Findings Of Fact The Department, a state agency, initiated the underlying proceeding when the Cease and Desist Order was filed on February 20, 1990. Petitioner, CGFS, Inc., is a corporation which has its principal office in this state. At the time the action was initiated by the Department, the corporation had less than 25 full-time employees and a net worth of less than $2 million dollars. Petitioner DeBellonia is the sole shareholder in the subchapter S corporation and does not have an independent claim for attorney's fees and cost. A Final Order dismissing the Cease and Desist Order was entered in favor of the Petitioners DeBellonia and CGFS, Inc. on October 16, 1990. The time for seeking judicial review of that order has expired and the order has become final agency action as a matter of law. The underlying Cease and Desist Order directed to Mr. DeBellonia and CGFS, Inc. was based upon a complaint made by Ms. Connie Jones, a client of CGFS, Inc. who dealt with Mr. DeBellonia. Ms. Jones, who contacted the Department, told representatives of the agency that Mr. DeBellonia, as president of CGFS, Inc., had agreed to arrange a mortgage loan on her behalf which was to be secured by real estate in Dade City, Florida. During the time period in which Ms. Jones had the business meeting with DeBellonia, neither Mr. DeBellonia nor CGFS, Inc. were licensed as a mortgage broker or a mortgage brokerage business. If the business transaction had occurred as originally represented by Ms. Jones, both Mr. DeBellonia and CGFS, Inc. would have been in violation of the Mortgage Brokerage Act. Based upon the complaint initiated by Ms. Jones prior to the Department's filing of the Cease and Desist Order, the agency had reason to believe that Mr. DeBellonia and CGFS, Inc. were violating or about to violate the law by acting as a mortgage broker and mortgage brokerage business without the proper licenses. Mr. DeBellonia and CGFS, Inc. were able to reveal during the formal hearing process that Ms. Jones' impressions of what occurred during her meeting with Respondent DeBellonia were faulty. It was necessary, however, for the Hearing Officer to resolve the question of what weight should be given to Ms. Jones' testimony and what credibility assessment should be made to resolve the disputed issues of material facts involved in the case. The Department disputes portions of the application for attorney's fees and costs relating to time spent with a private investigator and the review of a title search. Based upon the attorney's testimony at hearing in which he gave the reasons for the use of the investigator and the title search, the 1.33 hours spent by him on these matters during his preparation of the case was reasonable and necessary. As there is no other dispute as to the reasonableness of the hours spent by Mr. Mone in defending the Petitioners, it is determined that the 11.65 hours he spent in defending CGFS, Inc. as to the Cease and Desist Order should be included in his fee charges. Although the Hearing Officer specifically finds that $300.00 an hour is a reasonable hourly rate for an attorney of Mr. Mone's experience when the matter pursued is a civil action, this case is an administrative proceeding. Based upon the affidavit of Burton Wiand, whose law practice includes civil trial litigation as well as administrative law proceedings, $150.00 per hour is a reasonable fee within the Pinellas County and Hillsborough County area for services similar to those reasonably required from Mr. Mone in these proceedings. Great weight is given to Mr. Wiand's affidavit, and $150.00 per hour is a reasonable fee in this case.
The Issue The issue in this case is whether the Petitioner’s application for licensure as a mortgage broker should be approved.
Findings Of Fact The parties set forth an extensive set of stipulated facts in the Prehearing Stipulation filed prior to the commencement of the hearing. The stipulated facts describe the activities of Richard Eric Watts (Petitioner) on behalf of Frederick M. Larry in relation to a $50,000 investment of Mr. Larry's funds with D. F. Owen, Inc., in May 1985. At approximately the same time as the Larry investment was made, the Petitioner contracted with D.F. Owen to act as an investment adviser for a fee of $33,500. The stipulated facts describe the activities of the Petitioner on behalf of Cynthia Halabrin Trust. The Petitioner was the trustee for the trust, which was a residence. During a period of time that the residence was under renovation, the Petitioner allowed Mr. Larry to reside without payment to the trust. The stipulated facts describe the activities of the Petitioner regarding the unregistered operation of "Watts Investment Management, Inc." during 1985 and the subsequent registration of the entity in 1986. The stipulated facts describe the activities of the Petitioner regarding his employment as a broker for Paine Webber from 1982-1985, and the failure to obtain approval for outside employment activities while working for the investment firm. The stipulated facts describe the legal action taken by Cynthia Halabrin Raybuck against the Petitioner and Paine Webber related to the activities of the Petitioner as trustee of the Halabrin trust. The parties settled the case through arbitration. The stipulated facts address the creation of "Danbury Mortgage Company," and describe the preliminary activities of the unlicensed entity. The facts also identify the Petitioner's association with the Paradigm Mortgage Company, based in Jacksonville, Florida. For purposes of this Recommended Order, all stipulated facts set forth in the prehearing stipulation filed by the parties are adopted and incorporated herein. On or about August 29, 1996, the Petitioner filed an application with the Department of Banking and Finance, Division of Finance (Department) seeking licensure as a mortgage broker. The Petitioner’s application disclosed that in 1989 he was denied admission to the Florida Bar. In January 1989, the Petitioner was notified by the Florida Board of Bar Examiners (“Board”) of their intent to deny his application for admission to the Florida Bar. A hearing was conducted in June 1989 regarding the denial. The Petitioner was represented by legal counsel and testified under oath at the hearing. On August 31, 1989, the Board of Bar Examiners denied Petitioner’s application for admission. Based on the facts set forth in the Board's order, the Board concluded that the Petitioner “engaged in acts to serve his own interest to the detriment of others, violated registration laws, neglected payment of student loan obligations and issued numerous worthless checks.” The Board also determined that the Petitioner provided misleading testimony at his Bar hearing and failed to disclose material information on his application. Although at the formal administrative hearing the Petitioner attempted to explain the circumstances under which the Board's determination occurred, the testimony at hearing and the stipulated facts support the findings made by the Board. Upon the filing of the Petitioner's application for licensure as a mortgage broker, the Department undertook a review of the application. Based on the review, the Department determined that the Petitioner had held himself out for business as a mortgage broker without an appropriate license. In December 1995, the Petitioner registered the name "Danbury Mortgage Corporation" with the Florida Department of State, Division of Corporations. In January 1996, the Petitioner established a business location for Danbury Mortgage Corporation. The Petitioner listed the business under the "mortgage brokers" section of the Sarasota Yellow Pages. At no time was the Danbury Mortgage Company licensed by the Department of Banking and Finance. At the hearing, the Petitioner suggested that no mortgage business had been conducted by Danbury Mortgage Company. The Petitioner asserted that he had affiliated with another company (Paradigm) and that the other company was handling the registration of his office as a Paradigm branch. The evidence establishes that the Petitioner was involved in completion of at least one mortgage loan application on behalf of Paradigm Mortgage Company without appropriate licensure. The Paradigm "branch" office was located in the same building as Danbury Mortgage Company, and shared the Danbury telephone number. Based on a cryptic telephone message received by the Petitioner from a Paradigm supervisor, the Petitioner assumed that he was licensed. The Petitioner did not return the telephone call and made no credible attempt at determining whether he was licensed prior to acting on behalf of Paradigm Mortgage Company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order denying the application of Richard Eric Watts for licensure as a mortgage broker. DONE AND ORDERED this 30th day of December, 1997, in Tallahassee, Leon County, Florida. _ _ WILLIAM F. QUATTLEBAUM 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 Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1997. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Richard E. Watts, pro se 1345 Main Street, Suite C-4 Sarasota, Florida 34236 Pamela R. Jacobs, Esquire Regional Counsel Department of Banking and Finance 1300 Riverplace Blvd, Suite 640 Jacksonville, Florida 32207
The Issue The issue in Case No. 94-2065 is whether National Mortgage Bankers, Inc. violated certain disciplinary proceedings governing mortgage brokers and, if so, what penalty should be imposed. The issue in Case No. 94-2066 is whether National Mortgage Bankers, Inc. is entitled to licensure as a correspondent mortgage lender.
Findings Of Fact As of September 3, 1992, the Department of Banking and Finance, Division of Finance (Department), issued a mortgage lender's license to National Mortgage Bankers, Inc. (NMB). At all material times, NMB acted as a mortgage broker, not a mortgage lender. NMB originated mortgaged loans, which were funded by third parties. NMB's principal place of business was in Pt. Charlotte. At all material times, Sheldon Voron was employed as the chief executive officer of NMB. Business was slow for NMB during the first few months after it acquired its mortgage lending license. NMB was operated by Mr. Voron, who supervised loan officers and the processing of loan applications, and Mark Asciutto, who handled bookkeeping, payroll, and the checking accounts, including the escrow account. Mr. Asciutto left the company in September 1993. By the end of 1992, the net worth of NMB was $89,115.23, according to an audited financial statement issued on February 12, 1993. The net worth deteriorated during 1993, dropping to $63,533 by December 31, 1993, according to an audited financial statement issued on March 7, 1994. At no time did NMB ever advise the Department that its net worth was below $250,000. In early 1993, business picked up from late 1992, and NMB hired a second loan processor. Refinancing activity in early 1993 required that NMB continually add new help. At this time, the approval of uncomplicated conventional loan applications took 30-45 days, and the operation ran smoothly. But business continued to increase. From March to June, NMB opened up offices in Naples and Sarasota. A branch in office in Englewood was opened and quickly closed due to its proximity to other offices. By April, the volume of business at NMB was increasing rapidly, aided in part by the addition of government loans. An average of 75 cases monthly during the first three months increased to 125 cases in April. Employing four to five loan processors, NMB continued to hire additional employees, but soon had problems finding qualified persons, as competition in the lending business was increasing due to considerable refinancing activity. Mr. Asciutto handled the escrow account during these busy months, until another employee assumed these duties in late July or August 1994. Mr. Asciutto routinely transferred money from the escrow account to the general operating account when Mr. Asciutto determined that NMB was entitled to retain the money, such as when customers had not been responsive to inquiries from NMB employees. The only such transfer for which a specific amount was identified at the hearing was $860, which was swept from escrow to general operations by check dated April 16, 1993. As is obvious from the trend in net worth, profitability did not increase in direct proportion to increases in business volume. In fact, total income increased from $82,716.01 in 1992 to $556,907 in 1993, but net income increased only from $30,714.88 to $43,528. NMB simply could not keep up with the business, as is evidenced by the experiences of its customers. In July 1993, William Zinser read an NMB advertisement in the newspaper offering an adjustable mortgage rate and a low fixed-rate mortgage. He called the number and set up an appointment to visit the office. He met with an employee of NMB, who discussed interest rates and closing fees. She assured Mr. Zinser that it would take only about 30 days to close the loan. Mr. Zinser submitted a loan application, and the employee said NMB would be back in touch with him. Mr. Zinser waited three or four weeks and heard nothing. He called and was told that there were no problems. On two or three occasions, an NMB employee requested from Mr. Zinser a profit and loss statement or a verification of his wife's income. However, NMB had the wife's income information since the start of the loan application process and twice had received the profit and loss statements. On January 4, 1994, Mr. Zinser applied for a loan with another lender. Shortly thereafter, an NMB employee called him and said that his loan was approved. When he said that he had gone elsewhere, she reminded him that he had obligated himself to pay a $1250 fee in connection with the loan. He refused to pay. On or about July 15, 1993, Janice Hamann first contacted NMB about refinancing her home. She applied for a mortgage, and an NMB employee asked for more information. She supplied it the following day, and the employee said everything was fine. The employee said that it would probably take 4-6 weeks to close. On August 13, 1993, Ms. Hamann called NMB to check on the status of the loan application. An NMB employee said that they would probably close when she returned from a week's vacation. On August 23, Ms. Hamann called and was told to provide some additional information on her payment history. She provided the requested information by September 20. For a second time, she had to provide verification of her husband's employment. On September 18, Ms. Hamann received notification from her homeowner's insurer that they had changed her insurance, evidently to show a new loss payee. No one from NMB had told her that the loan was ready to close. A couple of months later, surveyors showed up and surveyed the property that was to have been the subject of the loan and additional property. Ms. Hamann called NMB and informed them of the mistaken inclusion of additional property. On November 22, Ms. Hamann called NMB and said that she wanted her paperwork and was withdrawing her application. Ten days later, someone from NMB called her and said they were ready to close. Ms. Hamann restated her demand for her paperwork and refused to close. A few days later, she received a letter demanding $1500 in addition to the $300 that she had paid for the credit check, survey, and appraisal. She still receives bills from the surveyor. On September 9, 1993, Richard Chadbourne contacted NMB about refinancing a mortgage. At the first office visit, he completed an application and delivered a check to NMB in the amount of $300. An NMB employee said they would contact him for more information and said it would take 30-45 days to close his loan. At the first meeting, Mr. Chadbourne stated that he wanted the 3.259 percent variable rate mortgage with a six point cap, which NMB was offering. An NMB employee said that they could get him a 3.375 percent rate. On the one or two occasions that NMB contacted Mr. Chadbourne for more information, he provided it to them immediately. Repeated calls to NMB by Mr. Chadbourne or his agent were never returned. No one from NMB ever called Mr. Chadbourne to tell him whether his loan was approved or denied, and he never withdrew his application. On September 10, 1993, Katherine Healey and her husband visited the NMB office to apply for a refinancing loan. Responding to a newspaper advertisement for a 3.375 percent interest rate, the Healeys learned that they would have to pay $1250 in fees to obtain such a low rate. They agreed to pay the sum. They were asked only for salary information and certain documentation concerning their liabilities. An NMB employee said they could lock in the quoted rate when they returned from vacation in a couple of weeks. After returning from vacation, the Healeys called NMB repeatedly, but often could not find anyone to speak to or to return their calls. When they finally talked to someone about their loan, they were told they had to pay another $100 or $150 to lock in at 3.375 percent. They continued calling NMB without much success for two months after returning from vacation. They could not get a closing date, and nothing was happening. In response to their repeated requests to lock in an interest rate, they were told only that they could not lock in until two weeks before closing. By the end of November, the Healeys applied elsewhere for a refinancing loan. Shortly after the Healeys applied elsewhere for a loan, which closed about three weeks later, they received a call from an employee of NMB, who told them that they had a closing date. They said that they had decided to obtain a loan elsewhere. The employee demanded the $1250 fee, which the Healeys had not yet paid, and threatened to sue them if they did not pay. The Healeys refused to pay the fee and were able to use the appraisal, for which they had already paid, with their new application. However, they had to pay for a second credit report. In November 1993, Wendy Harrison contacted NMB for two mortgages--one on a home in Massachusetts and one on a home in Punta Gorda. She filed mortgage applications on or about December 15, 1993, but, by mutual agreement, she withdrew her application on the Florida home. Ms. Harrison subsequently left several telephone messages that were not returned. In January, she was assigned a new loan processor, who still did not return calls. Around this time, Ms. Harrison's husband received a notice from the mortgagee on the Florida property concerning a payoff amount. The Harrisons contacted NMB and told them that this was the wrong property. Mortgage rates began to increase in January. Ms. Harrison called repeatedly on the status of her mortgage refinancing from mid-January to mid- March. A new person assumed loan processing duties on her file. She called Ms. Harrison on or about March 9 and said that the credit report raised some problems. This was the first time either Mr. or Ms. Harrison had been told that there were problems with the credit report, which NMB had received in late December. Ms. Harrison mailed the requested explanatory documents on the following day. Two weeks later, after hearing nothing, Ms. Harrison called NMB and learned that the interest rate would be 8 percent annually, which was higher than the rate in effect when she initiated the loan approval process. The NMB employee explained that the higher rate was due to the fact that the Massachusetts property was a rental property, but NMB employees had known that from the start. However, the NMB employee assured Ms. Harrison that the file was complete and being forwarded to Miami for final approval. The following day, Ms. Harrison sent a certified letter withdrawing the application and asking for the appraisal and any other services for which she had already paid. NMB received the letter on March 26. On April 5, Ms. Harrison found in her mailbox an unstamped, uncancelled envelope that had evidently been hand- delivered by an NMB employee or agent. Inside was a rejection letter backdated to March 23, so as to look like the Harrison application had been rejected before it was withdrawn. Based on customer complaints, the Department financial examiner conducted an unannounced inspection of NMB from November 15-17, 1993. In addition to discovering a violation of the minimum net worth requirement imposed upon mortgage lenders, the examiner found several violations of requirements imposed upon mortgage brokers. At no time did NMB disclose in writing that it could not guarantee acceptance into a particular loan program and could not promise any specific loan conditions or terms. When taking applications, NMB failed to disclose the nature of the mortgage brokerage fee charged by NMB. The fee varied according to the terms of the loan, and NMB only disclosed a broad range of fees at the time of the application. NMB received monies from customers, but did not record check numbers for checks used to pay vendors on behalf of specific customers. NMB thereby failed to maintain an updated record of escrow account activity on an appropriate form. In fact, NMB had the Department-promulgated form, but, as discussed below, used it improperly to try to record mortgage brokerage transactions. NMB did not maintain supporting documentation for monies paid from its escrow account on behalf of customers. NMB often used courier prepayments to pay unrelated expenses. NMB did not record the dates and amounts paid out of escrow. NMB maintained a mortgage brokerage transaction journal, but it lacked the date the customer applied for the mortgage loan, the date of disposition of the application, the total amount of brokerage fees, and the name of the lender. NMB used the Department-promulgated form for escrow account activity and tried to adapt it for mortgage brokerage transactions, but failed to include the above-cited crucial items of information. Concerning NMB's application for a correspondent mortgage broker's license, there is evidence, in at least one case, of fraud or deceit. Ms. Harrison, who was very credible, described an act of fraud or dishonest dealing in the postdating and delivery of her rejection letter. The atmosphere of incompetence and neglect that prevailed at NMB might well have left a typed letter unmailed for days or even weeks. However, an employee or other agent committed a wilful act of deceit in driving the letter out to Ms. Harrison's home and leaving it in the mailbox, rather than simply dropping it in the mail.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Banking and Finance enter a final order revoking the mortgage lender's license of National Mortgage Bankers, Inc. and denying its application for licensure as a correspondent mortgage lender. ENTERED on November 3, 1994, in Tallahassee, Florida. ROBERT E. MEALE 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 on November 3, 1994. COPIES FURNISHED: Hon. Gerald Lewis Comptroller The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, FL 32399-0350 Susan E. Steinberg Assistant General Counsel Office of the Comptroller 1313 Tampa St., Suite 615 Tampa, FL 33602-3394 Sheldon Voron 775 Tamiami Tr. Port Charlotte, FL 33953
The Issue The issue is whether respondent acted as a mortgage lender within the meaning of Section 494.001(3), Florida Statutes, and thus is subject to Division licensure requirements.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Department of Banking and Finance, Division of Finance (Division), is a state agency charged with the responsibility of administering and enforcing the Florida Mortgage Brokerage and Lending Act which is codified in Chapter 494, Florida Statutes. Among other things, the Division regulates mortgage lenders and requires such persons or entities to secure a license. Respondent, White Pine Resouces, Inc. (WPR), is a Florida corporation formed in March 1986. Its sole shareholder is John R. Grass, a Pensacola attorney. Although the corporation was originally formed for a number of purposes, its primary activity is the real estate investment business. It holds no licenses issued by, or registrations with, the Division. WPR's current business address is 358-C West Nine Mile Road, Pensacola, Florida. WPR's principal source of money is Grass, or his professional association, who loan money to the corporation. In some cases, the money is used to acquire parcels of property for resale, make necessary repairs or improvements, and then provide owner financing to the buyer. In other cases, WPR loans money to persons needing to make improvements to their homes or rental property and takes back a second mortgage from the borrower. These types of transactions, which occurred during the years 1992-95, are found in documents offered in evidence as petitioner's exhibits 1-5. Respondent has also stipulated that several other transactions of this nature occurred during that same period of time. In every case, WPR was investing its own money or that of its principal. In 1992, a Division examiner analyst noted the following listing in the Yellow Pages section of the Pensacola telephone directory under the heading of "Mortgages": White Pine Resources Having Trouble With Financing Residential & Land Fast Service on 1st Mortgages The advertisement also contained respondent's street address and telephone number. In the 1993-94 telephone directory, WPR carried the following advertisement under the "Mortgages" section of the Yellow Pages: White Pine Resources Specialists! Bad Credit - We Can Help Vacant Land Loans In the 1995-96 telephone directory, WPR placed the following advertisement in the "Mortgages" section of the Yellow Pages: White Pines Resources A Private Investor Not a Mortgage Broker Specialists! We Can Help Vacant Land Loans Although the Division first noted one of WPR's Yellow Page advertisements in 1992, for some reason it did not conduct a formal investigation of respondent's activities until February 28, 1994. On that day, an examiner analyst made an unannounced visit to respondent's office for the purpose of inspecting its records to determine if WPR was acting as a mortgage lender. However, WPR's principal, John R. Grass, was not in the office, and the analyst simply left his business card and a message for Grass to contact him. The next morning, Grass telephoned the analyst's supervisor and advised him that since WPR was merely a private investor, and not a mortgage lender, it was not subject to the Division's regulation, and hence it would not provide copies of its records. A subpoena duces tecum was then issued by the Division, records were produced pursuant to the subpoena, and this controversy ensued. The parties agree, however, that this action was not prompted by complaints from consumers or other persons having dealings with WPR. The record indicates that a mortgage lender differs from a private investor in several material respects. An important distinction is that a private investor uses its own funds rather than those of another party. Also, a private investor does not buy or sell paper, does not escrow taxes, does not split or broker commissions, and does not close its own loans. In all of these respects, WPR had the attributes of a private investor. When mortgage brokerage firms are involved in transactions with private investors, they must supply the private investor with certain documents that are not provided to an institutional investor. Among others, they include a disclosure agreement, receipt of recorded instruments, an appraisal or waiver of the same, and title insurance. In addition, Division rules require that a mortgage brokerage firm record its transactions with private investors in a log journal known as DBF-MB-888. The evidence shows that for transactions between WPR and at least two mortgage brokerage firms during the years in question, the two firms recorded those transactions on DBF-MB-888. They also provided WPR with documents typically given to private investors. The Division has adopted Rule 3D-40.290(2), Florida Administrative Code, which provides that a person is deemed to be holding himself out to the public as being in the mortgage lending business if he advertises in a manner "which would lead the reader to believe the person was in the business of buying, making or selling mortgage loans." The rule has not been challenged and, for purposes of resolving this controversy, is presumed to be valid. In view of the representations that WPR provided "Fast Service on 1st Mortgages" and "Vacant Land Loans," it is fair to infer that the Yellow Page advertisements made by WPR would reasonably lead the reader to believe that WPR was in the business of buying, making or selling mortgage loans. Therefore, by virtue of advertising in the Yellow Pages, WPR is deemed to be holding itself out to the public as being in the mortgage lending business. During the years 1993-95, the Division routinely sent WPR questionnaires regarding various WPR transactions with licensed lenders. The transmittal letter accompanying the questionnaire noted that the Division was conducting "a routine examination" of the licensed lender (and not WPR), and WPR's comments would "be of material assistance to (the Division) in determining compliance with the Florida Mortgage Brokerage Act." By way of an estoppel defense, WPR has essentially contended that the questionnaires constituted a representation by the Division that WPR was merely a private lender. It further contends that, to its detriment, it relied upon that representation. But there is nothing in the documents that states that the Division considered WPR to be a private lender. Nor is there any evidence that the Division made any other oral or written representations to WPR that it did not need to secure a license. Finally, assuming arguendo that such a representation occurred, there was no showing that WPR relied to its detriment on such an alleged "misstatement of fact." WPR also raises the defense of laches arguing that it was severely prejudiced by the Division's delay in prosecuting this action. Except for testimony that respondent was forced to secure the services of an attorney to defend against this action, and its principal was required to attend a hearing, there was no showing of prejudice on the part of WPR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order requiring respondent to cease and desist from engaging in the mortgage lending business without a license. DONE AND ENTERED this 17th day of June, 1996, in Tallahassee, Florida. DONALD R. ALEXANDER, 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 June, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 95-0290 Petitioner: Because petitioner's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. Respondent: Because respondent's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. COPIES FURNISHED: Honorable Bob Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry L. Hooper, III, Esquire Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Clyde C. Caillouet, Jr., Esquire 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 John T. Reading, Jr., Esquire 358-C West Nine Mile Road Pensacola, Florida 32534-1818
Findings Of Fact The Parties. The Department is a state agency charged with the administration and enforcement of Chapter 494, Florida Statutes, the Florida Mortgage Brokerage Act, and the rules promulgated thereunder. Financial Funding is a corporation. Eric Schwartz is the sole director, officer and shareholder of Financial Funding. Mr. Schwartz has been licensed by the Department as a mortgage broker continuously since 1983. Between 1983 and 1988 Mr. Schwartz acted as broker for a wholly-owned mortgage brokerage business. From 1988 until October 1, 1991, Mr. Schwartz was licensed as a self-employed mortgage broker. Mr. Schwartz has also held a real estate broker's license since approximately 1978. Financial Funding was created by Mr. Schwartz in order to comply with newly enacted requirements of Chapter 494, Florida Statutes. Effective October 1, 1991, licensed mortgage brokers in Florida were required to be employed by a mortgage brokerage business. Mr. Schwartz was, therefore, required to create a business entity or work for someone else's mortgage brokerage business in order to continue as a mortgage broker. Financial Funding's Application. On or about December 12, 1991, Financial Funding filed an application with the Department for licensure as a mortgage brokerage business (hereinafter referred to as the "Application"). It was revealed in the Application that Mr. Schwartz was the President of Financial Funding. By letter dated April 24, 1992, the Department denied Financial Funding's Application. The Department denied the Application because of its conclusion that Mr. Schwartz, an officer of Financial Funding, had violated Chapter 494, Florida Statutes and had a disciplinary history. Financial Funding timely challenged the denial of its Application. The Eason Complaint. Between approximately 1984 and 1987, Mr. Schwartz was the sole owner and president of Paramount Finance Corporation (hereinafter referred to as "Paramount"). Mr. Schwartz was the principal mortgage broker for Paramount and utilized Paramount as the vehicle for his practice as a mortgage broker. On or about November 5, 1985, Agnes Eason filed a complaint against Mr. Schwartz and Paramount (hereinafter referred to as the "Eason Complaint"), in the Circuit Court of the Eleventh Judicial Circuit, In and For Dade County, Florida. A Final Judgment was entered on the Eason Complaint on or about February 17, 1987. The court found that Mr. Schwartz had initiated contact with the Plaintiff, Agnes Eason. The court also found that Mr. Schwartz had represented to Ms. Eason that the Small Business Administration (hereinafter referred to as the "SBA"), was about to foreclose a lien on her home. The court also found that "[t]he Small Business Administration, in fact, was not foreclosing on Plaintiff's property [and had no plans to institute foreclosure proceedings in the near future.]" The language in brackets was struck from the Final Judgment. Therefore, no determination was made as to whether foreclosure proceedings might have been instituted in the future. The striking of this language, however, does not prove that the SBA was considering possible foreclosure proceedings on Ms. Eason's property. Nor was Mr. Schwartz's testimony persuasive enough to reject the findings of the court on the Eason Complaint. The court concluded that Mr. Schwartz told Ms. Eason that "the only way to save her home from foreclosure" would be to execute notes and mortgages in favor of Paramount. Ms. Eason executed the suggested notes and mortgages and they were recorded. Although the notes and mortgages were executed on terms which Ms. Eason accepted, the court concluded that "no consideration" passed from Paramount to Ms. Eason for the notes or mortgages. The court also concluded that Ms. Eason executed the notes and mortgages because of the misrepresentation concerning the SBA by Mr. Schwartz. The court found that when Ms. Eason notified Mr. Schwartz that her payments on the note she had executed to Paramount were more than she could afford, the notes and mortgages were cancelled and a satisfaction was recorded. The court also found that after cancelling the notes and mortgages, Mr. Schwartz incorrectly told Ms. Eason that "the only way left to save her home from imminent foreclosure by the Small Business Administration" would be to execute a Warranty Deed conveying the fee simple interest in Ms. Eason's home to him. Mr. Schwartz also told Ms. Eason that, pursuant to a document titled a "Disclosure", he would grant Ms. Eason and her mother a life estate in the property. Mr. Schwartz was also to pay Ms. Eason $1,000.00 and to pay real estate taxes on the property pursuant to the Disclosure. Ms. Eason executed a Warranty Deed and the Disclosure on June 18, 1985. The Warranty Deed was recorded June 19, 1985. The Disclosure was recorded, but not until September 13, 1985. Although the transaction was explained by Mr. Schwartz to Ms. Eason and she accepted it, the court concluded that Mr. Schwartz's representation that foreclosure by the SBA was imminent was incorrect and that Mr. Schwartz failed to tender the sum of $1,000.00 agreed to in the Disclosure. Although Mr. Schwartz testified that he did attempt to tender the $1,000.00 (less $175.00 in recording fees), he did so after the Eason Complaint had been filed and it was rejected because of the litigation. Therefore, although the Disclosure agreement was executed June 18, 1985, Mr. Schwartz did not attempt to tender the $1,000.00 until some time after the Eason Complaint was filed on November 5, 1985. The court also found that Mr. Schwartz had not paid real estate taxes on the property as promised in the Disclosure. Mr. Schwartz explained, however, that the taxes had not been paid because the first real estate taxes due on the property had not become due until after the litigation had been instituted. The court concluded as a matter of law, among other things, the following: That the Defendant, ERIC SCHWARTZ, on behalf of Defendant PARAMOUNT FINANCE CORPORATION [fraudulently] misrepresented a material fact to the Plaintiff, AGNES EASON, for the purpose of inducing Plaintiff to execute the aforementioned notes and mortgages. That the Defendant, ERIC SCHWARTZ [fraudulently] misrepresented a material fact to the Plaintiff, AGNES EASON, for the purpose of inducing Plaintiff to execute the aforementioned Warranty Deed and "Disclosure." That the Warranty Deed executed by Plaintiff in favor of Defendant was procured by Defendant SCHWARTZ through the exercise of coercion and duress upon Plaintiff. That no consideration passed from Defendant SCHWARTZ to Plaintiff for any of the instruments executed by Plaintiff. That the purported promises made by Defendant SCHWARTZ in the "Disclosure", to the effect that certain debts of the Plaintiff will be paid by SCHWARTZ "if necessary", are illusory promises and impose no obligation upon the Defendant SCHWARTZ. Such promises are therefore unenforceable and do not constitute consideration in support of the subject conveyance. The court ordered the promissory notes, Warranty Deed and the Disclosure cancelled and declared them null and void. The Department's Awareness of the Eason Complaint. There were employees of the Department that were aware of the Eason matter at the time that an administrative action against Mr. Schwartz, which is discussed, infra, was being investigated by the Department. Prior to the action of the Department in this case, the Department has not taken disciplinary action against Mr. Schwartz's individual mortgage broker license as the result of the judgment on the Eason Complaint. The weight of the evidence failed to prove why the Department did not take action against Mr. Schwartz as a result of the judgment on the Eason Complaint until this case arose. The evidence also failed to prove, however, that the Department ever represented to Mr. Schwartz that it would not take any action against his license as a result of the Eason matter. 1990 Administrative Action. At some point during 1987, Mr. Schwartz decided to begin business as a mortgage broker with Mr. Stephen Hertz. Mr. Schwartz intended to discontinue operating through Paramount. Mr. Schwartz and Mr. Hertz intended to operate their business as Dollar Mortgage Company (hereinafter referred to as "Dollar"). In June of 1987 Mr. Schwartz prepared an application to register Dollar as the mortgage broker. Mr. Schwartz also prepared an endorsement transferring his individual license as principal mortgage broker to Dollar. These documents (hereinafter referred to as the "Dollar Applications"), were provided to Mr. Hertz to file with the Department. Mr. Schwartz, having been advised by Mr. Hertz that the Dollar Applications had been filed, believed that the Dollar Applications had been filed with the Department. Before being informed by the Department that the Dollar Applications had been approved or that his individual license had been renewed, Mr. Schwartz engaged in several mortgage brokerage transactions in the name of Dollar. Engaging in the transactions in the name of Dollar, therefore, constituted acting as a mortgage brokerage business without a license. At some point after the Dollar Applications were filed, Mr. Schwartz contacted Mr. Paul Richman of the Department's Miami office to determine what the status of the applications was. Mr. Schwartz was informed that the Department was in the process of changing the manner in which applications were processed and the process was causing a delay. Mr. Richman advised Mr. Schwartz to check with the Department's Tallahassee office in November, 1987, if the Department had not acted on the Dollar Applications by then. In November, 1987, Mr. Schwartz contacted the Department's Tallahassee office and was informed that the Dollar Applications had never been received. Mr. Schwartz submitted new applications at that time. As a result of the fact that Mr. Schwartz had transacted business before his license had been renewed and had acted in the name of Dollar before receiving approval of Dollar to transact such business, the Department filed an Administrative Complaint, Number 1154-F-5/88 (hereinafter referred to as the "Complaint"), against Mr. Schwartz. The Complaint was entered August 29, 1988. On or about January 23, 1990, the Department and Mr. Schwartz entered into a Stipulation and Consent Agreement (hereinafter referred to as the "Stipulation"), settling the Complaint. Mr. Schwartz admitted in the Stipulation to the following: 3. Eric S. Schwartz admits that he acted as a mortgage broker with an inactive license, and that Dollar acted as a mortgage brokerage business without a valid registration but denies intentional wrongdoing as more fully set forth in Mr. Schwartz's affidavit dated May 30, 1989 which is referenced as if fully set forth at length herein. Pursuant to the Stipulation, Mr. Schwartz was required to pay an administrative fine of $2,500.00 for his violation of Chapter 494, Florida Statutes. It was also agreed that the Dollar application would be withdrawn and it was. Mr. Schwartz's individual license was, however, renewed. The Stipulation also provided that the Department would make at least one examination of Mr. Schwartz's mortgage brokerage activities during each six month period during the next twenty-four months from the date of the Stipulation. Audits were in fact conducted by the Department. No further charges were brought against Mr. Schwartz as a result of these audits. Additionally, the following agreement was contained in the Stipulation: 13. The Department agrees that, upon execution of this Stipulation, payment of the administrative fine, payment of the restitution ordered, and faithful compliance hereafter by Eric S. Schwartz with all of the terms and conditions of this Stipulation, the Department will take no further action against Eric S. Schwartz for violations of the Act and the rules of the Department as set forth in the Complaint. However, should the Department, in its exercise of its discretion, deem it necessary to take action against Eric S. Schwartz for violations of the Act and rules of Department occurring after the time period set forth in the Complaint, then, in that event, all such allegations and charges may be used against Eric S. Schwartz in any such subsequent proceeding, if relevant. Eric S. Schwartz understands that there is no order, administrative or judicial, sealing these proceedings in the event of a future administrative complaint regarding activities alleged to occur subsequent to the final date of the timeframe of the investigation of the affairs of Eric S. Schwartz' activities as set forth in the Complaint. See the second paragraph number "13" on page 4-5 of the Stipulation. In March of 1990, the Department entered a Consent Final Order incorporating the Stipulation. The Department has not brought any charges against Mr. Schwartz subsequent to the execution of the Stipulation. The Department has continued to renew Mr. Schwartz's mortgage broker's license.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order denying Financial Funding's application for licensure as a mortgage brokerage business. DONE AND ENTERED this 21st day of January, 1993, in Tallahassee, Florida. LARRY J. SARTIN 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 21st day of January, 1993. APPENDIX The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Financial Funding's Proposed Findings of Fact Accepted in 6 and 8. Accepted in 9. Accepted in 3. Accepted in 4. Accepted in 5. Although the Department offered no such evidence, the weight of the evidence failed to prove that there is "no difference." Hereby accepted. See 8. Accepted in 34. Accepted in 10-11 and 28-29. Accepted in 30, 32-33 and 37. Accepted in 31 and 34. Whether Mr. Hertz advised Mr. Schwartz to start doing business in the name of Dollar is not relevant. The evidence failed to prove that Mr. Schwartz "had no reason to operate improperly." What Mr. Hertz noted in his letter of May 18, 1988 is hearsay. The evidence failed to prove when the documents "had been previously provided . . . ." The weight of the evidence also failed to prove that Mr. Schwartz "was not at fault." Hereby accepted. See 37 and 38. The weight of the evidence failed to prove that Mr. Schwartz had "nothing to hide." The evidence also failed to prove that the Department's audits were "extremely thorough. What the Department did during their audits of Mr. Schwartz is based upon hearsay. Accepted in 37. Accepted in 39. Not relevant. Hereby accepted. Accepted in 12 and 25. See also 17-19 and 21. The weight of the evidence failed to prove the second sentence. The fifth sentence through the end of this proposed paragraph is not relevant. The evidence also failed to prove that Ms. Eason was "initially pleased." 20 See 14-15, 19, 21 and 22. 21 See 25-27. The weight of the evidence failed to prove that the Department was aware of the Eason matter for "seven years." The weight of the evidence also failed to prove the third sentence.. The Department's Proposed Findings of Fact Accepted in 1. Accepted in 12. Hereby accepted. Accepted in 13, 21 and 23 and hereby accepted. Accepted in 34. Accepted in 35. The Stipulation was executed in January, not December. Accepted in 36. Accepted in 37. Accepted in 38. Accepted in 40. Accepted in 6. Accepted in 3 and 7. Accepted in 8. COPIES FURNISHED: Harold F. X. Purnell, Esquire Highpoint Center, Suite 1200 106 East College Avenue Tallahassee, Florida 32301 J. Ashley Peacock Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves General Counsel Room 1302 The Capitol Tallahassee, FL 32399-0350
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 1. Prior to September 1, 1986, mortgage brokers in Florida who worked for several companies were issued separate licenses for each company. P. Ex. 10, P. The Respondent, Dennis C. Young, had several such licenses, the first having been issued on March 26, 1982. Id., P. 9. Prior to September 1, 1986, mortgage broker's licenses were issued for only one year and expired annually on August 31st. P. Ex. 10, P. 9-10. During the period from September 1, 1985, through August 31, 1986, the Respondent had only one mortgage broker license HA 0006667 as an additional broker for American Financial Consultants of Central Florida. R. Ex. 1, P. Ex. 10, P. 10-11. That license expired on August 31, 1986. Id. at P. 14. On January 22, 1986, the Respondent applied to the Petitioner, the Department of Banking and Finance, Division of Finance, for registration as a mortgage broker under Chapter 494, Florida Statutes. P. Ex. 7. This application was for a license with Southern States Mortgage Company. P. Ex. 10, P. 12. On April 18, 1986, Petitioner denied the application of the Respondent for registration as a mortgage broker. The basis of the denial was a finding by the Petitioned of a number of statutory violations by the Respondent as a mortgage broker for American Financial Consultants of Central Florida. P. Ex. 10, P. 13. On July 11, 1986, or shortly thereafter, the Petitioner advised the Respondent that his request for a formal administrative hearing with respect to the denial of his application for registration as a mortgage broker was denied because not timely filed, and advised the Respondent that he had thirty days from July 11, 1986, in which to file an appeal, if he so desired, to the Fifth District Court of Appeal. The Respondent contacted the attorney for the petitioner. The attorney for the petitioner in fact told the Respondent that he could reapply for a license, and if his application was again denied, the Respondent could then seek a formal administrative hearing and judicial review. The Respondent was also told that the petitioner would not forego or abate the final order denying the application, but was advised to "let sit" the final order denying his January 22, 1986, application. T. 100. The Respondent did not file a judicial appeal from the July 11, 1986, order. During the period from September 1, 1986, to November 12, 1987, the Respondent was not a licensed mortgage broker licensed by the Department of Banking and Finance, Division of Finance. P. Ex. 6, P. Ex. 10, P. 15. Between January 22, 1986, and June 12, 1987, the Respondent did not file any application with the Petit loner for licensure as a mortgage broker. P. Ex. 10, p. 15. In about December, 1986, the Respondent was hired by Independence One Mortgage Corporation as a builder's loan representative for a builder that Independence One Mortgage Corporation was then servicing. The builder was building and selling homes in the Williamsburg subdivision. T. 33, 35-37, 64. The Respondent's office was located at the building site. Independence One Mortgage Corporation hired the Respondent to offer to the clients of the builder the type of mortgage that Independence One Mortgage Corporation was then offering, and in so doing, to handle all aspects of negotiating mortgage loan commitments, from initial interview, making quotes of daily mortgage rates to the builder's customers, and following up on the application from the beginning to closing of the mortgage. T. 37. The Respondent told Independence One Mortgage Corporation that he held a current valid mortgage broker's license with Investor's Home Mortgage Company and showed the agent of Independence One a "license" that the Respondent claimed was his and was then valid. T. 37. This statement was untrue. The agent for Independence One Mortgage Corporation who hired the Respondent had known the Respondent several years earlier as an aggressive mortgage solicitor. T. 36 Independence One Mortgage Corporation thought that the Respondent then held a valid mortgage broker's license, and would not have hired the Respondent if he had not represented that he was a licensed mortgage broker. T. 37-38. While employed by Independence One Mortgage Corporation, the Respondent negotiated mortgage loans. He quoted mortgage rates to prospective borrowers, received and processed applications from prospective borrowers, prepared good faith estimates of settlement charges, and closed mortgage loans. T. 42-56, 96-97; P. Exs. 1, 2, 4, and 5. During his employment with Independence One Mortgage Corporation, the Respondent negotiated over 40 mortgage loans. T. 55. From December, 1986, to May, 1987, the Respondent was paid a salary by Independence One Mortgage Corporation. In May, 1987, due to a lack of mortgage demand, Independence One placed the Respondent on a commission basis only. About two weeks later, the Respondent resigned his employment with Independence One. T. 55-57, 65-66. At about the same time, Independence One Mortgage Corporation learned that the Respondent did not have a valid mortgage broker's license. T. 57-59. On June 12, 1987, the Respondent filed another application for licensure as a mortgage broker. P. Ex. 9. In answer to question number 6, which asked whether he had ever had his license "denied, suspended or revoked," he answered no. This answer was not true. P. Ex. 10, P. 16. The Respondent testified that he answered question number 6 in the negative because he thought that he would be afforded a right to contest the previous denial of his application if the new application was denied. At the time that the Respondent stated in his application that he had never had a license previously denied, the Respondent knew that statement was not true. He knew that he might again reapply and in such reapplication contest the basis for denial, but he also knew that the denial of the first application was final and that he had lost his right to appeal. See findings of-fact 5 through 8. If the Respondent had answered yes to question 6, he was required by the application form to identify the agency that denied the application for licensure and to provide the names of the complaining parties. P. Ex. 9. By failing to truthfully answer question 6, the Respondent failed to notify the Petitioner of the existence of the prior dispute concerning his licensure. This was a material misstatement of fact. If the Respondent had been candidly pursuing the option of making a second application in order to gain another appeal right, he would have candidly disclosed to the Petitioner in his second application that a prior application had been denied. In that manner, the Respondent would have laid the issue squarely on the table. By answering no to question 6, the Respondent affirmatively sought to mislead the Petitioner so that the prior basis of denial might not become the basis for denial of the second application. The Petitioner construes the provisions of Chapter 120, Florida Statutes, as mandating that a license be issued if not denied within ninety days from the filing of the application. P. Ex. 10, pp. 20-23. During the period in which the June 12, 1987, application was pending, the Petitioner did not independently verify the answers to questions on the license application, and assumed that the answer to question 6 was correct. P. Ex. 10, pp. 16 and 20. Had it known that the Respondent had previously been denied a mortgage broker's license, the Petitioner would have denied the application of June 12, 1987, for a material misrepresentation of facts. P. Ex. 10, P. 23. For these reasons, and since the ninety day period had expired, the Petitioner issued mortgage broker license HA 261088342 to the Respondent on November 12, 1987. P. Ex. 6. In July, 1987, Colony First Mortgage Corporation was looking for a branch manager for its Mount Dora, Florida, office. The company wanted a branch manager who held a mortgage broker's license to solicit business, as well as to hire and supervise other loan officers. T. 25. The Respondent applied for the job, and Colony First Mortgage Corporation asked for his mortgage broker's license. T. 93. The Respondent told Colony First Mortgage Corporation that he had a mortgage broker's license. T. 26. This statement was untrue. In July, 1987, the Respondent was employed by Colony First Mortgage Corporation as a branch manager in the Mount Dora, Florida, office. T. 24-25, 59-60. Colony First Mortgage paid the Respondent a salary with an override of the branch's mortgage loan production. It was also possible for the Respondent to have been paid a small commission for mortgage loans that he might personally have solicited, but there is no evidence in the record (one way or the other) that any commissions were ever paid or not paid. T. 26, 28. The Petitioner requires that licensed mortgage brokers who change employment file an "application for endorsement" to change the registration of that license to the new employment. T. 72# At some time shortly before August 11, 1987, the Respondent filed with the Petitioner an "application for endorsement" for endorsement of a mortgage broker's license to work for Colony First Mortgage Corporation. P. Ex. 8. Colony First Mortgage Corporation required the Respondent to file this application as a condition of the Respondent's employment. The application bears the signature of a William D. Tharpe, dated August 11, 1987, representing himself as the principal broker for the Respondent, and stating that the Respondent was employed on July 6, 1987, as a mortgage broker. The Respondent submitted the application for endorsement 50 that he would be licensed as a mortgage broker working as a mortgage broker for Colony First Mortgage Corporation. The Respondent characterized his own activity at Colony First Mortgage as operation as a mortgage broker for Colony First Mortgage. T. 10. But he denied that he personally solicited loans, T. 109, and characterized his work as supervision of loan officers, who did solicit and negotiate mortgage loans. T. 109-111. In his employment at Colony First Mortgage, the Respondent hired staff, since all prior staff had left, and trained and supervised loan officers. T. 110-111. There is no evidence that the Respondent personally solicited or negotiated mortgage loans. Toward the end of October, 1987, Colony First Mortgage learned that the Respondent did not have a mortgage broker's license. The company removed the Respondent from his manager's position and subsequently terminated his employment. T. 27# Directly under the heading of the Respondent's application for endorsement is the statement: "Use this form only if currently licensed." Two lines under that statement is the following statement in bold print: "CURRENT LICENSE MUST BE RETURNED WITH THIS APPLICATION." The Respondent signed the form and stated in part I of the form that he had license number HA 001637. Another license number appears above the first number, and is HA 0016329. P. Ex. 8. The application for endorsement is used only if the applicant has a current license. Neither license number was a valid license currently or previously held by the Respondent. Thus, the representation on the application for endorsement, P. Ex. 8, as to license numbers was untrue. T. 114. The Respondent admits placing the first number on the form and denies placing the second number on the form. The Respondent asserts that the first number he placed on the form was his guess as to the correct number, and that he thought the petitioner would correct it if it were incorrect. He further asserts that he represented that he was licensed because he thought that since he had reapplied, the prior denial of licensure was still a pending issue, and that he could rely on earlier licenses that had expired. He further stated that he intended the number to represent the number of one of his earlier licenses. T. 115. The Respondent did hold license number HA 0016329, which expired on August 31, 1985, and license number HA 0006667, which expired on August 31, 1986. R. Ex. 1 and 2. It is credible that the Respondent was trying to use one of his expired license numbers, notably, the one that expired on August 31, 1985, HB 0016329, which is similar to the number he used, HA 001637. But it is not credible that the Respondent thought that he was "currently licensed" as required by the form. The Respondent knew that his prior licenses expired automatically each year. T. 116. He knew that his January 22, 1986, application had been denied. He knew he was not currently licensed. T. 102. He only had pending an application for a license, and had no currently active license number. Thus, it is concluded that the Respondent knew that he did not have a valid license number when he placed the number HA 001637 on the application for endorsement. This was a material misstatement of fact. See findings of fact 38, 39, and 47. The Respondent denies that he placed the second license number HA 0016329 upon the application. The second series of numbers is written in larger script than the first one. While there are some similarities in some of the numbers compared to other numbers written by the Respondent on the application (the 6 is the same as the 6 in the Respondent's social security number and telephone number, the 2 is the same as the first 2 in the telephone number), there is insufficient evidence in this record to conclude that the Respondent placed the second license number on the application. P. Ex. 8. The Petitioner relied upon the statements in the application for endorsement, P. Ex. 8, when it issued the mortgage broker's license to the Respondent on November 12, 1987. p. Ex. 10, P. 20.
Recommendation For these reasons, it is recommended that the State of Florida, Department of Banking and Finance, Division of Finance, enter its final order finding that Dennis C. Young committed the violations described above and revoking license number HA 261088342 issued to him on November 1, 1987. DONE and ENTERED this 11th day of October, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of October, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2273 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix are adopted as additional findings of fact. Findings of fact proposed by the Petitioner: 1. The phrase "due to fiat of operation of law" is a conclusion of law, not fact. 2, 5, 6, 7, 22, 23, 39, 46 (second sentence) 49, 50, and 55. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 14 (first sentence). The fact that a witness "testified" in a certain way is not a relevant finding of fact. The subject matter of the Respondent's testimony, that he in fact filed another application in May or June of 1986, is rejected as not proven by credible evidence. The Department had no evidence of any application between January 22, 1986, and June 12, 1987. The testimony of the Respondent on this point was not supported by a copy of the alleged application. Due to the Respondent's evasiveness as to other material points at issue in this case, the testimony of the Respondent is rejected as not credible and unsupported. Findings of fact proposed by the Respondent: 1.C. This proposed finding of fact is contrary to the credible evidence. 1.E. While these proposed findings of fact are true, they are irrelevant. A "mortgage broker" is defined by law (section 494.02(3), F1a. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." The relevant issue is what the Respondent in fact did, not what the titles on the form said. 1.F-H. These proposed findings of fact are contrary to the credible evidence. 2.D.and G. A "mortgage broker" is defined by law (section 494.02(3), Fla. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." As discussed in the conclusions of law, the Respondent indirectly negotiated mortgage loans through his supervision of loan officers at Colony First Mortgage Corporation. 2.F. This proposed finding of fact is contrary to the credible evidence. See P. Ex. 8. 3.A.1-3. The Respondent admitted that Mr. Berkowitz told him to "let sit" the denial of his January 22, 1986, application, and the Respondent admitted that Mr. Berkowitz, on behalf of the Petitioner, would not abate or forgo the decision of denial. T. 100. Thus, it is clear that the Respondent knew that his application had been denied. This, coupled with receipt of P. Ex. 7, makes any contrary belief not credible. 3.B.4. There was intent to deceive. The Respondent knew he was not currently licensed. He knew the earlier license (the one which he tried to place by number on application) had expired. He knew that his last application had been finally denied. He only had a pending application (June 12, 1987), and had no decision on that yet. The Respondent told Colony First Mortgage Corporation that he was currently licensed. If the Respondent had no intent to deceive, he would have clearly mentioned on the application for endorsement the denial of his January 22, 1986, application, and his theory of the continued "existence" of his expired license. COPIES FURNISHED: Elise M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller 400 West Robinson Street, Suite 501 Orlando, Florida 32801 Dennis C. Young 4050 Gallagher Loop Post Office Box 771 Casselberry, Florida 32707 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
The Issue Whether the license of Respondent as a Mortgage Solicitor should be suspended for violation of Sections 494.05 (1) (a) & (b), Florida Statutes, Rule 3-3.07(1), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes. At the commencement of the hearing, Respondent's counsel moved to dismiss the proceedings by reason of Petitioner's failure to provide witness statements of Charles R. Burke & Kathryn C. Burke, pursuant to a letter from Respondent's counsel to the Deputy Director, Division of Finance, dated August 26, 1975, requesting copies of any witness statements obtained in the course of Petitioner'S investigation. Respondent not having previously sought to compel discovery in accordance with Florida Rules of Civil Procedure, the motion was denied. At this point, Respondent's counsel announced that he had been instructed by his client, who was not present at the hearing, to leave the hearing room and take no further part in the proceedings if the motion was denied. This being the case, Respondent's counsel departed and the hearing was then conducted as an uncontested proceeding.
Findings Of Fact Respondent was licensed as a Mortgage Solicitor with the firm of Hartwell and Associates, Inc., from May 27, 1974 to July 24, 1974, when his license was returned to Petitioner for cancellation by that firm. On September 13, 1974, Respondent was issued a Mortgage Solicitor's License with ABC Investment Corporation. Records of the Office of the Comptroller, State of Florida, Division of Finance, Department of Banking and Finance, failed to reveal any other license as a mortgage broker or mortgage solicitor having been issued to Respondent (Testimony of Ehrlich, Petitioner's Exhibit 1). In the spring of 1974, Mr. and Mrs. Charles R. Burke, Sr. of Ft. Lauderdale, Florida, met the Respondent who proposed to double the income that the Burkes were then receiving from interest on securities investments. This was to be done through the purchase of promissory notes secured by first mortgages on property located in Volusia County, ostensibly owned by LTP Properties, Inc., a land developer. Respondent showed them photographic slides of a club house at the development site and stated that there would be a golf course there and painted a bright picture of the receipt of 12 percent interest on the notes if the Burkes would liquidate the stocks that they owned and invest through him. He stated that the amounts that they would invest would represent only 40 per cent of the value of the real estate that secured their investment, and that it was a "sure thing.' Acting upon Respondent's advice, Mr. and Mrs. Burke cashed in some $180,000.00 in stocks and turned it over to the Respondent in June, 1974. In return, they received $180,000.00 in promissory notes in face amounts of $5,000.00 and$8,000.00 issued by LTP Properties, Inc. The promissory notes indicated on their face that the sale was approved by SEI, Inc., sales agent for LTP Properties, Inc., and they were signed by the president of SEI, Inc. The interest payments were to commence July 1st. Such payments were received during the months of July through December, 1974. In the fall of 1974, the Burkes invested another $100,000.00 with the Respondent for similar instruments, and again in January, 1975, they purchased another $20,000.00 in promissory notes and mortgages in face amounts of $5,000.00 each which also were issued by LTP Properties, Inc., but then owned by Respondent. At this time, the January 1st interest payment on the prior investments had not been made and, prior to making the final investment, the Burkes inquired of Respondent as to the reason for nonpayment of interest. He stated to them that LTP Properties was experiencing financial difficulties at the time but that it was endeavoring to get money from a bank overseas and from the Mellon Bank in Pennsylvania. No further interest payments have been made on any of the notes since December, 1974, and the Burkes discovered later that they did not, in fact, hold first mortgages on the real estate described in their mortgage deeds and consequently could not foreclose thereon (Testimony of Mr. and Mrs. Burke, Petitioner's Exhibit 2, Petitioner's Composite Exhibit 3). Prior to advising investors to purchase notes of LTP Properties, Inc., Respondent made several trips to the site of the property, checked with the local bank of the developer, was shown a financial statement which indicated that the developer was solvent, and compared values with surrounding real estate developments. He told the Burkes that LTP was obtaining foreign financing based on information he had received from Mr. David Edstrom of SEI, Inc., who in turn had acquired the information from Mr. Frank Carcaise of LTP Properties, Inc. This statement was made to the Burkes sometime between February and June of 1975 according to the Respondent. As far as Respondent knew, LTP Properties, Inc., stopped making interest payments on their notes about February, 1975 (Deposition of Respondent).
The Issue The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid. Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter- mined:
The Issue Whether the Respondent should be denied a mortgage solicitor's license under Chapter 494, Florida Statutes.
Findings Of Fact Mr. Steinhardt, the Respondent, requested an application for registration as mortgage solicitor and made application on the proper form. The Department of Banking and Finance denied the application for issuance of a mortgage solicitor license and as grounds for said denial stated: Arthur Steinhardt failed to attach to his application for registration as a mortgage solicitor, a signed, notarized statement of the charges and facts as to his arrest or indictment for a crime. Said omission is a violation of Section 494.05, Florida Statutes; Arthur Steinhardt failed to attach to his application for registration as a mortgage solicitor, a signed statement of the charges and facts as to why a license was denied, suspended or revoked. Said omission is a violation of Section 494.05(1)(g), Florida Statutes; On or about March 13, 1969, Arthur Steinhardt was convicted of uttering a forged Instrument and sentenced to six (6) months to three (3) years in prison. Said criminal conviction demonstrated fraudulent or dishonest dealings by Arthur Steinbardt. Said criminal conviction is a ground for denial of license pursuant to Section 494.05, Florida Statutes. The acts and conduct of Arthur Steinhardt in the foregoing three paragraphs demonstrates deficiencies in the qualities of honesty, truthfulness, integrity, and competency. Said qualities are an essential requirement for the issuance of a mortgage solicitor license. Since these qualities are necessary in negotiating financial transactions involving primary and subordinate mortgages, the paramount interest of the public are best served by denial of the application of Arthur Steinhardt based upon the foregoing grounds. The Respondent requested a public hearing and at this hearing showed: That he had responded affirmatively to the question on the form "Have you eyer been arrested or indicted for a crime?" Admitted that he had failed to attach a complete notarized statement of the charges and facts together with the name and location of the court in which the proceedings were had or were pending, but showed that he had sent in a notarized statement as required stating that he had sent these in when he had been told to send them in. Mr. Steinhardt, the Respondent, admitted that he had failed to attach to his application notarized statements as required in questions numbers 5 and 9 on the application form, stating that he had overlooked said requirements although he had answered affirmatively to the questions: Question 5, "Have you ever been arrested, or indicted for crime?" Question 9, "Has your license of any kind ever been denied, suspended or revoked?" Respondent admitted that he had been convicted of uttering a forgery in Case No. 65-9450, State of Florida v. M. A. Steinhardt. The Respondent did not contest the charges of the Department of Banking and Finance, however, he contended: that the trouble he had been involved in for which he had been convicted of a crime and had served time arose purely from family problems; that the fingerprint card of the FBI showed that the only arrest he had been involved in was in regard to this family problem and one vehicular accident; that he was known for his honesty and integrity; and that he had been rehabilitated since his conviction of a crime. The Department of Banking and Finance contends: that its chief purpose as required by the legislature is to review an applicants background and make a determination to protect the public; that upon such investigation the determination was made that the public would not be best protected by granting a license to the Respondent. The Hearing Officer further finds: That Respondent's application for registration was ultimately completed properly, but not until the Department had sent out the notice of denial; The Respondent did not "overlook" the requirements of question 5 and question 9, but intentionally failed to properly complete the application by failing to attach notarized statements as to his arrest and his indictment for crime and the denial of a license. The license of applicant should have been denied.
Recommendation Deny the application. DONE and ORDERED this 11th day of March, 1976. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Philip J. Snyderburn, Esquire General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Arthur Steinhardt Adirolf Mortgage Enterprises, Inc. 8134 N.W. 103 Street Hialeah, Florida 33016 Joseph M. Ehrlich, Deputy Director Division of Finance 335 Carlton Building Tallahassee, Florida 32304
