STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STATE OF FLORIDA, DEPARTMENT OF ) BANKING AND FINANCE, DIVISION ) OF FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 88-2202

)

C. F. CLINE and FLOYD G. HENDERSON, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Veronica E. Donnelly, held a formal hearing in the above-styled case on May 1-4, 1989, in Fort Myers, Florida.

APPEARANCES

For Petitioner: Elsie M. Greenbaum, Esquire

Assistant General Counsel Office of the Comptroller

400 West Robinson Street Suite 501

Orlando, Florida 32801

For Respondent Ann Mitchell, Esquire Cline: GERALD DUNCAN ENGVALSON

& MITCHELL

Foxworthy Professional Building Suite 101

1601 Jackson Street

Fort Myers, Florida 33902

For Respondent Floyd G. Henderson, pro se Henderson: Post Office Box 2875

Port Charlotte, Florida 33949 STATEMENT OF THE ISSUES

Whether the Respondents' individual mortgage broker licenses should be disciplined because of the misconduct alleged in the Administrative Complaint.

PRELIMINARY STATEMENT

By Final Order dated April 20, 1989, the Petitioner, State of Florida, Department of Banking and Finance, Division of Finance (hereinafter the Department), revoked the registration of Mortgage Acceptance Corporation (hereinafter MAC) a mortgage brokerage business. In addition to the revocation,

the Department seeks to discipline the individual mortgage broker license of Respondent C. F. Cline (hereinafter Cline) and Respondent Floyd G. Henderson (hereinafter Henderson). The Administrative Complaint filed February 11, 1988, alleges that Respondents, who were officers and shareholders of MAC, violated numerous provisions of the Mortgage Brokerage Act while conducting business through the corporation. The Respondents each denied the allegations set forth in the Administrative Complaint and requested a formal administrative hearing. The charges were amended by the Department on October 31, 1988, without objection from Respondents. The amendments were accepted, and a hearing was held on the merits.

During the hearing, the Department presented four witnesses and submitted fifty-three exhibits. The main witness for the Department was the financial examiner with the Department who conducted an examination of the books, records and accounts of MAC. Essentially, the exhibits were comprised of the financial examiner's written report and the underlying documentation found within MAC's records. Due to the additional notations located on some exhibits which were placed on copies of documents after they were removed from MAC, three exhibits were placed in evidence by the Hearing Officer.

Although various exhibits were marked for identification by Respondents in their respective cases, they chose not to submit exhibits or call witnesses in response to Petitioner's presentation. Due to the inability of the parties to effectively arrange discovery meetings to review and copy documents prior to hearing, the Respondents were given the opportunity to preserve objections regarding the accuracy of the copies of documents presented at hearing until the originals could be viewed by an objecting party. The parties were given until June 19, 1989, to complete their document review.

A transcript of the hearing was not ordered. The thirty-day requirement for the filing of the Recommended Order was waived by the parties when additional time was requested by the parties to file proposed recommended orders. Rulings on the proposed findings of fact filed by all three parties are in the Appendix of the Recommended Order.

FINDINGS OF FACT

1. At all times material to these proceedings, the Respondent Cline was licensed by the State of Florida as a mortgage broker and held license number HB 0017832 from January 13, 1986 through May 31, 1987. During this period of time, Respondent Cline was president and principal mortgage broker for MAC at the 4045 Tamiami Trail, Port Charlotte location. The Respondent was a director and shareholder of the corporation.

   
   

2. The Respondent Henderson was also licensed as a mortgage broker and held license number HA 0007460 from March 29, 19856 through June 19, 19889. Respondent Henderson conducted business through MAC as the corporation's vice president. The Respondent was a director and shareholder of the corporation.

   
   

3. In response to a consumer complaint, the Department initiated an examination of the books and records maintained at the Port Charlotte location of MAC on April 21, 1987. The conduct of the Respondents in their business dealings as mortgage brokers with MAC was investigated as part of the Department's review process. The examination and investigation involved the time period from March 1, 1986 to June 1, 1987.

4. The written examination report prepared by the Department's financial examiner concludes that the Respondents, as officers and directors of MAC, financially compensated MAC employees who were not licensed under the Mortgage Brokerage Act for soliciting or negotiating mortgage loans. Six alleged mortgage solicitors were named in the report. The loan packages of seventeen mortgages, along with MAC's commission reports, were submitted as evidence to support the conclusion.

   
   

5. A review of the documentation, along with a review of the commission checks and the testimony of Kimberly L. Johnson (nee Steed) revealed that the documents identified as "commission reports" were not indicators of commission funds received by the six employees named in the complaint. These employees were paid on a set salaried basis. They were hired by MAC to perform the ministerial acts of taking or typing applications for loans under the direction of a mortgage broker. The use of these employees' names in the commission reports incidentally shows which employee assisted in the completion of forms that resulted in commissions to the licensed brokers who completed the mortgage financing transactions. This interpretation of the "commission reports" is clearly supported by the first page of the reports, Petitioner's Exhibits 17 and

1. Commission checks on the loans, were issued to the licensed mortgage brokers.

   
   

   1. The evidence demonstrates that Rebecca Henderson, who was one of the employees performing ministerial acts, on one occasion acted beyond her authority and "locked in" the interest rate for a mortgage applicant while she was completing the application. The Department did not present evidence to show that either Respondent Henderson or Respondent Cline had actual knowledge of the employee's actions. Neither licensee was the mortgage broker directing the employee at the time the incident occurred.

      
      

   2. During the course of the Department's examination, the conclusion was reached that MAC advertised in a newspaper that the corporation was a "mortgage banker" and a "FNMA lender." The Department alleges that MAC is not a "mortgage banker" and a "FNMA lender."

      
      

   3. At hearing, Kenneth Moulin, a former shareholder of MAC, testified that the goal of MAC was to become a bank. The corporation had money which was used to fund two mortgage loans with MAC as mortgagor.

      
      

   4. Petitioner's Exhibit 34, which was loan documentation on the residential loan application of William T. Martel and Lora A. Martel, names MAC as the lender. The documents also include FNMA forms used by FNMA lenders.

      
      

   5. The examination report concluded that MAC did not maintain records for a five-year period. The company started doing business in March 1986. Records were continuously maintained from MAC's inception.

      
      

   6. An advertisement placed in the newspaper, The Monday Sun, which was published on April 28, 1986, failed to include the phrase that MAC was a "licensed mortgage broker." The advertisement was placed by Respondent Henderson. In mitigation, it should be noted that Respondent Henderson had his mortgage brokerage license for less than one month and was new to the business as it is regulated by the Department. There was no evidence provided to demonstrate that Respondent Cline was aware of the improper advertisement. Other documents provided which purported to be advertisements were not authenticated. They lacked mastheads or headings which could sufficiently identify the place, date or kind of publication.

   7. As part of the mortgage financing transactions involved in the sampling of mortgages conducted by the Department, MAC collected fees from applicants for the preparation of documents and reports. Specific fees were quoted to applicants and receipts were clearly marked to demonstrate that the fees were non-refundable to applicants. In its bookkeeping entries, MAC continuously failed to maintain ledger entries which showed that the fees had been assessed on each application, and that the monies had been used for the intended purposes for which they had been collected.

      
      

   8. In the sampling of mortgages reviewed by the Department, MAC retained money assessed for discount points. The money was not used to reduce the interest rate on mortgages closed, as represented to the borrowers by MAC. Instead, the mortgages were immediately assigned and the discount assessment was retained by MAC for its own, undisclosed use.

      
      

      CONCLUSIONS OF LAW

      
      

   9. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter pursuant to Section 120.57(1), Florida Statutes.

      
      

   10. During a license disciplinary proceeding, the Department has the burden of proof, and must prove by clear and convincing evidence that the Respondents committed the violations set forth in the charging documents. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

       
       

   11. The Department revoked the registration of MAC, a mortgage brokerage business, before the final hearing took place in these proceedings. The Department now seeks to discipline the individual mortgage broker licenses of two former officers of the corporation, Respondent Cline and Respondent Henderson. Essentially, the prosecution of the individual licenses is based upon the theory that the principal mortgage broker's license may be suspended or revoked if there is a pattern of repeated violations by employees, or the principal mortgage broker has knowledge of the violations. The authority for this type of disciplinary action is found in Section 484.055(3), Florida Statutes (Supp. 1986). This statute took effect on September 1, 1986.

       
       

   12. Based upon the pleadings, the Department is also empowered to discipline the individual mortgage broker licenses of Respondent Cline and Respondent Henderson for any violations committed by the individual license holders. The authority for this prosecution is located in Section 494.05, Florida Statutes (1985) and Section 494.055, Florida Statutes (Supp. 1986). As the alleged violations which are the subject of these proceedings took place at MAC between March 1, 1986 and June 1, 1987, different statutes apply to some of the alleged violations.

       
       

   13. Contrary to the allegations set forth in the Amended Administrative complaint, Respondent Henderson was not the principal mortgage broker for MAC during the time period in question. Accordingly, any attempt to prosecute Respondent Henderson's mortgage broker license under Section 494.055(3), Florida Statutes (Supp. 1986) should be dismissed. Respondent Henderson can be disciplined only for those violations which were committed by him during the thirteen-month time period.

       
       

   14. The charging document alleges that Respondent Cline was the principal mortgage broker for MAC from January 9, 1986 to March 24, 1986. Respondent Cline cannot be disciplined for employee violations at MAC during the time

       period in Section 494.055(3), Florida Statutes (Supp. 1986) was in effect as Respondent Cline was not placed on notice within the pleadings that such charges would be brought against him. Due process requires that only the individual violations committed by Respondent Cline can be prosecuted in these proceedings.

       
       

   15. Based upon the evidence adduced at hearing, the only violation committed by Respondent Henderson as an individual, was set forth in Paragraph

       10 of the Amended Administrative Complaint. Respondent Henderson placed an advertisement in a newspaper on behalf of MAC on April 28, 1986. Respondent Henderson's failure to include the phrase that MAC was a "licensed mortgage broker" violated Rule 3D-40.010(4), Florida Administrative Code, which provides:

       
       

       ... No licensed mortgage broker may advertise his services in any media which includes ... newspaper ... or permit them to be advertise, as such broker without the words "licensed mortgage broker" or "registered mortgage brokerage business."

       
       

   16. Although Respondent Cline was the principal mortgage broker for MAC at the time the improper advertisement occurred, the statute which would enable the Department to discipline him for the violation was not yet in effect.

       
       

   17. The other allegations set forth in the complaint which were proved by clear and convincing evidence as to MAC were Paragraphs 12 and 13. Neither of the Respondents were guilty of these violations or the other alleged violations in their individual capacities. Other licensed mortgage brokers, who were employees of MAC, handled the individual transactions involved in Paragraphs 12 and 13. A pattern of employee violations did exist, but the Department improperly determined that the principal mortgage broker at the time was Respondent Henderson as opposed to Respondent Cline.

RECOMMENDATION

Based upon the foregoing, it is RECOMMENDED:

That Respondent Henderson be issued a reprimand for failure to place the words "licensed mortgage broker" in the April 28, 1986 advertisement.

That all other charges against the Respondents be dismissed.

DONE and ENTERED this 27th day of November, 1989, in Tallahassee, Leon County, Florida.

VERONICA E. DONNELLY

Hearing Officer

Division of Administrative Hearings 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerkk of the Division of Administrative Hearings this 27th day of November, 1989.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-2202

Petitioner's proposed findings of fact are addressed as follows:

1. Accepted. See HO #1.

2. Accepted. See HO #2.

3. Accepted. See HO #1.

4. Accepted. See HO #2.

5. Rejected. See HO #2.

6. Rejected. Irrelevant.

7. Rejected. Irrelevant.

8. Rejected. Irrelevant. See HO #1.

9. Rejected. Irrelevant.

10. Rejected. Irrelevant.

11. Accepted. See HO #3.

12. Rejected. Irrelevant.

13. Rejected. Irrelevant.

14. Rejected. Irrelevant.

15. Rejected. Document speaks for itself. Also, this is established as proper evidence under Section 494.051, Florida Statutes, so these findings are redundant.

16. Rejected. Report speaks for itself.

17. Accepted.

18. Accepted.

19. Reject the phrase "negotiation." Contrary to fact. See HO #5.

20. Reject the phrase "negotiate." Contrary to fact. See HO #5.

21.-24. Rejected. Contrary to fact. Kimberly L. Johnson is the same person as Kimberly L. Steed who has been licensed as a mortgage broker since September 29, 1986.

25.&26. Rejected. Contrary to fact. See above.

This rendering of the testimony is rejected by the fact finder.

1. Accepted.

2. &29. Rejected. Contrary to fact. See HO #5 and HO #6.

1. Accepted.

2. Rejected. See HO #5. Contrary to fact.

3. Accepted.

4. Rejected. Contrary to fact. See HO #5.

5. Accepted.

6. Rejected. Contrary to fact. See HO #5.

7. Rejected. Contrary to fact. Steed completed ministerial acts. See HO #5.

8. Accept the first sentence. Reject the rest as contrary to fact. See HO #5.

9. Rejected. Improper legal conclusion. See HO #12.

10. Rejected. Contrary to fact. See HO #12.

11. Rejected. Cumulative.

12. Rejected. Repetitive. See HO #12.

13. Rejected. Contrary to fact. See HO #12.

14. Accepted. See HO #13.

15. Accepted.

16. Accepted.

17. Rejected. Improper legal conclusion. Appli- cation fees were not set up as entrusted funds. See HO #12.

18. Rejected. Contrary to fact. See HO #8 and #9.

19. Accepted.

20. Accepted.

21. Rejected. See HO #8. Contrary to fact.

22. Accepted.

23. Accepted.

24. Accepted.

25. Accepted.

26. Rejected. Repetitive.

27. Rejected. Contrary to fact. Cline was not the mortgage broker on any of the transactions presented at hearing.

28. Accepted.

29. Accepted.

30. Accepted.

31. Accepted.

32. Rejected. See HO #8 and #9.

33. Accepted. See HO #13.

34. Accepted. See HO #13.

35. Accepted. See HO #13.

Respondent Cline's proposed findings of fact are addressed as follows:

1. Accepted. See HO #1.

2. Accepted.

3. Accepted.

4. Rejected. The records presented were found to be reliable when compared with the originals presented simultaneously by Respondent Henderson, although those were not officially placed in evidence.

5. Rejected. See above.

6. Accepted. See Conclusions of Law.

7. Accepted. See HO #3.

8. Accepted.

9. Accepted.

10. Accepted. See HO #5.

11. Accepted. See HO #5.

12. Rejected. Calls for legal conclusion.

13. Rejected. See Section 494.051, Florida Statutes.

14. Accepted.

15. Accepted.

16. Accepted. See HO #8 and #9.

17. Accepted. See Conclusions of Law.

18. Rejected. Irrelevant. See Section 494.051,

    Florida Statutes. However, the competency

    of the examiner was considered in the factual determinations made by the Hearing Officer.

19. Accepted.

20. Not listed as factual finding. As a Conclu- sion of Law, the Hearing Officer cannot rule on this matter.

Respondent Henderson's proposed findings of fact are addressed as follows:

1. Accepted.

2. Accepted. See preliminary matters.

3. Accepted.

4. Accepted. See HO #2.

5. Rejected. Improper legal conclusion.

6. Unable to rule on proposed finding.

COPIES FURNISHED:

Elsie M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller

400 West Robinson Street Suite 501

Orlando, Florida 33801

Ann Mitchell, Esquire GERALD DUNCAN ENGVALSON

& MITCHELL

Foxworthy Professional Building Suite 101

1601 Jackson Street

Fort Myers, Florida 33902

Floyd G. Henderson Post Office Box 2875

Port Charlotte, Florida 33949

Charles L. Stutts, Esquire General Counsel

Office of the Comptroller The Capitol

Tallahassee, Florida 32399-0350

Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32399-0350

Docket for Case No: 88-002202

Orders for Case No: 88-002202