STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JANICE BUCHANAN,

Petitioner,

vs.

STEVE PICHICK AND TOWN AND COUNTRY MORTGAGE COMPANY,

Respondents.

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) Case No. 01-4345

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RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly-designated Administrative Law Judge,

Jeff B. Clark, held a formal administrative hearing in this case on February 12, 2002, in Orlando, Florida.

APPEARANCES

For Petitioner: Janice Buchanan, pro se

4266 Cloverleaf Place

Casselberry, Florida 32707

For Respondent: Daniel P. O'Gorman, Esquire

Ford & Harrison LLP

300 South Orange Avenue, Suite 1300 Orlando, Florida 32801

STATEMENT OF THE ISSUES

Whether or not Petitioner was subject to a discriminatory housing practice based on her race, age, and gender, or any of the foregoing, when her application for a loan was denied by Respondents.

PRELIMINARY STATEMENT

On April 24, 2000, Petitioner, Janice Buchanan, filed a Housing Discrimination Complaint alleging that because of her race and sex she was the victim of discriminatory financing in violation of Section 805 of Title VIII of the Civil Rights Act of 1968, as amended, by the Fair Housing Act of 1988.

On October 12, 2001, the Florida Commission on Human Relations ("FCHR") entered a Determination of No Reasonable Cause indicating that "[B]ased on the evidence obtained during the investigation, FCHR has determined that reasonable cause does not exist to believe that a discriminatory housing practice has occurred. Accordingly, the above-referenced complaint is hereby dismissed."

On October 23, 2001, the FCHR received Petitioner's Petition for Relief dated October 20, 2001, alleging that Respondents had violated the Florida Fair Housing Act, as amended, reasserting essentially the same allegations as stated in the April 24, 2000, Housing Discrimination Complaint and adding an allegation of age-based discrimination.

On November 5, 2001, the FCHR transmitted the Petition for Relief to the Division of Administrative Hearings. On

December 3, 2001, the case was set for final hearing in Orlando, Florida, on January 16, 2002. On January 10, 2002, on

Respondents' Motion for Continuance, the final hearing was continued until February 12, 2002.

On February 12, 2002, the final hearing was conducted as scheduled. Immediately prior to the final hearing, Respondents moved to tax fees and costs against the Petitioner for her failure to attend a deposition which had been agreed upon by the parties. Consideration of the motion was reserved until Respondents submitted an itemization of actual fees and costs incurred by Petitioner's failure to attend the deposition. No itemization of actual fees and costs has been submitted, and, therefore, the motion is denied herewith.

At the onset of the presentation of evidence, Petitioner indicated that her claim of discrimination was directed against the corporation, Town & Country Mortgage Company, and not against Steve Pilchick, its President; as a result, the housing discrimination claim against Mr. Pilchick, both as President of Town & Country Mortgage Company and individually, should be dismissed.

Petitioner presented five witnesses: herself, Steve Pilchick, Christine A. Ross, Theresa White, and Mona Lewis- Felton. Petitioner offered one exhibit which was received into evidence and numbered Petitioner's Exhibit 1. Respondent presented four witnesses: Laura Aguayo, Leroy Walwyn, Ana Pender and Janice Buchanan. Respondent offered 11 exhibits,

numbered Respondent's Exhibits 1-11, which were received into evidence. A Transcript of the hearing was filed with the Division of Administrative Hearings on March 2, 2002.

Respondent timely submitted a Proposed Recommended Order.

FINDINGS OF FACT

Based on the testimony and demeanor of the witnesses and documentary evidence presented, the following Findings of Fact are made:

1. Petitioner, Janice Buchanan, is an African-American female who was 44 years old at the time she applied for the home loan which is the subject of this claim. She had served on active duty in the United States Air Force and, as a result of her service, was eligible for a home loan guarantee by the federal Department of Veterans Affairs ("VA") if she met other financial criteria established by the VA.

2. At all times material to the claim herein, Town & Country Mortgage Company ("Town & Country") was a correspondent mortgage lender. A correspondent mortgage lender originates a loan application for an individual seeking a loan, locates an investor, and, if the investor approves the applicant, assigns the file to the investor. As a correspondent mortgage lender, Town & Country did not make loans or make the decision whether or not to approve a loan application. The decision whether to approve the loan is made by an underwriter employed by the

   investor. The investor's underwriter, not Town & Country, decides whether an application for a VA home loan guarantee meets the criteria established by the VA.

3. A Town & Country loan application commences with the "pre-qualification" interview. During this interview, the loan officer will obtain the applicant's income information, asset information, and look at a quick "snapshot" of the applicant's credit history, which is obtained from a credit reporting agency.

4. Once the loan officer believes sufficient information has been obtained during the pre-qualification interview, the loan application is actually filled out by the applicant and the loan officer, and the applicant provides the loan officer with documents such as bank statements and income verification documents. While processing the loan application, the loan officer attempts verification of the information provided by the applicant during the initial interview.

5. Once the loan application is completed, a loan processor with Town & Country will begin a more detailed verification of financial information which includes calling the applicant's employer, ordering a "full factual credit report," and verifying all financial information the applicant has provided. If the loan applicant has a complex financial

   history, the verification process may take a considerable amount of time.

6. In the instant case, the "full factual credit report" was obtained from Stateswide Credit Bureau Services, Inc. ("Stateswide"). Stateswide assembles credit information on the loan applicant from the three main credit information repositories in the United States (Equifax, TransUnion, and TRW). The "full factual credit report" is known as a "tri- merge," i.e., credit information from all three credit information repositories is combined into one document. A "tri- merge" report is used because one credit information repository may not have all of the information another repository has. As a result, even if an applicant produced a satisfactory credit report from one credit information repository, it would be insufficient to overcome an unsatisfactory report on a "tri- merge."

7. Petitioner's "full factual credit report" included at least nine negative credit references. A negative credit reference may be a delinquent account, a past due account, late payments or other activities considered inappropriate by a credit provider and reported to a credit information repository.

8. The Stateswide "full factual credit report" was prepared by Laura Aguayo on November 2, 1999. In compiling the report, Ms. Aguayo telephoned each creditor which had provided

   negative credit information. Each creditor verified the negative information by social security number, in addition to name. If a creditor did not accept Ms. Aguayo's telephone call, she wrote the creditor.

9. Petitioner was advised of the negative credit information; she provided Town & Country with additional information in an effort to explain the negative information on her credit report.

10. After the verification process is completed, Town & Country's loan processor forwards the information obtained during the loan application and verification process to the investor. This information includes the loan application completed by the applicant and a credit package consisting of the applicant's credit report, income, assets, property, collateral, and additional information, e.g., the loan applicant's explanation of negative credit information, which was forwarded in the instant case.

11. The investor's underwriter reviews the loan application and related information and makes a decision as to whether or not the investor will provide the loan. Town & Country would not forward a loan package to an investor if Town & Country did not want the application to be approved by

    the investor. There is an economic incentive for Town & Country to want a loan application to be approved by an investor; if an

    investor approves a loan, Town & Country receives a commission; if an investor does not approve a loan, Town & Country receives no income from the investor.

12. The investor in the instant case was Irwin Mortgage Corporation ("Irwin"); the underwriter at Irwin who reviewed Petitioner's application was Ms. Christine Ross who, like her employer, has no affiliation with Town & Country. Ms. Ross has

    15 or 16 years of underwriting experience.

    
    

13. Ms. Ross reviewed Petitioner's income and assets and assessed whether she has the ability to make the payments and reviewed her credit history to determine if Petitioner had, in the past, made payments in a timely fashion. Ms. Ross determined that Petitioner was not credit worthy because of a poor credit history and insufficient funds to close the loan. In addition, Ms. Ross considered that Petitioner had several checks returned because of insufficient funds. She reviewed all of the information provided and opined that the application would not meet VA guidelines.

14. If the loan is not approved by an investor, Town & Country's loan officer will work with the applicant to determine what can be done to have the loan approved. When dealing with a VA loan, as in this case, the loan application and related information can be forwarded to the VA for review even though it has not been approved by an investor. The benefit of having the

    package forwarded to the VA is that the VA might see something the investor missed, and provides the applicant with a second chance to have the loan approved. Town & Country would not request that the investor forward the loan file to the VA if it did not want the loan application to be approved. If the VA denies the loan, there is no purpose in trying to find another investor for the loan because by denying the loan application, the VA is indicating it will not accept the loan application from any investor.

15. When Irwin advised Town & Country that Petitioner's loan application had been denied, Town & Country requested that Irwin forward the application directly to the VA. Upon Town & Country's request, Ms. Ross sent the loan package to the VA. If the VA had decided to guarantee the loan, Irwin would have no risk and would approve the loan.

16. The VA also denied Petitioner's loan application. The reason the VA denied the loan was because "[t]he present income of the borrower(s) was not shown to be sufficient."

17. Ultimately, Ms. Aguayo of Stateswide was able to remove one negative entry from Petitioner's credit report, but she was unable to remove any others. This deletion of one negative entry is evidenced by a December 17, 1999, Stateswide "full factual credit report." Had Ms. Ross been in possession of the December 17, 1999, credit report from Stateswide, this

    would not have affected her decision to deny Petitioner's loan application, because the report still showed a credit history that did not meet VA guidelines. Additionally, the VA denied the loan because of insufficient income, not poor credit.

18. No credible evidence was presented that Town & Country caused a delay in seeking financing or provided false information as alleged in Petitioner's Petition For Relief.

19. Steve Pilchick, President of Town & Country, had no direct involvement with Petitioner's loan application and did not discriminate against her.

20. No evidence was offered regarding any discrimination against Petitioner based on her age.

21. No evidence was presented that Town & Country was responsible for the denial of Petitioner's loan application. Nor was any evidence presented that Town & Country had approved loans for any particular person or persons of any race or gender who had loan qualifications similar to Petitioner.

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this action. Subsection 120.57(1), Florida Statutes.

23. Forty-two USCA 3605, Discrimination in residential

    
    

    real estate transactions, and Section 760.25, Florida Statutes, Discrimination in the financing of housing or in residential

    real estate transactions, both cited hereinafter, prohibit discrimination based on race or sex in making loans on residential real property. Forty-two USCA 3605, reads as follows:

    1. In general

       
       

       It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.

       
       

    2. "Residential real estate-related transaction" defined

       
       

       As used in this section, the term "residential real estate-related transaction" means any of the following:

       
       

       1. The making or purchasing of loans or providing other financial assistance--

          
          

          1. for purchasing, constructing, improving, repairing, or maintaining a dwelling; or

             
             

          2. secured by residential real estate.

             
             

       2. The selling, brokering, or appraising of residential real property.

          
          

          Section 760.25, Florida Statutes, reads as follows:

          
          

          760.25 Discrimination in the financing of housing or in residential real estate transactions.–-

          
          

          (1) It is unlawful for any bank, building and loan association, insurance company, or

          other corporation, association, firm, or enterprise the business of which consists in whole or in part of the making of commercial real estate loans to deny a loan or other financial assistance to a person applying for the loan for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or to discriminate against him or her in the fixing of the amount, interest rate, duration, or other term or condition of such loan or other financial assistance, because of the race, color, national origin, sex, handicap, familial status, or religion of such person or of any person associated with him or her in connection with such loan or other financial assistance or the purposes of such loan or other financial assistance, or because of the race, color, national origin, sex, handicap, familial status, or religion of the present or prospective owners, lessees, tenants, or occupants of the dwelling or dwellings in relation to which such loan or other financial assistance is to be made or given.

          
          

          (2)(a) It is unlawful for any person or entity whose business includes engaging in residential real estate transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, national origin, sex, handicap, familial status, or religion.

          
          

          (b) As used in this subsection, the term "residential real estate transaction" means any of the following:

          
          

          1. The making or purchasing of loans or providing other financial assistance:

             
             

             1. For purchasing, constructing, improving, repairing, or maintaining a dwelling; or

                
                

             2. Secured by residential real estate.

          2. The selling, brokering, or appraising of residential real property.

          
          

24. Neither the Federal Fair Housing Act nor the Florida Fair Housing Act, both cited in paragraph 22, prohibits age- based discrimination. While Petitioner offered no evidence on the subject, the same was alleged in her Petition for Relief of October 20, 2001. Petitioner's allegation that she was discriminated against based on her age should be dismissed. Kenny v. Kemper National Insurance Companies, 960 F.Supp. 617, 620 (E.D.N.Y. 1997).

25. Similarly, no evidence was presented that Steve Pilchick was involved in any act of discrimination against Petitioner and therefore any claim of discrimination against him, individually or as President of Town & Country, should be dismissed.

26. Petitioner's allegation of race and sex discrimination, when brought under 42 USCA 3605 must be evaluated under the burden-shifting framework of McDonnell Douglas Corporation v. Green, 411 U.S. 792 (1973) and Texas

Department of Community Affairs v. Burdine, 450 U.S. 248 (1981). Ring v. First Interstate Mortgage, Inc., 984 F.2d 924, 926 (8th Cir. 1993). Thus, Petitioner has the burden of proving by a preponderance of the evidence a prima facie case of discrimination. Burdine, 450 U.S. at 252-53. When Petitioner

alleges the discriminatory denial of a loan application, to establish a prima facie case she must prove that (1) she is a member of a protected class; (2) she applied for and was qualified for the loan; (3) the loan was rejected despite her qualifications; and (4) Respondent approved loans for non- minority applicants with similar qualifications. Noland v.

Commerce Mortgage Co., 122 F.3d 551, 553 (8th Cir. 1997). If Petitioner succeeds in proving the prima facie case, the burden shifts to Town & Country to articulate some legitimate, nondiscriminatory reason for its action. Burdine, 450 U.S. at

253. If Town & Country carries this burden, Petitioner must prove by a preponderance of the evidence that the legitimate reasons offered by Town & Country were not its true reasons, but were a pretext for discrimination. Id.

1. Petitioner failed to establish a prima facie case.

   
   

   While Petitioner is clearly a member of a protected class and her loan application was denied, she offered no evidence that she was qualified for the home loan nor did she offer any evidence that Town & Country (or any entity involved) provided home loans to members of a non-protected class who had qualifications similar to hers.

2. Notwithstanding the fact that Petitioner failed to present a prima facie case, undisputed evidence was presented that Irwin found Petitioner's application to not meet the VA

   guidelines and refused to accept her as creditworthy, and it is undisputed that the VA also found that Petitioner's loan application did not meet VA guidelines.

3. Petitioner failed to establish that Town & Country denied the loan application. The evidence presented revealed that Irwin denied the loan application and that Town & Country insisted that Petitioner's loan application and related documents be forwarded to the VA for additional consideration. The VA confirmed the correctness of Irwin's denial, when it, too, denied Petitioner's loan application.

4. Petitioner failed to introduce any evidence that Town & Country's articulated reasons presented for Petitioner's

   denial were a pretext for discrimination. In fact, the evidence presented revealed that Petitioner's lack of funding and negative credit history were the reasons for the denial of her loan application. These reasons appear to be legitimate business reasons for the denial of Petitioner's loan application.

5. Not only has Petitioner failed to present a prima facie case of discrimination based on race or sex, there is no credible evidence of any discrimination against her based on race or sex.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Florida Commission on Human Relations dismiss Petitioner's Petition for Relief with prejudice finding that neither Town & Country Mortgage Company nor Steve Pilchick unlawfully discriminated against Petitioner.

DONE AND ENTERED this 4th day of April, 2002, in Tallahassee, Leon County, Florida.

JEFF B. CLARK

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 4th day of April, 2002.

COPIES FURNISHED:

Janice Buchanan

4266 Cloverleaf Place

Casselberry, Florida 32707

Janice Buchanan Teamesha Leyva

14901 Newland Street, Apartment C Midway City, California 92655

Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100

Tallahassee, Florida 32301

Daniel P. O'Gorman, Esquire Ford & Harrison LLP

300 South Orange Avenue, Suite 1300 Orlando, Florida 32801

Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100

Tallahassee, Florida 32301

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of 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: 01-004345

Orders for Case No: 01-004345