The Issue Whether the application of the Respondent Melvin Haber for a mortgage broker's license should be approved or denied.
Findings Of Fact Respondent Melvin Haber applied for registration as a mortgage broker by filing an application for registration as a mortgage broker on December 20, 1976. On January 14, 1977, Petitioner issued to Respondent its Notice of Intent to Deny Respondent's Application for registration as a mortgage broker. The reasons for such denial were set forth in an accompanying document entitled "Administrative Charges and Complaint." Petitioner Division of Finance had determined that Respondent Melvin Haber did not meet the proper qualifications necessary to be licensed as a mortgage broker and that he had, through Guardian Mortgage and Investment Corporation, charged and received fees and commissions in excess of the maximum allowable fees or commissions provided by the Florida Statutes; and although he had stated otherwise on his application, Respondent in fact had been charged in a pending lawsuit with fraudulent and dishonest dealings; and had demonstrated a course of conduct which was negligent and or incompetent in the performance of acts for which he was required to hold a license. By letter dated January 19, 1977, to Mr. Joseph Ehrlich of the Comptroller's Office, Tallahassee, Florida, Petitioner received a request from the Respondent Melvin J. Haber in which he acknowledged receipt of his rejection for mortgage broker's license and stated, "I received notice today of my rejection for my mortgage broker's license. I would, therefore, withdraw my application and re- quest return of $75.00 as I will not answer the rejection as I can't afford an attorney at this time." A Special Appearance to Dismiss Complaint was entered on February 11, 1977. The grounds are as follows: "1. The Department of Banking and Finance does not have jurisdiction over this Respondent. There is no jurisdiction in any administrative proceeding over this Respondent. There is no pending application for any mortgage broker's license by this Respondent. The application originally filed for the mortgage broker's license was withdrawn on January 19, 1977. A copy of the letter withdrawing application is attached hereto as Exhibit A. The proceedings are moot and would serve no useful purpose. Permitting this tribunal to proceed on a non-existent request for broker's license would deny to the Respondent due process of law, equal protection of the law, and his rights under the State and Federal Constitutions applicable thereto." On March 4, 1977, the Division of Administrative Hearings received a letter from Eugene J. Cella, Assistant General Counsel, Office of the Comptroller, State of Florida, requesting a hearing in this cause be set at the earliest practical date, and enclosed in the letter requesting a hearing was a copy of the Division of Finance's Administrative Complaint and a copy of the Respondent's Special Appearance to Dismiss the Complaint. A hearing was set for April 22, 1977, by notice of hearing dated March 30, 1977. A letter was sent by Irwin J. Block, Esquire, informing the attorney for the Petitioner that the Respondent "intends to permit the matter to proceed solely upon the written Special Appearance to Dismiss Complaint heretofore filed." Evidence was submitted to show that between May 29, 1973 and continuing through November 25, 1976, Guardian Mortgage and Investment Corporation and Melvin Haber as Secretary/Treasurer charged and received fees and commissions in excess of the maximum allowed fees or commissions in violation of the Florida Statutes and the Florida Administrative Code. Respondent's application for registration as a mortgage broker indicated that Petitioner was not named in a pending lawsuit that charged him with any fraudulent or dishonest dealings. However, on August 5, 1976, a suit was filed in Dade County, Florida, which charged the Petitioner and others with fraud in violation of the Florida Securities Law. The application was filed by Respondent, was processed by Petitioner and a Notice of Intent to Deny Respondent's Application for Registration was filed together with Administrative Charges and Complaint. The Division of Administrative Hearings has jurisdiction upon request of a party for a hearing once an application has been received and the Division has investigated and fully considered the application and issued its Notice of Intent to Deny and filed a Complaint on the applicant. In this cause the question of whether the applicant is entitled to a refund of fees also must be resolved. An orderly procedure to finalize the resolution of the issues is desirable and necessary. The Proposed Order filed by the Petitioner has been examined and considered by the Hearing Officer in the preparation of this order.
Recommendation Deny the application of applicant Melvin Haber for a mortgage broker's license. Refund the Seventy-Five Dollar ($75.00) fee Respondent paid upon filing the application. DONE and ORDERED this 31st day of May, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Irwin J. Block, Esquire Fine, Jacobson, Block, Goldberg & Semet, P.A. 2401 Douglas Road Miami, Florida 33145
Recommendation Based on the foregoing Stipulated Facts, Supplemental Findings Of Fact and Conclusions Of Law, it is recommended that Respondent, Department of Banking and Finance, enter a final order that the following disbursements from the Mortgage Broker Guaranty Fund be made Payee on the claims against Polk Investments, Inc.: Amount Amendolaro $ 2,661,22 Victorias 10,000.00 Fournier, Janice 10,000.00 Wilson 1,334.71 Ledfords 6,573.09 Fournier, Robert 10,000.00 Murphy 4,715.49 Murphy as Trustee 4,715.49 Total $50,000.00 RECOMMENDED this 13th day of November, 1986 in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSON, 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 13th day of November, 1986. COPIES FURNISHED: Paul C. Stadler, Jr., Esquire Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Dennis P. Johnson, Esquire SHELNUT AND JOHNSON, P.A. Suite One Belvedere Professional Center 1525 South Florida Avenue Lakeland, Florida 33806-2436 Cristy F. Harris, Esquire HARRIS, MIDYETTE & CLEMENTS, P.A. Post Office Box 2451 Lakeland, Florida 33806-2451 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 Charles Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32301
Findings Of Fact At all times material to these proceedings, the Respondent Cline was licensed by the State of Florida as a mortgage broker and held license number HB 0017832 from January 13, 1986 through May 31, 1987. During this period of time, Respondent Cline was president and principal mortgage broker for MAC at the 4045 Tamiami Trail, Port Charlotte location. The Respondent was a director and shareholder of the corporation. The Respondent Henderson was also licensed as a mortgage broker and held license number HA 0007460 from March 29, 19856 through June 19, 19889. Respondent Henderson conducted business through MAC as the corporation's vice president. The Respondent was a director and shareholder of the corporation. In response to a consumer complaint, the Department initiated an examination of the books and records maintained at the Port Charlotte location of MAC on April 21, 1987. The conduct of the Respondents in their business dealings as mortgage brokers with MAC was investigated as part of the Department's review process. The examination and investigation involved the time period from March 1, 1986 to June 1, 1987. The written examination report prepared by the Department's financial examiner concludes that the Respondents, as officers and directors of MAC, financially compensated MAC employees who were not licensed under the Mortgage Brokerage Act for soliciting or negotiating mortgage loans. Six alleged mortgage solicitors were named in the report. The loan packages of seventeen mortgages, along with MAC's commission reports, were submitted as evidence to support the conclusion. A review of the documentation, along with a review of the commission checks and the testimony of Kimberly L. Johnson (nee Steed) revealed that the documents identified as "commission reports" were not indicators of commission funds received by the six employees named in the complaint. These employees were paid on a set salaried basis. They were hired by MAC to perform the ministerial acts of taking or typing applications for loans under the direction of a mortgage broker. The use of these employees' names in the commission reports incidentally shows which employee assisted in the completion of forms that resulted in commissions to the licensed brokers who completed the mortgage financing transactions. This interpretation of the "commission reports" is clearly supported by the first page of the reports, Petitioner's Exhibits 17 and Commission checks on the loans, were issued to the licensed mortgage brokers. The evidence demonstrates that Rebecca Henderson, who was one of the employees performing ministerial acts, on one occasion acted beyond her authority and "locked in" the interest rate for a mortgage applicant while she was completing the application. The Department did not present evidence to show that either Respondent Henderson or Respondent Cline had actual knowledge of the employee's actions. Neither licensee was the mortgage broker directing the employee at the time the incident occurred. During the course of the Department's examination, the conclusion was reached that MAC advertised in a newspaper that the corporation was a "mortgage banker" and a "FNMA lender." The Department alleges that MAC is not a "mortgage banker" and a "FNMA lender." At hearing, Kenneth Moulin, a former shareholder of MAC, testified that the goal of MAC was to become a bank. The corporation had money which was used to fund two mortgage loans with MAC as mortgagor. Petitioner's Exhibit 34, which was loan documentation on the residential loan application of William T. Martel and Lora A. Martel, names MAC as the lender. The documents also include FNMA forms used by FNMA lenders. The examination report concluded that MAC did not maintain records for a five-year period. The company started doing business in March 1986. Records were continuously maintained from MAC's inception. An advertisement placed in the newspaper, The Monday Sun, which was published on April 28, 1986, failed to include the phrase that MAC was a "licensed mortgage broker." The advertisement was placed by Respondent Henderson. In mitigation, it should be noted that Respondent Henderson had his mortgage brokerage license for less than one month and was new to the business as it is regulated by the Department. There was no evidence provided to demonstrate that Respondent Cline was aware of the improper advertisement. Other documents provided which purported to be advertisements were not authenticated. They lacked mastheads or headings which could sufficiently identify the place, date or kind of publication. As part of the mortgage financing transactions involved in the sampling of mortgages conducted by the Department, MAC collected fees from applicants for the preparation of documents and reports. Specific fees were quoted to applicants and receipts were clearly marked to demonstrate that the fees were non-refundable to applicants. In its bookkeeping entries, MAC continuously failed to maintain ledger entries which showed that the fees had been assessed on each application, and that the monies had been used for the intended purposes for which they had been collected. In the sampling of mortgages reviewed by the Department, MAC retained money assessed for discount points. The money was not used to reduce the interest rate on mortgages closed, as represented to the borrowers by MAC. Instead, the mortgages were immediately assigned and the discount assessment was retained by MAC for its own, undisclosed use.
Recommendation Based upon the foregoing, it is RECOMMENDED: That Respondent Henderson be issued a reprimand for failure to place the words "licensed mortgage broker" in the April 28, 1986 advertisement. That all other charges against the Respondents be dismissed. DONE and ENTERED this 27th day of November, 1989, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerkk of the Division of Administrative Hearings this 27th day of November, 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-2202 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. See HO #2. Accepted. See HO #1. Accepted. See HO #2. Rejected. See HO #2. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. See HO #1. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. See HO #3. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Document speaks for itself. Also, this is established as proper evidence under Section 494.051, Florida Statutes, so these findings are redundant. Rejected. Report speaks for itself. Accepted. Accepted. Reject the phrase "negotiation." Contrary to fact. See HO #5. Reject the phrase "negotiate." Contrary to fact. See HO #5. 21.-24. Rejected. Contrary to fact. Kimberly L. Johnson is the same person as Kimberly L. Steed who has been licensed as a mortgage broker since September 29, 1986. 25.&26. Rejected. Contrary to fact. See above. This rendering of the testimony is rejected by the fact finder. Accepted. &29. Rejected. Contrary to fact. See HO #5 and HO #6. Accepted. Rejected. See HO #5. Contrary to fact. Accepted. Rejected. Contrary to fact. See HO #5. Accepted. Rejected. Contrary to fact. See HO #5. Rejected. Contrary to fact. Steed completed ministerial acts. See HO #5. Accept the first sentence. Reject the rest as contrary to fact. See HO #5. Rejected. Improper legal conclusion. See HO #12. Rejected. Contrary to fact. See HO #12. Rejected. Cumulative. Rejected. Repetitive. See HO #12. Rejected. Contrary to fact. See HO #12. Accepted. See HO #13. Accepted. Accepted. Rejected. Improper legal conclusion. Appli- cation fees were not set up as entrusted funds. See HO #12. Rejected. Contrary to fact. See HO #8 and #9. Accepted. Accepted. Rejected. See HO #8. Contrary to fact. Accepted. Accepted. Accepted. Accepted. Rejected. Repetitive. Rejected. Contrary to fact. Cline was not the mortgage broker on any of the transactions presented at hearing. Accepted. Accepted. Accepted. Accepted. Rejected. See HO #8 and #9. Accepted. See HO #13. Accepted. See HO #13. Accepted. See HO #13. Respondent Cline's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. Accepted. Rejected. The records presented were found to be reliable when compared with the originals presented simultaneously by Respondent Henderson, although those were not officially placed in evidence. Rejected. See above. Accepted. See Conclusions of Law. Accepted. See HO #3. Accepted. Accepted. Accepted. See HO #5. Accepted. See HO #5. Rejected. Calls for legal conclusion. Rejected. See Section 494.051, Florida Statutes. Accepted. Accepted. Accepted. See HO #8 and #9. Accepted. See Conclusions of Law. Rejected. Irrelevant. See Section 494.051, Florida Statutes. However, the competency of the examiner was considered in the factual determinations made by the Hearing Officer. Accepted. Not listed as factual finding. As a Conclu- sion of Law, the Hearing Officer cannot rule on this matter. Respondent Henderson's proposed findings of fact are addressed as follows: Accepted. Accepted. See preliminary matters. Accepted. Accepted. See HO #2. Rejected. Improper legal conclusion. Unable to rule on proposed finding. Insufficient. 7. Accepted. See HO #5. 8. Accepted. See HO #8. 9.&10. Reject. Insufficient. 11. Accepted. See HO #12. 12. Rejected. Insufficient. 13. Accepted. 14. Accepted. See HO #12. 15. Accepted. See HO #2. 16. Rejected. Conclusionary. 17. Accepted. 18. Accepted. 19.-30. Not listed as factual findings. As Conclusions of Law, Hearing Officer cannot rule on these matters. COPIES FURNISHED: Elsie M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller 400 West Robinson Street Suite 501 Orlando, Florida 33801 Ann Mitchell, Esquire GERALD DUNCAN ENGVALSON & MITCHELL Foxworthy Professional Building Suite 101 1601 Jackson Street Fort Myers, Florida 33902 Floyd G. Henderson Post Office Box 2875 Port Charlotte, Florida 33949 Charles L. Stutts, Esquire General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32399-0350 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350
The Issue The issue in Case No. 90-4722 was whether B & B Mortgage Equity, Inc. was entitled to licensure as a mortgage broker in the State of Florida. As discussed in more detail below, B & B Mortgage Equity subsequently withdrew its application for licensure and that case is now moot. The issue in Case No. 90- 6577 is whether Respondents committed the offenses alleged in the Amended Administrative Complaint filed in that case, and, if so, what disciplinary action should be imposed.
Findings Of Fact At all times pertinent hereto, B & B Investors was registered with the Department as a mortgage broker pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Investors was 1481 N.W. 7th Street #1, Miami, Florida 33125. B & B Investors' registration number is HB 592369518. On or about July 5, 1990, B & B Investors filed a petition for relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 9090-14587-SMW. Yanks was the president and principal mortgage broker for B & B Investors until May 10, 1989. Yanks is a licensed mortgage broker in Florida having been issued license number was 262788177. He has been licensed since 1980 or 1981. There is no evidence of any prior disciplinary action against him or B & B Investors. At all times pertinent hereto, Yanks was also the President of B & B Equity. B & B Equity has never been registered pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Equity was also 1481 N.W. 7th Street #1, Miami, Florida 33125. At all times pertinent hereto, Hernandez-Yanks was married to Yanks and was the Vice President and Secretary of B & B Equity. Hernandez-Yanks is an attorney, but she has never been licensed pursuant to Chapter 494, Florida Statutes. On or about March 15, 1990, Hernandez-Yanks filed a Petition for Relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 90-11654-BKC-AJC. On or about January 1, 1990, B & B Equity filed an Application for Registration as a Mortgage Brokerage Business (the "Registration Application"). Paragraph 6 of the Registration Application stated in part: List all officers, directors, partners, joint-ventures, and ultimate equitable owners. Ultimate equitable owner means natural person who owns 10 percent or more of applicant. NAME ADDRESS TITLE Barry Yanks 1481 NW 7 St. Pres. Ana Hernandez-Yanks 1481 NW 7 St. VP/Scty Yanks was designated as the principal mortgage broker on the Registration Application. The Department denied the Registration Application by notice dated June 4, 1990. CALVARY CHAPEL TRANSACTION At the time of the hearing in this matter, Marie Hall was 66 years old. She was last employed in 1988 by the Broward County School System as an adult vocational education instructor teaching students how to operate sewing machines. Her husband, the late Reverend Arthur Hall, died on March 22, 1988, at the age of 75. Because of health problems, he had been unable to work since 1962. The late Reverend Hall had very little education. Prior to the transactions involved in this case, the only other real estate deal in which the late Reverend and Mrs. Hall had been involved was the purchase of their home many years ago. In the summer of 1987, the late Reverend and Mrs. Hall sought to purchase Mount Bethel Baptist Church (the "Church"). To assist in their effort to purchase the Church, the Halls contacted Reverend Frank Lloyd. Reverend Frank Lloyd was the pastor of Hope Outreach, Church of God in Christ and the Chairman of the State of Florida Prison Ministry. Reverend Lloyd was also engaged in a consulting business through a company called Professional Proposal and Financial Consultants, Inc. ("PPFC"). In the summer of 1987, the Halls entered into an agreement with PPFC pursuant to which they paid PPFC $800 for PPFC's assistance in securing a loan of $250,000 to purchase the church. The agreement called for an interest rate of approximately 11 3/4 percent. The Halls deposited a total of $15,000 in escrow with Reverend Lloyd and/or PPFC. At the time the first $10,000 was deposited with PPFC, the parties entered into an agreement which provided as follows: ...This money is not to be used for down payment, or services rendered. It is to be escrowed only. At the closing of the loan this entire amount is to be returned to Elder Hall or his designate. If in the event no loan is secure [sic] all funds is [sic] to be returned to Elder Arthur Hall, President Calvary Chapel Church of God in Christ or his designate. Reverend Lloyd attempted to obtain a mortgage for the Halls from several companies including Ft. Lauderdale Mortgage and Horizon Development Mortgage ("Horizon"). The Halls decided not to pursue a loan from Horizon because Horizon wanted a non-refundable $3,000 up-front fee. There was also some question whether either company would handle a loan for a church. Reverend Lloyd introduced the late Reverend and Mrs. Hall to Yanks because Reverend Lloyd knew that Yanks had successfully obtained loans for other churches. The Halls met with Yanks on a couple of occasions in late 1987 and early 1988. Other members of the Hall's congregation attended some of these meetings. During those meetings, the need for some of the other church members to sign on the loan and/or pledge additional collateral was discussed. Yanks advised the late Reverend and Mrs. Hall that he might be able to secure a loan for them to purchase the Church, but the amount of the loan would be smaller and the interest rate would be higher than they had anticipated in their agreement with PPFC. Yanks did not require an up-front loan application fee. On January 14, 1988, the late Reverend and Mrs. Hall met with Reverend Lloyd and Yanks at the office of B & B Investors in Miami. As noted above, the Halls were initially seeking a loan of $250,000. During the January 14, 1988 meeting, Yanks advised the representatives of Calvary Chapel that he could arrange a loan of $162,000 at 17 percent if additional collateral was provided. At the January 14 meeting, the late Reverend and Mrs. Hall executed a mortgage loan application (the "Loan Application") with B & B Investors. The Halls executed the Loan Application on behalf of Calvary Chapel Church of God in Christ, Inc. (hereinafter Calvary Chapel). Yanks executed the Loan Application on behalf of B & B Investors. The Loan Application was for a $162,000 loan and stated that the loan origination fee would be $4,860.00 and the loan discount fee would be $4,860.00. The Loan Application did not indicate when those fees would be due or to whom they would be paid. The Loan Application noted that there would be an appraisal fee of $600.00 and attorneys' fees of $750.00. The evidence established that, in the mortgage brokerage business, a loan origination fee is often considered synonymous with a broker's fee. The origination fee is traditionally charged at closing. However, the agreement between a mortgage broker and a client determines when the mortgage broker is entitled to his fee. In certain circumstances, a mortgage broker may be entitled to payment upon obtaining a firm commitment for a loan irrespective of whether the loan closes. Although there was no statutory or rule requirement at the time of this transaction, it was customary in the industry for a mortgage broker to set forth in writing the terms as to when he is to be paid. The Application in this case did not state when the fees were to be considered as earned. The Loan Application also provided in part: If the above commitment or a commitment in an amount and/or upon terms acceptable to the undersigned is obtained and said mortgage loan is not closed because (I)(We) have not fulfilled our part of this agreement. (I)(We) agree to pay $ , the application deposit being a part, for obtaining said commitment. If an acceptable commitment is not obtained, the mortgage application deposit will be refunded, except $ to cover expenses actually incurred. A loan discount fee is the cost to the lender to discount the interest rate on a mortgage loan for sale in the secondary market. The discount fee is owed to the lender or investor and was collected at closing. A broker is not entitled to a loan discount fee. Yanks tries to ignore the terminology used in the Loan Application he prepared and claims that all parties knew that he and/or B & B Investors would receive both the loan origination fee and loan discount fee. He contends that he explained to the late Rev. Hall and Mrs. Hall that the loan origination fee and the loan discount fees were fees that would be paid to him when he arranged a firm commitment for a loan at the agreed upon terms. However, the more persuasive evidence established that the late Rev. Hall and Mrs. Hall did not understand that the loan origination fee and/or discount fee would be paid to Yanks irrespective of whether the loan actually closed. Moreover, Yanks has provided no credible explanation as to why he would ever be entitled to receive the loan discount fee. At the January 14, 1988 meeting, Yanks orally arranged a deal with Alan Greenwald, a private investor with whom Yanks had worked in the past, to fund a $162,000 loan at 17 percent. At the time of this transaction, there was no statutory requirement that loan commitments be made in writing. No written confirmation of the commitment was provided even though it was common in the industry for commitments to be given in writing in order to bind the lender to the transaction and to provide evidence of the terms of the commitment. The only written evidence of the loan commitment is a letter from Yanks to the attorney for Alan Greenwald. That letter states that Mr. Greenwald had asked for additional collateral. During the January 14, 1988 meeting, the late Rev. and Mrs. Hall agreed to put up their house as additional collateral. In addition, two other members of the congregation who were present at the meeting, Effie Davis and Cleveland Foreman, agreed in principal to permit a mortgage to be placed on their houses as additional collateral to secure the loan. Yanks contends that, as a result of his efforts in securing a commitment from Alan Greenwald as noted above, he was entitled to receive the loan origination fee and loan discount fee set forth in the Loan Application. After the January 14, 1988 meeting, Rev. Lloyd released to Yanks $10,000 of the $15,000 that he had been holding in escrow for the late Rev. and Mrs. Hall. The $10,000 check was made payable to B & B Investors. The $10,000 was not placed in an escrow or trust account upon receipt. Yanks apparently arranged for $1,000 of the money to be paid to Debbie Landsberg, the attorney for Alan Greenwald, as an advance on the legal fees and costs that were expected to be incurred in closing the transaction. At the time the $10,000 was transferred to B & B Investors, all of the parties to the transaction expected the loan to close and no one contemplated or anticipated that the loan would not go through. While both Yanks and Rev. Lloyd claim that the late Rev. Hall approved the release of the $10,000 as payment to Yanks for services in securing a commitment from Alan Greenwald, this testimony is rejected as not credible. The more persuasive evidence clearly established that at no time did the late Rev. and Mrs. Hall understand that if the loan did not close Yanks would keep the $10,000. After the January 14, 1988 meeting, the parties initiated the steps necessary to close the deal. These efforts were complicated by the illness of the attorney for the seller, the marriage of the attorney for the lender and the difficulty in locating the abstracts for the properties involved. Moreover, a number of title deficiencies regarding the Church were discovered and had to be corrected. The arrangements for financing the purchase of the Church changed several times. Initially, the Seller had indicated that it would take back a second mortgage for $50,000 in order to facilitate a closing. However, as the parties got closer to closing, the Seller changed its mind regarding the second mortgage. Ultimately, in September of 1988, the Seller agreed to take back a second mortgage of $35,000. Sometime during the summer of 1988, Greenwald reduced to $110,000 the amount he was willing to lend on the deal. That amount was to be secured solely by the Church property. Yanks claims that he arranged for another investor to lend between $40,000 to $45,000 with the residences of certain congregation members, including the Halls, Effie Davis and Cleveland Foreman, serving as collateral. These modifications were never memorialized in writing. As preparations for a closing proceeded, it became apparent that Effie Davis' house could not be used as security for the loan. While there is conflicting evidence as to why Effie Davis' house could not be used for additional collateral, the more persuasive evidence indicates that the presence of one or more existing liens on the property rendered it of minimal value as additional collateral. As a result of the inability to use Ms. Davis' house as part of the collateral for the loan, Yanks advised Calvary Chapel that the amount of the loan would have to be decreased from $162,000 to $150,000. Yanks also advised Calvary Chapel that an additional cash deposit of $14,000 was necessary to demonstrate to the lender that sufficient funds were available to conclude the deal. The additional money was paid in two parts. On or about August 23, 1988, Calvary Chapel paid $10,000 to the Ana-Hernandez-Yanks Trust Account. Shortly thereafter, on or about September 1, 1988, Calvary Chapel paid an additional $4,000 to the Ana Hernandez-Yanks Trust Account. These sums were received by Ana Hernandez-Yanks in trust as the attorney for the B & B Investors. No written escrow agreement was executed. No written amendment to the Loan Application was provided to reflect the new terms for the anticipated loan nor was there any written commitment letter. As noted above, the late Rev. Hall died in March of 1988. Reverend Phillip Hall, the son of the late Rev. Hall, was appointed the pastor of Calvary Chapel in April of 1988. At the time of his appointment, Rev. Phillip Hall was living in Nashville. He commuted between Nashville and Fort Lauderdale for a while before moving to Fort Lauderdale on July 31, 1988. Yanks suggests that the Reverend Philip Hall did not like the deal his parents had entered into and refused to honor it. More specifically, Yanks contends that Calvary Chapel and the seller made alternate arrangements for the sale of the property in order to avoid paying him. The evidence does not support such a conclusion. The Seller was obligated to provide clear title before the sale could close. The evidence established that the Seller was never able to provide all of the documents necessary to clear title. There is no persuasive evidence that Calvary Chapel failed to meet its obligations under the contract to purchase the Church. Instead, it appears that Calvary Chapel did everything in its power to go through with the transaction. Sometime in the fall of 1988, the seller, Mount Bethel Baptist Church, rescinded the contract to sell the Church. At some point thereafter, Calvary Chapel began occupying the Church under a lease/purchase arrangement, the terms of which have not been established in this case. As noted above, there is no persuasive evidence that the Rev. Phillip Hall and/or Calvary Chapel conspired to cheat Yanks out of his fees. In any event, even if Calvary Chapel decided for economic reasons not to go forward with the loan that Yanks was trying to arrange, it is concluded that neither Yanks nor B & B Investors had the contractual right to retain any of the money that had been advanced. After the deal failed to close, Rev. Lloyd returned to Calvary Chapel the remaining $5,000 he had been holding in escrow for the Halls. By letter dated September 19, 1988, Holly Eakin Moody, an attorney for Calvary Chapel, wrote to Yanks demanding the return of all the money that had been advanced. The letter stated: Please be advised that I have been retained by Calvary Chapel Church of God in Christ, Inc., to begin the appropriate legal action against you and your wife, Ana Hernandez-Yanks, for return of my clients [sic] escrow funds in the amount of $24,000. On or about December 24, 1988, Hernandez-Yanks tendered a check in the amount of $14,000 to Calvary Chapel. On the back of the check, the following release language was written: Full and Final Settlement of all claims against B & B Mortgage and Barry Yanks or Ana Hernandez- Yanks. Hernandez-Yanks wrote a letter dated February 7, 1989 to Holly Eakin Moody stating in part: Please be advised that as per your client's request, on December 24, 1988 I mailed them my trust account check in the amount of $14,000. I have checked numerous times with the bank and said check has not been presented for payment. I am hereby depositing said monies with the Registry of the Court. If you should have any questions, please contact me. It does not appear that Hernandez-Yanks ever deposited any money in the Registry of the Court in accordance with that February 7 letter. By letter dated March 14, 1989, Holly Eakin Moody returned the check containing the accord and satisfaction language to Hernandez-Yanks and reiterated a demand for a return of the entire $24,000. Ultimately, Hernandez-Yanks paid Calvary Chapel $14,000 by check dated March 6, 1990 on account number 020051156008 at the TransAtlantic Bank. A review of the bank records indicates that the $14,000 advanced by Calvary Chapel to B & B Investors in late August and early September of 1988 was not held in escrow. On or about September 1, 1988, $10,000 was deposited in the trust or escrow account of Hernandez-Yanks at Continental Bank (the "Continental Trust Account"). An additional $4,000 was deposited in the Continental Trust Account on or about September 6, 1988. On or about October 4, 1988, the Continental Trust Account was closed with a closing balance of or about $13,553.06. On or about October 4, 1988, Hernandez-Yanks opened a trust or escrow account at Ocean Bank (the "Ocean Trust Account"). The beginning balance of the Ocean Trust Account on or about October 4, 1988, was $13,000. On or about December 7, 1988, the balance in the Ocean Trust Account was $2,437. On or about December 15, 1988, Hernandez-Yanks opened a trust or escrow account at United National Bank (the "United Trust Account"). On or about January 19, 1990, the cash balance in the United Trust Account was $2,236.29. On or about January 5, 1990, Hernandez-Yanks opened a trust or escrow account at TransAtlantic Bank (the "TransAtlantic Trust Account"). The beginning balance of the TransAtlantic Trust Account on or about January 5, 1990, was $10,000. By check dated March 6, 1990, Calvary Church was paid $14,000 from the TransAtlantic Trust Account. There is no evidence that Yanks, Hernandez-Yanks and/or B & B Investors had any other escrow accounts. Based upon the foregoing, it is concluded that Yanks failed to ensure that monies received in trust were properly placed in escrow in a transaction wherein he acted as a mortgage broker. Moreover, Yanks failed to ensure that the $14,000 received by Hernandez-Yanks was returned expeditiously to Calvary Chapel. Yank's explanation that he does not tell his wife, who is an attorney, "how to run her business" does not excuse his failure to ensure that money placed in escrow with his company was promptly returned when the transaction was terminated. Yanks refused to repay any of the remaining $10,000 that was paid to B & B Investors claiming that he was entitled to keep the money as fees earned for processing a mortgage commitment from Allan Greenwald. As set forth above, the contention that the late Rev. Hall authorized payment in full of Yanks' fees is rejected as not credible. The more persuasive evidence established that the principals of Calvary Chapel did not understand that Yanks and/or B & B Investors were to be paid their fee even if the loan did not close. Since there was no agreement specifying when Yanks was to be paid, he had no legal right to retain the $10,000. Arguably, Yanks was entitled to some reimbursement for the expenses he incurred, including perhaps the $1,000 he supposedly paid to the investor's attorney. However, the evidence clearly established that Yanks was not entitled to retain the entire $10,000. 52 After the Department began its investigation of this case, Yanks offered to repay the loan discount fee of $4,860 to Calvary Chapel. As of the date of the hearing, Yanks was still refusing to repay the $4,860 loan origination fee which he claims he has earned. While Yanks' claim to the $10,000 was legally insufficient and should have been recognized as such, the evidence did not establish that Yanks was attempting to defraud the Halls and/or Calvary Chapel. There were clearly some misunderstandings between the parties. Many of these problems could have been avoided if Yanks had properly documented his fee arrangement in writing. Yanks spent a good bit of time trying to put the deal together and felt slighted when the transaction he structured fell apart, especially when Calvary Chapel ended up occupying the Church anyway. Yanks overreacted in his attempts to obtain compensation for his services. The evidence was insufficient to establish that his actions should be characterized as fraudulent. VAZQUEZ-CASTILLO TRANSACTION In approximately mid-December of 1988, Ana Vazquez began working for Yanks. Vazquez was hired by Yanks to assist in the processing of mortgages. Prior to becoming employed by Yanks, she had little experience in real estate transactions. Vazquez was employed by Yanks for only about two or three weeks. Thereafter, she was employed by Hernandez-Yanks as a secretary. Both Yanks and Hernandez-Yanks occupy space in the same building. As noted above, Hernandez- Yanks is an attorney. On or about February 27, 1989, Pura Castillo entered into a contract (the "Sales Contract") with Vazquez for the purchase of a condominium owned by Vazquez and located in Dade County, Florida, at 7440 Harding Avenue, Unit 301, Miami Beach, Florida (the "Condominium"). The sales price was $70,000. Pursuant to the Sales Contract, Vazquez was to convey title free and clear of all encumbrances, by a good and sufficient Warranty Deed. "Free and clear of all encumbrances" meant that the title being transferred from Ana Vazquez to Pura Castillo was not to be encumbered by any mortgages, judgments or other liens. The Sales Contract was not made contingent upon Pura Castillo obtaining new financing. The relationship between Ana Vazquez and Pura Castillo is not entirely clear. They were obviously well acquainted with each other. The evidence suggests that Pura Castillo's common law husband, Joseph Hardisson, was a close friend of the father of Ana Vazquez. While Pura Castillo and Joseph Hardisson were visiting with Vazquez, they began discussing the possible purchase of the Condominium by Pura Castillo. Yanks first learned about the possible sale of the Condominium to Pura Castillo when Vazquez asked Hernandez-Yanks to represent her. Hernandez-Yanks indicated that she would represent Vazquez in the sale. Vazquez also requested Yanks' assistance in obtaining a loan for Pura Castillo. Yanks advised Vazquez that he did not process loan applications for employees. He suggested that she contact one of the mortgage lenders with whom he did business. Vazquez contacted one such company, Inter-Mortgage Corporation, and obtained a loan application package. Shortly thereafter, a loan application was submitted with InterMortgage Corporation in the name of Pura Castillo. The circumstances surrounding the completion and submittal of that loan application are not entirely clear nor are they necessarily pertinent to this proceeding. The evidence did establish that the loan application contained some false information regarding Pura Castillo's residence and employment. InterMortgage contacted Yanks' office and advised that there were some problems with the application. Vazquez went to InterMortgage's office and retrieved the application. The evidence did not establish that Yanks was aware of the filing of the application with InterMortgage and/or that he knew the application contained any false information. It appears that a similar application with false information may also have been filed with another lender, Dixie Mortgage. There is no indication that Yanks was aware of the filing of this application and/or that he knew it contained false information. The Condominium was subject to a $42,000 mortgage from Standard Federal to Vazquez (the "Standard Federal Mortgage"). The Standard Federal Mortgage was a typical Fannie Mae mortgage and included a commonly used due-on- sale clause in Clause 17. That clause provided for a default by the borrower upon sale of the property unless the mortgagee had consented to the assumption of the mortgage by the purchaser. There were no federal or state laws in existence at the time prohibiting the enforceability of Clause 17. Vazquez had a contract to purchase another home which was contingent upon the sale of her Condominium. Thus, she was under some time pressure to close the sale of the Condominium. When it became apparent that a quick loan could not be arranged for Pura Castillo, Ana Vazquez turned to Yanks for advice. While there is conflicting evidence as to the discussions that took place, the more persuasive evidence established that Yanks agreed to structure a deal that would enable Ana Vazquez to sell the Condominium to Pura Castillo. As discussed in more detail below, Yanks structured a complicated and confusing arrangement whereby Pura Castillo was to make her monthly payments to B & B Equity, which was to play the role of a servicing agent and distribute the payments to the first mortgagee, Standard Federal. While Yanks now claims that after the Standard Federal Mortgage payment was made, the remainder of the monthly payments received by B & B Equity were going to be paid to Vazquez, there is no written agreement confirming this arrangement. It is the usual practice in the industry for mortgage brokers to determine whether there are outstanding mortgages on the property to be sold and to see to it that an existing mortgage is paid off or otherwise taken care of at the time of closing. It is the responsibility of the mortgage broker to contact the institution holding the mortgage to find out if it is assumable. If an existing mortgage has a due-on-sale clause, the mortgage broker would characteristically contact the first lien holder and get an estoppel letter to determine the balance of the loan. The mortgage broker might also seek a waiver from the lender so that the sale could be made without paying off the loan. Without such a waiver, a due-on-sale clause would entitle the original lender to declare the entire original loan due upon sale of the property. Yanks never obtained an estoppel letter or a waiver of the due-on-sale clause from Standard Federal. While Yanks claims that he contacted various persons regarding the enforceability of due-on-sale clauses, he never contacted Standard Federal about the specific clause in its mortgage to Vazquez. There is conflicting evidence regarding the discussions between Yanks and Vazquez regarding the structuring of the transaction. It is clear that Vazquez was more concerned with concluding the transaction rather than understanding the intricacies of it. As discussed in more detail below, the transaction structured by Yanks included several unexplained and/or inappropriate charges. In addition, the loan documentation was confusing and sometimes conflicting and/or contradictory. Vazquez indicated to Yanks that Pura Castillo was prepared to go forward with the sale and a closing was scheduled for June 16, 1989. In preparation for the closing of the sale of her condominium, Vazquez incurred several expenses. On or about March 31, 1989, she paid $275 to have the condominium appraised. On or about April 5, 1989, Vazquez paid $200 to National Title Abstract Company for an update of the abstract. On or about June 15, 1989, she paid $150 to Ticor Title Co. She also paid for a credit report on Pura Castillo. On June 16, 1989, Pura Castillo arrived at the office of Yanks and B & B Investors at 1481 N.W. 7th Street, Miami, Florida, to close on the purchase of the Condominium in accordance with the Sales Contract. Yanks and/or Hernandez- Yanks prepared the closing documents used at the closing. Much of the closing was conducted in Spanish. Yanks is not fluent in Spanish. Hernandez-Yanks, who speaks Spanish, acted as the closing agent and remained throughout the process. Yanks and Vazquez were in and out of the room throughout the closing. During the closing, Pura Castillo was told that B & B Equity was going to be the lender for the transaction. Pura Castillo inquired whether it was necessary for her to have her own attorney. Hernandez-Yanks replied that she could represent all parties and that it was not necessary for Pura Castillo to have her own attorney. At the closing, Pura Castillo presented cashiers checks for $5,800, $7,250 and $5,900 all made payable to the order of Ana Hernandez-Yanks, Trust Account. In addition, either Yanks or Hernandez-Yanks was given a check from Parker Realty in the amount of $2,800 which was the balance of the $7,000 deposit after payment of the $4,200 real estate commission. From the $21,750 brought to the closing, $14,000 was disbursed to Ana Vazquez. As noted above, Vazquez had already paid for the abstract, appraisal and credit report. In addition, as part of her mortgage payment, she had contributed approximately $1,281 to an escrow for taxes and insurance for which she was entitled to be reimbursed. Thus, the net cash that she received from the closing was less than $12,000 from the sale of a $70,000 condominium with a $42,000 mortgage. At the closing, Vazquez executed an "Agreement for Deed" in favor of Pura Castillo. An agreement for deed is a conditional sales contract pursuant to which a seller agrees to sell property to a buyer over a period of time. The seller retains the legal ownership of the property until the full consideration for the purchase is paid. After all the conditions have been met, the seller delivers a deed conveying ownership of the land to the buyer. The Agreement for Deed in this transaction provided as follows: That if said Buyers shall first make the payments and perform the covenants herein mentioned on their part to be performed, the said Sellers hereby covenant and agree to convey and assure to the Buyers or their heirs or assigns, in fee simple, clear of all encumbrances whatever, by good and sufficient Warranty Deed...[the condominium] And the Buyers hereby covenant and agree to pay to the Sellers the sum of $70,000 to be paid as follows: $19,073.12 cash in hand, the receipt of which is hereby acknowledged, and $704.32 or more per month on or before the 16th day of each and every month after the date of this instrument, to be mailed to the Sellers' address given herein, with interest at the rate of 11 percent, per annum on the whole sum remaining from time to time unpaid,... Arguably, the Agreement for Deed required Pura Castillo to make monthly payments to Vazquez of $704.32 plus interest on the outstanding balance. However, at the closing, Yanks provided Pura Castillo with a letter which explained that her monthly payments of $704.32 included $499.97 for principal and interest, $142.35 for real estate taxes and $62 for insurance. At the closing, Pura Castillo executed a mortgage (the "Mortgage") in favor of B & B Equity as mortgagee. The Mortgage stated that it secured an indebtedness of $52,500 and a promissory note for that amount was executed by Pura Castillo to B & B Equity at the closing. The Mortgage was similar in form and content to a Fannie Mae or a Freddie Mac mortgage form, except it included some additional provisions stating that it was a "Wraparound Mortgage." A wraparound mortgage is a financing device that is sometimes used when a seller of a piece of property agrees to take back and finance a portion of the difference between an existing first mortgage which is not being assumed or satisfied and the sales price for the property. Typically, the mortgagor on the first mortgage is the seller of the property and the mortgagee on the wraparound mortgage. The wraparound mortgage becomes a second or other junior mortgage behind the existing mortgage. The mortgagee of the wraparound mortgage agrees to continue making payments on the existing primary mortgage, at least so long as payments are made under the wraparound mortgage. Page 8 of the Mortgage included the following language: This is a Wraparound Mortgage. This wraparound mortgage is a second mortgage. It is inferior to certain mortgage [sic], herein called the first mortgage which covers the above described property at the time of execution of this wraparound mortgage. The wraparound mortgagee shall be excluded from any terms or conditions of the prior mortgagees. The wraparound mortgagee's obligation to pay the prior mortgages is limites [sic] to funds received from the wraparound mortgagor. For a number of reasons, the use of a wraparound mortgage in this transaction was totally inappropriate. The first page of the mortgage included a number of warranties including the following: The mortgagor hereby covenants with and warrants to the Mortgagee that the Mortgagor is indefeasibly seized with the absolute and fee simple title to said property. This warranty is inconsistent with the ownership interest that the Mortgagor, Pura Castillo, had as a result of this transaction. Pura Castillo's only claim to title was via the Agreement for Deed and she was not indefeasibly seized with the fee simple title. As noted above, the Mortgage states that it secures an indebtedness of $52,500 and a promissory note (the "Note") for that amount was executed by Pura Castillo to B & B Equity at the closing. That Note required Pura Castillo to make payments directly to B & B Equity. However, the Agreement for Deed calls for Pura Castillo to make payments to Vazquez. Moreover, Pura Castillo signed the Note obligating herself to make payments on a $52,500 indebtedness to B & B Equity even though the Standard Federal Mortgage was not satisfied and had a remaining balance of $42,000. In other words, the result of this transaction, at least as it appeared on the public records, is that a $70,000 condominium was encumbered by two separate mortgages (the Standard Federal Mortgage and the "Wraparound Mortgage") securing separate promissory notes totalling more than $94,000. At no time prior to or during the closing did Yanks or Hernandez-Yanks explain to Pura Castillo that an Agreement for Deed was being utilized in this transaction and that she would not obtain full legal title until all of the mortgages were paid off. Furthermore, neither Yanks or Hernandez-Yanks explained to Pura Castillo that the mortgage she signed in favor of B & B Equity was a wraparound second mortgage. While Yanks contends that Pura Castillo had plenty of opportunity to review the documents and ask questions regarding them, she was clearly an unsophisticated buyer who was incapable of deciphering the confusing and ambiguous documentation for this clumsily crafted transaction. In sum, the use of an agreement for deed and a wraparound mortgage in the same transaction was redundant, confusing and illogical. Moreover, Yanks' efforts in this transaction clearly violated the due-on-sale clause (Clause 17) in Standard Federal's existing first mortgage. The Department has suggested that the transaction was a calculated fraud with some undefined goal. After considering all the evidence, the transaction can more accurately be described as an awkward attempt at creative financing which included a number of hidden and inappropriate charges for the benefit of Yanks and/or B & B Equity. Yanks contends that Vazquez was desperate to close the sale and authorized him to proceed with whatever financing he could arrange so long as she netted $14,000 from the sale. He claims that she agreed to the wraparound mortgage as the only way to proceed with the deal under the circumstances. Under this arrangement, he contends that B & B was authorized to retain any additional proceeds as compensation for serving as a servicing agent on the wraparound mortgage. Even if this explanation is accepted, there are a number of problems with the actions of Yanks and B & B Equity in this transaction. First of all, there was no written servicing agreement setting forth the obligations of the servicing agent nor is there any delineation of the amount of money to be paid for servicing the wraparound mortgage. Moreover, the Agreement For Deed and the Promissory Note call for Pura Castillo to make payments of slightly more than $700 per month. These payments exceed the monthly payments due under the Standard Federal Mortgage. However, there is no written delineation of how the additional payments received each month were to be disbursed. Finally, the servicing arrangement was never explained to Pura Castillo and the documentation for the transaction was very confusing and often contradictory. There is no closing statement for the transaction that accurately reflects all of the disbursements made from the proceeds of the closing. Petitioner's Exhibit 23 is a closing statement signed by both Vazquez and Pura Castillo and purports to delineate certain expenses paid from the proceeds of the sale. Petitioner's Exhibit 7 is an unsigned closing statement which Yanks contends he prepared for use at the closing of the loan. He claims that, after the closing, he found out that Vazquez substituted Petitioner's Exhibit 23 for the closing statement that he intended to be used because she thought it more accurately depicted the fees as she had discussed them with Pura Castillo. This explanation is rejected as not credible. Petitioner's Exhibit 23 was the only closing statement signed by both the buyer and seller. As noted above, Vazquez was in and out during the closing. Hernandez-Yanks was present throughout the closing. The more credible evidence established that Petitioner's Exhibit 23 was the closing statement presented at the closing and executed by the participants. Neither closing statement accurately explains how all of the funds from the sale were disbursed. Thus, it is impossible to determine conclusively how much money Yanks and/or B & B Equity received from the closing. Both statements include some charges which are inappropriate or questionable. Furthermore, it is clear that Yanks and/or B & B received more than either statement indicated. Both closing statements reflect a payment of $600 for title insurance. However, the evidence established that no title insurance policy was ever issued. Vazquez paid for a title insurance commitment prior to the closing. Such a commitment is typically issued by a title insurance company prior to a real estate transaction and is a contractual agreement by the title insurer to issue a policy of title insurance upon compliance with certain terms and conditions. The actual title insurance policy is not issued until after the transaction has closed. The title insurance policy, not the commitment, insures the main insured against certain defects in title. The $600 charge for title insurance reflected on both closing statements was totally inappropriate in this case since no title policy was ever issued. Petitioner's Exhibit 23 includes a number of charges assessed to the buyer which were wholly inappropriate to this transaction. For example, the closing statement included a $500 charge for FNMA underwriting. This fee is charged by the institution underwriting a mortgage loan for compliance with Fannie Mae guidelines. Since the Mortgage in this case was clearly not intended to be sold to a Fannie Mae pool, the FNMA charge was not appropriate. Similarly, the closing statement included a $250 charge for a warehouse fee. This is a fee paid to institutions to cover the cost of a warehouse line of credit and is totally inapplicable to the transaction involved in this case. The closing statement also included a photo fee of $25, a lender's inspection fee of $150 and a survey fee of $225. There is no indication that any photos were taken, an inspection was conducted or a survey was prepared. Petitioner's Exhibit 23 also included a loan origination fee of $1,375 and brokerage fees of $1,575. Petitioner's Exhibit 7 included a lump sum brokerage fee of $5000, but did not include any of the other charges listed in this paragraph. There is no dispute that Yanks and/or his firm were paid mortgage brokerage fees out of the proceeds of the closing. These fees are reflected on both of the closing statements (Petitioner's Exhibits 7 and 23). A mortgage broker is paid a fee to negotiate a mortgage loan transaction for another party. In other words, he is retained to find a lender for a potential borrower. Under a mortgage servicing agreement, the servicer is paid a fee to handle the collection and disbursement of payments on a mortgage loan. Any fees paid for servicing a loan should be separately itemized and disclosed. It is not appropriate for a person who is to service a loan to receive what has been disclosed as a broker fee. Irrespective of which closing statement is deemed authentic, the evidence established that Yanks and/or B & B Equity received significantly more money from the closing than was reflected on either closing statement. As indicated above, $21,750 cash was presented at the closing, of which $14,000 was paid to Vazquez. According to Petitioner's Exhibit 7, there was $6,123.35 in closing costs (including a $5,000 brokerage fee). Thus, there is at least $1,626.65 in cash that is not reflected on the closing statement. Yanks contends that Vazquez told him to keep this money in return for servicing the loan. This contention is rejected as not credible. Similarly, Petitioner's Exhibit 23 indicates closing costs of $6,379 (including the charges in paragraph 89 above). Thus, there is $1371 unaccounted for. Moreover, it is clear that Yanks and/or B & B received in excess of $6,500 which is not readily discernible from the face of the closing statement. Subsequent to the closing, B & B Equity received at least five monthly payments of $704.32 on the Wraparound Mortgage from Joseph L. Hardisson, the common law husband of Pura Castillo. B & B Equity apparently distributed some of these funds in accordance with its claimed role of "servicing agent." However, on at least one occasion in late 1989, a check issued by B & B Equity to pay the Standard Federal Mortgage was returned for insufficient funds. In addition, a check issued by B & B Equity in the amount of $700 to Ana Vazquez in December of 1989 bounced. At some point in late 1989 or early 1990, Pura Castillo became concerned when she learned that the Standard Federal Mortgage had not been paid off. In January or February 1990, Pura Castillo and her husband came to Florida and attempted to contact Yanks regarding the transaction and the irregularities surrounding it. Ultimately, Pura Castillo filed a complaint with the Department and also filed a civil suit in Circuit Court seeking cancellation of the Mortgage and the issuance of a warranty deed in her favor. On April 17, 1990, Vazquez executed a warranty deed to Pura Castillo. Vazquez states that she felt obligated to convey all of her interest in the property to Pura Castillo in view of the confusing and unfair circumstances surrounding the initial transaction. On October 23, 1990, Yanks and B & B Equity entered into a Settlement Agreement with Pura Castillo pursuant to which they paid Pura Castillo $12,000 and the wraparound mortgage was cancelled of record. The Settlement Agreement also resulted in the dismissal of the civil suit and called for Pura Castillo to withdraw her complaint filed with the Department. Despite this withdrawal, the Department has chosen to proceed with this administrative action.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: A Final Order be entered finding Respondents B & B Investors, Yanks and Ana Hernandez-Yanks guilty of the violations alleged in Counts I, II, III, and IV of the Amended Administrative Complaint, finding them not guilty of Count VI and imposing an administrative fine of $5,000 which should be payable jointly and severally. Yanks and B & B Investors should also be required to repay $9,000 to Calvary Chapel within 30 days after the rendition of the Final Order. Failure to repay this sum should be a basis for the imposition of additional penalties, including revocation. The mortgage brokerage licenses of Yanks and B & B Investors should be suspended for one (1) year for their actions in connection with the Calvary Chapel transaction. A Cease and Desist Order should also be entered against Ana Hernandez- Yanks prohibiting her from any future violations of Chapter 494, Florida Statutes, from engaging in any act within the jurisdiction of the Department pursuant to Chapter 494, Florida Statutes, and from being an ultimate equitable owner of a business license pursuant to Chapter 494, Florida Statutes. The facts surrounding her trust account should be reported to the Florida Bar for investigation. A Final Order should also be entered finding Yanks, Hernandez-Yanks, and B & B Equity guilty of the violations alleged in Counts VIII, IX, and XI, finding Yanks and B & B Equity guilty of the violations alleged in Counts XII and finding Hernandez-Yanks guilty of violations alleged in Count XIII of the Amended Administrative Complaint. The Final Order should find the Respondents not guilty of the violations alleged in Counts X and XIV. Based upon the foregoing, the Department should impose an administrative fine of $5,000. The mortgage brokerage license of Yanks should be suspended for a period of three years to run consecutively with the suspension issued in connection with the Calvary Chapel transaction. Respondents should also be required to repay $6,040.12 to Ana Vazquez for inappropriate and undisclosed charges made at the closing. The collection of all fines and/or assessments against Ana Hernandez- Yanks and/or B & B Investors should be suspended pending approval of the Bankruptcy Court. In view of the Voluntary Dismissal filed on November 9, 1993, the Final Order should formally dismiss the Application Case. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of August 1994. J. STEPHEN MENTON 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 18th day of August 1994.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Respondent Ronald E. Clampitt is the President of Respondent Action Mortgage Corporation and is the person designated to act on behalf of said corporation under the provisions of Chapter 494, Florida Statutes. Action Mortgage Corporation currently holds a mortgage brokerage license. The individual mortgage broker license issued to respondent Clampitt expired on August 31, 1980, and has not been renewed. Respondent Joseph W. Langford currently holds a license as a mortgage solicitor for and on behalf of Home Mortgage Investment Corporation. His prior individual mortgage broker license expired on August 31, 1980, and has not been renewed. COUNT I The respondents were counter codefendants in a civil suit filed in the Circuit Court of Sixth Judicial Circuit of the State of the Florida in and for Pinellas County, which case was numbered 78-12033-18 and styled Action Mortgage Corporation, etc., et al., Plaintiffs, vs. Denture Services, Inc., etc., et al., Defendants. On February 8, 1980, a Final Judgment was entered in that proceeding by Circuit Court Judge David Seth Walker. Judge Walker found, as a matter of fact, that a limited confidential/fiduciary relationship existed between Langford and the counter-plaintiffs, and opined that certain activities on the part of the individual counter-defendants were "bedecked with the badge of fraud." The Court, inter alis, awarded the counter-plaintiffs Final Judgment in the nominal sum of $1.00, plus costs. It was noted that the claim of the counter-plaintiffs for punitive damages had previously been denied. Subsequent to the Final Judgment enteed in Case No. 78-12033-18, the counter-plaintiffs filed a Motion for Rehearing on the matter of punitive damages, since the Court had noted in its Final Judgment that the activities of the counter-defendants were "bedecked with the badge of fraud." The counter- defendants (respondents herein) also moved the Court to alter or amend its Final Judgment so as to remove the fraud language quoted above. By Order filed on March 10, 1980, both motions were denied by Judge Walker. Judge Walker's deposition was taken on August 22, 1980, and was received into evidence in this proceeding as petitioner's Exhibit 9. Referring to the language in the Final Judgment "bedecked with the badge of fraud," Judge Walker makes the following comments: "I do not interpret that as a finding of fraud absolute, but just that there were indicia of fraud." (p.4) "But I did not consider this to be an absolute finding of fraud. I think I mentioned that on one of the motions that the counter-plaintiffs made to reconsider the judgment of $1.00 or the refusal to grant punitive damages. I reiterated at that hearing that I found that it was an indicia, but I did not go so far in my own mind as to specifically find fraud." (p. 4) "If I had wanted to find specifically that they were in fact guilty of fraud, I would have said as much. The phrase, in my mind, 'bedecked with a badge of fraud,' is meant to suggest the indicia of fraud. Fraud is a legal conclusion that must be based upon several legally accepted circumstances. And in law school we learned the term, 'badges of fraud.' But a badge of fraud does not per se constitute fraud. I didn't feel that I needed to go too deeply in the questions, because of my finding that the counter-plaintiffs had not in fact suffered any real damage." (pp. 7 and 8) "I listed a certain series of circmustances and activities which had taken place, rather specifically. And I found that these activities and circumstances were bedecked by the badge of fraud which is admittedly a little bit flowery for normal language, but that's what I said. I did not specifically find fraud. Fraud always carries with it the badges of fraud in and of it- self does not collaterally, and on the other hand mean that fraud exists. I did not go that far in this particular judgment. I did not feel I had to." (pp. 18 and 19) "I did not feel that it was necessary for the Court to delve into the ultimate determination of fraud." (p. 20) "I do not perceive that my final judgment made an absolute finding of fraud. Again, the phrase, 'badge of fraud,' simply menas to me an indicia of fraud, and I'm confortable with the finding that that indicia is there. But as far as a finding of fraud is concerned, I did not proceed to that point, and it's not there." (pp. 20 and 21) COUNT II In 1978, Dorothy L. Jones and Byron A. Jones were the owners of real property located at 2656 Granada Circle East in St. Petersburg, Florida. The first mortgage on that property held by Molten, Allen and Williams, Inc. or the Mortgage Corporation of the South, was in default and a foreclosure action, and is pendens against the property had been filed. The monthly mortgage payments were approximately $225. At that time, Dorothy Jones was separated from her husband, lived in the home with her five minor children and was having financial difficulties. Having seen a newspaper advertisement, Dorothy Jones contacted the Respondents in an effort to obtain a second mortgage or additional funds with which to pay her debts and preserve her homestead. Neither of the Respondents agreed to make a second mortgage loan to Mrs. Jones. Instead, they agreed to make an outright purchase of the Jones's residence and lease the property back to Dorothy Jones at a monthly payment which approximated her prior monthly mortgage payment. The lease payments were later increased to $275 per month due to the loss of homestead exemption on the property. It was Mrs. Jones' understanding that she would be given the opportunity to repurchase the home at less than fair market value though she may have to pay a down payment and higher monthly payments. No appraisal was performed on the property. The closing of the transaction took place at a title company, independent of the Respondents. Mrs. Jones understood that she was signing a deed to the property and other documents transferring title to Respondents. The property was purchased by the Respondents in February of 1978 for $23,656.54 and the transfer was made subject to the mortgage to Molten, Allen and Williams, Inc., in the amount of $21,848.44. No funds were paid to Mr. or Mrs. Jones at the time of closing. During the months which followed, Dorothy Jones fell far behind in her lease payments to the Respondents. In May of 1979, Respondent Langford notified Mrs. Jones that the property owners had elected to sell the property in the near future, and advised her to contact his office if she was still interested in purchasing the property. In July of 1979, Dorothy Jones filed a Complaint against the Respondents in the Circuit Court in and for Pinellas County seeking a declaratory decree as to her rights under the aforementioned deed, lease and oral agreement to repurchase the property. (Civil No. 79-7307-17). Mrs. Jones was represented by an attorney in that action. By Order filed on July 29, 1980, the Circuit Court approved the terms and conditions of a Stipulation entered into by the Respondents and Mrs. Jones whereby Mrs. Jones was given the opportunity to purchase the subject property from the Respondents for $32,000 within 90 days, and was also required to pay back rental payments to the Respondents. For some reason not clear from the evidence adduced in the proceeding, Mrs. Jones did not repurchase the property from the Respondents. By Final Judgment filed on October 15, 1980, Mrs. Jones' claim against the Respondents was dismissed with prejudice and Respondents were awarded a judgment against Mrs. Jones in the amount of $2,887.50. Apparently, an eviction action in the County Court for Pinellas County resulted in the award of possession of the home to the Respondents. Mrs. Jones vacated the subject property in October of 1980. In April of 1981, Respondents sold the subject property to Harold and Peralita Odlam for a purchase price of $41,7000. COUNT III Respondent Clampitt was licensed as an individual mortgage broker for the years 1978 and 1979. His 1979 license expired on August 31, 1979, as did the license of Action Mortgage Corporation. Mr. Clampitt made an attempt to renew his individual mortgage broker license on October 16, 1979. The renewal license for Action Mortgage Corporation also bears the date of October 16, 1979. During the period of time between August 31, 1979 (the date upon which his individual mortgage broker license expired) and October 16, 1979 (the date upon which said renewal license was issued), respondent, Clampitt, as an individual mortgage broker, received at least three mortgage brokerage fees or commissions. A broker is considered to be licensed by the petitioner when a completed application form accompanied by the correct fee is received by the petitioner. It is the petitioner's practice to mail out renewal application to its approximately 6,500 licensees on July 15 of each year with the request that they be returned by August 15. All licenses expire on August 31 and are reissued for the following year to be effective from September 1 to August 31. Those applications which are received by the petitioner after August 31 bear a different license date. The correct amount to be remitted for the renewal of respondent Clampitt's individual license was $125-- a $75 license fee and a $50 guaranty fund fee. The $190 check received by the petitioner from the respondent on or before August 31, 1979, was accompanied by three renewal application cards. The petitioner did not apply $125 of the $190 to the renewal of respondent Clampitt's individual license because petitioner could not ascertain how the respondent desired to have the funds applied. Although a small minority of licensees do not renew their licenses in a timely fashion, it is not the practice of the petitioner to directly notify a licensee that his license has expired. Respondent Clampitt did hold a license with an effective date of September 13, 1979, as an additional broker for Fickling and Walker, Inc. in Winter Park, Florida. Under this license, respondent Clampitt would have no authority to act individually or on behalf of anyone other than Fickling and Walker, Inc. COUNT IV Respondent Clampitt arranged for a loan to a Mr. and Mrs. Fink. When examining the respondent's books, petitioner's financial examiner was unable to account for an apparent overcharge of $13.80 for credit life insurance on the loan. The examiner did not examine the loan closing documents with regard to this transaction. The evidence establishes that there had been a clerical error in the respondent's office concerning this transaction, that the cost of the credit life insurance had been miscalculated and that respondent Clampitt was entitled to the $13.80. COUNT V It is the practice of the respondent Clampitt to interview his clients over the telephone, look at the involved property and then, if he agrees to make a loan, send the client to a title insurance company to sign the necessary papers. These papers include a loan closing statement, the required RESPA statement and a recision notice which allows the customer to cancel the transaction within 72 hours without cost or obligation. Thereafter, generally five to seven days later, the customer returns to the title company to receive the loan proceeds. Respondent Clampitt does not take deposits and most often does not even meet this clients on a face-to-face basis. All borrower disclosures and rights required by law are provided respondent's clients by the title insurance company.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED THAT: The Administrative Charges and Complaint filed on March 23, 1981, against Joseph W. Langford be DISMISSED; The Administrative Charges and Complaint filed on February 3, 1981, against Action Mortgage Corporation be DISMISSED; Counts I, II, IV and V of the Administrative Charges and Complaint filed against Ronald E. Clampitt on February 3, 1981, be DISMISSED; and Respondent Ronald E. Clampitt be found guilty of accepting fees at a time when his individual license had expired, but, because of the unintentional violation of the pertinent statutory provisions, no disciplinary action be imposed for this offense. Respectfully submitted and entered this 27th day of July, 1981, in Tallahassee, Florida. DIANE D. TREMOR 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 27th day of July, 1981. COPIES FURNISHED: Walter W. Wood Assistant General Counsel Office of the Comptroller Suite 1302 - The Capitol Tallahassee, Florida 32301 John C. Dew and Jay Emory Wood Harris, Barrett and Dew Post Office Drawer 1441 600 Florida National Bank Building St. Petersburg, Florida 33731 Comptroller Gerald A. Lewis State of Florida The Capitol Tallahassee, Florida 32301
Findings Of Fact Exhibit 2 evidences some 13 arrests of Petitioner, most of which are for the offense of larceny. Although this document is hearsay, Petitioner readily acknowledged that in 1980 and 1984 he was a drug addict and supported his habit by stealing. Exhibit 3 consists of 6 convictions of grand theft and burglary on August 1, 1980, another count in 1984 and one count of attempted grand theft on October 26, 1990. The period between 1980 and 1984 was a period in Petitioner's life immediately following his discharge from the armed forces. On October 26, 1990, Petitioner was adjudicated guilty of grand theft following a plea of nolo contendere to the charge of obtaining or using or attempting to obtain or use the property of another with intent to deprive the owner of the use thereof of personal property of the value of $300 or more. Petitioner testified that in 1990 his 19 year old stepson, who was preparing to enter college, while driving Petitioner's pickup truck, stopped near a parked vehicle and attempted to steal personal property therefrom, but fled when someone observed him. The license number of the pickup was traced to Petitioner. The stepson confessed his actions to Petitioner and when the police arrived, Petitioner, who already had a criminal record that could hardly be blemished further, told the police that he was the driver of the pickup. He was charged with the offense of attempted grand larceny, pled nolo contendere, was adjudicated guilty and was sentenced to 5 years in prison of which he served some 7 months. The stepson graduated from college and is now married, gainfully employed, and raising a family. When submitting his application for licensure, Petitioner further testified that he researched the definition of moral turpitude, spoke to his lawyer and other people regarding his conviction of grand larceny, and was told that the offense did not necessarily constitute an offense involving moral turpitude. Accordingly, Petitioner assumed that he had not been convicted of an offense involving moral turpitude and marked item 5 on his application "No" which asked if he had ever been found guilty of a crime involving fraud, dishonest dealing, or any other act of moral turpitude. Petitioner contends that he told Respondent's employees, with whom he discussed his application for licensure, of his criminal record and was told this was not disqualifying. Accordingly, he spent the money to obtain the required mortgage broker education certificate and to take and pass the examination for mortgage broker license, only to be told after these efforts that he could not qualify for licensure.
Recommendation It is RECOMMENDED that a Final Order be issued denying the application of Stephen J. Matala for a licensure as a mortgage broker. DONE AND ENTERED this 27th day of January 1994 in Tallahassee, Leon County, Florida. K. N. AYERS 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 27th day of January 1994. COPIES FURNISHED: Stephen J. Matala 32414 Marchmont Circle Dade City, Florida 33525 Lisa L. Elwell, Esquire Office of the Comptroller Department of Banking and Finance 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Honorable Gerald Lewis Comptroller, State of Florida 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
The Issue The issue presented for decision herein is whether or not Respondent unlawfully refused to honor a subpoena issued by Petitioner as is more particularly set forth hereinafter in detail.
Findings Of Fact Respondent, ASPEC, Inc., is a Florida Corporation engaged in the business of Mortgage Brokerage in Florida. Shanker S. Agarwal is President of ASPEC, Inc. Mr. Agarwal has been licensed by the Department as a Mortgage Broker since May 24, 1985 and currently holds License No. HB-0016435 which expired, by its terms, August 31, 1986. On February 14, 1986, the Department received a consumer complaint about ASPEC, Inc., and pursuant to its investigation of Respondent's brokerage activities, the Department sent a certified letter to ASPEC, Inc., on March 21, 1986, to the attention of President Agarwal requesting that an appointment be scheduled with its Area Financial Manager, Division of Finance, Paul Richman. The returned service of the referenced letter was postmarked April 14, 1986. President Agarwal, or an officer from Respondent failed to schedule an appointment with Paul Richman as requested. On May 22, 1986, the Department served Respondent a subpoena duces tecum on May 23, 1986, by its then Financial Examiner Analyst I, Kevin J.C. Gonzales. (Petitioner's Exhibit 1, pp 9-10.) The subpoena issued to President Agarwal requested that the custodian of records, an officer, director, employee or member of ASPEC, Inc. appear before Paul Richman on May 30, 1986, at 9:00 a.m. at the Department's Miami Office and produce all books, papers and documents (of ASPEC, Inc.) from its inception to April 29, 1986, so that the Department could determine ASPEC's compliance with Chapter 494, Florida Statutes. President Agarwal, or a representative on behalf of ASPEC, Inc., failed to appear at the date and time specified on the subpoena, or thereafter, at the designated place to produce the requested documents. Respondent has challenged on constitutional and other procedural grounds, the Department's authority to conduct an investigation of Respondent as a licensee under the Mortgage Brokerage Act. Respondent's challenges were determined to be either beyond the authority of the Hearing Officer or lacked merit, and rulings to this effec were made during the course of the hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: Petitioner enter a Final Order suspending the Mortgage Brokers License No. HB-0016435 issued to Respondent for a period of (1) year. RECOMMENDED this 8th day of May 1987, in Tallahassee, Florida. JAMES E. BRADWELL 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 8th day of May 1987. COPIES FURNISHED: Miles J. Gopman Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399 Mr. Shanker S. Agarwal, President ASPEC, INC 6912 Stirling Road Hollywood, Florida 33024 Ronald P. Glantz, Esquire 320 Southeast 9th Street Fort Lauderdale, Florida 33316 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 =================================================================
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
The Issue In this proceeding pursuant to Section 120.56(4), Florida Statutes, Petitioner Dave Taylor (“Taylor) alleges that various purported “statements” which he attributes to Respondent Department of Banking and Finance (the “Department”) constitute rules-by-definition that were not adopted under, and therefore violate, Section 120.54(1)(a), Florida Statutes.
Findings Of Fact The evidence adduced at final hearing established the facts that follow. The Department of Banking and Finance is the state agency charged with the administration of Chapter 494, Florida Statutes, titled “Mortgage Brokerage and Mortgage Lending.” As such, it is responsible for regulating all persons, including mortgage brokers and lenders, licensed under that chapter. Taylor is licensed under Chapter 494 as a mortgage broker and as a “continuing education school.” His firm, Florida Compliance Specialists, Inc., provides consulting services to Chapter 494 licensees. The present dispute stems from amendments to Chapter 494 that the legislature enacted during the 2001 regular session. See Ch. 2001-228, Laws of Florida. These amendments were contained in a bill (CS/HB 455) approved by the governor on June 13, 2001, and became effective on October 1, 2001; they created a new position called “principal representative.” As defined by the legislature, the term “principal representative” means “an individual who operates the business operations of a licensee under part III.” Section 494.001(29), Florida Statutes (2001) (emphasis added).4 This statutory definition is amplified in a mandate that requires all licensees (and applicants) to designate a “principal representative who exercises control of the licensee’s business[.]” Sections 494.0061(8) and 494.0062(11), Florida Statutes. (Emphasis added). Notably, the terms “operates” and “exercises control of” are not defined. As mentioned, the statute requires all licensees and applicants to designate a PR. Although PRs do not engage in a licensed occupation (i.e. there is no PR license), an individual appointed to the post of PR after October 1, 2001, must satisfy certain educational and testing requirements (the details of which are not important here), and the designating lender must submit documents showing that its PRD has complied with those requirements.5 After the governor signed CS/HB 455 into law but before the amended statutes took effect, the Department began making rules to implement the new provisions. Before long, proposed rules were published in the August 31, 2001, issue of Florida Administrative Weekly. One provision of these proposed rules instructed that “[a]n individual can only be a principal representative for one [lender].” This “one lender to a PR” proposal did not implement an explicit statutory directive but arose from the Department’s then-prevailing interpretation of the statutory description of a PR as one who “operates” and “exercises control of” the lender’s business. Further illuminating the Department’s understanding of these terms were the Designation forms that it proposed to adopt, wherein the PRD was required to acknowledge that he or she would be “in full charge, control, and supervision of the [lender’s] business.” A person, the Department reasoned, could be “in full charge,” etc., of but one company at a time. In the course of rulemaking, however, the Department receded from its original interpretation. As a result, revised proposed rules——from which the bright line, “one lender to a PR” directive had been deleted——were published in the October 5, 2001, Florida Administrative Weekly.6 An amended Designation, which unlike earlier versions lacked language requiring a PRD to confirm (with his or her signature) having “full charge, control, and supervision” of the applicant’s or licensee’s business, was proposed as well.7 By the end of January 2002, the Department’s proposed rules relating to PRs had been adopted and, at the time of this Final Order, were among the agency’s duly promulgated, existing rules. See Rule 3D-40.242, Florida Administrative Code. Although the Department does not presently have a bright line rule or policy that flatly forbids an individual from serving simultaneously as PR to more than one licensee, the Department continues to be skeptical that a dual designee can effectively perform, for more than one lender at a time, the responsibilities that it believes inhere in the office of PR. Accordingly, whenever a lender or applicant nominates an XPR for PR, the Department without exception subjects that lender’s Designation to stricter scrutiny than would be given if its PRD were not an XPR. (Indeed, if the PRD is not an XPR, then the Department presumes that he or she will be able to carry out the duties of a PR and hence makes no inquiry as to how the PRD will function as PR.) The first outward manifestations of the Department’s internal decision to scrutinize any Designation in which an applicant’s PRD is an XPR emerged in late November 2001 after the agency had received four separate applications naming Taylor as PR.8 As the Department had discovered upon review of these four applications, Taylor was already serving as PR to an existing licensee. This situation had given rise to a dilemma for which the Department was not fully prepared, as evidenced by a November 26, 2001, e-mail message from an agency attorney to the responsible policy makers in which she (the attorney) had advised that: There are two pending applications in which there are no deficiencies and we need to decide how will [sic] we will proceed since we took out the language in the rule that specifically stated an individual could only be a PR for one company at a time. Let me know what times you would be available [for a meeting to decide what to do]. The Department quickly decided what to do. Between November 27 and November 29, 2001, the Department issued four nearly identical letters, one sent by certified mail to each applicant who had chosen Taylor as its PR, which provided, in pertinent part: We are in receipt of your company’s application to become licensed as a mortgage lender in the State of Florida. A review of the application materials indicates that [applicant’s name] has designated Dave Taylor at [address] as the company’s Principal Representative. [The next four paragraphs quote Sections 494.001(29); 494.0062(11); 494.0062(1)(f); and 494.0062(12), Florida Statutes, which pertain to PRs.] Sections 494.0072(1) and (2)(c), Florida Statutes, provide as follows: Whenever the department finds a person in violation of an act specified in subsection (2), it may enter an order imposing one or more of the following penalties against that person: Revocation of a license or registration. Suspension of a license or registration, subject to reinstatement upon satisfying all reasonable conditions that the department specifies. Placement of the licensee or applicant on probation for a period of time and subject to all reasonable conditions that the department specifies. Issuance of a reprimand. Imposition of a fine in an amount not exceeding $5,000 for each count or separate offense. Denial of a license or registration. Each of the following acts constitutes a ground for which the disciplinary actions specified in subsection (1) may be taken: (c) A material misstatement of fact on an initial or renewal application.[9] Dave Taylor has already been designated as a principal representative for another licensed lender under part III of Chapter 494, Florida Statutes. Please advise in detail how Mr. Taylor will operate and exercise control over your business.[10] We request that your response be submitted to the Department within 10 days of the date of this letter. If you have any questions regarding this matter, please call me at [phone number]. On or about November 30, 2001, the Department created a new deficiency code, DF 416, the description of which is “principal representative is designated to more than one entity.” This is an active deficiency code and is used consistently as a “red flag” on all applications to which it applies. When an application is tagged with a DF 416, the applicant is sent a letter in the form of the letters quoted in the preceding paragraph. This letter will hereafter be referred to as the “DF 416 Inquiry Letter.”11 It is important to emphasize that all applicants whose PRD is an XPR are sent the DF 416 Inquiry Letter, without exception.12 It is undisputed that Taylor has met all of the educational and testing requirements necessary to serve as a PR, and that the Department has no objection, based on facts and circumstances unique to Taylor, to Taylor’s being a lender’s PR. (In fact, he is presently a PR to one lender,13 under a designation to which the Department, consistent with its policy and practice of making no inquiry concerning PRDs who are not XPRs, raised no objection.) The Department’s concern about Taylor’s having been designated a PR by more than one company is indistinguishable from the concern that it expresses regarding all dual designees. This is why, although the contents of the DF 416 Inquiry Letter were developed to resolve a problem that specifically involved Taylor and his clients, the Department decided (and was able) to implement its Taylor-made solution on a generally applicable basis by sending the DF 416 Inquiry Letter to all applicants whose PRD is a dual designee. Each of the four applicants that had designated Taylor as its PR declined the Department’s November 2001 invitation to submit detailed information regarding the manner in which Taylor would operate and control the licensed business. Each applicant chose, instead, to designate someone else as PR. Thus, whatever advantages or considerations Taylor expected to receive in exchange for serving as these lenders’ PR were lost; the Department’s letters (the letters that became the form for the DF 416 Inquiry Letter) were the proximate cause of that loss, in that but for the letters, the lenders would not summarily have severed their respective business relationships with Taylor. After deciding how to deal with applicants whose PRDs are XPRs, the Department turned its attention to the dual designees of existing licensees. This was, in a sense, a bigger problem because, in their respective Designations, more than 50 licensees had selected an individual for PR who was a dual designee. Beginning around December 12, 2001, the Department sent all these lenders a letter similar to the DF 416 Inquiry Letter. This letter stated: We are in receipt of the principal representative designation forms for the following companies: [lender’s names]. A review of the principal representative forms indicates that [PRD’s name and address] has been designated the Principal Representative for both companies. [The next two paragraphs quote statutory provisions pertaining to PRs.] Sections 494.0072(1) and (2)(p) state as follows: Whenever the department finds a person in violation of an act specified in subsection (2), it may enter an order imposing one or more of the following penalties against that person: Revocation of a license or registration. Suspension of a license or registration, subject to reinstatement upon satisfying all reasonable conditions that the department specifies. Placement of the licensee or applicant on probation for a period of time and subject to all reasonable conditions that the department specifies. Issuance of a reprimand. Imposition of a fine in an amount not exceeding $5,000 for each count or separate offense. Denial of a license or registration. Each of the following acts constitutes a ground for which the disciplinary actions specified in subsection (1) may be taken: (p) Failure to comply with, or violations of, any other provision of ss. 494.001-494.0077. Please advise in detail how you will operate and exercise control over both of the above- mentioned businesses. We request that your response be submitted to the Department within 14 days of the date of this letter. If you have any questions regarding this matter, please call me at [phone number]. This form letter will be referred to as the “Compliance Inquiry Letter.” The evidence is unequivocal that the Department has sent, and plans to send, the Compliance Inquiry Letter to all licensees whose Designation names a person determined to be a dual designee, without exception.14 Taylor’s Description of the Alleged Rules-by-Definition In his petition, as required by Section 120.56(4)(a), Florida Statutes, Taylor described the alleged rules-by- definition. Here, in his words, are the Department’s alleged statements: Only one person can realistically “operate the business operations” of a licensee and “exercise control over the licensee’s business.” Therefore, only one individual shall prima facie be designated as principal representative for only one mortgage lender. The above rule shall not apply, however, to mortgage lenders which the Department deems to be “grand-fathered” i.e., such companies who designated their principal representative on or prior to October 1, 2001, the effective date of the statutory amendments. In such instances, an individual will be permitted multiple designations without further departmental scrutiny or inquiry as to how that individual will “operate” or “exercise control over each business.”[Footnote omitted]. Except for “grand-fathered” companies, if an individual once designated principal representative by a mortgage lender is similarly designated principal representative by a separate mortgage lender, the Department based upon the agency statement recited in (a) above, will require the subsequent mortgage lender(s) (i.e., the lender(s) other than the one first designating that individual) to provide in writing a detailed explanation to the Department, subject to potential sanctions, describing how that individual will operate and exercise control over that second mortgage lender. The Department considers as a “licensing deficiency” any mortgage lender application or principal representative designation submitted to the Department where the individual designated as the mortgage lender’s principal representative has previously been and continues to be designated principal representative by another mortgage lender. The Department, based upon this “deficiency,” shall not deem the application(s) “complete” for purposes of section 120.60, Florida Statutes. Such application(s) shall be subjected to the licensing procedures set forth in paragraphs (e) and (f) hereafter. In conformity with the agency statement set forth in (a) above, the Department will not undertake an inquiry of the principal representative designation submitted by the mortgage lender who first designated the individual as its’ principal representative. The Department will require mortgage lenders to provide the information referred to in section c above, through the use of a form, [i.e., the form letters attached as EXHIBITS “14”, “15”, & “16”, to this Petition]. Further, this form created for the purpose of soliciting information [not specifically required by statute or an existing rule] will require mortgage lenders to provide a response, specifically subject to announced sanctions, of details not otherwise required under the applicable statutes or rules. The Department, though requiring mortgage lenders to comply with the agency statements through the threat of announced sanctions, shall not provide to mortgage lenders or their designated principal representatives any clarifying or defining circumstances or criteria the Department will deem as acceptable——contractual or otherwise——for a person to be designated as principal representative for more than one mortgage lender. Any responses provided by such mortgage lenders in response to the Department’s written form shall be submitted by the applicant “at their peril.” Ultimate Factual Determinations In his just-quoted statements “a,” “c,” “d,” and “e,” Taylor described, with reasonable particularity, the essence of policies that, in fact, fall within the statutory definition of the term “rule.” Statement “a” describes (albeit somewhat imprecisely) a Departmental mindset, the view that a person is likely to have difficulty simultaneously serving more than one master as a PR; the last sentence of statement “d” accurately describes the Department’s related policy of not inquiring as to how a PRD who is not a dual designee will operate and control the lender’s business (because the agency presumes that a person will probably have no difficulty serving as PR to one lender at a time). Taken together, these views, in fact, constitute the Department’s interpretation of the PR statutes.15 Taylor’s statement “c” and the third sentence of “d” (all of which, of course, he attributes to the Department) correctly describe, for the most part,16 the Department’s policy of requiring additional information from all licensees and applicants whose Designations nominate an XPR for the position of PR. This policy is plainly driven by the Department’s interpretation of the PR statutes, and it leads, in turn, directly to statement “e.” Restated to conform to the evidence, statement “e” holds that the Department will send either the DF 416 Inquiry Letter or the Compliance Inquiry Letter, whichever is applicable, to any lender whose PRD is an XPR. It is the form letters——the DF 416 Inquiry Letter and the Compliance Inquiry Letter——that have emerged as the most visible, most readily identifiable unadopted rules of the Department, for they solicit information not specifically required by statute or by an existing rule. By the end of December 2001 at the latest, rulemaking was both feasible and practicable with regard to the above- described statements, but no effort was made to adopt them as rules. Thus, the Department failed timely to commence rulemaking with regard to these statements in accordance with Section 120.54(1)(a), Florida Statutes.17
Conclusions For Petitioner: H. Richard Bisbee, Esquire Law Office of H. Richard Bisbee 124 Salem Court, Suite A Tallahassee, Florida 32301-2810 For Respondent: Cynthia K. Maynard, Esquire James H. Harris, Esquire Department of Banking and Finance Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of appeal with the Clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.
