STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHARLES PETERS, )

)

)

Petitioner, )

)

vs. ) CASE NO. 90-41

)

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF SECURITIES ) AND INVESTOR PROTECTION, )

)

)

Respondent. )

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, on September 20, 1990, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Robert L. Saylor, Esquire

215 Fifth Street Suite 302

West Palm Beach, FL 33401

For Respondent: Eric Mendelsohn, Esquire

Department of Banking and Finance

Office of the Comptroller

111 Georgia Avenue Suite 211

West Palm Beach, FL 33401-5293 STATEMENT OF THE ISSUE

The issue is whether Mr. Peters' application for a mortgage brokage license should be denied by the Department because he engaged in activities constituting mortgage brokerage before he became licensed.

PRELIMINARY STATEMENT

The parties presented testimony at the final hearing, but the Department largely relied on responses to requests for admissions which the Department had filed on August 31, 1990, and Mr. Peters answered in a response served on September 18, 1990. The application filed by Mr. Peters for licensure is the only exhibit offered. The Department filed a proposed recommended order, but Mr. Peters did not. Based on the admissions, and the evidence at the final hearing the following findings are made.

FINDINGS OF FACT

1. Mr. Charles Peters was employed by Ameri-lantic Corporation at the time he applied for licensure as a mortgage broker, and he is currently employed by Ameri-lantic Mortgage Brokerage Company.

   
   

2. Mr. Peters' duties at Ameri-lantic have included contacting potential lenders.

   
   

3. These duties have also included discussing loan terms and rates with potential lenders.

   
   

4. As an employee of Ameri-lantic, Mr. Peters has received compensation for his efforts on behalf of his employer, in the form of salary. There is no evidence that Mr. Peters' compensation was based on commissions of any kind.

   
   

5. There is no evidence that Mr. Peters' duties included contacting persons who wished to borrow money, or that he acted to bring together those who wish to borrow with those who wished to lend money for mortgages.

   
   

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over this matter. Sections 120.57(1) and 120.60, Florida Statutes.

   
   

7. The Department initially proposed to deny Mr. Peters' licensure on the grounds that he failed to acknowledge in his application a conviction for a crime involving dishonest dealing. The Department abandoned that claim. Both parties treated the denial as having been based on the Department's argument that Mr. Peters acted as a mortgage broker before he was licensed, although no statement to that effect was mailed to Mr. Peters.

   
   

8. The Department contends that Mr. Peters has violated Chapter 494, Florida Statutes, by indirectly negotiating or arranging for mortgage loans or mortgage loan commitments when he was not licensed by the Department as a mortgage broker. The Department relies upon the language of Section 494.02(3), Florida Statutes, to support its contention, which defines a mortgage broker in the following way:

   
   

   1. ny person who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly negotiates, acquires, sells, or arranges for, or offers to 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.

      
      

9. Persons engaging in business as mortgage brokers are required to be licensed under Section 494.037, Florida Statutes, subsection (2) of which authorizes the Department to deny licensure "if the applicant has committed any violation as set forth in Section 494.055(1)." Acting as a mortgage broker without a current, active license or registration subjects a person to discipline under Section 494.055(1)(l), Florida Statutes.

10. During the hearing, the Department submitted testimony that the Department, as a matter of policy, regards the actions taken by Mr. Peters of contacting lenders to determine their willingness to make mortgage loans at stated rates for given periods of time, as indirect negotiation for a mortgage, and falls within the definition of acts requiring licensure as a mortgage broker under Section 494.02(3), Florida Statutes. The Department therefore believes Mr. Peters has engaged in the business of mortgage brokerage without licensure, which in turn is grounds to deny his application for licensure.

    
    

11. The Department is specifically authorized to adopt rules to administer the Mortgage Brokage Act (Chapter 494), which will "have the force and effect of law." Section 494.035(2), Florida Statutes. The Department has adopted no rule stating the policy it proffered in testimony at the hearing. There would be no way, short of telephoning some person at the Department, in the hope of reaching someone with authority, for a citizen to know that the rather broad language found in Section 494.02(3) defining activities of a mortgage broker is interpreted in the manner advocated by the Department.

    
    

12. As a general proposition, the Department is entitled to develop its policies by rule or by order. In this instance, however, the Department is construing the statute which lists grounds for disciplinary action, Section 494.055, as that statute has been incorporated by reference in the statute on licensure, Section 494.037(2), Florida Statutes. The legal principles applicable to the imposition of discipline on a licensed mortgage broker ought to apply here as well. The Third District Court of Appeal held in Cohn v. Department of Professional Regulation, 477 So.2d 1039 (Fla. 1st DCA 1985):

    
    

    [I]t is settled Florida doctrine that the rule which ascribes effect to an agency's determination of ultimate "facts" on a subject about which it may rightfully claim expert insight, which originated in McDonald v.

    Department of Banking and Finance, 346 So.2d 569, 579 (Fla. 1st DCA 1977), is not applicable to disciplinary proceedings in general, and

    to ones like this which are based upon an alleged breach of a broad standard of conduct in particular. Id. at 1046.

    
    

13. Actions which an unlicensed person might perform which the Department later could characterize as ones which "indirectly negotiate . . . or offer to negotiate, acquire, sell or arrange for, a mortgage loan or mortgage loan commitment" as those terms are found in Section 494.02(3), Florida Statutes, are limited only by the ingenuity or imagination of counsel for the Department.

    
    

14. There is no proof, in the record of this case, that Mr. Peters engaged in a strategy purposefully designed to evade the requirement that a mortgage broker be licensed. Mr. Peters was employed by a mortgage broker and made calls to potential lenders to see whether they were willing to lend money, and if so for how long and at what rate of interest. A secretary for a license mortgage broker could do the same thing.

    
    

15. The record is not clear as to how this information gathered by Mr. Peters was then used, and is especially unclear as to who used it. If Mr. Peters were merely passing this information on to a licensed mortgage broker, to save that broker time, there would be nothing improper about the activity.

    Moreover, there is no proof that Mr. Peters was using information gathered by some other person, whether licensed or not, to learn the wishes of potential borrowers of money, and matching that information with his inquiries from potential lenders, to bring borrowers and lenders together. Such proof would make out a case of indirect negotiation, but no such proof was offered.

    
    

16. There is insufficient proof to demonstrate that Mr. Peters is engaged in conduct which should bar him from licensure as a mortgage broker. As in the case of St. Francis Hospital, Inc. v. Department of Health and Rehabilitative Services, 553 So.2d 1351 (Fla. 1st DCA 1989), the agency has failed to establish the factual basis for its proposed non-rule policy. It has failed to prove Mr. Peters attempted to negotiate any mortgage through contact with potential lenders. Unlike the situation in St. Francis Hospital, however, this is a proceeding in the nature of a disciplinary action. Even if the agency could prove there is reason to believe that telephoning potential lenders is a means for evading licensure requirements and should be forbidden, the agency could not use such a non-rule policy, of which potential licensees have no notice, as a basis for refusing a license. See, Cohn, supra. Such general assumptions could be incorporated in a rule, giving all persons notice of the Department's view of forbidden actions.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Charles Peters for licensure as a

mortgage broker be granted, if he meets the other requirements for licensure, such as sucessful completion of the written examination.

DONE and ENTERED this 4th day of December, 1990, at Tallahassee, Florida.

WILLIAM R. DORSEY, JR.

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 4th day of December, 1990.

COPIES FURNISHED:

Eric Mendelsohn, Esquire Department of Banking and

Finance

Office of the Comptroller

111 Georgia Avenue Suite 211

West Palm Beach, Florida 33401-5293

Robert L. Saylor, Esquire

215 Fifth Street Suite 302

West Palm Beach, Florida 33401

Honorable Gerald Lewis

Department of Banking and Finance The Capitol

Tallahassee, Florida 32399-0350

William G. Reeves, General Counsel Department of Banking and Finance The Capitol

Plaza Level, Room 1302 Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-004134

Orders for Case No: 90-004134