STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

DIVISION OF FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-0685

) MERIDIAN MORTGAGE GROUP, INC., )

and JOAN HARNAGEL, individually ) and as President of Meridian ) Mortgage Group, Inc., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on February 11, 1993, in Fort Pierce, Florida.

APPEARANCES

For Petitioner: Robert K. Good, Esquire

Chief Trial Counsel Office of the Comptroller

Department of Banking and Finance Hurston Tower South, Suite S225

400 West Robinson Street Orlando, Florida 32801-1799

For Respondent: Marie A. Mattox, Esquire

Friedlander & Mattox, P.A. 3045 Tower Court

Tallahassee, Florida 32303 STATEMENT OF THE ISSUES

Whether Petitioner proved the factual allegations of the Administrative Complaint, whether those factual allegations establish that the Respondents violated provisions of the Florida Mortgage Brokerage Act, and the penalties, if any, that should be imposed.

PRELIMINARY STATEMENT

At the times pertinent to this proceeding, both Respondents were registered under Chapter 494, Florida Statutes, the Florida Mortgage Brokerage Act. At the time of the formal hearing, Respondent Meridian Mortgage Group, Inc., (Meridian) did not have current registration under the Florida Mortgage Brokerage Act.

Petitioner conducted an investigation of the Respondents's activities for the period January 1, 1989, through April 30, 1990. This investigation began after Petitioner received a complaint that an appraisal company had not been paid for work it had performed on behalf of Respondents.

By Administrative Complaint filed December 16, 1991, Petitioner alleges certain facts pertaining to its investigation into the Respondents's dealings. Paragraphs 1-5 of the Administrative Complaint allege certain facts pertaining to the parties that are not contested by this proceeding. Paragraphs 6-17 of the Administrative Complaint allege that Respondents committed certain acts while acting as mortgage brokers. Paragraphs 18-28 contain conclusions of law that Respondents committed certain violations of the Florida Mortgage Brokerage Act and the pertinent rules.

Prior to the beginning of the formal hearing, Petitioner moved, ore tenus, to amend Paragraphs 19-27 of the Administrative Complaint to reflect that it was relying on the 1987 statutes and rules in addition to the 1989 statutes and rules. There was an objection to the motion to amend Paragraphs 21 and 23 because of differences between the 1987 and 1989 statutes. That objection was sustained after it was determined that Respondents would be prejudiced by the amendments to Paragraphs 21 and 23. Thereafter, Petitioner voluntarily dismissed the violations asserted by Paragraphs 21 and 23 (and the underlying factual allegations in Paragraphs 9 and 11, respectively). The motion to amend was granted as to Paragraphs 19, 20, 22, 24, 25, 26, and 27.

With respect to the allegations of Paragraph 6, Petitioner did not pursue any violations except for the transactions involving Pooler and Carlsen. With respect to Paragraph 8, Petitioner dismissed the factual allegations related to Rigney and Kleis/Widmann.

At the formal hearing, the Petitioner called as witnesses Richard Hyland, John Willard, Ronald D. Mims, and Respondent Harnagel. Mr. Hyland is an appraiser who is affiliated with an appraisal company known as Duffy and Associates. Mr. Willard is the supervisor of Petitioner's investigation unit in the West Palm Beach office who testified generally as to practices referred to as "advanced fee schemes". Mr. Mims is an investigator employed by Petitioner who performed the subject investigation. In addition, Petitioner offered nine exhibits, seven of which were accepted into evidence. The other two exhibits, the deposition of Robert Hastings taken June 15, 1992, and the deposition of Michael Grdina taken June 11, 1992, were rejected because the depositions were taken by telephone and counsel for Respondents had not, at the time of the depositions, been provided copies of documents that were needed for the cross examination of these witnesses. Petitioner was given leave to retake the depositions of these two witnesses and file them as late-filed exhibits.

Thereafter, the depositions of Mr. Hastings and Mr. Grdina, both taken February 25, 1993, were filed and are hereby accepted as exhibits in this proceeding.

Mr. Hastings and Mr. Grdina are the respective representatives of two entities that had business dealings with Respondents. On August 5, 1992, Petitioner served interrogatories on Respondents. Petitioner's Exhibit 9 is the Respondents's answers to those interrogatories. On March 9, 1992, Petitioner served on Respondent Harnagel request for admissions. The request for admissions were never answered and are, consequently, deemed admitted.

Respondents presented no additional witnesses at the formal hearing but, with the approval of the undersigned, filed as exhibits in this proceeding the depositions of Robert Desjean and of Michael Coniglio, both taken March 1, 1993. Mr. Coniglio, an attorney who initially represented Respondents in this

proceeding, testified as to his understanding of certain provisions of the Mortgage Brokerage Act and of the policies of the Petitioner. Mr. Desjean, a mortgage broker, testified as to his understanding of the Mortgage Brokerage Act. Official recognition was taken of Florida's Mortgage Brokerage Act, Chapter 494, Florida Statutes, and of the rules promulgated pursuant thereto.

A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript and the late-filed exhibits.

Respondents filed motions to extend the period of time within which to file their proposed recommended order and to exceed the 40 page limit on such orders. Both motions are hereby granted. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner is charged with the responsibility of administering and enforcing the provisions of Chapter 494, Florida Statutes, including the duty to sanction those licensed under the Mortgage Brokerage Act (the Act) for violations of the Act.

   
   

2. At all times pertinent to this proceeding, Respondent Joan N. Harnagel (Ms. Harnagel), was a registered mortgage broker in the State of Florida, holding license No. HA 517383319. There was no evidence that Ms. Harnagel's registration has been previously disciplined by Petitioner.

   
   

3. Respondent Meridian Mortgage Group, Inc. (Meridian) first became a licensed mortgage broker in the State of Florida in September, 1988, with Respondent Joan N. Harnagel (Ms. Harnagel) serving as its vice-president and principal mortgage broker. Between September, 1988, and August, 1992, Meridian was a mortgage brokerage business in the State of Florida and held license No.HB 880000176-00. Meridian has held no active license as a Florida mortgage broker since August, 1992. There was no evidence that Meridian's registration has been previously disciplined by Petitioner.

   
   

4. In September 1988, Meridian bought a Florida mortgage brokerage company named Bay Pointe Mortgage. At the time of this purchase, Ms. Harnagel was the principal mortgage broker and was responsible for the daily operations of Bay Pointe as its general manager. Upon Meridian's purchase of Bay Pointe, Ms. Harnagel served as Meridian's principal mortgage broker in Florida and continued her responsibility for the daily operation of Meridian's activities in Florida.

   
   

5. Until July 15, 1989, Ms. Harnagel had no ownership interest in Meridian. The owners of Meridian between September 1988 and July 15, 1989, were Majorie Mohr and Larry Mohr of Carmel, Indiana. On July 15, 1989, Ms. Harnagel assumed ownership of Meridian and continued to serve as its principal mortgage broker and general manager responsible for daily operations.

   
   

6. At all times pertinent to this proceeding, Ms. Harnagel was the principal mortgage broker of Meridian and was responsible for its daily operations, which included the hiring and firing of employees, the ordering of appraisals and credit reports for customers, and the preparation of good faith estimates.

   
   

7. Petitioner conducted an examination of the Respondents Harnagel and Meridian for the period inclusive of January 1, 1989, through April 30, 1990. As a result of the investigation, Petitioner prepared and forwarded to

   Respondents a report of its investigation. Subsequently thereto, Petitioner prepared and served on Respondents an "Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights" which is the charging document for this proceeding. 1/

   
   

   PAR PLUS VIOLATIONS

   
   

8. There is a difference between a mortgage broker's origination fee and a lender's discount fee. A mortgage broker's origination fee is a fee charged by the mortgage broker for finding a loan for the applicant. A discount fee is a fee charged by the lender to a borrower for doing the paperwork on a loan and is usually expressed as a percentage of the amount borrowed. A discount may be considered as prepaid interest to the lender to cover the lender's expenses in making the loan.

   
   

9. In the typical transaction that does not involve "par plus", the mortgage broker's origination fee is paid to the mortgage broker by the borrower at closing either by separate check or out of the proceeds of the closing. A "par plus" transaction is one in which the mortgage broker's origination fee is paid to the mortgage broker by the lender instead of by the borrower.

   
   

10. Petitioner's Exhibit 1 is a composite exhibit and pertains to a transaction involving borrowers Oscar and Arlene Carlsen. Petitioner's Exhibit

    2 is a composite exhibit and pertains to a transaction involving borrowers J. Richard and Sara Pooler. The first page of each exhibit is the good faith estimate that was completed by Ms. Harnagel. The good faith estimate is normally given to a borrower when the borrower first comes to the mortgage broker's office and applies for a loan. The purpose of the good faith estimate is to make full disclosure of what fees are going to be charged to the borrower. The second and third pages of Petitioner's Exhibit 1 and Exhibit 2 constitute the Settlement Statements for each transaction and was prepared by the respective closing agents for these transactions. The Settlement Statement should reflect all costs that were paid by the buyer and the seller in the transaction being financed.

    
    

11. The Carlsen transaction was a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. The Pooler transaction was also a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. By failing to respond to requests for admissions, Respondents admitted 2/ that in the Carlsen transaction and in the Pooler transaction neither Meridian nor Ms. Harnagel disclosed to the borrowers Meridian's participation in a "par plus" program. Both the Carlsen and the Pooler transactions closed in December 1989.

    
    

    ESCROW FUND VIOLATIONS - RESIDENTIAL 3/

    
    

12. Respondents received the following sums from the following borrowers on the following dates:

    
    

    BORROWER	AMOUNT	DATE
    K. Carrol	$525.00	06-07-89
    R. Williams	$400.00	11-28-89
    J. Gentile	$270.00	06-30-89
    C. Saffer	$270.00	05-15-89
    J. Mark	$270.00	02-22-89
    G. Norton	$275.00	07-14-89
    F. Sloss	$275.00	03-02-89

    W.	Nachman	$275.00	02-27-89
    E.	Ward	$270.00	04-26-89
    H.	Rosen	$310.00	04-24-89
    J.	Morris	$825.00	06-30-89
    S.	Lewis	$270.00	03-24-89
    E.	Fuller	$485.00	05-01-89
    G.	Fleming	$270.00	03-30-89
    J.	Bishop	$270.00	03-28-89
    P.	Bifulco	$270.00	04-10-89
    E.	Zulueta	$270.00	05-26-89
    L.	MacCalister	$325.00	06-21-89
    T.	Nangle	$275.00	01-26-89
    I.	Rybicki	$270.00	03-31-89
    I.	Rybicki	$275.00	03-07-89

    
    

13. The foregoing sums were received by Respondents from borrowers to pay for credit reports and appraisals. Respondents should have placed these funds in the escrow account Meridian maintained at Sun Bank. Instead of being used for the intended purpose, these funds were placed in Meridian's operating account at Sun Bank and were used to pay Meridian's overhead. At all times pertinent hereto Respondent Harnagel was the principal mortgage broker for Meridian and knew that these sums were not being placed in escrow, knew that the funds should have been placed in escrow, and knew that these funds were not being expended for credit reports and appraisal reports.

    
    

14. Ms. Harnagel asserts that the practice of placing these funds in Meridian's operating account was dictated by Meridian's out-of-state owners. Ms. Harnagel knew this practice violated the Mortgage Brokerage Act and asserts that she repeatedly informed the Mohrs of this problem. Notwithstanding her acknowledged violation of the Act, she continued to collect these fees and continued to place these fees in Meridian's operating account. The great

    majority of these transactions occurred prior to Ms. Harnagel assuming ownership of Meridian on July 15, 1989. As a result of these practices, Meridian became indebted to at least two appraisal companies, Duffy and Associates (Duffy) and Diamond Realty and Appraisal Company (Diamond). Neither appraisal company had been fully repaid as of the time of the formal hearing. Duffy and Associates is owed a total of $4,000 by Respondents for work that was performed on the order of Respondents. At least six of the appraisals for which Duffy has not been paid were ordered after Ms. Harnagel assumed ownership of Meridian. In each of these transactions Respondents collected the amount necessary to pay for the appraisal, but, instead of paying for the appraisals, spent the amounts as part of the operating account on overhead expenses. Ms. Harnagel paid Diamond the sum of $1,500 as partial payment of the accumulated debt to Diamond. At the time of the formal hearing, Respondents owed Diamond the sum of $1,675 plus interest and attorney's fees.

    
    

    THE COMMERCIAL LENDER: VICTORY ENTERPRISES TRUST

    
    

15. The proposed lender for each of the four commercial transactions at issue in this proceeding was an entity referred to as "Victory Enterprises Trust". The principals of this trust were Thomas Telford, Harold McDonnard, Harold Meridon, and a man identified as Mr. Carpenter.

    COMMERCIAL TRANSACTION ONE: GOLDEN HILLS

    
    

16. Golden Hills is one of the four commercial projects that was at issue in this proceeding. A group of individuals including Robert Hastings, Doug Ollenberger, and Jeffery Kollenkark formed a partnership to purchase, refurbish, and develop a golf course and its surrounding property known as Golden Hills. This partnership, initially known as EBBCO Partnership and later incorporated under the name of Fore Golf Management, Inc., discussed with Ms. Harnagel the financing that would be required for the project. Ms. Harnagel suggested to this borrower a possible joint venture with a potential lender, the Victory Enterprises Trust, and requested a deposit in the amount of $12,000. Ms. Harnagel did not identify her lender to the borrower. This borrower deposited with Meridian the sum of $12,000 on or about September 28, 1989, with conditions that may be summarized as follows:

    
    

    1. The money was to be placed in Meridian's escrow account.

    2. The money was to be "100 percent refundable" if the joint venture partner did not fund the project or if terms of funding were not acceptable.

    3. Signatures from both parties to the joint venture would be required to release the funds from escrow.

    4. This money was not to be considered an application fee, but as a deposit for closing costs of the proposed joint venture. Any funds remaining were to be returned to Fore Golf Management, Inc.

       
       

17. At no time did the Golden Hills borrowers authorize Ms. Harnagel to remove any of the funds from her trust account.

    
    

18. On October 2, 1989, Ms. Harnagel wrote Robert Hastings a letter that included the following:

    
    

    Friday, September 29, 1989, Sun Bank received the Twelve Thousand Dollars ($12,000.00) and deposited in MERIDIAN MORTGAGE GROUP, INC.

    TRUST ACCOUNT. These monies are used for prudent expenses needed to bring FORE GOLF MANAGEMENT, INC. an acceptable commitment.

    THE MONIES ARE REFUNDABLE if the commitment is not acceptable. (Emphasis in the original)

    
    

19. On February 1, 1990, Mr. Hastings wrote Ms. Harnagel a letter that included the following:

    
    

    ... For about five months we have been attempting to put together a deal on Golden Hills. You have had our $12,000.00 since 9/29/89. To date no commitment has been brought to us. We do not mind continuing to try, but we do not wish to continue with this indefinitely. It is our wish that you suggest a time frame within which the project is completed and funded, or unless extended in

    writing by both parties, all agreements are null and void and all monies are refunded.

    
    

20. On March 3, 1991, the Golden Hills borrowers demanded that Respondents return the $12,000 deposit, noting that the Golden Hills property had been sold to another entity approximately six months previously and that no commitment from Respondents or their lender had been forthcoming. Thereafter, the Golden Hills borrowers sent Dr. Kollenkark to Florida from California in an effort to collect the deposit from Respondents.

    
    

21. On March 11, 1991, Ms. Harnagel wrote to Dr. Kollenkark a letter that provided, in part, as follows:

    
    

    The Trust does not want to return the monies as they felt they bought a commitment but that you were unable to obtain a viable contract.

    As I have said to you when we were told in December, 1990 that Golden Hills had definitely been sold. I told you that I would pay the $13,000 and get the money through the legal department.

    
    

22. The reference to the Trust in Ms. Harnagel's letter of March 11, 1991, is to the Victory Enterprises Trust. The reference to the sum of $13,000 was an error and should have been $12,000. There was no evidence as to whether the deposit was transferred from Meridian's trust account to the proposed lender as implied by the letter of March 11, 1991. Ms. Harnagel testified that the money was transferred to Meridian's operating account and expended on Meridian's operating expenses. Ms. Harnagel admitted that the sum deposited by the Golden Hills borrowers should be refunded, but that she has been unable to do so. Her position that using the money to fund her operating expenses was authorized by the agreement with the Golden Hills borrowers is rejected as being contrary to the evidence. Although the record establishes that Ms. Harnagel expended considerable time and effort to secure funding for the Golden Hills borrowers, the record is equally clear that she was not entitled to use the deposit to fund her overhead expenses.

    
    

    COMMERCIAL TRANSACTION TWO: GENESIS CORPORATION

    
    

23. The second commercial transaction involved the funding of two hotel projects with the Genesis Corporation as Respondents' borrower. By letter dated December 15, 1989, the Genesis Corporation deposited with Meridian the sum of

    $1,500. Paragraph two of the transmittal letter is as follows:

    
    

    2. The Funding must be to Genesis Corp. satisfaction. The Application Fee of $1,500. is refundable, if Genesis Corp. is not Completely Satisfied with the Funding.

    
    

24. The principals of Genesis Corporation did not provide certain financial statements requested by Respondents. Consequently, Respondents were unable to secure financing for the two hotel projects. After the request for the financial statements was made, Respondents did not hear further from the Genesis Corporation. Respondents expended the deposit made by the Genesis Corporation for its operating expenses.

    COMMERCIAL TRANSACTION THREE: RIVER RUN

    
    

25. The third commercial transaction involved River Run Limited Partnership (River Run), which proposed to develop a golf course in North Carolina. As part of the transaction, Meridian required the borrower to pay an advance fee of $10,000.00 to be placed in Meridian's trust account. This deposit was subject to the following conditions:

    
    

    1. The deposited fee may be used by the lender (an unidentified trust) or by MERIDIAN MORTGAGE GROUP, INC. in conjunction with the lender to conduct an inspection of the property and for other prudent and reasonable expenses necessary to bring the BORROWER an acceptable loan commitment. For all monies spent a full accounting of such expenses will be made to BORROWER. If no loan commitment is offered within fifteen (15) days of the last signature date of this agreement, the entire application fee will be refunded unless otherwise agreed to by both parties to this agreement.

    2. Should an offer be made by the lender that, for any reason, is unacceptable to the BORROWER, the BORROWER shall have the right to reject such an offer and the entire application fee shall be refunded to the BORROWER. In such an event, the BORROWER shall be obligated to notify MERIDIAN MORTGAGE GROUP, INC. within five (5) working days of receipt of such offer that the offer is rejected, otherwise the deposited funds will be forfeited and will become the property of MERIDIAN MORTGAGE GROUP, INC.

       
       

26. The foregoing agreement between Meridian and River Run was extended so that Meridian was given until November 15, 1989, to obtain the financing.

    
    

27. The $10,000 deposit to Meridian was paid on behalf of River Run by Nate Bowman. No financing for River Run was secured by Respondents. Mr. Bowman demanded a refund of the deposit and subsequently obtained judgment against Respondents for the $10,000 deposit. As of the formal hearing, Respondents had not satisfied the Bowman judgment or otherwise refunded the deposit to River Run.

    
    

28. Ms. Harnagel asserted that the following circumstances were the reason that the River Run transaction did not close:

    
    

    1. The trust that was to be the lender asked for financial statements that were not provided.

    2. There was a lawsuit between certain of the partners of River Run.

    3. A financial officer would not relinquish certain tax returns for one of the partners of River Run.

    4. There was a concern about River Run's ability to repay the money.

29. Ms. Harnagel stated that of the $10,000 that was deposited into Meridian's trust account, she only retained the sum of $3,500 and that the balance went to the lending trust. The $3,500 that was retained by Ms. Harnagel was expended. There was no accounting for these expenditures. Likewise, there was no accounting for the sums paid to the lending trust.

    
    

    COMMERCIAL TRANSACTION FOUR: CHAPEL HILL

    
    

30. The fourth commercial transaction involved a group of borrowers represented by Michael Grdina, an attorney in Ohio, who desired to obtain financing for the construction of a series of projects that will be referred to as the Chapel Hill complex.

    
    

31. Subsequent to a telephone conversation between Mr. Grdina and Ms. Harnagel, Ms. Harnagel sent a letter dated November 16, 1989. This letter reflected that Respondents represented a Trust and that the Trust was interested in participating in a joint venture with Mr. Grdina's clients. The letter contained certain requirements imposed by the Trust and provided, in part, as follows:

    
    

    A Seventy-Five Hundred ($7,500.00) application fee be placed in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring Chapel Hill Commerce Center an acceptable commitment. If the commitment is not acceptable the monies are refundable.

    
    

32. In response to that letter of November 16, 1989, Mr. Grdina wrote Ms. Harnagel a letter on behalf of his clients and enclosed a check for the sum of

    $7,500. Mr. Grdina's letter became the agreement between the parties as to the status of the $7,500 deposit paid to Respondents by Mr. Grdina. That letter omitted the language in Ms. Harnagel's letter of November 16, 1989, pertaining to the use of the deposit "for prudent business expenses". Mr. Grdina's letter of December 1, 1989, provided, in part, as follows:

    
    

    By wire transfer to Meridian's trust account the entities [Mr. Grdina's clients] have placed with you a Seven Thousand Five Hundred Dollars ($7,500.00) refundable good faith deposit. If an entity accepts a proposal for funding from sources identified by you, and such entity does not close the transaction for reason other than the fault of the lender, the good faith deposit will be forfeited as liquidated damages for expenses and fees incurred in the transaction.

    
    

33. The initial agreement between Harnagel and Grdina contemplated that Harnagel's Trust would provide financing for Grdina's clients. By letter dated February 23, 1990, Mr. Grdina accepted the offer that the transaction be modified so that the Trust would secure 100 percent of the loan by a lending institution by depositing with the lending institution certificates of deposit. As additional consideration to the Trust, the Trust would become entitled to 25 percent equity participation in the construction project. The letter of

    February 23, 1990, did not modify the status of the deposit paid by Mr. Grdina on behalf of his clients.

    
    

34. The loan to Mr. Grdina's clients did not close because the lending institution with whom Ms. Harnagel and Victory Trust dealt would not fund the loan. Thereafter, Mr. Grdina demanded return of the $7,500 deposit. As of the date of the formal hearing, that deposit has not been refunded. Although Ms. Harnagel argues that she was entitled to keep the deposit, that argument is without merit since none of the conditions precedent to her entitlement to the deposit occurred.

    
    

    CUSTOMER OVERCHARGE

    
    

35. Respondents admitted that two customers were charged brokerage fees, origination fees, and/or discount fees which were greater than those disclosed on the Good Faith Estimates. On the Morris transaction, a fee of $450.80 was estimated, but the fee actually assessed at closing was $2,240, an overcharge of

    $1,790. On the Rosen transaction a fee of $1,773 was estimated, but the actual fee assessed was $1,871.50, for an overcharge of $98.50. Both overcharges resulted from charges imposed by a lending institution and neither overcharge resulted in inappropriate payments to Respondents.

    
    

    WALL STREET JOURNAL ADVERTISEMENT

    
    

36. Respondents placed an advertisement in the Wall Street Journal on February 16, 1990. This advertisement did not contain the address of Meridian as required by law. The deletion of Meridian's address was the fault of the Wall Street Journal.

    
    

    INVESTIGATION OF LENDING SOURCE

    
    

37. Ms. Harnagel testified without contradiction that she made efforts to verify the reliability of the Victory Enterprises Trust and its principals. She learned of this potential lender through an advertisement the Trust had placed in the Miami Herald. Neither the Trust or the principals were required to be licensed in Florida. Her efforts included having her attorney and her bank officer make inquiries to verify the reliability of the proposed lender. Petitioner argues that Respondents should have made further inquiry after the loan to the Golden Hills borrowers was not forthcoming from this lender. Petitioner has failed to establish by clear and convincing evidence that Respondents breached any standards imposed upon them to investigate the reliability of lenders so as to prove that Respondents are incompetent.

    
    

    CONCLUSIONS OF LAW

    
    

38. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings. See, Section 120.57(1), Florida Statutes.

    
    

39. Section 494.052, Florida Statutes (1989) provides as follows:

    
    

    When the department finds any person in violation of the grounds set forth in s. 494.055(1), it may enter an order imposing one or more of the following penalties:

    1. Revocation of a license or registration.

    2. Suspension of a license or registration

       subject to reinstatement upon all reasonable conditions as the department may specify.

    3. Placement of the licensee, registrant, or applicant on probation for a period of time and subject to all reasonable conditions as the department may specify.

    4. Issuance of a reprimand.

    5. Imposition of a fine not to exceed $5,000 for each count or separate offense.

    6. Denial of a license or registration.

    
    

40. Section 494.055(1), Florida Statutes (1989), provides, in pertinent part, as follows:

    
    

    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.

    * * *

    1. 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;

    2. Failure to account or deliver to any person any personal property, such as any money, fund, deposit, check, draft, mortgage, or other document or thing of value, which has come into his hands and which is not his property or which he is not in law or equity entitled to retain, under the circumstances and at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivers;

    3. Failure to disburse funds in accordance with agreements;

    4. Any breach of trust funds or escrow funds, or any misuse, misapplication, or misappropriation of personal property, such as any money, fund, deposit, check, draft, mortgage, or other document or thing of value, entrusted to his care to which he had no current property right at the time of entrustment regardless of actual injury to any person;

41. Section 494.093(3), Florida Statutes (1989), provides, in pertinent part, as follows:

    
    

    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:

    1. To knowingly or willingly employ any device, scheme, or artifice to defraud.

    2. 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.

    3. To obtain property by fraud, willful misrepresentation of a future act, or false promise.

    
    

42. Section 494.08(5), Florida Statutes (1987), provides as follows:

    
    

    (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.

    
    

43. Section 494.055(3), Florida Statutes provided, at all times pertinent hereto, as follows:

    
    

    (3) A principal mortgage broker shall be subject to the disciplinary actions specified in s. 494.052 for violations of subsection (1) by employees in the course of employment with

    the mortgage brokerage business. The principal mortgage broker shall only be subject to suspension or revocation for employee actions if there is a pattern of repeated violations by employees or the principal mortgage broker has knowledge of the violations.

    
    

44. Rule 3D-40.008(1), Florida Administrative Code (As Amended September 1986), provided, in pertinent part, as follows:

    
    

    (1) In addition to the fees or commissions provided for in Subsection 494.08(3), F.S., loan closing costs or expenses incidental to the processing and closing of the mortgage loan transaction may also be charged and collected provided they are itemized and supported by an actual expenditure.

    
    

45. Rule 3D-40.008(1), Florida Administrative Code (As Amended June 1989), provided, in pertinent part, as follows:

    
    

    (1) A licensee or registrant shall state in any loan estimate or contract for services the total fees to be received. The total fees shall not exceed the maximum as prescribed in s. 494.08(3), F.S.

    
    

46. Rule 3D-40.006(5), Florida Administrative Code, provided, at all times pertinent hereto, as follows:

    
    

    (5) In the event a registrant or licensee requires a deposit in connection with an application for a mortgage loan, there must be an agreement in writing, signed by the parties thereto, with each party retaining a copy, setting forth the disposition of the deposit, whether the loan is finally consummated or not, and the term for which the agreement is to remain in force before return of the deposit for nonperformance can be required.

    
    

47. Rule 3D-40.006(6)(a), Florida Administrative Code, provided, at all times pertinent hereto, as follows:

    
    

    If deposits are accepted, every licensee or registrant shall maintain and upon receipt immediately place all funds, money, check, draft, or other things of value entrusted to him with some bank or recognized depository. Said trust fund account shall designate the licensee or registrant as trustee and all such trust fund accounts must provide for withdrawals of the funds without previous notice. Such withdrawals should be disbursed according to the terms of the deposit

    agreement or in the absence thereof, on written demand of the person entitled to the funds. A licensee or registrant who receives such trust funds shall preserve and make available to the Department or its authorized representative, all deposit slips and statements of account rendered by the bank, trust company or title company, in which said deposit is placed, together with agreements between the parties involved in the transaction, all contracts, agreements, instructions to or with the said depository, and shall keep an accurate account in the books of each separate bank account wherein such trust funds have been deposited, together with a record of all withdrawals therefrom, and shall support such accounts by such additional data as good accounting practice requires. Any other amounts accepted by the broker which are not his own or have not been earned by the broker, including mortgage servicing payments, should be maintained in trust or escrow until an authorized disbursement is made.

    
    

48. Rule 3D-40.091, Florida Administrative Code (As Amended June 1989) provides as follows:

    
    

    1. Prior to entering into a contract to provide mortgage brokerage services, the broker shall fully inform the borrower in writing of all charges and costs, including discounts, if any, that the borrower will be required to pay in connection with securing the loan.

       
       

49. Rule3D-40.010(2), Florida Administrative Code provided, at all times pertinent hereto, as follows:

    
    

    1. No advertisement shall be inserted in any publication by a licensee or registrant

    where only a post office box number, telephone number or street address appears. All advertisements must contain the broker's name and his office address.

    
    

50. Section 494.055(3), Florida Statutes, provides, in pertinent part, as follows:

    
    

    A principal mortgage broker shall be subject to the disciplinary actions specified in s.

    494.052 for violations of subsection (1) by employees in the course of employment with the mortgage brokerage business. The principal mortgage broker shall only be subject to suspension or revocation for employee actions if there is a pattern of repeated violations

    by employees or the principal mortgage broker has knowledge of the violations.

    
    

51. Paragraph 6 charges Respondents with engaging in a practice referred to as "par plus financing" in certain transactions. Paragraph 18 concludes that Respondents violated Section 494.055(1)(b) and Section 494.093(3), Florida Statutes, and Rule 3D-40.008, Florida Administrative Code. The two transactions referred to as "par-plus" transactions closed in December of 1989. Because neither the Good Faith Estimate nor the Settlement Statement reflected the fee Respondents received from the lender, Petitioner established that Respondents violated the provisions of Rule 3D-40.008(1), Florida Administrative Code (as amended June 1989). 4/ Petitioner also alleged that Respondents violated the provisions of Sections 494.055(1)(b) and 494.093(3), Florida Statutes (1989) as well as the provisions of Rule 3D-40.008(1), Florida Administrative Code. Petitioner did not establish by clear and convincing evidence that the Respondents violated the provisions of either Section 494.055(1)(b) or Section 494.093(3), Florida Statutes (1989), by failing to disclose these fees because there was no evidence that the borrowers were misled or defrauded by the failure to disclose. Petitioner's argument as to the possible harm that may befall borrowers if mortgage brokers do not fully disclose fees establishes rationale for the subject rule, but does not establish a violation of Section 494.055(1)(b) or Section 494.093(3), Florida Statutes (1989).

    
    

52. Paragraph 7 alleges that Respondents failed to deposit certain funds in an escrow account. Paragraph 19 concludes that Respondents violated the provisions of Sections 494.055(1)(e),(g), and (h), Florida Statutes and Rule 3D- 40.006(5) and (6)(a), Florida Administrative Code. Petitioner established by clear and convincing evidence that Respondents repeatedly violated the provisions of Section 494.055(1)(e), Florida Statutes, and the provisions of Rule 3D-40.006(6)(a), Florida Administrative Code, by their dealings with cost deposits and their failure to place these deposits in an escrow account. Prior to taking over the company in July 1989, there existed a practice of misapplying deposits that were paid for appraisals. These funds should have been deposited in escrow and not used as a part of Meridian's operating account. As the principal broker, Ms. Harnagel is responsible for the misapplication of these funds pursuant Section 494.055(3), Florida Statutes. Her efforts to avoid responsibility for these violations is disturbing, especially since the practice continued, but not as frequently, after she assumed ownership of Meridian.

    
    

53. Paragraph 8 alleges that Respondents failed to make certain disbursements from its escrow account. Paragraph 20 concludes that Respondents violated the provisions of Section494.055(1)(f),(g), and (h), Florida Statutes. Petitioner established by clear and convincing evidence that Respondents violated the provisions of Sections 494.055(1)(g) and (h), Florida Statutes, and the provisions of Rule 3D-40.006(6)(a), Florida Administrative Code, by the manner Ms. Harnagel handled the advance fee deposits received in connection with the four commercial transactions involved in this proceeding. Instead of disbursing those escrow funds in a manner consistent with the agreements pertaining thereto, Respondents used the funds to pay Meridian's overhead, which is an unauthorized disbursement. Respondents' argument that the written agreements contemplated such use of the advance fee deposits is without merit. Petitioner established by clear and convincing evidence that Respondents violated the provisions of Section 494.055(1)(f), Florida Statutes, by failing to account for money that had been collected from customers for appraisals and for advance fee deposits.

54. Paragraph 10 alleges that Respondents assessed brokerage fees, origination fees, and/or discount fees in excess of the good faith estimate. Paragraph 22 concludes that Respondents violated Section494.08(5), Florida Statutes, and Rule 3D-40.008(1) [prior to 5/89] and Rule3D-40.008(3)(a) [after 5/89], Florida Administrative Code. Petitioner did not establish that Respondents violated the provisions of Section 494.085(5)(a), Florida Statutes, as alleged in Paragraph 10 of the Administrative Complaint since Respondents satisfactorily explained the differences between the estimates and the actual costs incurred.

    
    

55. Paragraph 12 alleges that Respondents assessed such costs as Federal Express charges and courier fees in excess of the amounts estimated. Paragraph

    24 concludes that Respondents violated Section 494.055(1)(p), Florida Statutes, and Rule 3D-40.091, Florida Administrative Code. Petitioner did not present evidence concerning these allegations at the formal hearing.

    
    

56. Paragraph 13 alleges that Respondents advertised in the Wall Street Journal without providing their office address. Paragraph 25 concludes that Respondents violated Rule 3D-40.010(2), Florida Administrative Code. Petitioner did not establish that Respondents violated the provisions of Rule 3D-40.010(2), Florida Administrative Code, as alleged in Paragraph 13 of the Administrative Complaint. Although the advertisement in the Wall Street Journal did not include information required by that Rule, the absence of the information was the fault of the publication, and not of the Respondents.

    
    

57. Paragraph 14 alleges that Respondents made unnecessary charges to borrowers for assignments of mortgages. Paragraph 25 concludes that Respondents violated Section495.055(1)(b), Florida Statutes. Petitioner did not present evidence concerning these allegations at the formal hearing.

1. Paragraph 15 alleges that Respondents failed to establish the reliability of lenders prior to referring borrowers to those lenders.

   Petitioner did not establish that Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes, as alleged in Paragraph 15 of the Administrative Complaint since there was insufficient evidence as to what Ms.

   Harnagel should have done in addition to the efforts she made to determine the reliability of the Victory Enterprises Trust.

   
   

2. Paragraph 16 alleges that Respondents used closing documents that misrepresented that Meridian was the lender. Paragraph 17 alleges that Respondents used one line for both the loan discount fee and the loan origination fee. Paragraph 27 concludes that Paragraphs 15, 16, and 17 establish that Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes. Petitioner did not establish that Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes, as alleged in Paragraphs

   16 and 17 of the Administrative Complaint. While the manner in which Respondents prepared these documents may arguably be evidence of an intent to deceive the customer, these practices, without further evidence, do not establish by clear and convincing evidence a violation of the statute.

   
   

3. The following recommendation takes into consideration that violations of escrow accounts are serious violations, that clients of the Respondents and the appraisers lost money as a result of these practices, and that relatively large sums of money were involved in this proceeding.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all licenses and registrations issued either to Joan N.

Harnagel or Meridian Mortgage Group, Inc., be revoked. It is further recommended that an administrative fine be imposed against Joan N. Harnagel in the amount of $25,000. It is further recommended that a separate administrative fine be imposed against Meridian Mortgage Group, Inc., in the amount of $25,000.

DONE AND ENTERED this 22nd day of July, 1993, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON

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 22nd day of July, 1993.

ENDNOTES

1/ The following is a brief outline of the Administrative Complaint and is provided for convenience only. Any question as to the contents of the Administrative Complaint should be resolved by reviewing the complete Administrative Complaint.

Paragraph 6 charges Respondents with engaging in a practice referred to "par plus financing" in certain transactions. Paragraph 18 concludes that Respondents violated Section 494.055(1)(b) and Section 494.093(3), Florida Statutes, and Rule 3D-40.008, Florida Administrative Code.

Paragraph 7 alleges that Respondents failed to deposit certain funds in an escrow account.

Paragraph 19 concludes that Respondents violated the provisions of Sections 494.055(1)(e),(g), and (h), Florida Statutes and Rule 3D-40.006(5) and (6)(a), Florida Administrative Code.

Paragraph 8 alleges that Respondents failed to make certain disbursements from its escrow account. Paragraph 20 concludes that Respondents violated the provisions of

Section 494.055(1)(f),(g), and (h), Florida Statutes.

Paragraph 10 alleges that Respondents assessed brokerage fees, origination fees, and/or discount fees in excess of the good faith estimate. Paragraph 22 concludes that Respondents violated Section494.08(5), Florida Statutes, and Rule 3D-40.008(1) [prior to 5/89] and Rule3D-40.008(3)(a) [after 5/89], Florida Administrative Code.

Paragraph 12 alleges that Respondents assessed such costs as Federal Express charges and courier fees in excess of the amounts estimated. Paragraph 24 concludes that Respondents violated Section 494.055(1)(p), Florida Statutes, and Rule 3D-40.091, Florida Administrative Code.

Paragraph 13 alleges that Respondents advertised in the Wall Street Journal without providing their office address. Paragraph 25 concludes that Respondents violated Rule

3D-40.010(2), Florida Administrative Code.

Paragraph 14 alleges that Respondents made unnecessary charges to borrowers for assignments of mortgages. Paragraph 25 concludes that Respondents violated Section 495.055(1)(b), Florida Statutes.

Paragraph 15 alleges that Respondents failed to establish the reliability of lenders prior to referring borrowers to those lenders.

Paragraph 16 alleges that Respondents used closing documents that misrepresented that Meridian was the lender. Paragraph 17 alleges that Respondents used one line for both the loan discount fee and the loan origination fee. Paragraph 27 concludes that Paragraphs 15, 16, and 17 establish that Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes.

Paragraph 28 concludes that Ms. Harnagel is responsible as Meridian's principal mortgage broker for acts of Meridian's employees pursuant to Section 494.055(3), Florida Statutes.

2/ This admission is conclusively established pursuant to Rule 1.370, Florida Rules of Civil Procedure. Ms. Harnagel's self-serving testimony at the formal hearing that she made verbal disclosures to the Carlsens and they elected to participate in the "par plus" transaction is rejected.

3/ The factual allegations pertaining to these violations are found in Paragraph 7 of the Administrative Complaint, which also alleges certain facts pertaining to four commercial transactions. Those commercial transactions are

discussed in subsequent sections of this Recommended Order. The factual allegations pertaining to the residential transactions were established by Respondents's failure to respond to Requests for Admissions.

4/ In its post-hearing submittal, Petitioner erroneously refers to Rule 3D- 40.008(1), Florida Administrative Code (as amended September 1986). This reference is treated as a scrivener's error since the transactions at issue occurred after the effective date of the June 1989 version of the Rule.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-0685

The following rulings are made on the proposed findings of fact submitted by Petitioner. There was no paragraph number 18 in the proposed recommended order.

1. The proposed findings of fact in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 22, 25, 27, 28, 33, 34, 35, 36, 37, 38, 39, 41, 44, 49, 50, 51, 52, 54, 68, 69, 70, 71, 72, 73, 75, and 78 are adopted in material part by the Recommended Order.

   
   

2. The proposed findings of fact in paragraphs 14, 16, 17, 19, 20, 21, 23, 24, 26, 30, 42, 43, 45, 46, 47, 48, 53, 55, 56, 57, 58, 59, 61, 62, 63, 64, 65, 66, 67, 74, 76, 77, 79, and 81 are subordinate to the findings made.

   
   

3. The proposed findings of fact in paragraphs 29 and 30 are rejected as being unnecessary to the conclusions reached. Although the proposed findings are factually correct in that Mr. Willard did testify as reflected by the proposed findings, that testimony is unnecessary to the findings made and to the conclusions reached. Mr. Willard essentially testified to the general elements of a fraudulent practice referred to as an advance fee scheme. While Respondents' practices may arguably contain certain elements of an advance fee scheme, there was no clear and convincing evidence that these practices constitute an advance fee scheme.

   
   

4. The proposed findings of fact in paragraph 32 are rejected as being argument and subordinate to the findings made.

   
   

5. The proposed findings of fact in paragraphs 40 and 60 are adopted in part by the Recommended Order and are rejected in part as being subordinate to the findings made.

   
   

6. The proposed findings of fact in paragraphs 80 and 82 are rejected as being subordinate to the findings made and, in part, as being contrary to the conclusions reached.

The following rulings are made on the proposed findings of fact submitted by Respondents. The proposed findings began in paragraph 15 of the Proposed Recommended Order.

1. The proposed findings of fact in paragraphs 15, 16, 19, 20, 28, 33, 35, 38, 40, 41, 47, 48, 49, 54, 57, 58, 59, 60, 61, 65, 74, 75, 76, 77, 80, 83, 84, 87, 88, 90, 91, 92, 93, 94, 95, 102, 120, 122, 125, 126, 127, 130, 131, 132, 133, 134, 149, and 150 are adopted in material part by the Recommended Order.

   
   

2. The proposed findings of fact in paragraph 17 are discussed as a preliminary matter, but are rejected as being unnecessary as findings of fact.

3. The proposed findings of fact in paragraphs 18, 20, 21, 22, 24, 25, 26, 27, 29, 30, 32, 37, 42, 43, 45, 46, 50, 51, 52, 56, 63, 64, 79, 85, 86, 89, 96, 97, 98, 99, 100, 101, 104, 105, 107, 111, 121, 123, and 124 are subordinate to the findings made and to the conclusions reached.

   
   

4. The proposed findings of fact in paragraphs 23, 34, 36, 44, 72, 118, 128, 129, 135, 140, 141, 142, 143, 146, and 147 are rejected as being unnecessary to the conclusions reached.

   
   

5. The proposed findings of fact in paragraphs 53, 66, 67, 68, 69, 71, 144, and 145 are rejected as being unsubstantiated by the evidence.

   
   

6. The proposed findings of fact in paragraph 55 are rejected as being unsubstantiated by the evidence. There was evidence that Respondents did engage in such a scheme, but it is concluded that the evidence did not establish the allegation by clear and convincing evidence.

   
   

7. The proposed findings of fact in paragraphs 70, 73, 106, 110, and 148 are rejected as being contrary to the findings made or to the conclusions reached.

   
   

8. The proposed findings of fact in the first sentence of paragraph 81 are rejected as being contrary to the findings made or to the conclusions reached. The proposed findings of fact in the second sentence of paragraph 81 are adopted in material part by the Recommended Order.

   
   

9. The proposed findings of fact in the first sentence of paragraph 82 are rejected as being subordinate to the findings made. The proposed findings of fact in the second sentence of paragraph 82 are rejected as being contrary to the findings made or to the conclusions reached.

   
   

10. The proposed findings of fact in paragraph 103 are rejected as being unsubstantiated by the evidence.

    
    

11. The proposed findings of fact in paragraphs 108, 109, 110, and 112 are rejected as being unnecessary to the conclusions reached since expert testimony as to legal conclusions is not necessary.

    
    

12. The proposed findings of fact in paragraphs 113, 112, 113, 114, 115, 116, and 117 have been considered, but are rejected to the extent they are contrary to the conclusions reached.

    
    

13. The proposed findings of fact in the first sentence of paragraph 119 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 25 are rejected as being contrary to the conclusions reached.

    
    

14. The proposed findings of fact in paragraphs 135, 136, and 137 are subordinate to the conclusion that Petitioner failed to establish that Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes, based on the allegations contained in Paragraph 16 of the Administrative Complaint.

    
    

15. The proposed findings of fact in paragraphs 138 and 139 are subordinate to the conclusion that Petitioner failed to establish that

Respondents violated the provisions of Section 494.055(1)(b), Florida Statutes, based on the allegations contained in Paragraph 17 of the Administrative Complaint.

COPIES FURNISHED:

Robert K. Good, Esquire Office of the Comptroller

Department of Banking and Finance Hurston Tower South, Suite S225

400 West Robinson Street Orlando, Florida 32801-1799

Marie A. Mattox, Esquire Friedlander & Mattox, P.A. 3045 Tower Court

Tallahassee, Florida 32303

Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

William G. Reeves General Counsel

Office of the Comptroller The Capitol, 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 ten 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.

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF FINANCE

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

)

Petitioner, )

) DOAH Case No. 92-0685

vs. ) Administrative Proceeding

) Numbers #1915-F-7/90 MERIDIAN MORTGAGE GROUP, INC., ) #1915a-F-7/90 and JOAN N. HARNAGEL, )

Individually and as President ) and Principal Mortgage Broker ) of MERIDIAN MORTGAGE GROUP, INC., )

)

Respondents. )

)

FINAL ORDER AND NOTICE OF RIGHTS

This matter has come before the undersigned as Head of the Department of Banking and Finance, Division of Finance ("Department"), for the entry of a Final Order in the above referenced proceeding upon a review of the entire record of this proceeding.

BACKGROUND

This matter arose when the Department issued its Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights ("Administrative Charges") filed against Meridian Mortgage Group, Inc. ("Meridian Mortgage") and Joan N. Harnagel ("Harnagel") on December 16, 1991. Harnagel and Meridian Mortgage, through counsel, filed a Petition for Formal Hearing with respect to the Administrative Charges. Harnagel's and Meridian Mortgage's Petition for Formal Hearing was granted, and this matter was transferred to the Division of Administrative Hearings for the assignment of a hearing officer to conduct the formal hearing. A Formal Hearing was held in Ft. Pierce, Florida on February 11, 1993. On July 22, 1993, the Hearing Officer from the Division of Administrative Hearings submitted his Recommended Order ("Recommended Order") in this proceeding, a copy of which is attached hereto as Exhibit A. Said Recommended Order recommended that the Department enter a Final Order revoking all licenses and registrations issued either to Harnagel or Meridian Mortgage, and that the Department impose an administrative fine against Harnagel in the amount of $25,000.00 and that a separate administrative fine be imposed against Meridian Mortgage in the amount of $25,000.00.

On May 21, 1993, Harnagel and Meridian Mortgage submitted their Recommended Order, and on May 20, 1993, the Department submitted its Recommended Order to the Hearing Officer in this proceeding. The transcript was prepared and filed in this proceeding.

Neither party filed exceptions with respect to the Hearing Officer's Recommended Order.

STATEMENT OF FINAL AGENCY ACTION

Having reviewed the complete record of this proceeding, it is accordingly ORDERED:

1. The Hearing Officer's Findings of Fact are adopted in toto and incorporated herein;

   
   

2. The Hearing Officer's Conclusions of Law numbered 38 50, 51 (with respect to its application to Section 494.093(3), Florida Statutes), and 52-59 are adopted and incorporated herein.

   
   

3. The Department rejects Conclusion of Law number 51 with respect to its application to Section 494.055(1)(b), Florida Statutes (1989). The Department has construed Section 494.055(1)(b), Florida Statutes (1989) as providing that the engaging in of conduct constituting misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction constitutes grounds for which disciplinary action may be taken as specified in Section 494.052, Florida Statutes (1989). The Department is not required to establish that the borrowers were actually misled or defrauded based on Petitioner's conduct in failing to disclose the "par plus financing" fees. The agency's interpretation of the statute must be upheld if it is not unreasonable or outside the range of possible interpretation. Pershing Industries v. Department of Banking and Finance, 591 So.2d 991 (Fla. 1st DCA 1991); Motel 6, Operating L.P. v. Department of Business Regulation, 560 So.2d 1322 (Fla. 1st DCA 1990). As such, the Hearing Officer's Conclusion of Law number 51 is hereby rejected, with respect to its application to Section 494.055(1)(b), Florida Statutes, and the Department accordingly finds that Meridian Mortgage and Harnagel violated the provisions of Section 494.055(1)(b), Florida Statutes (1989) in accordance with paragraphs 6 and 18 of the Administrative Complaint.

   
   

4. All licenses and registrations issued either to Joan N. Harnagel or Meridian Mortgage Group, Inc. are hereby REVOKED.

   
   

5. An administrative fine is hereby imposed against Joan N. Harnagel in the amount of $25,000.00 and a separate administrative fine is hereby imposed against Meridian Mortgage Group, Inc. in the amount of $25,000.00. Payment of these administrative fines will be made payable to the Department of Banking and Finance, c/o Linda Dilworth, Director Division of Finance, 202 Blount Street, The Fuller Warren Building, 1st Floor, Tallahassee, Florida 32399-0350, and shall be made within thirty (30) days from the date of entry of this Final Order.

DONE and ORDERED this 20th day of October, 1993.

GERALD LEWIS, as Comptroller and Head of the Department of Banking and Finance, Division of Securities

Copies furnished to:

Linda Dilworth, Director Division of Finance

Robert K. Good Chief Trial Counsel Orlando Office

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 OF THE DEPARTMENT BANKING AND FINANCE, SUITE 1302, THE CAPITOL, TALLAHASSEE, FLORIDA 32399-0350 AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, 300 MARTIN LUTHER KING, JR.

BLVD., TALLAHASSEE, FLORIDA 32399-1850, OR IN 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 the foregoing Final Order and Notice of Rights was sent by regular U.S. Mail to Marie A. Mattox, Esquire, Friedlander and Mattox, P.A., 3045 Tower Court, Tallahassee, Florida 32303, this 20th day of October, 1993.

ELISE M GREENBAUM

Assistant General Counsel The Capitol, Suite 1302 Tallahassee, Florida 32399

(904) 488-9896

Docket for Case No: 92-000685

Orders for Case No: 92-000685