STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
STATE OF FLORIDA, DEPARTMENT )
OF BANKING AND FINANCE, )
)
Petitioner, )
)
vs. ) CASE NO. 89-5187
) INLET MORTGAGE COMPANY, LTD., ) and JOHN DAVIS, )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on June 8, 1990, in Tallahassee, Florida.
APPEARANCES
For Petitioner: Elise M. Greenbaum, Esquire
Office of the Comptroller
400 West Robinson Street, Suite 501 Orlando, Florida 32801
For Respondent: John O. Williams, Esquire
Renaissance Square
1343 East Tennessee Street Tallahassee, Florida 32308
STATEMENT OF THE ISSUES
The Respondents have been charged with multiple violations of Chapter 494,
(1987), the Florida Mortgage Brokerage Act, and administrative rules promulgated pursuant to the act.
The violations, described in an amended administrative complaint dated April 16, 1990, are as follows:
Rule 3D-40.006(5), F.A.C.: Respondents failed to issue a statement signed by both parties, when receiving a deposit on a mortgage loan, regarding disposition of the deposit and other matters.
Section 494.08(10), F.S. and Rule 3D-40.091(2), F.A.C.: Respondents failed to provide a written statement with a summary of limits and conditions for recovery from the Mortgage Broker Guaranty Fund.
Section 494.055(1)(b), F.S. and Rule 3D-40.008(1), F.A.C.: Respondents assessed fees for credit reports, phone calls, appraisals and courier services, which fees were not supported by the files.
Section 494.055(1)(0), F.S. and Rule 3D-40.006(4), F.A.C.: The department had to issue a subpoena for compensation records.
Section 494.055(1)(g) and (p), and Section 494.08(5), F.S.: Borrowers were required to pay higher closing costs than were disclosed on the good faith estimate form.
Section 494.08(5), F.S.: Respondents failed to secure executed modified mortgage loan applications from the borrowers or to return excess monies to the borrowers.
Section 494.08(5), F.S. and Rule 3D-40.091(1), F.A.C.: Respondents accepted deposits from loan applicants but failed to obtain executed mortgage broker agreements which would disclose the cost of the loans.
Sections 494.055(1)(b) and (g), and Sections 494.093(3)(a), (b), (c), and (4), F.S.: Respondents failed to disclose that they would retain both origination fees and discount points as their compensation, and failed to disclose compensation received from the lender in addition to brokerage fees assessed the borrowers on the closing statements.
Section 494.055(1)(b), F.S., Section 494.08(5), F.S. and Sections 494.093(3)(a), (b), (c) and (4), F.S.: Respondents collected a servicing release fee from the borrowers when the Respondents were not the lender, and failed to disclose the collection.
Section 494.055(1)(e), F.S. and Rule 3D-40.006(b)(a), F.A.C.: Respondents failed to maintain an escrow account.
PRELIMINARY STATEMENT
On December 8, 1988, the Florida Department of Banking and Finance, Division of Finance issued its notice of intention to impose administrative penalties and administrative charges and complaint with notice of rights. The complaint charged that an examination of Respondents' affairs for the time period February 1988 through June 1, 1988, revealed a series of violations of Chapter 494, F.S. and the agency's rules.
The Respondents requested a hearing, and after referral to the Division of Administrative Hearings, the hearing was scheduled for December 15, 1989.
The hearing was cancelled, and the case was placed in abeyance, when the parties agreed to a follow-up examination of Respondents' files. After the examination, an amended complaint was filed and the formal hearing was rescheduled. Respondents contested the allegations of the amended complaint but had no objection to Petitioner's motion for leave to amend.
At the hearing Petitioner presented the testimony of Timothy J. Wheaton and Barbara Janet Hutchersien, both financial examiner analysts with the Division of Finance. Testimony of Ronald McCurdy, Lee Barnes, Betty Alexander, Raymond Howell, Gerald Stewart, and Roger Krueger was presented by deposition.
Petitioner's twelve exhibits were received in evidence without objection.
Respondent, John Davis, testified in his own behalf and presented twelve exhibits, including the deposition testimony of Richard Sneed. Exhibits #5 and #6, written character references, were rejected as uncorroborated hearsay and irrelevant. Ruling on exhibits #8-12, legislative history of Chapter 494, F.S. and some Internal Revenue Service regulations, was taken under advisement after objection by Petitioner. Those exhibits are rejected as immaterial. The sections of Chapter 494, F.S. (1987) at issue are not ambiguous. Exhibits #8-11 include incomplete legislative committee notes and a tape of comments by a subcommittee. The IRS regulations (Exhibit #12) could be officially recognized, as provided in Section 90.202(3) or (5), F.S., but the regulations are excerpted from a larger publication and bear no effective date.
Petitioner requested a portion of the transcript, the testimony of Jan Hutchersien and of John Davis. This was filed on July 16, 1990. The parties' proposed recommended orders were filed on July 26, 1990. Rulings on the proposed findings of fact are included in the attached appendix.
FINDINGS OF FACT
Inlet Mortgage Company, Ltd. ("IMC") is a mortgage brokerage business operating under license #HB65002147500. Its place of business is 700 Virginia Avenue, Suite 105, Ft. Pierce, Florida 34982.
John Davis is the principal mortgage broker of Respondent IMC, operating under license #HA246700273. He has been licensed in Florida since approximately 1987, and opened his business in February 1988.
As authorized by Section 494.065(1), F.S. (1987), the Department of Banking and Finance ("department") conducted an examination of the affairs of the Respondents for the time period February 1988 through June 1, 1988. The examination was completed on July 5, 1988, with a written report. At the time of the examination Respondents had closed only four loans and had another six in progress.
The audit was conducted because a loan processor working for IMC had applied for her mortgage broker license, and her application seemed to imply that she was already practicing mortgage brokering. The audit cleared up this question and the processor was not found to be operating improperly. However, Timothy Wheaton, the department examiner, found other violations by IMC.
When an audit or review is conducted by the department, the agency staff first interviews the person in charge to explain the review and to learn about the company. The staff then looks at the licenses, reviews files of closed and active loans, and examines books and accounts, payroll records, and the like.
Generally, a sampling of loan files is selected from the broker's loan log, but in this first review all loans were reviewed, as so few existed.
The staff writes a preliminary report and conducts an exit interview to let the broker know its findings. Later, a formal report is completed and provided to the broker, who has thirty days to respond.
Timothy Wheaton conducted his review of IMC and John Davis at the company office in Ft. Pierce on June 3, 1988 and June 7, 1988.
At some point on June 3rd, Wheaton was reviewing compensation records to determine how the broker, his partner and the loan processor were paid. Davis had checkbooks available, but the accountant had not prepared his books as the office had just opened. Wheaton had questions as to whether the checkbooks were all that was available; when he asked for the payroll records, Davis told him he would have to subpoena them. Wheaton returned on Monday with a subpoena and was given the same records as before.
Davis admits that he made the demand for the subpoena. He was piqued because he was very busy when the audit staff arrived, and when he suggested they return later, he felt they wrongfully impugned his motives and accused him of hiding something.
Respondent Davis has admitted to several "technical" violations or oversights in the loan files at the time of the first review.
A summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund was not being provided, but has been provided since the first audit.
Deposits for credit report, appraisal fees and other costs were collected from the borrowers, but the files did not include a statement, signed by the borrowers, describing disposition of the funds in the event that the loan was not consummated, or the term of the agreement. After the first audit Davis has provided such a form statement and has included it in each file.
On three closed loans, and one that was still pending, the files did not include documentation to support minimal (i.e., $25.00, $10.00, $6.56) fees for phone calls and courier fees, or fees were collected which exceeded the documentation in the file. Davis explained that these are charges made by the closing attorney, and the files now document those expenses. The difference between what was collected for a credit report and what was spent was returned to the borrower. (For example, $20.30 was returned to borrower, G. Stewart).
In three loans closed at the time of the first audit, Davis and IMC received as compensation both the origination fee and a portion of the discount points. In the McCurdy loan, IMC received its 1 percent origination fee ($600.00), plus one half of the 1 percent discount fee ($300.00). In the Alexander loan, IMC received its 1 percent origination fee ($469.00), plus a .75 percent discount fee ($351.75). In the Stewart loan, IMC received its 1 percent origination fee ($612.00), plus 1/2 percent discount fee ($306.00).
In each case, the Good Faith Estimate form provided to the borrowers disclosed the fees separately and did not break out which portion of the loan discount would be paid to the lender and which portion would be paid to IMC.
The origination fee is sometimes called the broker's fee, although some banks also collect the fee when a mortgage broker is not involved. Discount points are a one-time payment to a lender to increase its yield on the loan. They are a percentage of the loan, paid up front, to reduce the interest rate over the term of the loan. These are distinctly different forms of charges to the borrower.
Davis claims that he explained orally to each borrower how much compensation he would receive. The borrowers do not remember the specifics of that explanation, but rather consider the total origination fee and discount fee as their cost of the loan. They knew that the broker was going to be compensated for his services and understood that compensation would come from those fees in some unspecified manner.
Davis claims that he checked with some lenders who told him that it was standard practice for part of the broker's compensation to be called a "discount" fee. He considered it a tax advantage to the borrower, as discount fees could be deductible, just as interest is deductible.
During the audit, Davis discussed his compensation practice with the agency staff, who explained that, whatever it is called, the broker's compensation had to be fully disclosed to the borrower at the time of application on the Good Faith Estimate form.
Between June 3rd and June 7th, Davis attempted to redisclose his compensation to the borrowers, but this resulted in unsigned disclosure forms in the file when the agency review staff returned on June 7th to complete the audit.
At the time of the first audit, Davis and IMC maintained an escrow account for the deposits received from applicant/borrowers for audit reports, appraisal fees and other costs.
Davis later closed his escrow account because he felt it was costing him money and because he did not consider the funds he received at the time of application to be escrow deposits. In most cases, the credit report and appraisal and other relevant services were ordered the same day as the loan application. Whether the loan was eventually consummated, the customer was still responsible for paying the charge if the services were provided. This is disclosed in a statement at the bottom of the Good Faith Estimate form and in a separate "Notice to Borrower", signed by the applicant which, since the first audit, is maintained in the loan file.
According to the Notice to Borrower, if the loan is cancelled or denied, and the services have not been performed, the funds will be returned to the customer, less any cancellation charge by the appraisal or credit firm. These funds are deposits.
When the escrow account was closed, Davis deposited the money for appraisals and credit report in his operating account. After services were rendered and an invoice received, he would pay the bill.
Barbara Janet (Jan) Hutchersien, conducted the department's second audit of IMC in January 1990. This review covered the period from July 1, 1988 through December 31, 1989.
John Davis provided the boxes of loans and bank records and loan log. The auditor used the logs to review a sample of loans from each lender with whom IMC works. The bank records were used to trace funds reflected in the loan files.
Ms. Hutchersien found, and noted in her examination report, that no escrow account was maintained, although deposits were received in a sample of loan applications.
In the Fishman loan, which closed on 4/11/89, closing costs were disclosed by IMC as $1,822.00 on the Good Faith Estimate form dated 1/12/89, yet those costs actually amounted to $2,075.00, disclosed at closing on the U.S. Housing and Urban Development (HUD) Settlement form, for a difference of
$253.00.
In determining consistency between a good faith estimate and actual closing costs, the agency staff looks at items which are predeterminable costs.
In the Fishman case, the estimate for survey was $225.00, but the actual cost was $400.00, due, according to John Davis, to an oddly-shaped lot.
In two loans financed by Greentree Mortgage Corporation, IMC received a substantial fee from the lender, which fee was not disclosed on the Good Faith Estimate form, on the HUD Settlement form, or anywhere in writing to the borrower. File documents call these fees "discount for pricing".
In the Meslin loan, closed on 8/11/89, the fee from the lender to broker was $432.00; in the Krueger loan, closed on 7/21/89, the payment was $820.00.
These paybacks are called "par plus pricing", a relatively new (within the last five years) form of loan pricing.
Par plus pricing allows a borrower who does not wish to pay cash at closing, but who would qualify for a higher interest rate in terms of monthly payments, to avoid paying discount points fee at closing. Instead, the lender pays the points to the broker, and the borrower gets a higher interest rate.
This is contrasted with the discount point system where the borrower pays cash points at closing in return for a lower interest rate.
Par plus pricing can work to the advantage to all parties: The borrower avoids a large cash outlay at closing, the lender enjoys a higher interest rate over the term of the loan, and the broker receives his money from the lender.
The borrower, however, should understand his options, including the option to pay cash at closing for a lower interest rate.
Davis did not disclose the payback from the lender in writing because that is the way he says he was told to handle the loan by Greentree's representative.
Davis told the borrowers that he was getting his money from the lender. He did not, however, explain that the borrower would be paying a higher interest rate in return, and Roger Krueger did not understand why his loan was at 10 1/4 percent, rather than 9 3/4 percent, which he thought was the going rate at the time of closing.
IMC also received funds from the lender in the Barnes loan, closed on 12/30/88. Cobb Financial Partners was the original lender, yet they paid IMC a service release fee ordinarily paid by one lender to another for release of servicing a loan.
Although the fee from Cobb to IMC was not disclosed in writing to the borrowers, the Barnes' were told that the fee for IMC's services would come from the lender, rather from them. They were told, and it is disclosed on the Good Faith Estimate form, and on the HUD Settlement Form, that Cobb Partners Financial was paid $900.00 (1.25 percent loan discount) by the borrowers. Of this, $810.00 was returned by Cobb to IMC.
John Davis concedes that Cobb, not IMC, was the lender and was not "comfortable" with how Cobb told him to handle his fee. He has not done business with Cobb since this loan and was simply trying to avoid having to charge his fee to Barnes, who had just arrived in town to become the newspaper editor.
The borrowers who were the subject of the files in which the agency found violations generally did business with Davis and IMC because they thought he would get the best deal for them. They were financially unsophisticated and trusted him to represent them. They understood that he was being paid for his services and felt that he should be paid. Except for Mr. Krueger, they were generally satisfied with their mortgage rates.
The mortgage broker's fiduciary responsibility is to the borrower, rather than the lender, although he must deal fairly and honestly with the lender. The service that the broker provides to the borrower is his knowledge and his ability to shop for the best product.
Par plus pricing and other mechanisms by which the broker receives his fee in whole or part from the lender are not considered by the department to be a violation of standards governing the practice of mortgage brokerage, so long as the customer is fully apprised of his options and is informed of the role of those payments in the product or service they are receiving.
The Barnes' and Kruegers clearly were not so apprised, nor does the record establish that the Meslins were informed, although they did not testify.
Categorizing brokerage fees or compensation as "discount points" is patently misleading, as discount points are used to buy down an interest rate. When the points are diverted instead to the broker, the consumer does not receive the loan for which he has paid.
John Davis admits certain technical violations, but unequivocally denies that he wilfully misled his customers or committed fraud. Since the second audit, he has restored his escrow account. He now discloses his compensation as brokers fees rather than discount points, and has learned how to disclose in writing the par plus pricing loans.
In considering certain violations as "technical", and in recommending a penalty in this case, the undersigned has considered Respondents' willingness to correct the errors addressed by the department and Respondents' inexperience at the time of the first audit. Although he was involved in banking, insurance, and accounting, John Davis had not practiced mortgage brokering before moving to Florida and starting his business. In his early practice, as evidenced by his own testimony, he was willing to rely on the advice of lenders, rather than to seek guidance from his licensing authority.
He misconceived his role as being jointly responsible to the borrowers and lenders with whom he worked, rather than a primary fiduciary duty to the borrowers, his clients.
Although the concealment of compensation as discount points was a willful misrepresentation, the record establishes a pattern of ignorance, albeit inexcusable, rather than fraud.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction in this proceeding pursuant to Section 120.57(1), F.S.
In license discipline cases such as this, the agency must prove the allegations of its complaint with evidence that is clear and convincing. Ferris
v. Turlington, 510 So2d 292, (Fla 1987).
As provided in Section 494.052, F.S., the department may revoke or suspend a license, place the licensee on probation subject to reasonable conditions, issue a reprimand and impose a fine for violations of Section 494.055, F.S.
Respondents are charged with violations of the following provisions of Chapter 494, F.S. (1987):
Grounds for disciplinary action.--
The following acts shall constitute grounds for which the disciplinary actions specified in s. 494.052 may be taken;
* * *
(b) Fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction;
* * *
(e) Failure to place, immediately upon receipt, any money, fund, deposit, check, or draft entrusted to him by a person dealing with him as a broker, in escrow with an escrow agent located and doing business in this state, pursuant to a written agreement, or to deposit said funds in a trust or escrow account maintained by him with a bank or savings and loan association located and doing business in this state, wherein said funds shall be kept until disbursement thereof is properly authorized;
* * *
(g) Failure to disburse funds in accordance with agreements;
* * *
Refusal to permit an investigation or examination of books and records, or refusal to comply with a department subpoena or subpoena duces tecum;
Consistently underestimating the maximum closing costs; or
Failure to comply with, or violation of, any other provision of this chapter.
* * *
494.08 Requirements and Prohibitions.--
* * *
(5) No person shall enter into a contract for mortgage brokerage services 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. The contract for mortgage brokerage services shall indicate the financing terms, interest rate, and loan origination fees which are
acceptable to the borrower. The maximum estimated costs may be expressed as a range of possible costs. In the event the total actual costs, excluding the mortgage brokerage fee, loan origination fee, and prepaid items, including taxes, hazard insurance, prepaid interest, and mortgage insurance, exceed the estimate by more than 10 percent or $100, whichever is greater, the broker shall be required to obtain a written agreement from the borrower acknowledging that although the borrower is under no obligation to conclude the transaction, the borrower has elected to do so notwithstanding the increase over estimated costs. This subsection shall apply only to brokerage agreements on loans to be secured by residential properties containing four or less units.
* * *
(10) Each deposit agreement entered into by a licensee or registrant shall include
a summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund. The department may prescribe by rule the form of each summary.
494.093 Prohibited practices.--
It is unlawful, and a violation of the provisions of this chapter, for any person;
* * *
In any practice or transaction or course of business relating to the sale, purchase, negotiation, promotion, advertisement, or hypothecation of mortgage transactions, including any transaction consummated by parties under the provisions of s. 494.03, directly or indirectly;
To knowingly or willingly employ any device, scheme, or artifice to defraud.
To engage in any transaction, practice, or course of business which operates as a fraud upon any person in connection with the purchase or sale of any mortgage loan.
To obtain property by fraud, willful misrepresentation of a future act, or false promise.
In any matter within the jurisdiction of the department, to knowingly and willfully falsify, conceal, or cover up by any trick, scheme, or device a material fact, or make any false or fraudulent statement or representation, or make or use any false writing or document, knowing the same to contain any false or fraudulent statement or entry.
Certain rules, cited in the administrative complaint, further clarify the obligations of the licensee, regarding the above statutory provisions.
Rules 3D-40.006(4), (5) and (6), F.A.C. describe the requirement to keep adequate books and records, and requirement for an escrow account and a written agreement, signed by the parties as to disposition of depositions.
Rule 3D-40.008(1), F.A.C. requires the licensee state in any loan estimate or contract for services the total fee to be received, not to exceed the statutory maximum.
Rules 3D-40.091(1) and (2), F.A.C. require that the broker inform the borrower in writing, prior to the contract for services, of all charges and costs, including discounts, if any, that the borrower will be required to pay in connection with securing the loan; and that the broker provide a summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund.
Respondents admitted to oversights in information provided to borrowers and have taken steps to correct them. The disposition of deposit funds and Mortgage Brokerage Guaranty Fund statements were not provided in early loans, but now appear in the files.
Respondents now also specifically account for cost items, even those which are incurred by the closing attorney.
Respondents also admit that the escrow account was closed. This was a result of ignorance and misadvice, but is, nonetheless, a violation of Section 494.055(1)(e), F.S. and Rule 3D-40.006(6)(a), F.A.C.
Respondent Davis concedes that he taunted the agency reviewer with a demand for a subpoena when compensation records were being sought. Whether that subpoena produced any additional records is immaterial, this constitutes a violation of Section 494.055(1)(o), F.S..
In one case, the Fishman loan, actual costs exceeded IMC's estimate to the borrower by more than 10 percent or $100.00. Davis failed to obtain the written acknowledgment required by Section 494.08(5), F.S. (1987). The 10 percent provision has been deleted from the 1989 statute. The agency failed to prove that Respondents consistently underestimated maximum closing costs, as provided in Section 494.055(1)(p), F.S.
The agency proved that Respondents violated Section 494.055(1)(b),
F.S. and Section 494.093(4), F.S. by concealing a portion of the mortgage brokerage fee as "discount points". Although not defined in statute or rule, the terms "discount points" or "discount fee" have a meaning within the loan market that is clear and distinct from a brokerage fee or origination fee. Respondents knew or should have known that distinction. Whether the concealment inured to the ultimate tax benefit of the borrower is immaterial. The labeling of compensation was false.
The agency did not prove that Davis' handling of the par plus pricing and service release fee was a fraud or deliberately false. He was unfamiliar with the process and relied on the lenders' instructions regarding disclosure. This was imprudent, but not dishonest. The error was not clearly willful or deceitful.
Based on the foregoing, it is hereby, RECOMMENDED
That a Final Order be entered, finding that Respondents violated Sections 494.055(1)(e), (o), and (q), F.S. (1987); Sections 494.08(5) and (10), F.S.
(1987); and Section 494.093(4), F.S. (1987), and imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency.
DONE AND RECOMMENDED this 30th day of July, 1990, in Tallahassee, Leon County, Florida.
MARY CLARK, Hearing Officer Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904)488-9675
Filed with the Clerk of the Division of Administrative Hearings this
30th day of July, 1990.
APPENDIX
The following constitute specific rulings on the findings of fact proposed by the parties.
Petitioner's Proposed Findings of Facts
Rejected as unnecessary.
Adopted in paragraphs 3 and 6.
Adopted in paragraphs 5 and 6.
Rejected as redundant.
- 8. Rejected as unsupported by the weight of evidence except as found in paragraph 6. The
department was required to obtain a subpoena due to Respondents' feigned or real refusal to produce certain records.
Rejected as unnecessary.
Adopted in substance in paragraph 13.
Adopted in substance in paragraph 7.
Adopted in substance in paragraph 7.
- 18. Rejected as unnecessary.
Adopted in summary in paragraph 8.
Rejected as immaterial. The telephone charges were incurred by the closing agent, not Respondents.
Rejected as unnecessary.
Rejected as contrary to the weight of evidence.
Rejected as unnecessary.
Adopted in summary in paragraph 7. and
Rejected as unnecessary and
- 48. Adopted in summary in paragraph 8.
49. - 52. Adopted in summary in paragraph 14.
Adopted in paragraph 15.
Rejected as unnecessary.
Adopted in paragraph 13. and
Rejected as unnecessary.
Adopted in paragraphs 16 and 20.
59 - 74. Adopted in summary in paragraphs 16-19.
Rejected as unnecessary.
The conclusion that the handling of "par plus
pricing" was fraudulent is rejected as contrary | to | |||
the weight of evidence. | ||||
77. | - | 81. | Adopted in summary in paragraphs 20 and 21. | |
82. | Rejected as contrary to the weight of evidence. | |||
83. | Adopted in paragraphs 10 and 12. | |||
84. | Adopted in paragraph 10. | |||
85. | - | 89. | Rejected as unnecessary. | |
90. | Adopted in paragraph 22. | |||
91. | - | 93. | Rejected as unnecessary. | |
94. | Adopted in part in paragraph 26. | |||
Respondent's Proposed Findings of Fact
Adopted in paragraphs 1 and 2.
Rejected as unnecessary.
Adopted in paragraph 6.
Rejected as contrary to the weight of evidence.
Adopted in paragraph 3.
Adopted in paragraph 13.
- 9. Adopted in summary in paragraph 7.
Rejected as contrary to the evidence. Liability for payment occurs when the service is rendered, as reflected in Respondent's "Notice to Borrower".
Rejected as unnecessary.
Adopted in paragraph 12.
Rejected as unnecessary and immaterial.
Rejected as unnecessary.
- 19. Adopted in summary in paragraph 8.
20. - 22. Rejected as unnecessary.
Adopted in paragraph 14.
Adopted in substance in paragraph 13.
Adopted in substance in paragraph 16.
Adopted in substance in paragraph 19.
Rejected as unnecessary.
- 29. Rejected as contrary to the weight of evidence.
Included in conclusion of law number 9.
Rejected as immaterial.
- 33. Rejected as contrary to the evidence. The terms implied that the loans would be at a discounted rate, but were not, because the "discount" (partial) went to the broker.
Adopted in paragraphs 19 and 20.
Rejected as immaterial.
COPIES FURNISHED:
Elise M. Greenbaum, Esquire Office of the Comptroller
400 W. Robinson St., Suite 501 Orlando, FL 32801
John O. Williams, Esquire Renaissance Square
1343 East Tennessee St. Tallahassee, FL 32308
Hon. Gerald Lewis Comptroller, State of Florida The Capitol
Tallahassee, FL 32399-0350
William G. Reeves General Counsel
Dept. of Banking & Finance The Capitol
Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
STATE OF FLORIDA, DEPARTMENT OF BANKING and FINANCE, DIVISION OF FINANCE,
Petitioner,
vs. DBF #1213-F-7/88
DOAH #89-5187
INLET MORTGAGE COMPANY, Ltd., and JOHN R. DAVIS,
Respondents.
/
FINAL ORDER
AND NOTICE OF RIGHTS
The State of Florida Department of Banking and Finance, Division of Finance (hereinafter "Department"), being charged with the administrative and civil enforcement of Chapter 494, Florida Statutes (hereinafter "Act"), and the Rules duly promulgated with respect thereto, does herewith enter this Final Order and Notice of Rights, against Respondents Inlet Mortgage Company, Ltd., and John R. Davis, for violations of the Act and the Rules related thereto and in support thereof states as follows:
FINDINGS OF FACT
On or about December 8, 1988, the Department issued its Notice of Intention to Impose Administrative Penalties and Administrative Charges and Complaint with Notice of Rights, which administrative charges were subsequently amended by the Department (hereinafter referred to as the "Amended Administrative Charges"). These Amended Administrative Charges filed against the Respondents alleged numerous violations of the Act and Rules of the Department. Said Amended Administrative Charges had attached thereto a Notice of Rights which fully advised the Respondents that they had twenty-one (21) days after receipt thereof within which to petition the Department for an administrative hearing concerning the allegations as set forth in said Amended Administrative Charges and that failure to do so would constitute a waiver of such right. The Amended Administrative Charges were duly received by the
Respondents, and the Respondents petitioned the Department for a formal administrative hearing concerning the allegations as set forth in said Amended Administrative Charges.
The final administrative hearing was held on this matter on June 8, 1990, before Mary Clark, Hearing Officer, Division of Administrative Hearings. The Recommended Order, filed by Mary Clark, Division of Administrative Hearings on July 30, 1990, sets forth Findings of Fact and Conclusions of Law entered based on the evidence presented by the Department and the Respondents during said final administrative hearing. A copy of said Recommended Order is attached hereto as Exhibit "A" and incorporated herein by reference. No exceptions were filed to the Recommended Order.
The Findings of Fact, as set forth within the Recommended Order are hereby accepted as true and correct and are adopted by the Department as the Findings of Fact of this Final Order and Notice of Rights.
CONCLUSIONS OF LAW
The Conclusions of Law, as set forth within the Recommended Order are hereby accepted as true and correct and are adopted by the Department as the Conclusions of Law of this Final Order and Notice of Rights. Respondents John
Davis and Inlet Mortgage Company, Ltd. are hereby specifically found to have violated Sections 494.055(1)(b), (e), (k), (o), and (q), 494.08(5) and (10), and 494.093(4), Florida Statutes (1987); and Rules 3D-40.006(4), (5), and (6), 3D- 40.008(1), and 3D-40.091(1) and (2), Florida Administrative Code.
FINAL ORDER
NOW THEREFORE, based on the foregoing Findings of Fact and Conclusions of Law, it is
ORDERED:
That the Respondents John R. Davis and Inlet Mortgage Company, Ltd. shall be placed on probation for a period of one (1) year from the date of entry of the Final Order on this matter subject to the following conditions designed to effectuate the hearing officer's recommendation concerning review and supervision:
Davis shall not be employed as a principal mortgage broker, designated associated broker, or self-employed mortgage broker. Davis may maintain employment as a mortgage broker under the direct control and supervision of a principal mortgage broker. The principal mortgage broker supervising Davis shall be physically present in the mortgage brokerage office where Davis is employed.
Davis shall not supervise or control any other mortgage brokers.
Davis shall not have any type of ownership or controlling interest in any mortgage brokerage business other than Inlet Mortgage Company during this probationary period.
Inlet Mortgage Company, Ltd., shall not open any branch offices.
That Respondents John R. Davis and Inlet Mortgage Company, Ltd. shall be jointly and severally liable for paying the Department an administrative fine in the amount of One thousand dollars ($1,000). Payment shall be made within thirty (30) days from the date of entry of the Final Order on this matter to:
Gerald Lewis, Office of the Comptroller Division of Finance, The Capitol Tallahassee, Florida 32399-0350
That the Respondents are hereby ordered to strictly comply with all provisions of the Act as it now exists or may hereafter be amended and with all Rules of the Department adopted pursuant to the Act as such Rules now exist or may hereafter be duly adopted for amended.
DONE AND ORDERED in Tallahassee, Leon County, Florida this 13th day of September, 1990.
GERALD LEWIS, as Comptroller of the State of Florida and Head of the Department of Banking and Finance
NOTICE OF RIGHT TO JUDICIAL REVIEW
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK, AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of foregoing Final Order was furnished by U.S. Mail this 13th day of September, 1990 to John O. Williams, Esquire, Attorney for Respondents Inlet Mortgage Company and John R. Davis, Renaissance Square, 1343 East Tennessee Street, Tallahassee, Florida 32308.
H. RICHARD BISBEE Deputy General Counsel
Office of the Comptroller The Capitol, Suite 1302
Tallahassee, Florida 32399-0350
Florida Bar #0477982
Copies furnished:
Randall A. Holland, Director Division of Finance
================================================================= DISTRICT COURT OPINION
=================================================================
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
INLET MORTGAGE COMPANY,LTD., NOT FINAL UNTIL TIME EXPIRES TO and JOHN R. DAVIS, FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED.
Appellants,
CASE NO. 90-3027
vs. DOAH CASE NO. 89-5187
STATE OF FLORIDA, DEPARTMENT OF BANKING AND FINANCE, DIVISION OF FINANCE,
Appellee.
/ Opinion filed July 11, 1991.
An Appeal from an order by the Department of banking and Finance, Division of Finance.
John O. Williams, of Lindsey & Williams, P.A., Tallahassee, for Appellants.
Elise M. Greenbaum, Assistant General Counsel, Office of Comptroller, Tallahassee, for Appellees.
ERVIN, J.
In this case appellants, Inlet Mortgage Company, Ltd. and John R. Davis, challenge a final administrative order on the ground that appellee, the Department of Banking and Finance, Division of Finance (Department), increased the recommended penalty without complying with the directives set forth in Section 120.57(1)(b)10, Florida Statutes (1987). Although the Department contends it did not increase the recommended penalty, but merely set forth conditions that effectuated the hearing officer's recommendation, we cannot agree and therefore reverse.
Section 120.57(1)(b)10 provides, in pertinent part:
The agency may accept the recommended penalty in a recommended order, but may not reduce or increase it without a review of the complete record and without stating with particularity its reasons therefor in the order, by citing to the record in justifying the action.
Here the Department of Administrative Hearings (DOAH) officer entered a recommended order wherein she concluded that appellants had violated various provisions of Chapter 494, Florida Statutes (1987). She recommended
imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency.
No exceptions were filed by either party. In its final order, the Department adopted all of the hearing officer's findings of fact and conclusions of law without alteration, but then ordered:
That the Respondents John R. Davis and Inlet Mortgage Company, Ltd. shall be placed on probation for a period of one year from the date of entry of the Final
Order on this matter subject to the following conditions designed to effectuate the hearing officer's recommendation concerning review and supervision:
Davis shall not be employed as a principal mortgage broker, designated associated broker, or self-employed mortgage broker. Davis may maintain employment as a mortgage broker under the direct control and supervision of a principal mortgage broker. The principal mortgage broker supervising Davis shall be physically present in the mortgage brokerage office where Davis is employed.
Davis shall not supervise or control any other mortgage brokers.
Davis shall not have any type of ownership or controlling interest in any mortgage brokerage business other than Inlet Mortgage Company during this probationary period.
Inlet Mortgage Company, Ltd., shall not open any branch offices.
That Respondents John R. Davis and
Inlet Mortgage Company Ltd. shall be jointly and severally liable for paying the Department an administrative fine in the amount of One thousand dollars ($1,000). . . (Emphasis added.)
We cannot agree with the Department's argument that these changes did not increase the recommended penalty in form or substance, but merely were "designed to effectuate the hearing officer's recommendation concerning review and supervision." Appellant Davis has alleged, and we agree, that the conditions contained in the final order, particularly Paragraph (1)(a) effectively act as a suspension of his license for one year. This is so because Davis is the principal mortgage broker of Inlet Mortgage Company, a business he opened in February 1988. By precluding him from acting as a principal mortgage broker or a self-employed mortgage broker, the Department has effectively ruled that he can no longer operate the business he opened. Such a result is substantially different from probation.
Moreover, the final order shifts the duty of supervision to some nonagency principal mortgage broker whom Davis must work under, while the recommended order suggested that Davis be subject to "periodic review and supervision by the agency." (Emphasis added.) By doing this, the agency has effectively increased the level of supervision recommended in the DOAH hearing officer's order.
Although the increase here is not as obvious as the penalty increases in cases such as Department of Professional Regulation v. Bernal, 531 So.2d 967 (Fla.
1988); Hambley v. Department of Professional Regulation, Division of Real Estate, 568 So.2d 970 (Fla. 2d DCA 1990); O'Connor v. Department of Professional Regulation, Construction Industry Licensing Board, 566 So.2d 549 (Fla. 2d DCA 1990); and Pages v. Department of Professional Regulation, Board of Medicine,
542 So.2d 456 (Fla. 3d DCA 1989), it is nonetheless an increase in penalty for which the Department did not state with particularity its reasons therefor or cite to the record in justification thereof. Therefore, the final order must be reversed and the matter remanded with directions for the Department to enter an order adopting the penalty set forth in the recommended order. Bernal, Hambley, O'Connor, Pages.
In addition to the above, we note that the Department in its answer brief stated that no transcript was submitted to it prior to the entry of the final order. Thus, the Department could not have complied with the statute in that it did not review the complete record.
REVERSED and REMANDED for further proceedings consistent with this opinion.
ZEHMER AND MINER, JJ., CONCUR.
| Issue Date | Proceedings |
|---|---|
| Jul. 30, 1990 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 11, 1991 | Opinion | |
| Sep. 13, 1990 | Agency Final Order | |
| Jul. 30, 1990 | Recommended Order | Falling short of fraud, respondent made a series of errors as mort. broker which constituted technical violations of statutes and rules $1000 fine and 1year probation |
