The Issue The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid. Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter- mined:
The Issue Whether the license of Respondent as a Mortgage Solicitor should be suspended for violation of Sections 494.05 (1) (a) & (b), Florida Statutes, Rule 3-3.07(1), Florida Administrative Code, and Section 494.05(1)(g), Florida Statutes. At the commencement of the hearing, Respondent's counsel moved to dismiss the proceedings by reason of Petitioner's failure to provide witness statements of Charles R. Burke & Kathryn C. Burke, pursuant to a letter from Respondent's counsel to the Deputy Director, Division of Finance, dated August 26, 1975, requesting copies of any witness statements obtained in the course of Petitioner'S investigation. Respondent not having previously sought to compel discovery in accordance with Florida Rules of Civil Procedure, the motion was denied. At this point, Respondent's counsel announced that he had been instructed by his client, who was not present at the hearing, to leave the hearing room and take no further part in the proceedings if the motion was denied. This being the case, Respondent's counsel departed and the hearing was then conducted as an uncontested proceeding.
Findings Of Fact Respondent was licensed as a Mortgage Solicitor with the firm of Hartwell and Associates, Inc., from May 27, 1974 to July 24, 1974, when his license was returned to Petitioner for cancellation by that firm. On September 13, 1974, Respondent was issued a Mortgage Solicitor's License with ABC Investment Corporation. Records of the Office of the Comptroller, State of Florida, Division of Finance, Department of Banking and Finance, failed to reveal any other license as a mortgage broker or mortgage solicitor having been issued to Respondent (Testimony of Ehrlich, Petitioner's Exhibit 1). In the spring of 1974, Mr. and Mrs. Charles R. Burke, Sr. of Ft. Lauderdale, Florida, met the Respondent who proposed to double the income that the Burkes were then receiving from interest on securities investments. This was to be done through the purchase of promissory notes secured by first mortgages on property located in Volusia County, ostensibly owned by LTP Properties, Inc., a land developer. Respondent showed them photographic slides of a club house at the development site and stated that there would be a golf course there and painted a bright picture of the receipt of 12 percent interest on the notes if the Burkes would liquidate the stocks that they owned and invest through him. He stated that the amounts that they would invest would represent only 40 per cent of the value of the real estate that secured their investment, and that it was a "sure thing.' Acting upon Respondent's advice, Mr. and Mrs. Burke cashed in some $180,000.00 in stocks and turned it over to the Respondent in June, 1974. In return, they received $180,000.00 in promissory notes in face amounts of $5,000.00 and$8,000.00 issued by LTP Properties, Inc. The promissory notes indicated on their face that the sale was approved by SEI, Inc., sales agent for LTP Properties, Inc., and they were signed by the president of SEI, Inc. The interest payments were to commence July 1st. Such payments were received during the months of July through December, 1974. In the fall of 1974, the Burkes invested another $100,000.00 with the Respondent for similar instruments, and again in January, 1975, they purchased another $20,000.00 in promissory notes and mortgages in face amounts of $5,000.00 each which also were issued by LTP Properties, Inc., but then owned by Respondent. At this time, the January 1st interest payment on the prior investments had not been made and, prior to making the final investment, the Burkes inquired of Respondent as to the reason for nonpayment of interest. He stated to them that LTP Properties was experiencing financial difficulties at the time but that it was endeavoring to get money from a bank overseas and from the Mellon Bank in Pennsylvania. No further interest payments have been made on any of the notes since December, 1974, and the Burkes discovered later that they did not, in fact, hold first mortgages on the real estate described in their mortgage deeds and consequently could not foreclose thereon (Testimony of Mr. and Mrs. Burke, Petitioner's Exhibit 2, Petitioner's Composite Exhibit 3). Prior to advising investors to purchase notes of LTP Properties, Inc., Respondent made several trips to the site of the property, checked with the local bank of the developer, was shown a financial statement which indicated that the developer was solvent, and compared values with surrounding real estate developments. He told the Burkes that LTP was obtaining foreign financing based on information he had received from Mr. David Edstrom of SEI, Inc., who in turn had acquired the information from Mr. Frank Carcaise of LTP Properties, Inc. This statement was made to the Burkes sometime between February and June of 1975 according to the Respondent. As far as Respondent knew, LTP Properties, Inc., stopped making interest payments on their notes about February, 1975 (Deposition of Respondent).
Findings Of Fact At all times pertinent to the allegations contained herein, Respondent was a licensed Mortgage Broker and the principal broker for Mortgage Associates of Countryside, located at 2623 Enterprise Rd., Clearwater, Florida. The Department was and is the state agency charged with regulating the activities of mortgage brokers in this state. In September, 1987, Andrew Grosmaire and Kevin Gonzalez, compliance officer and financial examiner, respectively, for the Department, pursuant to a complaint from Mark Snyder, conducted an examination of Respondent's affairs as they pertained to his operation as a mortgage broker. During the survey, which covered the period from August, 1986 through August, 1987, Mr. Grosmaire and Mr. Gonzalez examined between 50 and 60 loan files which had culminated in loan closings. In addition, they examined loan files which did not result in closings, bank account records, and other of Respondent's miscellaneous records. In order for an appropriate audit of a closed loan file to be conducted, it is imperative that the loan closing statement be included. Without it, the examiner cannot accurately determine what, if any, closing costs the borrower actually paid and if closing costs paid were consistent with those disclosed by the broker on the Good Faith Estimate Form at the initial interview. Of the closed loan files reviewed, these closing statements were missing from seven files. Respondent admits that several closed loan files did not have the required closing costs statement form enclosed. He attributes this, however, to the failure of his processor, an assistant, to place the closing statement in the file. They were not presented at hearing or thereafter. The investigators examined the Good Faith Estimate Forms in those files which culminated in loans and found that the form utilized by the Respondent failed to contain language, required by statute, which summarized the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund. Respondent contends that the pertinent statutory section was not in existence at the time he was engaged in mortgage brokerage activities. This was found to be not true. The Act became effective July 1, 1986 and the files surveyed were from the period August, 1986 through August, 1987. Examination of the Good Faith Estimate Forms used by the Respondent in each of the cases which culminated in loan closing revealed that Respondent consistently underestimated closing costs. This resulted in the borrowers generally paying higher closing costs than was initially disclosed to them. On -loans applied for by Mr. and Mrs. Snyder, Mr. Iyer, and Mr. Toland. Respondent redistributed loan points to himself in an amount higher than that which was agreed to by the parties. In the Toland case, Mr. Toland agreed to pay a 1% loan origination fee in the amount of $996.00. The settlement statement dated approximately 2 months later reflected that Toland paid Respondent a loan origination fee of $1,128.00 in addition to a 1% ($664.00) loan discount fee to the lender. This latter mentioned discount fee was not disclosed in advance to Mr. Toland on the estimate form nor was the excess loan origination fee charged. It should be noted here that a second Good Faith Estimate Form, dated nine days after the original, reflecting a 3% loan origination fee, was found in the file. Though signed by Respondent, this second form was not signed by the borrower as required. It cannot, therefore, serve to support Respondent's claim that he advised the Tolands of the higher cost by this second form. There is no showing that the Tolands were aware of it. In the Iyer case, the estimate form dated September 19, 1986 reflected a points and origination charge of $1,332.50 which is 1% of the mortgage loan amount of $133,250.00. The Iyers were subsequently approved for a mortgage in the amount of $145,600.00. The closing statement dated March 6, 1987, almost six months later, reflects that the Iyers paid a 2% loan origination fee of $2,740.00 to Mortgage Associates and a load discount fee of $685.00 to the lender. Here again the Respondent claims that a second cost estimate form reflecting a 2% point and origination fee of $2,912.00 was subsequently executed by the Iyers. However, this second form, found in Respondent's files, is undated and fails to reflect the signature of either Respondent or the Iyers. It cannot, therefore, serve as proof that the Iyers were made aware of the change. It does appear, as Respondent claims, that the bottom of the second form, (here, a copy) , was excluded from the copy when made, but there is no evidence either in the form of a signed copy or through the testimony of the Iyers, that they were aware of the change. Consequently, it is found that the Iyers had not been made aware of the second estimate and had not agreed to pay as much as they did, in advance. As to the Snyder closing, both Mr. Snyder and Respondent agree that it was their understanding at the time the loan was applied for, that Respondent would attempt to obtain a lower interest rate for them than that which was agreed upon in the application and in the event a lower rate was obtained, Respondent's commission points would remain the same as agreed upon in the brokerage agreement. In that case, as Respondent points out, his commission is based on the mortgage amount, not the interest rate, and he would be entitled to the agreed upon percentage of the loan face amount regardless of the interest rate charged by the lender on the loan. The Snyders had agreed to a 1% commission to Respondent plus a 1% loan origination fee to the lender. When the lender agreed to lend at par, without an origination fee, Respondent appropriated that 1% to himself, thereby collecting the entire 2% called for in the application. This was improper. Respondent's claim that it is an accepted practice in the trade is rejected. The Snyders initially made demand upon the Respondent for reimbursement of that additional 1% and ultimately had to hire an attorney to pursue their interests. Respondent subsequently made a $400 partial reimbursement payment of the amount owed but nothing further notwithstanding the fact that the Snyders ultimately secured a Judgement in Pinellas County Court against him for $1,082.52 plus interest, attorney's fees and costs. As a result, the Florida Mortgage Brokerage Guarantee Fund will reimburse the Snyders for their loss. According to the investigators, the Snyders Toland, and Iyer files, in addition to the problems described, also reflected that Respondent received payments for other items which should have gone into an escrow account. These included such things as credit reports and appraisal fees. The Department requires that any money received by a broker other than as commission, be placed in the broker's escrow account pending proper disbursement. Respondent did not have an escrow account. Mr. Gonzalez looked at Respondent's overall operation, including closed files, in an attempt to correlate between income and outgo to insure that Respondent's operation was in compliance with the statute. In addition to his search for an escrow account, Mr. Gonzalez also examined Respondent's "Loan Journal" which by statute is required to contain an entry for each transaction in each loan. The purpose of this journal is to provide a continuing record to show when each item in the loan processing was accomplished. In Mr. Gonzalez' opinion, the Respondent's journal was inadequate. It contained repeat and conflicting entries for specific items which hindered the investigators' ability to determine an audit trail. In addition, all required information was not put in the journal in complete form in each account. In the opinion of the investigators, the Respondent's violations were significant in that they made it impossible for the Department to determine compliance with statutes and Department rules and inhibited the compliance examination. All in all, Respondent's way of handling his accounts, his failure to maintain an escrow account, and his unauthorized increase in commission income, all indicated his actions were not in the best interest of his clients. The investigators concluded that clients funds were not being handled properly and that the purpose of Chapter 494, Florida Statutes, to protect the consumer, was not being met. In Mr. Gonzalez' opinion, Respondent's method of business constituted incompetence as a mortgage broker and "possibly" fraudulent practice. It is so found. Both Mr. Gonzalez and Mr. Grosmaire indicated they had extreme difficulty in attempting to locate Respondent after the complaint was filed by Mr. Snyder, in order to conduct their examination. They finally located him at a site different from that which appeared in the records of the Department. Respondent contends that the Department had been notified in writing within the required time, of his change of location when he filed a notice of fictitious name. He contends that after filing his notice of name change, he received no response from the state but took no action to inquire whether the change had been made. In any case, his current address was in the phone book and had the agents chose to look there, they would have found him. Respondent contends that the good faith estimates required by the statute are just that, an estimate, and that actual figures may vary from and exceed these estimates. This is true, but there is a procedure provided whereby the broker is to notify the client of a change in advance and if the change exceeds a certain amount, it may constitute grounds for voiding the contract. In paragraph 7 of the complaint, Petitioner alleges that Respondent used a form for the estimates which failed to contain a statement defining the maximum estimated closing costs. Review of the statement offered herein reflect this to be a fair analysis. However, Respondent claims that certain items cannot be predicted accurately in that some companies charge more than others for the same item and it was his practice to insert in the estimate portion of the form a "worst case scenario." However, at no time did he address in his form what could be the maximum a prospective purchaser might be expected to pay. Respondent "doesn't like" the total picture painted by the investigators concerning his operation. He claims it is cot a fair and accurate representation. In many cases, he claims, he expended funds on behalf of clients in excess of that he received in either commission or reimbursement and even though he may have received more than entitled in some cases, it "evens out over a period of time." Though this may be so, it is no way to do business. The state requires the keeping of accurate records and, just as the broker should not be required to assume responsibility for other than his own misconduct, neither should the client be required to pay more than is his legal obligation. Respondent professes to know the mortgage business and he resents having his qualifications as a mortgage broker questioned. In his opinion, he has trained himself well and has acted in good faith on the basis of the information available to him at the time. He ignores the impact of the Judgement of the court in the Snyder matter because he feels it was "unilateral." He believes the law is designed to protect the client and he wants to know who protects the broker. It is for that very reason, he contends, that fees paid in advance are not refundable. Mr. Sample feels the Department should be more informative to the brokers and get the governing regulations updated more quickly. Respondent cherishes his license and claims he needs it to make a living. He went out of business once before, several years ago, because of bad business conditions, (the reason he uses for not complying with the court order), but did not declare bankruptcy because he wanted to go back into business and pay off the judgements against him. Though he has been back in business for several years, he has failed to make any effort to pay off any of his former creditors even though in his former operation, he improperly tapped his escrow account for other business expenses.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Respondent, Howard E. Sample's license as a mortgage broker in Florida be revoked. RECOMMENDED this 15th day of September, 1988 at Tallahassee, Florida. ARNOLD H. POLLOCK 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 day of September, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NUMBER 88-2858 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Insofar as Petitioner's submission refers to testimony of a witness, that is considered as a proposed finding of fact. FOR THE PETITIONER; Accepted and incorporated herein & 3. Accepted and incorporated herein 4. & 5. Accepted and incorporated herein Accepted and incorporated herein & 8. Accepted and incorporated herein Rejected as contra to the evidence A conclusion of law and not a finding of fact & 11a Accepted and incorporated herein Accepted Accepted and incorporated herein Accepted Accepted and incorporated herein - 18. Accepted 19. - 21. Accepted and incorporated herein Accepted & 24. Accepted and incorporated herein 25. & 26. Accepted and incorporated herein Accepted &-29. Accepted 30. - 34. Accepted and incorporated herein FOR THE RESPONDENT: Nothing Submitted by way of Findings of Fact COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 West Robinson St. Suite 501 Orlando, Florida 32801 Howard E. Sample 2465 Northside Drive Apartment 505 Clearwater, Florida 34621 Honorable Gerald Lewis Ccmptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance Plaza Level, The Capitol Tallahassee, FL 3 2399-0350
Findings Of Fact For the purposes of these proceedings, Jager Industries, Inc. and Castle Realty Ltd. are synonymous as Petitioner. Through name changes, Castle Realty Ltd. became Jager Industries, Inc. Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Office of the Comptroller, Department of Banking and Finance (Department), is charged with the responsibility and duty of administering the Mortgage Brokerage Guaranty Fund (Fund) which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 494.042, Florida Statutes. At all times material hereto, 1st Federated Realty Mortgage, Inc. (1st Federated) was licensed as a mortgage broker in this state pursuant to Chapter 494, Florida Statutes, having license number HE 7896. On or about January 8, 1981, 1st Federated filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida, Tampa, Division. Thereafter, on or about December 16, 1981, 1st Federated was dissolved. On January 29, 1985, the Department received a letter dated January 25, 1985, by regular mail, requesting payment from the Fund on behalf of Castle Realty Ltd. Attached to the letter was a final judgment entered on April 21, 1982, in the Circuit Court for Pinellas County against 1st Federated in the principal amount of $50,000 based upon a violation of Section 494.042(2)(d), Florida Statutes, a Writ of Execution returned unsatisfied and an Affidavit of Reasonable Search. Thereafter on May 17, 1987, the Department received by certified mail a copy of the Complaint filed against 1st Federated and supporting documents including a copy of the Master Loan Commitment, Affidavit and Acceptance of Service. Pursuant to the Master Loan Commitment, Castle Realty paid $50,000 to 1st Federated as a Master Commitment Fee in exchange for a promise by 1st Federated to fund up to $4,000,000 for individual condominium loans. The individual commitments and closing of loans were subject to the lender approving the borrower's credit; however, approvals could not be unreasonable withheld. Timely notice of the institution of the action by Petitioner against 1st Federated as required by s. 494.043(5), Florida Statutes (1985), was waived by Respondent. No evidence was submitted regarding the number of claims involving 1st Federated and the amount of those claims that have been paid by Respondent from the Fund. Accordingly, no recommendation is made regarding the amount of Petitioner's claim that may be paid from the Fund pursuant to the limitations contained in s. 494.044, Florida Statutes (1985). By Notice of Intent to Deny Payment from the Mortgage Brokerage Guaranty Fund dated May 22, 1987, Respondent entered findings of fact, conclusions of law and denied Petitioner's claim. As grounds therefor, Respondent concluded that the 1985 and 1986 amendments to Chapter 494 were applicable in this case as those amendments were remedial or procedural in nature and should be given retrospective application. Thereafter, Petitioner requested formal proceedings by petition filed June 16, 1987, and this request was forwarded to the Division of Administrative Hearings by the Comptroller's letter dated July 23, 1987.
Findings Of Fact At the time of CMNI's application, Mr. Giunta was president of CMNI and, as such, exercised primary control over the day-to-day activities of CMNI (Tr.12). Mr. Giunta is also the president of Christian Investors Network, Inc. (CINI), and exercised similar control over the activities of that corporation (Tr. 11-12). Mr. Giunta, CMNI, and CINI have never been licensed as mortgage brokers by the Department (Tr. 12-13). CINI, with the knowledge and approval of Mr. Giunta, placed advertisements in the St. Petersburg Times (Tr. 13). One such advertisement appeared in St. Petersburg Times edition of April 20, 1986, under the heading "Loan Information." That advertisement stated "Major Real Estate Financing" and "Residential Real Estate." (Exhibit 1). Sometime in the middle of 1986, Paul Mark called Mr. Giunta in response to an advertisement in the St. Petersburg Times. Mr. Mark was seeking a mortgage loan or loans to build several houses on real estate he owned and so informed Mr. Giunta, who indicated to Mr. Mark that he could arrange a mortgage loan for Mr. Mark (Tr. 28-29). Messrs. Mark and Giunta met shortly after the telephone call. Mr. Mark handed Mr. Giunta a package of documents including a site plan, survey, credit information and a completed mortgage loan application. Mr. Giunta again stated that he would have no problem arranging a mortgage loan for Mr. Mark and requested a fee for such service in the amount of $300.00 (Tr. 30-31). After the meeting, Mr. Mark sent to Mr. Giunta a check made out to Mr. Giunta in the amount of $300.00, together with a letter dated July 16, 1986, confirming that Mr. Giunta would secure mortgage financing (Tr. 31-33); Exhibit 3). In October of 1986, Clifford Clark called Mr. Giunta in response to a newspaper advertisement, seeking a mortgage loan to refinance a certain parcel of property owned by Mr. Clark. Mr. Giunta stated that he could arrange mortgage financing for Mr. Clark at an interest rate of approximately ten percent (Tr. 48-49). After the telephone contact, Messrs. Clark and Giunta met and Mr. Giunta had Mr. Clark fill out a residential loan application (Exhibit 7). Mr. Clark provided Mr. Giunta with originals of his deed to the property and other real estate related documents. Mr. Giunta indicated that he could obtain mortgage financing for Mr. Clark and requested a fee of $250.00, whereupon Mr. Clark gave Mr. Giunta a check for that amount (Tr. 49-51). In early 1986, Robert Miraglia called Mr. Giunta in response to a newspaper advertisement, seeking a second mortgage. Mr. Giunta arranged to meet with Mr. Miraglia to discuss the requested loan. In August of 1986, Russell Foreman contacted Gerald Giunta in response to a newspaper advertisement, seeking a mortgage loan to refinance his home (Exhibit 5). On August 26, 1986, Mr. Foreman met with Mr. Giunta and at Mr. Giunta's request gave him copies of his deed, a survey of the lot, the mortgages to be satisfied and other real estate related documents. Mr. Giunta assured Mr. Foreman that there would be no problem in obtaining a mortgage loan and requested a fee of $200.00. Mr. Foreman wrote a check for that amount and gave it to Mr. Giunta (Exhibit 5). Mr. Giunta never informed Messrs. Mark, Clark, Miraglia and Foreman that he was not a licensed mortgage broker. In approximately April of 1986, Mr. Giunta met with Mr. Arthur M. James, Area Financial Manager for the Department's Tampa Regional Field Office. At that meeting, Mr. James explained to Mr. Giunta that he could not offer to arrange or negotiate mortgage loans on behalf of clients and collect a fee for such service without first becoming licensed by the Department as a mortgage broker (Tr. 84). At some point prior to May 8, 1986, Mr. Giunta was contacted by the Department and informed of the statutes and regulations applicable to advertising his services in the area of real estate financing (Exhibit 2; Tr. 23-24). At some point in 1987, CMNI, with the knowledge and approval of Giunta, listed "Christian Mortgage Network, Inc." in the yellow pages of a local telephone book under the heading of "Mortgages." (Exhibit 1; Tr. 15).
Findings Of Fact Mr. Charles Peters was employed by Ameri-lantic Corporation at the time he applied for licensure as a mortgage broker, and he is currently employed by Ameri-lantic Mortgage Brokerage Company. Mr. Peters' duties at Ameri-lantic have included contacting potential lenders. These duties have also included discussing loan terms and rates with potential lenders. As an employee of Ameri-lantic, Mr. Peters has received compensation for his efforts on behalf of his employer, in the form of salary. There is no evidence that Mr. Peters' compensation was based on commissions of any kind. There is no evidence that Mr. Peters' duties included contacting persons who wished to borrow money, or that he acted to bring together those who wish to borrow with those who wished to lend money for mortgages.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Charles Peters for licensure as a mortgage broker be granted, if he meets the other requirements for licensure, such as sucessful completion of the written examination. DONE and ENTERED this 4th day of December, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 4th day of December, 1990. COPIES FURNISHED: Eric Mendelsohn, Esquire Department of Banking and Finance Office of the Comptroller 111 Georgia Avenue Suite 211 West Palm Beach, Florida 33401-5293 Robert L. Saylor, Esquire 215 Fifth Street Suite 302 West Palm Beach, Florida 33401 Honorable Gerald Lewis Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Banking and Finance, (Department), was the state agency in Florida responsible for the regulation and licensing of mortgage brokers in this state, and Respondent, Harriet Ijames, was a licensed mortgage broker. On February 17, 1989, Respondent entered into a Stipulation, Consent Agreement and Final Order with the Department whereby she was placed on probation for 2 years for misconduct relating to the misappropriation of mortgage application fees, with the further requirement that she not act independently but under the supervision of a broker acceptable to the Department. On October 2, 1991, the Department filed a complaint against the Respondent alleging she had violated the terms of the prior Consent Order by conducting business as a mortgage broker without the requisite supervision. Thereafter, on April 29, 1992, Respondent entered into another Stipulation, Consent Agreement and Final Order with the Department regarding the October, 1991 complaint by which she was again placed on probation conditioned upon her operating only under the supervision of an approved broker. This latter Order provided that any violation thereof would be automatic grounds for immediate and summary revocation of her license and also imposed an administrative fine of $2,000.00. The Final Order incorporating that agreement was issued by the Department on July 13, 1992. In May, 1992, Respondent was contacted by Rhudine M. McGhee, a resident of Tampa, who had been referred to her by a mutual acquaintance. Mrs. McGhee indicated she was interested in purchasing another house. Somewhat later, Respondent contacted Mrs. McGhee and told her of a friend who had a house for sale. She also gave Mrs. McGhee the addresses of some other houses in the area which were for sale. Mrs. McGhee did not like any of them. Thereafter, Respondent advised Mrs. McGhee that she was a mortgage broker and not a real estate broker, and that she would have a real estate broker contact her. Respondent also offered to provide Mrs. McGhee with listings of Resolution Trust Corporation foreclosures in the desired price range. Some time later, the broker referred by Respondent showed Mrs. McGhee a house she liked and she signed a contract to buy it. In the interim, Respondent had taken a credit application from the McGhees over the phone and followed up with a visit to the McGhee home. On May 13, 1992, during the visit to the McGhee residence, Respondent had Mrs. McGhee sign a loan application. On that same visit, she solicited and received from Mrs. McGhee a check for $300.00, payable to the Respondent and subsequently endorsed and cashed by her, which reflected the check was the application fee for a loan. She specifically asked that the check be made to her, personally. When Mrs. McGhee asked Respondent about the check, she was told it would be credited to the purchase price at time of closing. This was not done and it was only later, after a complaint was filed with the Department, that Mr. Brigliadora, the mortgage broker with whom she was affiliated, repaid the fee from his company's funds. Though at hearing Respondent denied she took a loan application fee or that the check she received was for that purpose or bore any notation to that effect when received, Mrs. McGhee is quite certain she put that notation on the check at her husband's direction at the time she gave it to Respondent. Respondent claimed the check was for finding the house but Mr. McGhee specifically recalls Respondent indicating the check was to be an application fee to be credited against the purchase price. It is so found. On June 1, 1992, Respondent again returned to the McGhee home to have them sign a second loan application. This time Mr. McGhee was not at home and Respondent suggested to Mrs. McGhee that she sign her husband's name to the application. This was done. Respondent did not give the McGhees copies of the applications they signed but said she would bring them copies at a later date. This was never done. Though Respondent also denies soliciting the second application, her apparent signature appears on both application forms and it is found she did both solicit and sign the forms and the application fee check. The first application was for a loan of $80,000.00 at 8.5 percent. The second was for $36,000.00 at 8.625 percent. At the time of the solicitation, Respondent was employed by Frank Brigliadora, a licensed mortgage broker and owner of the Money Tree Mortgage Co. However, neither Respondent nor Mr. Brigliadora had notified the Department of their arrangement or obtained Departmental approval of the supervisory relationship. Clearly, Respondent knew the taking of an application fee, as the evidence indicates she did here, was inappropriate. Sometime in mid 1992, Respondent approached George Banks, a licensed mortgage broker in Tampa and owner of his own brokerage company, with a view toward working for him. In their conversation about that, they discussed the practice of application fees. Respondent indicated she wanted to take a fee of $200.00 to $300.00 up front, but Banks felt this was not proper, advised her so, and declined to accept her as a broker. Even when she claimed that other brokers took fees of this nature, he demurred, claiming he did not endorse the practice. Respondent worked for Mr. Brigliadora, a licensed mortgage broker, at his firm, Money Street Mortgage, for approximately 3 months during 1992. At the time she went to work for him, Respondent did not tell him she was under sanctions by the Department to have strict supervision and at no time did he agree to the Departmental supervision program. Mr. Brigliadora did not receive the $300.00 check Respondent obtained from the McGhees nor did he ever get the money it represented from the Respondent. It was only just before or at the closing on the property that he first became aware of the deposit. When he refunded the money to the McGhees, Respondent agreed to reimburse him but she never did. Normally, Money Street Mortgage does not take application fees on residential loans, and Mr. Brigliadora denies he ever approved or suggested to Respondent that she solicit them. When Respondent gave him the documentation on the McGhee loan application it did not include the required good faith estimate found in the brokerage agreement nor did the application form or any other document make the required disclosures. The application he got from Respondent does not constitute a brokerage agreement and Mr. Brigliadora never got one from the Respondent on this loan. What he received is no more than an application for a loan. Mr. James, the Department's Area Financial Manager, whose job includes the assignment of examiners and the review of investigations by examiners, knows Respondent as a licensed mortgage broker under Chapter 494, Florida Statutes. He is aware of prior complaints received by the Department about the Respondent in the past. Two of them relate to the Final Orders previously mentioned herein. In the instant case, he recalls receiving a telephone call regarding a deposit of $300.00 given to Respondent and commenced an investigation into the incident. The current Administrative Complaint which resulted in this hearing was the outcome of that investigation. Based on his evaluation of the matters discovered in the investigation, he concluded that Respondent took a fee from a client without having a brokerage agreement with that client; failed to make the required full disclosure to a client; and misappropriated a fee which she received from a client; all of which are violations of various provisions of Chapter 494. In his official capacity with the Department, Mr. James had the duty to approve a supervisory mortgage broker for the Respondent as called for in the two prior Final Orders referred to previously herein. Neither Money Street Mortgage nor Mr. Brigliadora were submitted by Respondent for approval by the Department even though Respondent knew she was required to do so. Respondent claims she made it very clear to Mrs. McGhee that she was a mortgage broker and not a real estate broker. Nonetheless, Mrs. McGhee, she claims, insisted Respondent help her and offered to pay her for her efforts. Respondent claims that all Petitioner's witnesses lied about her and forged documents relating to her alleged activities. She denies she would ever cheat or disobey the rules because she knows she would lose her license if she did. Claiming she is well respected in the community, she asserts the Department did not thoroughly investigate the allegations against her and is, therefore, destroying her reputation over something which did not happen as alleged. Her assertions are not accepted, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: Recommended that a Final Order be entered in this case finding her guilty of the offenses alleged in the Administrative Complaint filed herein; revoking Harriett Ijames' license as a mortgage broker in Florida; and imposing an administrative fine of $5,000.00. RECOMMENDED this 24th day of May, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK 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 24th day of May, 1993. COPIES FURNISHED: Lisa L. Elwell, Esquire Office of the Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Harriett Ijames 8341 Paddlewheel Street Tampa, Florida 33617 Gerald Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302 The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact Petitioner is charged with the responsibility of administering and enforcing the provisions of Chapter 494, Florida Statutes, including the duty to sanction those licensed under the Mortgage Brokerage Act (the Act) for violations of the Act. At all times pertinent to this proceeding, Respondent Joan N. Harnagel (Ms. Harnagel), was a registered mortgage broker in the State of Florida, holding license No. HA 517383319. There was no evidence that Ms. Harnagel's registration has been previously disciplined by Petitioner. Respondent Meridian Mortgage Group, Inc. (Meridian) first became a licensed mortgage broker in the State of Florida in September, 1988, with Respondent Joan N. Harnagel (Ms. Harnagel) serving as its vice-president and principal mortgage broker. Between September, 1988, and August, 1992, Meridian was a mortgage brokerage business in the State of Florida and held license No.HB 880000176-00. Meridian has held no active license as a Florida mortgage broker since August, 1992. There was no evidence that Meridian's registration has been previously disciplined by Petitioner. In September 1988, Meridian bought a Florida mortgage brokerage company named Bay Pointe Mortgage. At the time of this purchase, Ms. Harnagel was the principal mortgage broker and was responsible for the daily operations of Bay Pointe as its general manager. Upon Meridian's purchase of Bay Pointe, Ms. Harnagel served as Meridian's principal mortgage broker in Florida and continued her responsibility for the daily operation of Meridian's activities in Florida. Until July 15, 1989, Ms. Harnagel had no ownership interest in Meridian. The owners of Meridian between September 1988 and July 15, 1989, were Majorie Mohr and Larry Mohr of Carmel, Indiana. On July 15, 1989, Ms. Harnagel assumed ownership of Meridian and continued to serve as its principal mortgage broker and general manager responsible for daily operations. At all times pertinent to this proceeding, Ms. Harnagel was the principal mortgage broker of Meridian and was responsible for its daily operations, which included the hiring and firing of employees, the ordering of appraisals and credit reports for customers, and the preparation of good faith estimates. Petitioner conducted an examination of the Respondents Harnagel and Meridian for the period inclusive of January 1, 1989, through April 30, 1990. As a result of the investigation, Petitioner prepared and forwarded to Respondents a report of its investigation. Subsequently thereto, Petitioner prepared and served on Respondents an "Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights" which is the charging document for this proceeding. 1/ PAR PLUS VIOLATIONS There is a difference between a mortgage broker's origination fee and a lender's discount fee. A mortgage broker's origination fee is a fee charged by the mortgage broker for finding a loan for the applicant. A discount fee is a fee charged by the lender to a borrower for doing the paperwork on a loan and is usually expressed as a percentage of the amount borrowed. A discount may be considered as prepaid interest to the lender to cover the lender's expenses in making the loan. In the typical transaction that does not involve "par plus", the mortgage broker's origination fee is paid to the mortgage broker by the borrower at closing either by separate check or out of the proceeds of the closing. A "par plus" transaction is one in which the mortgage broker's origination fee is paid to the mortgage broker by the lender instead of by the borrower. Petitioner's Exhibit 1 is a composite exhibit and pertains to a transaction involving borrowers Oscar and Arlene Carlsen. Petitioner's Exhibit 2 is a composite exhibit and pertains to a transaction involving borrowers J. Richard and Sara Pooler. The first page of each exhibit is the good faith estimate that was completed by Ms. Harnagel. The good faith estimate is normally given to a borrower when the borrower first comes to the mortgage broker's office and applies for a loan. The purpose of the good faith estimate is to make full disclosure of what fees are going to be charged to the borrower. The second and third pages of Petitioner's Exhibit 1 and Exhibit 2 constitute the Settlement Statements for each transaction and was prepared by the respective closing agents for these transactions. The Settlement Statement should reflect all costs that were paid by the buyer and the seller in the transaction being financed. The Carlsen transaction was a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. The Pooler transaction was also a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. By failing to respond to requests for admissions, Respondents admitted 2/ that in the Carlsen transaction and in the Pooler transaction neither Meridian nor Ms. Harnagel disclosed to the borrowers Meridian's participation in a "par plus" program. Both the Carlsen and the Pooler transactions closed in December 1989. ESCROW FUND VIOLATIONS - RESIDENTIAL 3/ Respondents received the following sums from the following borrowers on the following dates: BORROWER AMOUNT DATE K. Carrol $525.00 06-07-89 R. Williams $400.00 11-28-89 J. Gentile $270.00 06-30-89 C. Saffer $270.00 05-15-89 J. Mark $270.00 02-22-89 G. Norton $275.00 07-14-89 F. Sloss $275.00 03-02-89 W. Nachman $275.00 02-27-89 E. Ward $270.00 04-26-89 H. Rosen $310.00 04-24-89 J. Morris $825.00 06-30-89 S. Lewis $270.00 03-24-89 E. Fuller $485.00 05-01-89 G. Fleming $270.00 03-30-89 J. Bishop $270.00 03-28-89 P. Bifulco $270.00 04-10-89 E. Zulueta $270.00 05-26-89 L. MacCalister $325.00 06-21-89 T. Nangle $275.00 01-26-89 I. Rybicki $270.00 03-31-89 I. Rybicki $275.00 03-07-89 The foregoing sums were received by Respondents from borrowers to pay for credit reports and appraisals. Respondents should have placed these funds in the escrow account Meridian maintained at Sun Bank. Instead of being used for the intended purpose, these funds were placed in Meridian's operating account at Sun Bank and were used to pay Meridian's overhead. At all times pertinent hereto Respondent Harnagel was the principal mortgage broker for Meridian and knew that these sums were not being placed in escrow, knew that the funds should have been placed in escrow, and knew that these funds were not being expended for credit reports and appraisal reports. Ms. Harnagel asserts that the practice of placing these funds in Meridian's operating account was dictated by Meridian's out-of-state owners. Ms. Harnagel knew this practice violated the Mortgage Brokerage Act and asserts that she repeatedly informed the Mohrs of this problem. Notwithstanding her acknowledged violation of the Act, she continued to collect these fees and continued to place these fees in Meridian's operating account. The great majority of these transactions occurred prior to Ms. Harnagel assuming ownership of Meridian on July 15, 1989. As a result of these practices, Meridian became indebted to at least two appraisal companies, Duffy and Associates (Duffy) and Diamond Realty and Appraisal Company (Diamond). Neither appraisal company had been fully repaid as of the time of the formal hearing. Duffy and Associates is owed a total of $4,000 by Respondents for work that was performed on the order of Respondents. At least six of the appraisals for which Duffy has not been paid were ordered after Ms. Harnagel assumed ownership of Meridian. In each of these transactions Respondents collected the amount necessary to pay for the appraisal, but, instead of paying for the appraisals, spent the amounts as part of the operating account on overhead expenses. Ms. Harnagel paid Diamond the sum of $1,500 as partial payment of the accumulated debt to Diamond. At the time of the formal hearing, Respondents owed Diamond the sum of $1,675 plus interest and attorney's fees. THE COMMERCIAL LENDER: VICTORY ENTERPRISES TRUST The proposed lender for each of the four commercial transactions at issue in this proceeding was an entity referred to as "Victory Enterprises Trust". The principals of this trust were Thomas Telford, Harold McDonnard, Harold Meridon, and a man identified as Mr. Carpenter. COMMERCIAL TRANSACTION ONE: GOLDEN HILLS Golden Hills is one of the four commercial projects that was at issue in this proceeding. A group of individuals including Robert Hastings, Doug Ollenberger, and Jeffery Kollenkark formed a partnership to purchase, refurbish, and develop a golf course and its surrounding property known as Golden Hills. This partnership, initially known as EBBCO Partnership and later incorporated under the name of Fore Golf Management, Inc., discussed with Ms. Harnagel the financing that would be required for the project. Ms. Harnagel suggested to this borrower a possible joint venture with a potential lender, the Victory Enterprises Trust, and requested a deposit in the amount of $12,000. Ms. Harnagel did not identify her lender to the borrower. This borrower deposited with Meridian the sum of $12,000 on or about September 28, 1989, with conditions that may be summarized as follows: The money was to be placed in Meridian's escrow account. The money was to be "100 percent refundable" if the joint venture partner did not fund the project or if terms of funding were not acceptable. Signatures from both parties to the joint venture would be required to release the funds from escrow. This money was not to be considered an application fee, but as a deposit for closing costs of the proposed joint venture. Any funds remaining were to be returned to Fore Golf Management, Inc. At no time did the Golden Hills borrowers authorize Ms. Harnagel to remove any of the funds from her trust account. On October 2, 1989, Ms. Harnagel wrote Robert Hastings a letter that included the following: Friday, September 29, 1989, Sun Bank received the Twelve Thousand Dollars ($12,000.00) and deposited in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring FORE GOLF MANAGEMENT, INC. an acceptable commitment. THE MONIES ARE REFUNDABLE if the commitment is not acceptable. (Emphasis in the original) On February 1, 1990, Mr. Hastings wrote Ms. Harnagel a letter that included the following: ... For about five months we have been attempting to put together a deal on Golden Hills. You have had our $12,000.00 since 9/29/89. To date no commitment has been brought to us. We do not mind continuing to try, but we do not wish to continue with this indefinitely. It is our wish that you suggest a time frame within which the project is completed and funded, or unless extended in writing by both parties, all agreements are null and void and all monies are refunded. On March 3, 1991, the Golden Hills borrowers demanded that Respondents return the $12,000 deposit, noting that the Golden Hills property had been sold to another entity approximately six months previously and that no commitment from Respondents or their lender had been forthcoming. Thereafter, the Golden Hills borrowers sent Dr. Kollenkark to Florida from California in an effort to collect the deposit from Respondents. On March 11, 1991, Ms. Harnagel wrote to Dr. Kollenkark a letter that provided, in part, as follows: The Trust does not want to return the monies as they felt they bought a commitment but that you were unable to obtain a viable contract. As I have said to you when we were told in December, 1990 that Golden Hills had definitely been sold. I told you that I would pay the $13,000 and get the money through the legal department. The reference to the Trust in Ms. Harnagel's letter of March 11, 1991, is to the Victory Enterprises Trust. The reference to the sum of $13,000 was an error and should have been $12,000. There was no evidence as to whether the deposit was transferred from Meridian's trust account to the proposed lender as implied by the letter of March 11, 1991. Ms. Harnagel testified that the money was transferred to Meridian's operating account and expended on Meridian's operating expenses. Ms. Harnagel admitted that the sum deposited by the Golden Hills borrowers should be refunded, but that she has been unable to do so. Her position that using the money to fund her operating expenses was authorized by the agreement with the Golden Hills borrowers is rejected as being contrary to the evidence. Although the record establishes that Ms. Harnagel expended considerable time and effort to secure funding for the Golden Hills borrowers, the record is equally clear that she was not entitled to use the deposit to fund her overhead expenses. COMMERCIAL TRANSACTION TWO: GENESIS CORPORATION The second commercial transaction involved the funding of two hotel projects with the Genesis Corporation as Respondents' borrower. By letter dated December 15, 1989, the Genesis Corporation deposited with Meridian the sum of $1,500. Paragraph two of the transmittal letter is as follows: 2. The Funding must be to Genesis Corp. satisfaction. The Application Fee of $1,500. is refundable, if Genesis Corp. is not Completely Satisfied with the Funding. The principals of Genesis Corporation did not provide certain financial statements requested by Respondents. Consequently, Respondents were unable to secure financing for the two hotel projects. After the request for the financial statements was made, Respondents did not hear further from the Genesis Corporation. Respondents expended the deposit made by the Genesis Corporation for its operating expenses. COMMERCIAL TRANSACTION THREE: RIVER RUN The third commercial transaction involved River Run Limited Partnership (River Run), which proposed to develop a golf course in North Carolina. As part of the transaction, Meridian required the borrower to pay an advance fee of $10,000.00 to be placed in Meridian's trust account. This deposit was subject to the following conditions: The deposited fee may be used by the lender (an unidentified trust) or by MERIDIAN MORTGAGE GROUP, INC. in conjunction with the lender to conduct an inspection of the property and for other prudent and reasonable expenses necessary to bring the BORROWER an acceptable loan commitment. For all monies spent a full accounting of such expenses will be made to BORROWER. If no loan commitment is offered within fifteen (15) days of the last signature date of this agreement, the entire application fee will be refunded unless otherwise agreed to by both parties to this agreement. Should an offer be made by the lender that, for any reason, is unacceptable to the BORROWER, the BORROWER shall have the right to reject such an offer and the entire application fee shall be refunded to the BORROWER. In such an event, the BORROWER shall be obligated to notify MERIDIAN MORTGAGE GROUP, INC. within five (5) working days of receipt of such offer that the offer is rejected, otherwise the deposited funds will be forfeited and will become the property of MERIDIAN MORTGAGE GROUP, INC. The foregoing agreement between Meridian and River Run was extended so that Meridian was given until November 15, 1989, to obtain the financing. The $10,000 deposit to Meridian was paid on behalf of River Run by Nate Bowman. No financing for River Run was secured by Respondents. Mr. Bowman demanded a refund of the deposit and subsequently obtained judgment against Respondents for the $10,000 deposit. As of the formal hearing, Respondents had not satisfied the Bowman judgment or otherwise refunded the deposit to River Run. Ms. Harnagel asserted that the following circumstances were the reason that the River Run transaction did not close: The trust that was to be the lender asked for financial statements that were not provided. There was a lawsuit between certain of the partners of River Run. A financial officer would not relinquish certain tax returns for one of the partners of River Run. There was a concern about River Run's ability to repay the money. Ms. Harnagel stated that of the $10,000 that was deposited into Meridian's trust account, she only retained the sum of $3,500 and that the balance went to the lending trust. The $3,500 that was retained by Ms. Harnagel was expended. There was no accounting for these expenditures. Likewise, there was no accounting for the sums paid to the lending trust. COMMERCIAL TRANSACTION FOUR: CHAPEL HILL The fourth commercial transaction involved a group of borrowers represented by Michael Grdina, an attorney in Ohio, who desired to obtain financing for the construction of a series of projects that will be referred to as the Chapel Hill complex. Subsequent to a telephone conversation between Mr. Grdina and Ms. Harnagel, Ms. Harnagel sent a letter dated November 16, 1989. This letter reflected that Respondents represented a Trust and that the Trust was interested in participating in a joint venture with Mr. Grdina's clients. The letter contained certain requirements imposed by the Trust and provided, in part, as follows: A Seventy-Five Hundred ($7,500.00) application fee be placed in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring Chapel Hill Commerce Center an acceptable commitment. If the commitment is not acceptable the monies are refundable. In response to that letter of November 16, 1989, Mr. Grdina wrote Ms. Harnagel a letter on behalf of his clients and enclosed a check for the sum of $7,500. Mr. Grdina's letter became the agreement between the parties as to the status of the $7,500 deposit paid to Respondents by Mr. Grdina. That letter omitted the language in Ms. Harnagel's letter of November 16, 1989, pertaining to the use of the deposit "for prudent business expenses". Mr. Grdina's letter of December 1, 1989, provided, in part, as follows: By wire transfer to Meridian's trust account the entities [Mr. Grdina's clients] have placed with you a Seven Thousand Five Hundred Dollars ($7,500.00) refundable good faith deposit. If an entity accepts a proposal for funding from sources identified by you, and such entity does not close the transaction for reason other than the fault of the lender, the good faith deposit will be forfeited as liquidated damages for expenses and fees incurred in the transaction. The initial agreement between Harnagel and Grdina contemplated that Harnagel's Trust would provide financing for Grdina's clients. By letter dated February 23, 1990, Mr. Grdina accepted the offer that the transaction be modified so that the Trust would secure 100 percent of the loan by a lending institution by depositing with the lending institution certificates of deposit. As additional consideration to the Trust, the Trust would become entitled to 25 percent equity participation in the construction project. The letter of February 23, 1990, did not modify the status of the deposit paid by Mr. Grdina on behalf of his clients. The loan to Mr. Grdina's clients did not close because the lending institution with whom Ms. Harnagel and Victory Trust dealt would not fund the loan. Thereafter, Mr. Grdina demanded return of the $7,500 deposit. As of the date of the formal hearing, that deposit has not been refunded. Although Ms. Harnagel argues that she was entitled to keep the deposit, that argument is without merit since none of the conditions precedent to her entitlement to the deposit occurred. CUSTOMER OVERCHARGE Respondents admitted that two customers were charged brokerage fees, origination fees, and/or discount fees which were greater than those disclosed on the Good Faith Estimates. On the Morris transaction, a fee of $450.80 was estimated, but the fee actually assessed at closing was $2,240, an overcharge of $1,790. On the Rosen transaction a fee of $1,773 was estimated, but the actual fee assessed was $1,871.50, for an overcharge of $98.50. Both overcharges resulted from charges imposed by a lending institution and neither overcharge resulted in inappropriate payments to Respondents. WALL STREET JOURNAL ADVERTISEMENT Respondents placed an advertisement in the Wall Street Journal on February 16, 1990. This advertisement did not contain the address of Meridian as required by law. The deletion of Meridian's address was the fault of the Wall Street Journal. INVESTIGATION OF LENDING SOURCE Ms. Harnagel testified without contradiction that she made efforts to verify the reliability of the Victory Enterprises Trust and its principals. She learned of this potential lender through an advertisement the Trust had placed in the Miami Herald. Neither the Trust or the principals were required to be licensed in Florida. Her efforts included having her attorney and her bank officer make inquiries to verify the reliability of the proposed lender. Petitioner argues that Respondents should have made further inquiry after the loan to the Golden Hills borrowers was not forthcoming from this lender. Petitioner has failed to establish by clear and convincing evidence that Respondents breached any standards imposed upon them to investigate the reliability of lenders so as to prove that Respondents are incompetent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all licenses and registrations issued either to Joan N. Harnagel or Meridian Mortgage Group, Inc., be revoked. It is further recommended that an administrative fine be imposed against Joan N. Harnagel in the amount of $25,000. It is further recommended that a separate administrative fine be imposed against Meridian Mortgage Group, Inc., in the amount of $25,000. DONE AND ENTERED this 22nd day of July, 1993, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of July, 1993.
Findings Of Fact 1. Prior to September 1, 1986, mortgage brokers in Florida who worked for several companies were issued separate licenses for each company. P. Ex. 10, P. The Respondent, Dennis C. Young, had several such licenses, the first having been issued on March 26, 1982. Id., P. 9. Prior to September 1, 1986, mortgage broker's licenses were issued for only one year and expired annually on August 31st. P. Ex. 10, P. 9-10. During the period from September 1, 1985, through August 31, 1986, the Respondent had only one mortgage broker license HA 0006667 as an additional broker for American Financial Consultants of Central Florida. R. Ex. 1, P. Ex. 10, P. 10-11. That license expired on August 31, 1986. Id. at P. 14. On January 22, 1986, the Respondent applied to the Petitioner, the Department of Banking and Finance, Division of Finance, for registration as a mortgage broker under Chapter 494, Florida Statutes. P. Ex. 7. This application was for a license with Southern States Mortgage Company. P. Ex. 10, P. 12. On April 18, 1986, Petitioner denied the application of the Respondent for registration as a mortgage broker. The basis of the denial was a finding by the Petitioned of a number of statutory violations by the Respondent as a mortgage broker for American Financial Consultants of Central Florida. P. Ex. 10, P. 13. On July 11, 1986, or shortly thereafter, the Petitioner advised the Respondent that his request for a formal administrative hearing with respect to the denial of his application for registration as a mortgage broker was denied because not timely filed, and advised the Respondent that he had thirty days from July 11, 1986, in which to file an appeal, if he so desired, to the Fifth District Court of Appeal. The Respondent contacted the attorney for the petitioner. The attorney for the petitioner in fact told the Respondent that he could reapply for a license, and if his application was again denied, the Respondent could then seek a formal administrative hearing and judicial review. The Respondent was also told that the petitioner would not forego or abate the final order denying the application, but was advised to "let sit" the final order denying his January 22, 1986, application. T. 100. The Respondent did not file a judicial appeal from the July 11, 1986, order. During the period from September 1, 1986, to November 12, 1987, the Respondent was not a licensed mortgage broker licensed by the Department of Banking and Finance, Division of Finance. P. Ex. 6, P. Ex. 10, P. 15. Between January 22, 1986, and June 12, 1987, the Respondent did not file any application with the Petit loner for licensure as a mortgage broker. P. Ex. 10, p. 15. In about December, 1986, the Respondent was hired by Independence One Mortgage Corporation as a builder's loan representative for a builder that Independence One Mortgage Corporation was then servicing. The builder was building and selling homes in the Williamsburg subdivision. T. 33, 35-37, 64. The Respondent's office was located at the building site. Independence One Mortgage Corporation hired the Respondent to offer to the clients of the builder the type of mortgage that Independence One Mortgage Corporation was then offering, and in so doing, to handle all aspects of negotiating mortgage loan commitments, from initial interview, making quotes of daily mortgage rates to the builder's customers, and following up on the application from the beginning to closing of the mortgage. T. 37. The Respondent told Independence One Mortgage Corporation that he held a current valid mortgage broker's license with Investor's Home Mortgage Company and showed the agent of Independence One a "license" that the Respondent claimed was his and was then valid. T. 37. This statement was untrue. The agent for Independence One Mortgage Corporation who hired the Respondent had known the Respondent several years earlier as an aggressive mortgage solicitor. T. 36 Independence One Mortgage Corporation thought that the Respondent then held a valid mortgage broker's license, and would not have hired the Respondent if he had not represented that he was a licensed mortgage broker. T. 37-38. While employed by Independence One Mortgage Corporation, the Respondent negotiated mortgage loans. He quoted mortgage rates to prospective borrowers, received and processed applications from prospective borrowers, prepared good faith estimates of settlement charges, and closed mortgage loans. T. 42-56, 96-97; P. Exs. 1, 2, 4, and 5. During his employment with Independence One Mortgage Corporation, the Respondent negotiated over 40 mortgage loans. T. 55. From December, 1986, to May, 1987, the Respondent was paid a salary by Independence One Mortgage Corporation. In May, 1987, due to a lack of mortgage demand, Independence One placed the Respondent on a commission basis only. About two weeks later, the Respondent resigned his employment with Independence One. T. 55-57, 65-66. At about the same time, Independence One Mortgage Corporation learned that the Respondent did not have a valid mortgage broker's license. T. 57-59. On June 12, 1987, the Respondent filed another application for licensure as a mortgage broker. P. Ex. 9. In answer to question number 6, which asked whether he had ever had his license "denied, suspended or revoked," he answered no. This answer was not true. P. Ex. 10, P. 16. The Respondent testified that he answered question number 6 in the negative because he thought that he would be afforded a right to contest the previous denial of his application if the new application was denied. At the time that the Respondent stated in his application that he had never had a license previously denied, the Respondent knew that statement was not true. He knew that he might again reapply and in such reapplication contest the basis for denial, but he also knew that the denial of the first application was final and that he had lost his right to appeal. See findings of-fact 5 through 8. If the Respondent had answered yes to question 6, he was required by the application form to identify the agency that denied the application for licensure and to provide the names of the complaining parties. P. Ex. 9. By failing to truthfully answer question 6, the Respondent failed to notify the Petitioner of the existence of the prior dispute concerning his licensure. This was a material misstatement of fact. If the Respondent had been candidly pursuing the option of making a second application in order to gain another appeal right, he would have candidly disclosed to the Petitioner in his second application that a prior application had been denied. In that manner, the Respondent would have laid the issue squarely on the table. By answering no to question 6, the Respondent affirmatively sought to mislead the Petitioner so that the prior basis of denial might not become the basis for denial of the second application. The Petitioner construes the provisions of Chapter 120, Florida Statutes, as mandating that a license be issued if not denied within ninety days from the filing of the application. P. Ex. 10, pp. 20-23. During the period in which the June 12, 1987, application was pending, the Petitioner did not independently verify the answers to questions on the license application, and assumed that the answer to question 6 was correct. P. Ex. 10, pp. 16 and 20. Had it known that the Respondent had previously been denied a mortgage broker's license, the Petitioner would have denied the application of June 12, 1987, for a material misrepresentation of facts. P. Ex. 10, P. 23. For these reasons, and since the ninety day period had expired, the Petitioner issued mortgage broker license HA 261088342 to the Respondent on November 12, 1987. P. Ex. 6. In July, 1987, Colony First Mortgage Corporation was looking for a branch manager for its Mount Dora, Florida, office. The company wanted a branch manager who held a mortgage broker's license to solicit business, as well as to hire and supervise other loan officers. T. 25. The Respondent applied for the job, and Colony First Mortgage Corporation asked for his mortgage broker's license. T. 93. The Respondent told Colony First Mortgage Corporation that he had a mortgage broker's license. T. 26. This statement was untrue. In July, 1987, the Respondent was employed by Colony First Mortgage Corporation as a branch manager in the Mount Dora, Florida, office. T. 24-25, 59-60. Colony First Mortgage paid the Respondent a salary with an override of the branch's mortgage loan production. It was also possible for the Respondent to have been paid a small commission for mortgage loans that he might personally have solicited, but there is no evidence in the record (one way or the other) that any commissions were ever paid or not paid. T. 26, 28. The Petitioner requires that licensed mortgage brokers who change employment file an "application for endorsement" to change the registration of that license to the new employment. T. 72# At some time shortly before August 11, 1987, the Respondent filed with the Petitioner an "application for endorsement" for endorsement of a mortgage broker's license to work for Colony First Mortgage Corporation. P. Ex. 8. Colony First Mortgage Corporation required the Respondent to file this application as a condition of the Respondent's employment. The application bears the signature of a William D. Tharpe, dated August 11, 1987, representing himself as the principal broker for the Respondent, and stating that the Respondent was employed on July 6, 1987, as a mortgage broker. The Respondent submitted the application for endorsement 50 that he would be licensed as a mortgage broker working as a mortgage broker for Colony First Mortgage Corporation. The Respondent characterized his own activity at Colony First Mortgage as operation as a mortgage broker for Colony First Mortgage. T. 10. But he denied that he personally solicited loans, T. 109, and characterized his work as supervision of loan officers, who did solicit and negotiate mortgage loans. T. 109-111. In his employment at Colony First Mortgage, the Respondent hired staff, since all prior staff had left, and trained and supervised loan officers. T. 110-111. There is no evidence that the Respondent personally solicited or negotiated mortgage loans. Toward the end of October, 1987, Colony First Mortgage learned that the Respondent did not have a mortgage broker's license. The company removed the Respondent from his manager's position and subsequently terminated his employment. T. 27# Directly under the heading of the Respondent's application for endorsement is the statement: "Use this form only if currently licensed." Two lines under that statement is the following statement in bold print: "CURRENT LICENSE MUST BE RETURNED WITH THIS APPLICATION." The Respondent signed the form and stated in part I of the form that he had license number HA 001637. Another license number appears above the first number, and is HA 0016329. P. Ex. 8. The application for endorsement is used only if the applicant has a current license. Neither license number was a valid license currently or previously held by the Respondent. Thus, the representation on the application for endorsement, P. Ex. 8, as to license numbers was untrue. T. 114. The Respondent admits placing the first number on the form and denies placing the second number on the form. The Respondent asserts that the first number he placed on the form was his guess as to the correct number, and that he thought the petitioner would correct it if it were incorrect. He further asserts that he represented that he was licensed because he thought that since he had reapplied, the prior denial of licensure was still a pending issue, and that he could rely on earlier licenses that had expired. He further stated that he intended the number to represent the number of one of his earlier licenses. T. 115. The Respondent did hold license number HA 0016329, which expired on August 31, 1985, and license number HA 0006667, which expired on August 31, 1986. R. Ex. 1 and 2. It is credible that the Respondent was trying to use one of his expired license numbers, notably, the one that expired on August 31, 1985, HB 0016329, which is similar to the number he used, HA 001637. But it is not credible that the Respondent thought that he was "currently licensed" as required by the form. The Respondent knew that his prior licenses expired automatically each year. T. 116. He knew that his January 22, 1986, application had been denied. He knew he was not currently licensed. T. 102. He only had pending an application for a license, and had no currently active license number. Thus, it is concluded that the Respondent knew that he did not have a valid license number when he placed the number HA 001637 on the application for endorsement. This was a material misstatement of fact. See findings of fact 38, 39, and 47. The Respondent denies that he placed the second license number HA 0016329 upon the application. The second series of numbers is written in larger script than the first one. While there are some similarities in some of the numbers compared to other numbers written by the Respondent on the application (the 6 is the same as the 6 in the Respondent's social security number and telephone number, the 2 is the same as the first 2 in the telephone number), there is insufficient evidence in this record to conclude that the Respondent placed the second license number on the application. P. Ex. 8. The Petitioner relied upon the statements in the application for endorsement, P. Ex. 8, when it issued the mortgage broker's license to the Respondent on November 12, 1987. p. Ex. 10, P. 20.
Recommendation For these reasons, it is recommended that the State of Florida, Department of Banking and Finance, Division of Finance, enter its final order finding that Dennis C. Young committed the violations described above and revoking license number HA 261088342 issued to him on November 1, 1987. DONE and ENTERED this 11th day of October, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of October, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2273 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix are adopted as additional findings of fact. Findings of fact proposed by the Petitioner: 1. The phrase "due to fiat of operation of law" is a conclusion of law, not fact. 2, 5, 6, 7, 22, 23, 39, 46 (second sentence) 49, 50, and 55. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 14 (first sentence). The fact that a witness "testified" in a certain way is not a relevant finding of fact. The subject matter of the Respondent's testimony, that he in fact filed another application in May or June of 1986, is rejected as not proven by credible evidence. The Department had no evidence of any application between January 22, 1986, and June 12, 1987. The testimony of the Respondent on this point was not supported by a copy of the alleged application. Due to the Respondent's evasiveness as to other material points at issue in this case, the testimony of the Respondent is rejected as not credible and unsupported. Findings of fact proposed by the Respondent: 1.C. This proposed finding of fact is contrary to the credible evidence. 1.E. While these proposed findings of fact are true, they are irrelevant. A "mortgage broker" is defined by law (section 494.02(3), F1a. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." The relevant issue is what the Respondent in fact did, not what the titles on the form said. 1.F-H. These proposed findings of fact are contrary to the credible evidence. 2.D.and G. A "mortgage broker" is defined by law (section 494.02(3), Fla. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." As discussed in the conclusions of law, the Respondent indirectly negotiated mortgage loans through his supervision of loan officers at Colony First Mortgage Corporation. 2.F. This proposed finding of fact is contrary to the credible evidence. See P. Ex. 8. 3.A.1-3. The Respondent admitted that Mr. Berkowitz told him to "let sit" the denial of his January 22, 1986, application, and the Respondent admitted that Mr. Berkowitz, on behalf of the Petitioner, would not abate or forgo the decision of denial. T. 100. Thus, it is clear that the Respondent knew that his application had been denied. This, coupled with receipt of P. Ex. 7, makes any contrary belief not credible. 3.B.4. There was intent to deceive. The Respondent knew he was not currently licensed. He knew the earlier license (the one which he tried to place by number on application) had expired. He knew that his last application had been finally denied. He only had a pending application (June 12, 1987), and had no decision on that yet. The Respondent told Colony First Mortgage Corporation that he was currently licensed. If the Respondent had no intent to deceive, he would have clearly mentioned on the application for endorsement the denial of his January 22, 1986, application, and his theory of the continued "existence" of his expired license. COPIES FURNISHED: Elise M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller 400 West Robinson Street, Suite 501 Orlando, Florida 32801 Dennis C. Young 4050 Gallagher Loop Post Office Box 771 Casselberry, Florida 32707 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
The Issue The central issue in this case is whether Petitioners are entitled to recover against the Mortgage Brokerage Guaranty Fund and, if so, the priority of payment to be applied to their claim. A secondary issue is whether claimants who gave notice prior to Petitioners are entitled to payment or whether they have waived or abandoned their claims.
Findings Of Fact Based upon the stipulations filed by the parties and the documentary evidence, I make the following findings of fact: The Mortgage Brokerage Guaranty Fund (the "fund") was created in 1977 to provide recovery for any person who meets all of the conditions prescribed in Section 494.043, Florida Statutes. The Department is charged to disburse the fund according to Section 494.044, Florida Statutes. Section 494.043, Florida Statutes, (Supp.1986) provides: Any person who was a party to a mortgage financing transaction shall be eligible to seek recovery from the Mortgage Brokerage Guaranty Fund if: The person has recorded a final judgment issued by a Florida court of competent jurisdiction in any action wherein the cause of action was based on s. 494.042(2); The person has caused to be issued a writ of execution upon such judgment and the officer executing the same has made a return showing that no personal or real property of the judgment debtor liable to be levied upon in satisfaction of the judgment can be found or that the amount realized on the sale of the judgment debtor's property pursuant to such execution was insufficient to satisfy the judgment; The person has made all reasonable searches and inquiries to ascertain whether the judgment debtor possesses real or personal property of other assets subject to being sold or applied in satisfaction of the judgment, and by his search he has discovered no property or assets or he has discovered property and assets and has taken all necessary action and proceedings for the application thereof to the judgment, but the amount thereby realized was insufficient to satisfy the judgment; The person has applied any amounts recovered from the judgment debtor, or from any other source, to the damages awarded by the court. The person, at the time the action was instituted, gave notice and provided a copy of the complaint to the division by certified mail; however, the requirement of a timely giving of notice may be waived by the department upon a showing of good cause; and The act for which recovery is sought occurred on or after September 1, 1977. Recovery of the increased benefits allowable pursuant to the amendments to s. 494.044 which are effective October 1, 1985, shall be based on a cause of action which arose on or after that date. The requirements of paragraphs (1)(a),(b),(c),(d), and (e) are not applicable if the licensee or registrant upon which the claim is sought has filed for bankruptcy or has been adjudicated bankruptcy; however, in such event the claimant shall file a proof of claim in the bankruptcy proceedings and shall notify the department by certified mail of the claim by enclosing a copy of the proof of claim and all supporting documents. Pertinent to this case, Section 494.044, Florida Statutes, (Supp. 1986) Provides: Any Person who meets all of the conditions Prescribed in s 494.043 may apply to the department for payment to be made to such person from the Mortgage Brokerage Guaranty Fund in the amount equal to the unsatisfied portion of that person's judgment or judgments or $20,000, whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages. As to claims against any one licensee or registrant, payments shall be made to all persons meeting the requirements of s. 494.043 upon the expiration of 2 years from the date the first complete and valid notice is received by the department. Persons who give notice after 2 years from the date the first complete and valid notice is received and who otherwise comply with the conditions precedent to recovery may recovery from any remaining portion of the $100,000 aggregate, in an amount equal to the unsatisfied portion of that person's judgment or $20,000, whichever is less, but only to the extent and amount reflected in the judgment as being actual or compensatory damages, with claims being paid in the order notice is received until the $100,000 aggregate has been fully disbursed. * * * (3) Payments for claims shall be limited in the aggregate to $100,000, regardless of the number of claimants involved, against any one mortgage broker or registrant. If the total claims exceed the aggregate limit of $100,000, the department shall prorate the payment based on the ratio that the person's claim bears to the total claims filed. The first notice received by the Department alleging a claim against Barry Koltun or Oakland Mortgage Company was filed on August 13, 1984. This notice was filed on behalf of John and Mary Ahern. The Department utilized this notice in computing the two-year period addressed in Section 494.044(1), Florida Statutes. For purposes of recovery from the fund, the individual mortgage broker (Koltun) and the company qualified by the broker (Oakland) are treated as one. Petitioners filed an initial notice of their claim against the fund on October 16, 1985. This claim was asserted against Oakland Mortgage Company, Barry Koltun and Robert Tamarro. On January 23, 1987, the Department issued a "Notice of Intent to Grant or Deny Payment from the Mortgage Brokerage Guaranty Fund Re Oakland Mortgage Company." This notice outlined the status of some thirteen claims which had given notice of their civil actions against the licensee within the two year period. Two claimants, Kusich and Szafran, had provided all documentation required by Section 494.043, Florida Statutes; consequently, they were approved for payment. The Petitioner's claim was denied because they had allegedly failed to satisfy the statutory requirements of Section 494.043, Florida Statutes and had failed to do so prior to August 12, 1986 (the end of the two year period). The Petitioners timely filed a petition for formal Chapter 120 proceedings challenging the Department's denial of their claim for payment. Subsequent to January 23, 1987, Petitioners completed the conditions precedent for recovery and submitted all documentation required to satisfy the requirements of Section 494.043, Florida Statutes. On July 6, 1987, the Department received notice and a claim from the Intervenors. This claim satisfied the requirements of Section 494.043, Florida Statutes. Of the thirteen original claims filed, only two claimants (Kusich and Szafran) completed all conditions of Section 494.043, Florida Statutes, on or before August 12, 1986.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Banking and Finance, Division of Finance, enter a Final Order finding the claims of Rusich and Szafran eligible for payment, and that the claim of Petitioners be evaluated as part of the second class established in Section 494.044(1), Florida Statutes, DONE and RECOMMENDED this 1st day of December, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of December, 1987. COPIES FURNISHED: Paul A. Zeigler, Esquire Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A. Suite 1010, Monroe Park Tower 101 North Monroe Street Tallahassee, Florida 32301 Paul C. Stadler, Jr., Esquire Department of Banking and Finance Division of Finance Suite 1302 The Capitol Tallahassee, Florida 32399-0350 Joseph Degance, Esquire 1995 East Oakland Park Boulevard Suite 101 Fort Lauderdale, Florida 33306 Jack F. Weins, Esquire Boca Bank Building Suite 200 855 South Federal Highway Boca Raton, Florida 33432 Morey Udine, Esquire 3111 University Drive Suite 425 Coral Springs, Florida 32065-6930 Hon. Gerald Lewis Department of Banking and Finance Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 =================================================================
