by Section 494.055(3), Florida Statutes (1987).
Stanley is primarily guilty of nonfeasance rather than malfeasance. Accordingly, although revocation is within the range of permissible penalties, it would be more appropriate pursuant to Section 494.052(3), Florida Statutes (1987), to place her on probation for a period of three years under the condition that she will not act as a principal mortgage broker, designated associated mortgage broker, or in any way supervise the operation of, or be responsible for the supervision of, a person or an office engaged in the business of acting as a mortgage broker pursuant to Chapter 494, Florida Statutes.
The Cease and Desist Orders Against Childers and Cincotta
Pursuant to Section 494.072(1), Florida Statutes (1987) the Department has the authority to issue a cease and desist order against any person whenever there is reason to believe that the person is violating, has violated, or is
about to violate any of the provisions of the Mortgage Brokerage Act or of the rules of the Department.
It is clear from the facts in this case that both Childers and Cincotta have acted as mortgage brokers without being licensed. For that reason alone it is appropriate for the Department to issue a cease and desist order against Childers and Cincotta.
The Cease and Desist Order Against Mid South
Pursuant to Sections 494.072(2), Florida Statutes (1985), and 494.072(1), Florida Statutes (1987), the Department has the authority to issue a cease and desist order whenever there is reason to believe that a mortgage broker is violating, has violated, or is about to violate any of the provisions of the Mortgage Brokerage Act or of the rules of the Department.
From approximately April 15, 1986, until August 22, 1986, and again from October 1986 through April 1987, the Pensacola, Florida, office of Mid South operated without having a broker in charge on a full-time basis in violation of Section 494.04(11), Florida Statutes (1985), and Section 494.0393(2), Florida Statutes (1987). Inasmuch as Mid South has operated without having its Pensacola, Florida, office under the charge, control, and supervision of a broker on a full-time basis, it is appropriate for the Department to issue a cease and desist order against Mid South.
Based upon all of the foregoing, it is recommended that the Department issue final orders in these cases to the following effect:
In DOAH Case No. 87-3299
Incorporating the terms of the stipulation and consent agreement entered into between the Department and William D. Hughes;
Placing Carolyn G. Stanley on probation for a period of three years under the condition that she will not act as a principal mortgage broker, designated associated mortgage broker, or in any way supervise the operation of, or be responsible for the supervision of, a person or an office engaged in the business of acting as a mortgage broker pursuant to Chapter 494, Florida Statutes;
Revoking the license of Mid South Mortgage Corporation to act as a registrant pursuant to Chapter 494, Florida Statutes;
Fining John Childers a total of $10,000.00; and
Fining Mid South Mortgage Corporation a total of $15,000.00.
In DOAH Case No. 87-3300
Entering a cease and desist order against John Childers and Janie Cincotta ordering said persons to cease and desist from any and all present and future violations of the provisions of Chapter 494, Florida Statutes, or the rules duly promulgated by the Department with respect thereto, more
specifically, but not by way of limitation from, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly making, negotiating, acquiring, selling, or arranging for, or offering to make, negotiation, acquire, sell, or arrange for, a mortgage loan or mortgage loan commitment.
In DOAH Case No. 87-3301
Entering a cease and desist order against Mid South Mortgage Corporation ordering said mortgage broker to cease and desist from any and all present and future violations of the provisions of Chapter 494, Florida Statutes, or the rules duly promulgated by the Department with respect thereto, more specifically, but not by way of limitation from, operating a mortgage brokerage office in the state of Florida without having a duly licensed broker in full charge, control, and supervision of said office on a full-time basis.
DONE AND ENTERED this 28th day of July, 1988, at Tallahassee, Florida.
MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parlay
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 28th day of July, 1988.
APPENDIX TO RECOMMENDED ORDER
IN CASE NOS. 87-3299, 87-3300, & 87-3301
The following are my specific rulings on all of the proposed findings of fact submitted by all parties.
Findings proposed by Petitioner
All proposed findings of fact submitted by the Petitioner have been accepted and Incorporated into the findings of fact in this recommended order, except as specifically noted below:
Paragraphs 1, 2, 3, and 4: The findings proposed in these paragraphs have been omitted from the findings of fact because they involve primarily procedural or introductory details. (Most of this information has been included in the introduction to the recommended order.)
Paragraph 5: The findings proposed in this paragraph have been omitted as unnecessary subordinate details.
Paragraph 50: Rejected as Irrelevant.
Paragraph 51: Rejected a Irrelevant or as subordinate and unnecessary details.
Paragraphs 141, 142, and 143: Rejected as subordinate and unnecessary details (I have found that the A.R.M. would have been a better mortgage than the G.E.M.)
Findings proposed by Respondents
(The Respondents did not submit any proposed findings.)
COPIES FURNISHED:
John Childers, President
Mid South Mortgage Corporation
955 Downtowner Boulevard, Suite 105
Mobile, Alabama 36609
Ms. Carolyn G. Stanley
Mid South Mortgage Corporation
955 Downtowner Boulevard, Suite 105
Mobile, Alabama 36609
Ms. Janie Cincotta 2829 Village Circle
Pensacola, Florida 32504
Mr. William D. Hughes 4347 Burton Wood Court Pensacola, Florida 32504
Paul C. Stadler, Jr., Esquire Assistant General Counsel Office of the Comptroller
The Capitol, Suite 1302 Tallahassee, Florida 32399-0350
Honorable Gerald Lewis Comptroller, State of Florida The Capitol
Tallahassee, Florida 32399-0350
| Issue Date | Proceedings |
|---|---|
| Jul. 28, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Aug. 31, 1988 | Agency Final Order | |
| Jul. 28, 1988 | Recommended Order | Addresses numerous issues regarding disciplinary action based on multiple violations of the mortgage brokerage statutes |
ALTERNATE MORTGAGE CORPORATION vs DIVISION OF FINANCE, 87-003299 (1987)
ROY L. MCCUTCHEON vs. OFFICE OF THE COMPTROLLER, 87-003299 (1987)
DAVE TAYLOR vs DEPARTMENT OF BANKING AND FINANCE, OFFICE OF THE COMPTROLLER, 87-003299 (1987)
DIVISION OF REAL ESTATE vs SHERIN V. REYNOLDS, 87-003299 (1987)
DIVISION OF FINANCE vs WHITE PINE RESOURCES, INC., 87-003299 (1987)
