The Issue The central issue in this case is whether the Respondents are guilty of the violations alleged in the Amended Administrative Complaint; and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: The Department of Banking and Finance, Division of Finance, is charged with the responsibility of administering the provisions of Chapter 494, Florida Statutes. At all times material to the allegations in this case, Diko Investments, Inc. ("Diko") conducted business as a mortgage broker in Palm Beach County, Florida. At all times material to the allegations in this case, Dieter Kolberg ("Kolberg") was an officer, director, and acted as principal mortgage broker for Diko. Kolberg passed the mortgage broker's examination on May 28, 1985. Diko was issued a license as a mortgage broker with Kolberg as its principal broker on June 26, 1985 (license NO. HB-16568) Prior to May 28, 1985, Diko ran advertisements soliciting investors for mortgage opportunities. These ads included Kolberg's home telephone number. Prior to May 28, 1985, Kolberg/Diko entered into a business relationship with Michael D. Cirullo, a licensed mortgage broker, to "co-broke" mortgage transactions. Pursuant to their agreement, Cirullo represented the borrower/mortgagor while Kolberg obtained and represented the lender/mortgagee. Kolberg and Cirullo solicited and negotiated at least two loans prior to May 28, 1985. Kolberg acted in expectation of being paid as a mortgage broker. Cirullo remitted 50 percent of the commissions earned on these transactions to Diko. Diko stationery included the phrase "Licensed Mortgage Bankers." Neither Diko nor Kolberg has been licensed as a "mortgage banker." In August and September of 1985, investors, Marcel and Ida Barber, responded to a Diko advertisement which offered a 16 percent interest mortgage loan secured by prime residential real estate. The Barbers were interested in a safe, high interest yielding investment and requested more information from Diko. On September 23, 1985, Kolberg wrote to the Barbers to outline the following business policies of Diko: The first objective of the Diko lending program was "The Safety of the Investor's Capital." Any investment was to be secured by a mortgage on prime residential real estate clear of all liens with the exception of a first mortgage where a second mortgage would be given. Investors would be issued mortgagee title insurance to insure against loss due to defects in title to the mortgaged property. Investors would be issued fire and hazard insurance to cover any losses in the event of fire or storm. Subsequent to the receipt of the aforesaid letter, the Barbers decided to invest $25,000 in a mortgage through Diko/Kolberg. This initial transaction proceeded satisfactorily and the objectives addressed in paragraph 10 above were met. In late December, 1985, the Barbers advised Kolberg that they would be willing to invest an additional $50,000 in early January, 1986. The Barbers expected the transaction to be handled in the same manner as their prior investment through Diko. After reviewing two or three loan proposals, the Barbers chose to invest in a loan to Tony Medici/Automatic Concrete, Inc. The loan was to be secured by a second mortgage on property at 713-717 "L" Street, West Palm Beach, Florida. The "L" Street property consisted of a 24-unit apartment complex and an adjacent laundry facility. Kolberg accompanied the Barbers to view the property. During discussions with the Barbers regarding the proposed investment, Kolberg made the following false material representations: That the property had a high occupancy; That rental payments were guaranteed or subsidized by a government program; That the asset-to-debt ratio for the property was acceptable; and That a proposed expansion of the laundry facility would further enhance the security of the loan. Financial statements of the borrower (Medici/Automatic Concrete, Inc.) did not include all obligations against the "L" Street property. Diko/Kolberg did not give the Barbers an accurate or complete statement of the financial condition of the "L" Street investment. Kolberg knew the information on the statement was incomplete. Diko/Kolberg did not disclose to the Barbers the high rate of crime in the area which compromised the security of the "L" Street investment. Kolberg knew of the crime problem in the area. Diko/Kolberg did not disclose to the Barbers that foreclosure proceedings had been instituted against the "L" Street property. Kolberg knew of the foreclosure action as well as the delinquency on other obligations. Kolberg did not disclose to the Barbers that he represented, as trustee, a Kolberg family company which would directly benefit from the Barber loan. The Barber loan would satisfy a mortgage held by Kolberg, as trustee, on the subject property, which mortgage was in default and in the process of foreclosure (the Ropet Anlagen foreclosure). Kolberg did not disclose to the Barbers that another mortgage held on the "L" Street property (David Marsh loan) was also in default. A subordination agreement was required to be executed by Marsh in order for the Barber/Medici loan to close. Marsh agreed to subordinate his mortgage position for approximately $3,000 in arrear payments. Marsh was owed approximately $125,000 but chose to subordinate because by doing so he was able to recoup a small amount of what he considered a lost investment. Kolberg knew of Marsh's situation and did not advise the Barbers. The Barber loan to Medici/Automatic Concrete, Inc. closed on January 18, 1986. The Barbers delivered a check for $53,000 payable to the title company chosen by Diko. Neither Diko nor Kolberg gave the title company, Manor Title, closing instructions to protect the lenders' interests. Kolberg did, however, instruct the title company to list expenses relating to the Ropet Anlagen foreclosure against the Medici loan. Proceeds from the closing, in the amount of $50,000 were paid to Kolberg, as trustee for "Ropet Anlagen," and deposited to an account by that name. The name "Ropet Anlagen" translates to "Ropet Investments." Kolberg handles all transactions for this Kolberg family company in the United States. (Kolberg has two sons, Robin and Peter, from a former marriage. The name "Ropet" may derive from their names.) Kolberg's former wife, Patricia Kolberg, owns an interest in Ropet Anlagen. Regular monthly payments were made by Kolberg to Patricia Kolberg on a Ropet Anlagen account. Many of the checks drawn on the Ropet Anlagen account were for personal expenses of Kolberg or his business. The first mortgage on the "L" Street property was 45 days overdue on January 13, 1986. Kolberg knew of this delinquency but did not advise the Barbers. To the contrary, Diko gave the Barbers an estoppel notice from a prior closing showing the first mortgage to be current. The first mortgagee ultimately foreclosed its mortgage and the Barbers lost their entire investment. The Barbers did not receive a fire and hazard insurance policy to cover losses in the event of fire or storm for the "L" Street property. The Barbers did not receive a mortgagee title insurance policy until March, 1986, by which time the first mortgage was further in default. Additionally, the mortgagee policy disclosed a financing statement and a collateral assignment of rents recorded prior to the Barbers' mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Banking and Finance, Office of the Comptroller, enter a Final Order revoking the mortgage broker license issued to Dieter Kolberg and Diko Investments, Inc. DONE and RECOMMENDED this 30th day of November, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 1987. APPENDIX Rulings on proposed Findings of Fact submitted by Petitioner: Paragraphs 1, 2, 3, 4 and 5 are accepted. Paragraph 6 is accepted; however, Kolberg's interest when financing with funds he controlled was only on a temporary, interim basis. The activities were conducted with Diko to receive a commission, therefore requiring a license. Paragraphs 7-15 are accepted. Paragraph 16 is accepted to the extent addressed in findings of fact paragraphs 12, 13. Paragraphs 17-18 are accepted to the extent addressed in findings of fact paragraphs 14, 18, 22. Paragraphs 19-27 are accepted. Paragraph 28 is rejected as immaterial and unnecessary. Paragraphs 29-42 are accepted. The detail of Petitioner's finding is unnecessary to the conclusions reached herein. Paragraphs 43-45 are accepted but unnecessary. Paragraph 46 is accepted. Paragraph 47 is rejected as unnecessary and immaterial. Paragraphs 48-52 are accepted. Paragraph 53 is rejected as unnecessary. Paragraph 54 is accepted. Paragraph 55 is accepted to the extent found in findings of fact paragraphs 20, 21. Paragraphs 56-57 are accepted. Paragraph 58 is accepted to the extent addressed in finding of fact paragraph 21. Paragraphs 59-63 are accepted but unnecessary. Paragraphs 64-65 are accepted. Rulings on proposed Findings of Fact submitted by Respondents: Paragraph 1 is accepted. Those portions of paragraph 2 which set forth Respondent's dates of testing and licensure are accepted, the balance is rejected as an erroneous conclusions of law. Paragraph 3 is rejected as contrary to the weight ofevidence. Paragraph 4 is accepted but irrelevant to the issue. Paragraph 5 is rejected as the transaction was solicited with Kolberg's company, Diko, participating as a mortgage broker. Paragraph 6 is accepted but irrelevant to the issue. Paragraph 7 is rejected as contrary to the weight of theevidence and law. Paragraph 8 is accepted but does not mitigate, as a matter of law, Respondent's improper useage of the phrase. Paragraphs 9-11 are accepted; however the detail of thefindings is unnecessary and immaterial to the issues of thiscause. Paragraphs 12-14 are accepted to the extent addressed in findings of fact paragraphs 12, 13 the balance is rejected as unnecessary and immaterial. Paragraph 15 is rejected as unnecessary, relevant portions having previously been addressed. Paragraph 16 is accepted. Paragraph 17 is accepted but is unnecessary. Paragraph 18 is rejected to the extent it qualifies Barber as a "Sophisticated Investor." The record is clear Mr. Barber was experienced in the laws of France; however, he relied on Kolberg completely as to both transactions which took place in Palm Beach. Moreover, Mr. Barber's useage and understanding of the English language was suspect. He could hardly be considered a "sophisticated investor" in light of the total circumstances. Paragraph 19 is rejected as contrary to the weight of the evidence. Paragraph 20 is accepted to the extent addressed in finding of fact paragraph 13, the balance is rejected as contrary to the weight of evidence. Moreover, it is found that the only times of capacity occupancy (which were limited) were due to temporary, transient, undesirable tenants who may have directly affected the crime problem. Paragraph 21 is accepted. Paragraph 22 is rejected as contrary to the weight of evidence. Paragraphs 23-24 are rejected as contrary to the weight of evidence. Paragraph 25 is accepted but is unnecessary. The crime problem was there prior to closing and was undisclosed to Barber. That it worsened after closing only assured the disclosure should have been made. Paragraphs 26-35 are rejected as contrary to the weight of the evidence. Many of the facts asserted here are based on testimony given by Kolberg. Respondents presume that testimony to be truthful, accurate, and candid. I found the opposite to be true. Paragraph 36 is accepted but does not mitigate Respondents' responsibilities to have completed the items at closing. Paragraph 37 is accepted with same proviso as above paragraph 36, ruling #22). Paragraphs 38-39 are rejected. See ruling #21. Paragraph 40 is accepted. Paragraph 41 is accepted but see findings of fact paragraph 21 as to Kolberg's useage of Ropet funds for personal expenses. Paragraphs 42-43 are rejected as contrary to the weight of the evidence. COPIES FURNISHED: Lawrence S. Krieger, Esquire 111 Georgia Avenue, Suite 211 West Palm Beach, Florida 33401 Keith A. Seldin, Esquire 1340 U.S. Highway #1, Suite 106 Jupiter, Florida 33469 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
The Issue Whether the Petitioner's application for licensure as a mortgage broker should be granted or denied.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Office is the state agency responsible for regulating mortgage brokerage and mortgage lending and for licensing mortgage brokers. §§ 494.0011(1); 494.0033(2), Fla. Stat. License revocation and criminal prosecution The Office's predecessor, the Department of Banking and Finance ("Department"), issued a mortgage broker's license to Mrs. Comas in 1997. Mrs. Comas worked as a mortgage broker with Miami Mortgage Lenders until 1999, when she left her employment with that company after she was involved in what will be referred to as "the Sipple transaction." The Department initiated disciplinary action against Mrs. Comas's mortgage broker's license, and, because Mrs. Comas stipulated to the material facts of the Sipple transaction, an informal administrative hearing was held before a hearing officer appointed by the Department. The Department entered a final order revoking Mrs. Comas's mortgage broker's license on June 25, 2001, which was upheld on appear by the Third District Court of Appeal in Comas v. Department of Banking and Finance, 820 So. 2d 1088 (Fla. 3d DCA 2002). The material facts of the Sipple transaction and the basis for the revocation of Mrs. Comas's mortgage broker's license were set out by the district court in Comas, which quoted the Final Order with approval, as follows: "Appellant's conduct in altering a customer check, depositing it in her personal account, and later writing a letter to the customer on company letterhead falsely stating that the funds were in the hands of the title company jeopardized not only the customer, but also her employer and the title company. This conduct violates the numerous statutory provisions referenced in the Final Order, casts considerable doubt on either Appellant's competence, integrity, or both, and clearly warrants license revocation." Criminal charges were filed against Mrs. Comas as a result of her actions in the Sipple transaction. The information filed against Mrs. Comas, and all counts thereof, was dismissed by order of the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, in April 2002. Denials of applications for licensure as a mortgage broker subsequent to revocation In October 2002, Mrs. Comas applied for licensure as a mortgage broker. The Office notified her that it intended to deny her application in a Notice of Denial dated March 17, 2003. Mrs. Comas requested an administrative hearing, and the case was transmitted to the Division of Administrative Hearings and assigned DOAH Case No. 03-1738. A recommended order was entered on September 30, 2003, in which the administrative law judge found that Mrs. Comas failed to establish that she was rehabilitated and recommended that Mrs. Comas's application be denied. The Office entered a final order in which it adopted the findings of fact and conclusions of law in the recommended order, and denied Mrs. Comas's application for licensure as a mortgage broker. Among the findings of fact made in the Recommended Order in DOAH Case No. 03-1738 and adopted in the Office's Final Order was a finding that Mrs. Comas had failed to make restitution to the owner of Miami Mortgage Lenders, who had paid Ms. Sipple the monies that Mrs. Comas had improperly deposited in her personal account. On March 10, 2006, Mrs. Comas again applied to the Office for licensure as a mortgage broker. In a Notice of Denial of Application dated November 9, 2006, the Office notified Mrs. Comas that it intended to deny her application. Mrs. Comas did not request an administrative hearing, and the Office entered a final order denying the application on December 18, 2006. The Office incorporated into the final order the factual bases set forth in the November 9, 2006, Notice of Denial of Application, which were virtually identical to the factual bases set forth in paragraphs a. through d. of the Notice of Denial at issue herein. RPM Lenders, Inc. and related companies In 1997, Mrs. Comas and her husband, Rolando Comas, founded RPM Lenders, Inc. ("RPM Lenders"). Mrs. Comas worked as a mortgage broker with RPM Lenders from the time she left her employment at Miami Mortgage Lenders in 1999 until her mortgage broker's license was revoked in 2001. Mrs. Comas continued working for RPM Lenders after her mortgage broker's license was revoked in 2001.2 RPM Lenders shared office space with RPM Systems, a computer company which set up computer networks and distributed computers, and it also shared office space with RPM Loans and Realty, which was created in 1999 or 2000 to handle real estate transactions. On or about December 29, 2003, Mr. Comas and Mrs. Comas, on behalf of RPM Lenders, signed a Stipulation and Consent that was incorporated into a final order entered by the Office on December 30, 2003. In the Stipulation and Consent, it was recited that Mrs. Comas was the sole owner and president of RPM Lenders until May 14, 2003. In paragraph 6.1.1 of the Stipulation and Consent, Mrs. Comas agreed that she would "not become a mortgage broker, principal broker, principal representative, owner, officer or director of R.P.M. Lenders, Inc." From 2004 through April 17, 2008, Mrs. Comas was the corporate secretary for RPM Lenders until it ceased business in 2007, when its name was changed to ROC Lenders, Inc. ROC Lenders, Inc., never did any business, but Mrs. Comas nonetheless continued to serve as that company's corporate secretary until her name was deleted as the corporate secretary pursuant to a filing with the Florida Secretary of State dated April 17, 2008.3 At the times material to this proceeding, Mrs. Comas managed RPM Lenders, RPM Loans and Realty, and RPM Systems. Her title with RPM Lenders and RPM Loans and Realty was "Finance Manager," and her duties included the general daily management responsibilities of an office manager, such as ensuring that office equipment was repaired and maintained and ordering office supplies, as well as duties that included customer support, marketing and advertising, developing and implementing quality control procedures, preparing financial statements, handing accounts receivable and accounts payable, reconciling all bank accounts, reviewing all funded files, and attending all of the closings. Mrs. Comas was paid a management fee for her services as Financial Manager and Office Manager for RPM Lenders and RPM Loans and Realty. In providing customer support for RPM Lenders and RPM Loans and Realty, Mrs. Comas responded to customer complaints on behalf of the brokers employed by those companies, reviewing files and attempting to resolve problems and disagreements between customers and brokers. RPM Loans and Realty was created in 1999 or 2000 "for realty purposes," and Mrs. Comas began working with RPM Loans and Realty as a real estate associate beginning in March 1999. Mrs. Comas continued to work with RPM Loans and Realty both as manager and as a real estate associate up to the time of the final hearing.4 Rehabilitation As part of her practice as a real estate associate, Mrs. Comas accepts deposits from buyers and transmits them to title companies.5 Mrs. Comas's license as a real estate associate was current at the time of the final hearing, and it has never been the subject of disciplinary action. In a letter dated November 12, 2008, to Sherry Sipple, the person whose check Ms. Comas altered and deposited in her personal bank account, Mrs. Comas denied having altered the check, stating that her name was placed on the check by someone else. Mrs. Comas did not mention in the letter her depositing Ms. Sipple's check in her personal bank account, and Mrs. Comas blamed Ms. Sipple and Ms. Sipple's brother for what she called a "misunderstanding," stating that, because Ms. Sipple and Ms. Sipple's brother went to the closing on the subject property without Mrs. Comas, she was unable to deliver to the title company the money Ms. Sipple had entrusted to her. Mrs. Comas apologized to Ms. Sipple "for what happened," but then asked that she give Mrs. Comas's attorney a "statement of acceptance of this BIG MISUNDERSTANDING."6 Mrs. Comas telephoned Mark Mazis, her employer at Miami Mortgage Company, and apologized to him for "what happened."7 Mrs. Comas acknowledged in her testimony at the final hearing that she did something wrong, although she insisted that she did not intend to steal Ms. Sipple's money by placing it in her personal bank account but intended only to expedite Ms. Sipple's closing. Since her license was revoked in 2001, Mrs. Comas has contributed to charities and attends church approximately twice a month. Summary The Sipple transaction The evidence presented by the Office in the form of the opinion of the Third District Court of Appeal in Comas v. Department of Banking and Finance establishes conclusively that, in 1999, Mrs. Comas committed fraud, misrepresentation, deceit, or incompetence in a mortgage financing transaction; that Mrs. Comas failed to deliver funds to her customer that Mrs. Comas was not entitled to retain; and that Mrs. Comas misappropriated the customer's check by depositing it in her personal account. Untruthful testimony in DOAH Case No. 03-1738 The evidence presented by the Office is not sufficient to support a finding of fact that Mrs. Comas gave untruthful testimony in a previous administrative proceeding. In the Notice of Denial dated August 6, 2008, the Office stated as one of the factual grounds for its denial of Mrs. Comas's application for a mortgage broker's license that Mrs. Comas had testified untruthfully at the final hearing in DOAH Case No. 03- 1738. This allegation was apparently based on several findings of fact in the Recommended Order which were referenced in the Office's Proposed Recommended Order in the instant case, as follows: At the July 23, 24[, 2003] formal hearing three issues were litigated — Mrs. Comas’s claims about the circumstances of the Sipple transaction, Mrs. Comas’s claim that she had paid restitution, and her claim that she had apologized to the victims, Sherry Sipple (now Sherry Mercugliano) and Marc Mazis. (Exhibit Q) On these three claims, Mrs. Comas’s testimony conflicted with that of the victims. (Id.) The Administratively [sic] Law Judge weighed the conflicting testimony and determined: 18. Through the time of the hearing, Comas falsely claimed the transaction failed because Sipple was dissatisfied with the interest rate Comas was able to obtain. This testimony is rejected in favor of Sipple's much more convincing explanation that she rejected the balloon payment Comas proposed, insisting upon the fixed rate which she had required from the beginning. * * * 20. For all of the trouble Comas caused Sipple and Mazis, she has never apologized to them. Although Comas testified to the contrary on that point, her self- serving testimony is not credible. * * * 22. Taking into account the entire record, and having had the opportunity to view the demeanor, credibility, ability to perceive facts, knowledge of the facts and circumstances of the events to which they testified, and motive to testify, of each of the witnesses in close and stressful quarters, the conclusion is inescapable that the victims' version of events is entirely consistent with the truth. To the extent that victims' recollections or characterizations of material events differ from those of Comas and her witnesses, the testimony of the victims is credited. (Emphasis added.) (Id.) Consequently, Petitioner made false claims and testified untruthfully at the July 23-24, 2003 formal hearing. The discussions in the quoted paragraphs are not findings of fact regarding the truth or falsity of Mrs. Comas's testimony. Rather, the Administrative Law Judge was assessing the quality and quantity of the evidence presented by the parties as a predicate to making findings of fact regarding the issue of whether Mrs. Comas had established rehabilitation. The Administrative Law Judge's assessment that Mrs. Comas's testimony was not as credible or as persuasive as the conflicting testimony of other witnesses was an assessment of the weight of the evidence and the credibility of the witnesses made by the Administrative Law Judge in order to determine which conflicting testimony and evidence is the more persuasive. Although the Administrative Law Judge included in paragraph 18 of the Recommended Order in DOAH Case No. 03-1738 a statement that Mrs. Comas made a "false" claim in her testimony, it is clear from a reading of the entire paragraph that the Administrative Law Judge found Ms. Sipple's version of the events more credible. Indeed, an Administrative Law Judge would be acting improperly if he or she were to make a finding of fact that a party's or witness's testimony was untruthful or false because the truth or falsity of evidence is not at issue in an administrative proceeding. Such a finding would amount to a finding that the party or witness had committed perjury, which cannot be litigated in an administrative forum but is, rather, subject to criminal prosecution. See Ch. 837, Fla. Stat. The Office's denials of Mrs. Comas's applications for licensure subsequent to the revocation of her license The evidence presented by the Office establishes that it denied Mrs. Comas's applications for licensure as a mortgage broker in 2003 and 2006. The 2003 denial was based on a Final Order in which the Office, adopting the findings of fact and conclusions of law in the Recommended Order in DOAH Case No. 03- 1738, found that Mrs. Comas had failed to establish that she had rehabilitated herself since the license revocation. The 2006 denial referenced, among other grounds, the denial of her application for licensure in 2003 for fraud and dishonest dealing. The Office's denials of Mrs. Comas's previous applications for licensure cannot, however, serve as an independent basis for denial of the application at issue herein. Were the previous denials sufficient of themselves to provide a basis for denying Mrs. Comas's future applications, the Office could perpetuate the denial of Ms. Comas's future applications indefinitely without regard to any efforts of Mrs. Comas to prove herself entitled to licensure. Mrs. Comas's service as an officer of RPM Lenders The evidence presented by the Office is sufficient to establish that Mrs. Comas violated a final order of the Office by serving as an officer of RPM Lenders and its successor company, ROC Lenders, Inc., subsequent to signing a stipulation in December 2003 averring that she would not serve as a corporate officer of RPM Lenders. Mrs. Comas's role in responding customer complaints about the service provided by mortgage broker employed by RPM Lenders does not, however, rise to the level of acting as an officer of the corporation.8 Rehabilitation The evidence presented by Mrs. Comas is not sufficient to establish that she has rehabilitated herself in the 10 years that have elapsed since the Sipple transaction. Although she attends church and contributes to charities, she presented no evidence of any other community service. The lack of any disciplinary action against her real estate associate's license since it was issued is a factor in Mrs. Comas's favor, but she failed to present any evidence regarding the number of real estate transactions she handles, and it was, therefore, not possible to assess the frequency with which she handled the funds of others in the context of real estate transactions. Other than her testimony about the November 2008 conversation with Mr. Mazis, Mrs. Comas presented no evidence with respect to her apology to him or to any acknowledgment she made to him that she had acted improperly in the Sipple transaction. Mrs. Comas's letter of apology to Ms. Sipple consisted primarily of her attempts to cast her actions in the Sipple transaction in a light favorable to herself, to excuse her actions as efforts to assist Ms. Sipple, and to blame others, including Ms. Sipple, for the incident. Although Mrs. Comas expresses remorse for what happened, she does not accept responsibility for her actions.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order denying the application of Marta Comas for licensure as a mortgage broker pursuant to Section 494.0033(4), Florida Statutes, for the acts specified in Section 494.0041(2)(b), (f), (h), (i), (j), (p), (q), and (u)2., Florida Statutes. DONE AND ENTERED this 27th day of February, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 27th day of February, 2009.
Findings Of Fact For the purposes of these proceedings, Jager Industries, Inc. and Castle Realty Ltd. are synonymous as Petitioner. Through name changes, Castle Realty Ltd. became Jager Industries, Inc. Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Office of the Comptroller, Department of Banking and Finance (Department), is charged with the responsibility and duty of administering the Mortgage Brokerage Guaranty Fund (Fund) which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 494.042, Florida Statutes. At all times material hereto, 1st Federated Realty Mortgage, Inc. (1st Federated) was licensed as a mortgage broker in this state pursuant to Chapter 494, Florida Statutes, having license number HE 7896. On or about January 8, 1981, 1st Federated filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida, Tampa, Division. Thereafter, on or about December 16, 1981, 1st Federated was dissolved. On January 29, 1985, the Department received a letter dated January 25, 1985, by regular mail, requesting payment from the Fund on behalf of Castle Realty Ltd. Attached to the letter was a final judgment entered on April 21, 1982, in the Circuit Court for Pinellas County against 1st Federated in the principal amount of $50,000 based upon a violation of Section 494.042(2)(d), Florida Statutes, a Writ of Execution returned unsatisfied and an Affidavit of Reasonable Search. Thereafter on May 17, 1987, the Department received by certified mail a copy of the Complaint filed against 1st Federated and supporting documents including a copy of the Master Loan Commitment, Affidavit and Acceptance of Service. Pursuant to the Master Loan Commitment, Castle Realty paid $50,000 to 1st Federated as a Master Commitment Fee in exchange for a promise by 1st Federated to fund up to $4,000,000 for individual condominium loans. The individual commitments and closing of loans were subject to the lender approving the borrower's credit; however, approvals could not be unreasonable withheld. Timely notice of the institution of the action by Petitioner against 1st Federated as required by s. 494.043(5), Florida Statutes (1985), was waived by Respondent. No evidence was submitted regarding the number of claims involving 1st Federated and the amount of those claims that have been paid by Respondent from the Fund. Accordingly, no recommendation is made regarding the amount of Petitioner's claim that may be paid from the Fund pursuant to the limitations contained in s. 494.044, Florida Statutes (1985). By Notice of Intent to Deny Payment from the Mortgage Brokerage Guaranty Fund dated May 22, 1987, Respondent entered findings of fact, conclusions of law and denied Petitioner's claim. As grounds therefor, Respondent concluded that the 1985 and 1986 amendments to Chapter 494 were applicable in this case as those amendments were remedial or procedural in nature and should be given retrospective application. Thereafter, Petitioner requested formal proceedings by petition filed June 16, 1987, and this request was forwarded to the Division of Administrative Hearings by the Comptroller's letter dated July 23, 1987.
The Issue Whether or not the Respondent, Evers & Associates, Inc. and Dovard J. Evers, its President, a licensed mortgage broker in the State of Florida, has charged and accepted fees and commissions in excess of the maximum allowable fees or commissions on the transactions set forth in the administrative complaint, Exhibit "A," in violation of Sec. 494.08(4), F.S., and thereby subjected the Respondent to a possible suspension under the terms of 494.05(1)(g), F.S.
Findings Of Fact Evers & Associates, Inc. through the parson of Dovard J. Evers, its President, was a licensed mortgage broker in the State of Florida, during the time period contemplated by the administrative complaint. Subsequent to the time of receiving the mortgage brokers-license, Dovard J. Evers, on behalf of Evers & Associates, Inc., entered into an agreement with several other parties to sell notes secured by mortgages on real estate. One of the agreements was with David Edstrom, of a corporation known as S.E.T., Inc., Mr. Edstrom being the President of said corporation, and the location of that corporation being in Fort Lauderdale, Florida. A similar agreement was held with one Gary George of the Mortgage Consultants, Inc., Ocala, Florida. The agreement with Gary George involved a sale of mortgages for the benefit of the mortgagor, Washington Development Corporation. The third such agreement was with Phil Swan of Southeast Florida Corporation. The written conditions of the S.E.T., Inc. arrangement with Mr. Evers can be found in Respondent's Exhibits No. 2 through No. 5. Essentially, the arrangement was to have Mr. Evers, through Evers & Associates, act as a salesman for the benefit of S.E.T., Gary George and Phil Swan. Their agreement envisioned that Mr. Evers would be afforded a percentage discount varying from 14 percent to 16 percent of the amount of a mortgage loan which was a note secured by real estate. In actual , the contact was made between S.E.T., Gary George and Phil Swam Mr. Evers for purposes of placing notes that were for sale. The apparatus worked by having Mr. Evers contact mortgagees/investors who made a check payable to Evers & Associates for the full amount of the mortgage loan, whose price had been quoted by the intermediary; S.E.T., Gary George and Phil Swan. This amount was held in escrow until such time as the note and mortgage which secured the note could be drawn. The executed note and mortgage went directly to the third party mortgagee/investor without ever having the name of Mr. Evers or Evers & Associates, Inc., affixed to such documents. After this note and mortgage had been executed in behalf of the third party investor, Mr. Evers deducted a fee in favor of Evers & Associates, Inc., according to the percentage agreement with S.E.T., Gary George and Phil Swan and sent the balance of the money to S.E.T., Inc.; Washington Development Corporation through the person of Gary George and to Phil Swan of the Southeast Florida Corporation. The arrangement with Washington Development Corporation changed at a later date because Gary George was no longer involved and payments subsequent to his involvement were sent directly to Washington Development Corporation. The facts show that in the transactions found in Petitioner's Exhibit "A," the complaint, charges were made in behalf of Evers & Associates in the person of Mr. Evers which exceed the statutory allowance for fees and commissions in the amount stated in the column entitled overcharges. These overcharges are according to the percentage agreement between Mr. Evers and S.E.I., Inc., Gary George, and Phil Swan, minus adjustments made in behalf of the third party investor/mortgagee, as indicated in the testimony. This finding of facts, excludes the mortgage by M. Berkell which was stipulated between the parties as not being a matter for further consideration in the hearing. There was no evidence offered of the charge, if any, between S.E.T., Inc., Gary George, and Phil Swan in their dealings with their developer/mortgagors. At present the Respondent, Evers & Associates, Inc., and Dovard J. Evers, its President, have failed to renew the license in the current license period and, as of the moment of the hearing, have expressed no further interest in such renewal.
Recommendation It is recommended that the license of Evers & Associates, Inc., by Dovard J Evers, its President, be suspended for a period not to exceed 30 days. DONE and ENTERED this 8th day of June, 1976, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III, Esquire Office of the Comptroller The Capitol Tallahassee, Florida 32304 Earl M. Barker, Esquire 218 East Forsythp Street Jacksonville, Florida 32202
Findings Of Fact On or about January 9, 1974, Petitioners and their partners, Edward Mehler, and Sylvia Mehler, sold certain property located in Broward County, Florida, to Leo Koehler, Pat Manganelli, and Walter Urchison. A copy of the deed was received in evidence as Respondent's Exhibit 1. The Petitioners and the Mehlers took a $50,000 mortgage from the buyers as a part of the purchase price. The mortgage deed was received in evidence as Respondent's Exhibit 2. The face amount of the mortgage is $50,000. The buyers defaulted on the mortgage to the Petitioners and the Mehlers without having made any payments on the mortgage. The Petitioners and the Mehlers were unsuccessful in negotiating any payment from the buyers. The buyers were apparently irresponsible, and were unsuccessful in business. The buyers had given their deed to the property to a Mr. Frank Post. Mr. Post apparently took the deed in payment for a debt. The Petitioners and the Mehlers were unsuccessful in negotiating any payment on the mortgage from Post. The Petitioners and the Mehlers were unsuccessful in locating any market for the mortgage. The mortgage had no market value. Rather than foreclosing one the mortgage, the Petitioners and the Mehlers took a warranty deed from the original buyers and a quitclaim deed from Post. These deeds were received in evidence as Respondent's Exhibits 3 and 4. The deeds were taken in lieu of foreclosure, and the effect of the deeds was to discharge the $50,000 mortgage obligation. Petitioners and the Mehlers placed minimum Florida documentary stamp tax and surtax stamps on each deed, taking the position that the consideration for the deeds was nothing. The Respondent took the position that the consideration for the deeds was the discharge of the mortgage obligation, and assessed $410 in stamp tax, surtax, and penalty obligations upon the Petitioners. The petitioners subsequently commenced this action. The property which is the subject of this matter has very little market value. The property has been on the market for some time, and no buyer has been found. The property has been valued at $12,500, but its market value is less than that.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the request of petitioners to participate in the distribution of mortgage broker guaranty funds pertaining to First Fidelity Financial Services, Inc. be granted, and that they be paid their pro-rata portion of the fund in accordance with Section 494.044, Florida Statutes. It is further RECOMMENDED that the request of intervenors in Case No. 85- 3305 to be included in the above group of claimants for fund distribution purposes be denied unless they furnish the Division evidence of compliance with Subsections 494.043(1); (4) and (5), Florida Statutes (1985), by June 18, 1986. DONE and ORDERED this 17th day of February, 1986, in Tallahassee; Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1986.
Findings Of Fact Respondent Frank Lamb has been a mortgage broker licensed in the State of Florida for approximately nine years. Respondent Next Step Brokerage, Inc., a Florida corporation, was incorporated on June 20, 1989. As stated in its Articles of Incorporation, the corporation was organized for the purpose of operating a mortgage brokerage business. Respondent Lamb was the only incorporator of the corporation, and he and his wife were the only directors of the corporation. A bank account was opened in the name of Respondent Next Step Brokerage, Inc. Respondent Next Step Brokerage, Inc., has never been registered with the Department as a mortgage brokerage business. At the time that Respondent Lamb incorporated Respondent Next Step, and until December of 1989, Respondent Lamb was a Senior Vice President in charge of lending at Bay Savings Bank, a savings and loan association. Earlier in 1989, a Reginald McNaughton entered into a contract with the bank's chairman to purchase the bank. As part of the contractual arrangement, McNaughton would bring loan applications to the bank. If the bank could fund those loans, part of the points received by the bank would be credited to McNaughton toward the purchase price of the bank. If the bank did not fund the loans, but another lender did, then the bank would take a brokerage commission and credit part of it to McNaughton. Although no mortgage broker's license is required for the bank to fund loans, a mortgage broker's license is required for a bank to broker loans to another lender. McNaughton brought in a large number of loans to be funded by the bank and to be brokered to other lenders. He entered into an agreement with Respondent Lamb whereby he would pay Lamb additional compensation for his services in reviewing and processing the volume of loan applications which McNaughton engendered. One of the loan applications brought in by McNaughton was the Fourth Executive loan. Bay Savings Bank funded that loan. Points, amounting to approximately $40,000, were received by the bank on the transaction. Part of this "points" money was credited to McNaughton's purchase. Sometime after the Fourth Executive loan, it was discovered that McNaughton was a disreputable character with a criminal history, and his purchase agreement with the chairman was terminated. Prior to that time, however, McNaughton had given Respondent Lamb two payments pursuant to their agreement. The first payment was made on June 19, 1989, in the amount of $5,000 and was payable to Respondent Lamb. The second check, in the amount of $14,000, was dated July 7, 1989, and was paid to Next Step Brokerage's account. On February 22, 1991, the Department of Banking and Finance, Division of Banking, issued an Administrative Complaint for Prohibition and Notice of Rights against Respondent Lamb seeking to prohibit him from serving as an officer, director, committee member, employee, or other person participating in the affairs of a financial institution in the State of Florida. Respondent Lamb, who was no longer employed in the banking industry, entered into a stipulation with the Department expressly stating that he neither admitted nor denied the Department's allegations, but was permitting an order of prohibition to be entered barring him from future services as an officer, director, committee member, or employee of any financial institution. Such an order was entered in April of 1991. Accordingly, no judicial or administrative determination has ever been made that Respondent Lamb was guilty of the allegations contained in the Department's Administrative Complaint for Prohibition and Notice of Rights. The allegations in the Department's prohibition action arose out of the Fourth Executive loan and involved two matters. The first was not requiring a written "take out" commitment for permanent financing prior to closing since the loan from Bay Savings Bank was only a temporary loan. The second was Respondents' receipt of the $5,000 and $14,000 payments, alleged to be a conflict of interest unless there was written authority from the bank's board of directors. As to the first matter, a $30,000 "take out" commitment fee was sent to Holliday Fenoglio Co. from the closing proceeds, which fee was never returned to the bank. Further, the commitment letter from Bay Savings Bank to Fourth Executive which requires the "take out" commitment for permanent financing does not specify that the commitment be in written form. In June of 1990, the Department of Banking and Finance, Division of Finance, conducted an examination of Respondent Lamb's activities from July 1, 1989, through May 30, 1990. During the first part of the audit, Respondent Lamb was employed by Bay Savings Bank. During the remainder of the examination period, Respondent Lamb was, for the most part, unemployed. He was primarily trying to work out an arrangement with a Jacksonville bank, Community Savings. He was working out of a room in his home while looking for office space and employees in furtherance of that arrangement whereby he would set up a loan production office for Community Savings in South Florida. He was to produce SBA loans for Community Savings and began receiving funds as a draw against future commissions in order to set up the office and begin operations. Also in furtherance of that arrangement, Respondent Lamb printed business cards and ran an ad in the newspaper. The business card contained the names of Respondent Lamb and Respondent Next Step Brokerage, Inc., and contained the words "Licensed Mortgage Broker." One ad which ran one time in The Palm Beach Post contained the names of Respondent Lamb and Next Step Brokerage. Under Respondent Lamb's name appeared the words "a Licensed Mortgage Broker." The Department employee conducting the examination found a second ad in Respondent's files containing the names of Respondent Next Step Brokerage and Respondent Lamb. No evidence was offered that the second ad ever appeared in any publication. No loans were closed through Community Savings. Since any loans would have been SBA loans, no commission would have been due from the borrower. During the time that Respondents were temporarily operating out of Respondent Lamb's home, Respondents did not have a sign or an occupational license posted at the home. During the examination period, Respondents received $1,000 from a Mr. Deckman to cover Respondents' expenses in attempting to find funding for a loan for an adult congregate living facility. No loan was ever made. There was no brokerage agreement signed by Mr. Deckman in Respondents' file. During the examination period, Respondents received a $200 payment from Ted Graham, a friend of Respondent Lamb. Respondents obtained an $8,000 loan for Mr. Graham without expectation of any commission. After the closing Graham appeared at Respondent Lamb's home and gave him a check for $200 made payable to Next Step Brokerage, in appreciation for his assistance. Respondents did not have a brokerage agreement or closing statement regarding this transaction in their file. During the examination period, Respondents also received $2,000 from Pinnacle Financial for introducing Pinnacle to NCNB, thereby introducing two lenders. Pinnacle, a finance company, was seeking a source of funding for mobile home financing. Respondents did not negotiate any specific transactions between Pinnacle or Pinnacle's borrowers and NCNB. Respondent Lamb received a telephone call from a Department employee who had seen the newspaper ad which had the name Next Step Brokerage in it. Although the ad also had Respondent Lamb's name in it with the words "a Licensed Mortgage Broker" under Respondent Lamb's name, Respondent Lamb discontinued the ad in accordance with the instructions of the Department's employee to do so. Next Step's name and its bank account are no longer used, and the corporation has presumably been dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered placing Respondent Lamb on probation for a period of two years and requiring Respondent Lamb to pay a fine in the amount of $1,000 by a date certain. DONE and ENTERED this 17th day of January, 1992, at Tallahassee, Florida. LINDA M. RIGOT 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 17th day of January, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1, 8, 9, 24, 25, 27, and 30 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony. Petitioner's proposed findings of fact numbered 2-4, 6, 12-14, 18, 28, and 29 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 7, 16, 17, 19-23, and 31 have been rejected as being unnecessary for determination of the issues involved herein. Petitioner's proposed findings of fact numbered 10, 11, and 15 have been rejected as not being supported by the weight of the credible evidence in this cause. Petitioner's proposed findings of fact numbered 26, 32, and 33 have been rejected as being irrelevant to the issues involved in this proceeding. Respondents' proposed finding of fact numbered 1 has been rejected as being irrelevant to the issues involved in this proceeding. Respondents' proposed findings of fact numbered 2-13 have been adopted either verbatim or in substance in this Recommended Order. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Jodi R. Marvet Assistant General Counsel Office of Comptroller 201 West Broward Boulevard Suite 302 Fort Lauderdale, Florida 33301 Richard W. Glenn, Esquire 2001 Palm Beach Lakes Boulevard Suite 200 West Palm Beach, Florida 33409
Findings Of Fact Respondent is an applicant to register as a securities salesman with Realty Income Securities, Inc., said application having been submitted to the Division of Securities on February 2, 1975 and is currently pending (Testimony of Dove). During the period of approximately February through - September, 1973, Respondent, a registered mortgage broker, was employed by Financial Resources Corporation of Fort Lauderdale, Florida, in the sale of promissory notes secured ostensibly by first mortgages upon land located in Highlands County, Florida. These notes and security documents were issued by Equitable Development Corporation of Miami Beach, Florida. The notes were payable to "investors" at 14 percent interest per year, payable monthly for several years at which time the full principal balance would become due. The mortgage deeds recited that Equitable Development Corporation held the land which secured the notes in fee simple, free and clear of all encumbrances except real estate taxes. The mortgage deeds further recited that Equitable reserved the right to convey the land to a purchaser under an installment land contract subject to the lien of the mortgage and would deliver to the National Industrial Bank of Miami, an escrow agent, a copy of any such agreement for deed and a quit-claim deed which would be held in escrow. They also provided a procedure by which under any default of Equitable, the escrow agent would deliver the escrow documents to the investor (Testimony of Dove, Petitioner's Composite Exhibit 1). Respondent's association with Financial Resources Corporation came about as a result of a visit by Mr. Robert Rinehart, President of the firm, who explained the mortgage sales program to him and stated that the security instruments were indeed first mortgages. Additionally, Rinehart supplied Respondent with brochures, letters, and documents containing questions and answers concerning the program and the protection afforded thereby to investors. Respondent personally viewed the property in question at Highland Park Estates and observed that over a hundred homes had been constructed which were of a value from $14,000 to $40,000. He also observed that docks had been built on the lake in the project area and that almost all of the roads had been paved. He was shown the MIA appraisal on the property which stated that Rinehart's representations as to property values were accurate. Equitable further represented to him that the notes in question were exempt securities in that they came within the provisions of Section 517.06(7), F.S., concerning the issuance or sale of notes secured by a specific lien upon real property created by mortgage or security agreement. In fact, Respondent became so convinced of the merits of these transactions that he had his mother invest twenty thousand dollars in the program (Testimony of Respondent, Watts; Respondent's Exhibits 1,2). In September 1973, Respondent formed Florida Income Resources Corporation, a mortgage brokerage firm. He did not sell any of the Equitable notes for a period of some months and, prior to commencing sale of them through his firm in the Spring of 1974, his attorney looked over the various aspects of the Equitable program and advised him that everything seemed "open and above board." Respondent thereafter on April 9 and August 1, 1974 sold to William H. Mott secured promissory notes of Equitable Development Corporation in the amounts of $2,000 and $2,250 respectively (Testimony of Respondent, Zawadsky; Petitioner's Composite Exhibit 1). During the period of these sales, letters of Albert George Segal, attorney, were being sent to investors advising them that he had examined the title to the real property purchased and that it was free and clear of encumbrances and constituted valid first mortgages (Respondent's Exhibit 3, Stipulation). Administrative proceedings were brought against Respondent by the Division of Finance involving sales of the notes in question resulting in a settlement by stipulation whereby Respondent did not acknowledge any wrongdoing, but agreed to a suspension of his mortgage broker's registration for two years. Respondent's firm secured no appraisals or title searches on the property involved in the sales to Mott (Testimony of Respondent).
Recommendation That the allegations be dismissed and that Respondent Edgar A Dove be registered as a securities salesman if he otherwise meets the qualifications set forth in Section 517.12, Florida Statutes and Chapter 3E-30, Florida Administrative Code. DONE and ENTERED this 15th day of March, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 H. Gordon Brown, P.A. 301 W. Camino Gardens Boulevard Suite B P.O. Box 1079 Boca Raton, Florida 33432
The Issue The issue in this case is whether disciplinary action should be taken against Respondents' mortgage brokerage licenses for the reasons set forth in the Order to Cease and Desist, Administrative Complaint and Notice of Rights filed by Petitioner on January 18, 1989 (the "Administrative Complaint".) The Administrative Complaint alleges that Respondents violated the following statutory and rule provisions: Section 494.055(1)(b), Florida Statutes, by charging borrowers closing costs that were in excess of the actual amount incurred by the mortgagor; Section 494.08(3), Florida Statutes, and Rule 3D- 40.008(9), Florida Administrative Code, by charging excess brokerage fees; Section 494.055(1)(b), Florida Statutes, by engaging in deceit, misrepresentation, negligence or incompetence in mortgage financing transactions and for breach of the fiduciary duty of a broker as a result of the manner in which escrow accounts were handled; Section 494.055(1)(h), Florida Statutes, due to the misuse, misapplication or misappropriation of funds, mortgage documents or other property entrusted to Respondents as a result of the excess charges assessed to borrowers and the misuse of monies in the escrow accounts; Rule 3D- 40.006(6)(a), Florida Administrative Code, for failing to maintain trust, servicing and escrow account records in accordance with good accounting practices; and Section 494.0393(2), Florida Statutes by failing to operate the company under the full charge, control and supervision of a principle who is a licensed mortgage broker.
Findings Of Fact At all times pertinent hereto, Respondent All States Mortgage and Investment Corporation ("All States Mortgage") was licensed by the Department as a mortgage brokerage company having been issued License Number HB-592582215. All States Mortgage had its principle place of business in Davie, Florida. All States Mortgage did not typically engage in traditional "mortgage broker functions." Instead, it generally worked with other mortgage brokers in providing funds for loans brought to All States Mortgage by other brokers. At all times pertinent hereto, Respondent, Lynn F. Smith ("Smith") was a licensed mortgage broker having been issued License Number HA-265-72-0045. Smith was the principle mortgage broker for All States Mortgage. Smith has been the principle mortgage broker for All States Mortgage since its inception and has been registered with the Department as a licensed mortgage broker since before a license was issued to All States Mortgage. In addition to being the principle broker for All States Mortgage, Smith was an officer and director of the company and had responsibility for the direction, control, operations and management of the company. In May of 1988, Respondents were affiliated with a licensed consumer finance company known as All States Finance Company. Currently, both All States Mortgage and All States Finance are inactive and an application has been filed to transfer the license of All States Mortgage to a new company known as All States Financial Services. As a result of an audit and examination conducted by the Department in May, 1988, it was determined that one client of All States Mortgage, Donald Salvog, was charged a brokerage fee in excess of the maximum allowable fee under Chapter 494. After notification by the Department, Respondents admitted that they inadvertently charged an excess fee to Mr. Salvog and Respondents immediately proceeded to refund the excess of $82.63 to the customer. There is no evidence that Respondents charged any other customers with a brokerage fee in excess of the maximum allowed under Chapter 494. In a number of the individual mortgage transactions in which it was involved, Respondents charged a standard credit report fee of $25.00 to the borrowers. The following chart reflects the individual loan files where such a fee was charged and the total amount of the invoices in the respective loan file to support the charges. Borrower's Name Cost per Closing Stmt. Cost per Invoices Roland Sagraves $25.00 $3.25 John Murphy $25.00 $3.25 Donald Salvog $25.00 $2.95 Harry Walley $25.00 $2.57 Raymond Parker $25.00 $5.14 Shateen/Lawrence $25.00 $5.75 James Arnold $25.00 $3.94 Richard Pope $25.00 $5.04 James Smith $25.00 $6.50 9. In four of the nine customer files listed in Findings of Fact 8 above, a "standard factual" credit report was included in the file. The typical cost for a "standard factual" is $45.00. No invoices were included in those files to reflect this cost. In obtaining credit reports for an individual mortgage transaction, Respondents did not generally order a credit report from an existing service. Instead, All States Mortgage had an on-line computer terminal with a direct phone modem linked to the individual credit reporting agency's computer data base. An employee of All States Mortgage, usually Burton Horowitz, used this computer link-up to conduct a credit report on the borrower. "Standard Factual" reports were ordered from existing services as necessary to supplement the computer search. The standard $25.00 fee charged by All States Mortgage was based upon an estimate of the overhead and indirect costs associated with producing credit reports in this manner. The overhead and indirect costs involved in obtaining credit reports as described in Findings of Fact 10 include the cost of leasing the equipment, the labor involved in obtaining the computer report (it typically takes an operator 30 minutes to obtain the credit reports) and the cost of the materials involved in producing a copy of the report. The standard $25.00 fee charged by All States Mortgage was not based on a specific allocation of the indirect costs associated with producing a particular report, but, instead, was simply based upon an estimate of the costs involved. During the course of its operations, All States Mortgage would periodically receive funds that were to be held in escrow. These escrow funds were kept in an interest-bearing account that was used by All States Mortgage and All States Finance. (This account is hereinafter referred to as the "Commingled Account.") The escrow funds in this Commingled Account were mixed with other funds of All States Mortgage as well as money belonging to All States Finance. Respondents contend that the escrow funds were commingled with the other funds because the companies had only one interest bearing account and that account had limited check writing ability. Respondents transferred money between the interest bearing Commingled Account and their other operating accounts on a continuous basis. At the end of each month, Respondents attempted to perform a reconciliation as to the escrow balances in the Commingled Account. On several occasions during the period from July 1987 through May 1988, the balance in the Commingled Account was less than the total funds that Respondents were supposed to be holding in escrow. No evidence was introduced to indicate that Respondents' handling of the escrow funds and/or the Commingled Account ever resulted in a loss to any of their borrowers or customers. Thus, while the evidence does indicate that, on occasion, the balance of the Commingled Account was less than the funds that should have been in escrow, the difference on each occasion was ultimately corrected in the reconciliation process. Respondents failed to use good accounting principles in the handling of the escrow funds. The Department has not adopted any rules requiring a mortgage broker to handle escrow funds in a separate account. Prior to the initiation of this Administrative Complaint, Respondents were never informed that they were required to do so. The Department's examiners prepared a schedule indicating that Respondents had diverted some of the escrow funds to their own use. However, that schedule includes several loans that had already been sold to another company on the date listed. Thus, the schedule does not accurately reflect the funds that should have been in escrow on any particular day. Although Respondent Lynn Smith was only in the office approximately fifteen percent (15%) of the time while the Department's examiners were conducting their audit in May of 1988, insufficient evidence was introduced to establish the charge that Smith was not fully supervising or controlling the actions of the employees of All States Mortgage. The unrefuted testimony of Smith indicates that she often worked non-regular hours, that she reviewed all the documents for every transaction in which All States Mortgage was involved and she supervised the work of all of the employees of the company. Extenuating circumstances in May of 1988 caused her to be out of the office more than usual during regular business hours. However, this fact alone is insufficient to establish the charge that she was not fully supervising or controlling the actions of the company.
Recommendation Based upon the foregoing Findings of Facts and Conclusions of Law it is, it is RECOMMENDED that the Department of Banking and Finance enter a final order finding the Respondents guilty of violating Sections 494.055(1)(b), (d), (f), (h) and (k) and issue a reprimand to the Respondents and impose a fine of one thousand five dollars ($1,500.00). DONE and ORDERED this 9th day of July, 1990, in Tallahassee, Florida. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1990.
