Findings Of Fact The facts which the Department asked Respondents to admit by Petitioner's Second Request for Admissions (Pet. Ex. 3) and Paragraphs 1-32 and each odd-numbered paragraph from 33-117, inclusive, of Petitioner's First Request for Admissions (Pet. Ex. 2) are conclusively established. Rather than recite all of those undisputed facts as findings, this Recommended Order will summarize those facts as necessary and make additional findings on the relatively few disputed issues of fact which were raised during the final hearing. The Financial Transactions Between February 1, 1980, and October 31, 1982, Davide, Inc., brokered 43 real estate mortgage loans which consisted of a wraparound second mortgage securing a promissory note in an amount equal to (1) the amount of "new money actually advanced to the borrower out of the wraparound mortgagee's pocket, plus the amount of the principal balance remaining on the first mortgage. There was no evidence how the interest rate on any of the 43 wraparound mortgage loans compared to the interest rate on the corresponding first mortgage loan. All 43 loans included, as an addendum to the wrap- around mortgage, the following agreements between the wrap- around mortgagee and the borrower: Mortgagor shall pay the taxes and insurance deposits required by Senior Mortgagee. The Mortgagor shall comply with all of the terms and provisions of the Senior Mortgage other than with respect to the payments of the principal and interest due. If the Mortgagor shall fail to so comply with all of the terms, provisions and conditions of the Senior Mortgage so as to result in a default under it (other than with respect to pay ments due upon the note secured by the Senior Mortgage) that failure on the part of the Mortgagor shall constitute a default under this mortgage and shall entitle the Mortgagee, at its option, to exercise any and all rights and remedies given the Mortgagee in the event of a default under this Mortgage. The Mortgagee agrees to pay to the holder of the Senior Mortgage the unpaid principal balance of the mortgage together with all interest accruing under it as and when required by the terms of the Senior Mortgage; therefore, by paying the constant monthly installments each provided to be paid from the date of funding this mortgage to and including the date the Note secured hereby becomes due at which time the Mortgagee's payment obligation shall terminate. At such time of termina tlon of the Mortgagee's obligation, the balloon balance due upon [sic] the Note secured hereby shall be credited for an amount aggregating the principal then owing upon the Senior Mortgage plus all sums which were paid as principal to the Senior Mortgage by the Mortgagee. All those payments provided to be paid by the Mortgagee pursuant to the provisions of paragraph 3 above shall be made by the Mortgagee before the expira tion of the applicable grace periods provided for those payments as contained in the Senior Mortgage. The Mortgagee does not assume any of the obligations of the Mortgagor under the Senior Mortgage except as provided above with respect to principal and interest payments due after this mortgage has been funded. If the Mortgagee shall default in making any required payment of principal or interest under the Senior Mortgage, the Mortgagor shall have the right to advance the funds necessary to cure that default and all funds so advanced by the Mortgagor, together with interest at the rate of 18 percent per annum shall be credited against the next installment(s) of interest and prin cipal due under the Note secured by the mortgage. The Mortgagor and the Mortgagee covenant and agree not to enter into any agreement with the holder of the Senior Mortgage modifying or amending any of the provisions dealing with payment of princi pal or interest under the Senior Mortgage without the prior written consent of the other. All 43 loans are short-term loans which are designed, by their terms, to become due before the first mortgages were, by their payment terms, to be paid in full. The loan application statements and closing statements related to each of the 43 wraparound mortgage loans show the first mortgage balance as, respectively, part of the amount of the loan and part of the disbursements to the borrowers. But both make clear that those items which refer to the amount of the balance on the first mortgage which the wraparound mortgagee agreed, in the addendum, to pay during the life of the wraparound mortgage. The first mortgage balances were not paid off by the wraparound mortgagee, nor was cash in the amount of the first mortgage balance disbursed to the borrower out of the wraparound mortgagee s pocket. In each of the 43 wraparound mortgage loans, the mortgage brokerage fee or commission would exceed the maximum allowable by law if computed only on the "new money," but would not exceed the maximum allowable by law if computed on the total face amount of the promissory note secured by the wraparound mortgage. If they were excessive fees, the total amount of the excess would be $22,508.29, and the Department's report of examination (Pet. Ex. 1) would identify the amount of the excess that should be refunded to each borrower. Finally, the mortgage brokerage fee actually charged on each of the 43 loans much more closely approximates what would be the maximum fee if computed on "new money" than what would be the maximum fee if computed on the face amount of the promissory note secured by the wraparound mortgage. B. The Department's Actions The Department apparently has not had the occasion to apply the law, which is now codified as Section 494.08(3), Florida Statutes (1983), and the Department's rules promulgated under it, to precisely the financial transactions shown by the evidence in this case. But since at least 1973, the Department consistently has interpreted the law and rules in various cases involving wraparound mortgages as requiring the maximum mortgage brokerage commission or fee to be computed on the new money" rather than on the total amount of the promissory note secured by the wraparound mortgage. In 1979, the Department considered two similar financial transactions: One was a specific refinancing wraparound second mortgage in which the wraparound mortgagee was obligated to make payments due on the first mortgage "out of sums paid hereunder"; the other was the generic purchase money wraparound second mortgage transaction in which the seller/wraparound mortgagee remains liable on the first mortgage. The Department concluded that, in both cases, the maximum fee should be computed on the "new money." The conclusion in the latter case was based upon the complete absence of any assumption by the wraparound mortgagee of a preexisting indebtedness of the borrower on the first mortgage. In the case of a purchase money wrap- round second mortgage, the wraparound mortgagee always was and simply remains liable on the first mortgage. The conclusion in the former case is based upon a determination: (1) that the wraparound mortgagee's assumption of the obligation to pay the first mortgage was not unconditional, but rather was conditioned upon the wrap- around mortgagee's receipt of payments on the wraparound mortgage; and (2) that the first mortgagee acquired no cause of action against the wraparound mortgagee. The Department acknowledged at the time that its interpretation was based upon the two sets of facts under consideration and that the Department was not foreclosing the possibility of reaching the opposite conclusion on other sets of facts. In recent years, Department personnel consistently have advised mortgage brokers of its position regarding computation of maximum fees on wraparound mortgage loans, as summarized above. Department personnel have on occasion attended meetings of Florida mortgage brokers in Miami and elsewhere in which the subject has been discussed and the Department's position publicly stated. There is no evidence whether Davide or any representative of Davide, Inc., attended any of those meetings or became aware of the Department's position before June, 1982. Although Davide attended the final hearing, he did not testify. In June, 1982, the Department and Respondents began communications regarding the maximum brokerage commission or fee on wraparound mortgage loans. The Department advised Respondents that it believed the maximum fee should be computed on the "new money." C. Respondents' Response Since approximately May 5, 1981, Respondent had relied on advice of counsel that the maximum mortgage brokerage commission or fee should be computed on the entire face amount of a wraparound mortgage. Counsel qualified his opinion, acknowledging that there was no judicial construction of the statute and that his interpretation could be wrong. Counsel's opinion did not mention, and apparently did not even consider, any Department rule interpreting the statute. Rather, the opinion was based primarily upon counsel's assessment that any other interpretation of the statute would render it unconstitutionally vague and ambiguous. On or about September 27, 1982, Respondents' counsel wrote a letter to the Department and seemed to agree that Respondents would conduct an audit and refund any excess fees charged on the wraparound mortgages. The Department completed its audit on December 3, 1982, and sent Respondents a copy on December 13, 1982. The audit specified alleged excess fees charged on the 43 wrap- around mortgages and on seven straight" mortgages. (Pet. Ex. 1) Respondents' counsel responded by January 10, 1983, letter, again seeming to indicate that Respondents agreed to refund excess fees "as applicable." But by January 20, 1983, letter, Respondents' counsel again wrote the Department to advise that Respondents would refund excess fees on the seven "straight" mortgages, but not on the 43 wraparound mortgages. Based on the above facts, I find that the Department did not mislead Respondents concerning the Department's position. Specifically, Respondents were not misled by the erroneous reference in Rule 3D-40.00(3), Florida Administrative Code, to Section 494.08(4), instead of Section 484.08(3), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED THAT: Petitioner, Department of Banking and Finance, enter a final order requiring Respondents, Davide & Associates, Inc., and Salvatore G. Davide, to refund to each of the first 43 borrowers identified in the report of examination (Pet. Ex. 1) as "Mortgagor(s)" the amounts identified therein as "Overcharge" to the borrower. RECOMMENDED this 5th day of March, 1984, in Tallahassee, Florida. COPIES FURNISHED: Walter W. Wood, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Herman T. Isis, Esquire Post Office Box 144567 Coral Gables, Florida 33114 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 J. LAWRENCE JOHNSTON 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 5th day of March, 1984.
The Issue The issue in this case is whether disciplinary action should be taken against Respondents' mortgage brokerage licenses for the reasons set forth in the Order to Cease and Desist, Administrative Complaint and Notice of Rights filed by Petitioner on January 18, 1989 (the "Administrative Complaint".) The Administrative Complaint alleges that Respondents violated the following statutory and rule provisions: Section 494.055(1)(b), Florida Statutes, by charging borrowers closing costs that were in excess of the actual amount incurred by the mortgagor; Section 494.08(3), Florida Statutes, and Rule 3D- 40.008(9), Florida Administrative Code, by charging excess brokerage fees; Section 494.055(1)(b), Florida Statutes, by engaging in deceit, misrepresentation, negligence or incompetence in mortgage financing transactions and for breach of the fiduciary duty of a broker as a result of the manner in which escrow accounts were handled; Section 494.055(1)(h), Florida Statutes, due to the misuse, misapplication or misappropriation of funds, mortgage documents or other property entrusted to Respondents as a result of the excess charges assessed to borrowers and the misuse of monies in the escrow accounts; Rule 3D- 40.006(6)(a), Florida Administrative Code, for failing to maintain trust, servicing and escrow account records in accordance with good accounting practices; and Section 494.0393(2), Florida Statutes by failing to operate the company under the full charge, control and supervision of a principle who is a licensed mortgage broker.
Findings Of Fact At all times pertinent hereto, Respondent All States Mortgage and Investment Corporation ("All States Mortgage") was licensed by the Department as a mortgage brokerage company having been issued License Number HB-592582215. All States Mortgage had its principle place of business in Davie, Florida. All States Mortgage did not typically engage in traditional "mortgage broker functions." Instead, it generally worked with other mortgage brokers in providing funds for loans brought to All States Mortgage by other brokers. At all times pertinent hereto, Respondent, Lynn F. Smith ("Smith") was a licensed mortgage broker having been issued License Number HA-265-72-0045. Smith was the principle mortgage broker for All States Mortgage. Smith has been the principle mortgage broker for All States Mortgage since its inception and has been registered with the Department as a licensed mortgage broker since before a license was issued to All States Mortgage. In addition to being the principle broker for All States Mortgage, Smith was an officer and director of the company and had responsibility for the direction, control, operations and management of the company. In May of 1988, Respondents were affiliated with a licensed consumer finance company known as All States Finance Company. Currently, both All States Mortgage and All States Finance are inactive and an application has been filed to transfer the license of All States Mortgage to a new company known as All States Financial Services. As a result of an audit and examination conducted by the Department in May, 1988, it was determined that one client of All States Mortgage, Donald Salvog, was charged a brokerage fee in excess of the maximum allowable fee under Chapter 494. After notification by the Department, Respondents admitted that they inadvertently charged an excess fee to Mr. Salvog and Respondents immediately proceeded to refund the excess of $82.63 to the customer. There is no evidence that Respondents charged any other customers with a brokerage fee in excess of the maximum allowed under Chapter 494. In a number of the individual mortgage transactions in which it was involved, Respondents charged a standard credit report fee of $25.00 to the borrowers. The following chart reflects the individual loan files where such a fee was charged and the total amount of the invoices in the respective loan file to support the charges. Borrower's Name Cost per Closing Stmt. Cost per Invoices Roland Sagraves $25.00 $3.25 John Murphy $25.00 $3.25 Donald Salvog $25.00 $2.95 Harry Walley $25.00 $2.57 Raymond Parker $25.00 $5.14 Shateen/Lawrence $25.00 $5.75 James Arnold $25.00 $3.94 Richard Pope $25.00 $5.04 James Smith $25.00 $6.50 9. In four of the nine customer files listed in Findings of Fact 8 above, a "standard factual" credit report was included in the file. The typical cost for a "standard factual" is $45.00. No invoices were included in those files to reflect this cost. In obtaining credit reports for an individual mortgage transaction, Respondents did not generally order a credit report from an existing service. Instead, All States Mortgage had an on-line computer terminal with a direct phone modem linked to the individual credit reporting agency's computer data base. An employee of All States Mortgage, usually Burton Horowitz, used this computer link-up to conduct a credit report on the borrower. "Standard Factual" reports were ordered from existing services as necessary to supplement the computer search. The standard $25.00 fee charged by All States Mortgage was based upon an estimate of the overhead and indirect costs associated with producing credit reports in this manner. The overhead and indirect costs involved in obtaining credit reports as described in Findings of Fact 10 include the cost of leasing the equipment, the labor involved in obtaining the computer report (it typically takes an operator 30 minutes to obtain the credit reports) and the cost of the materials involved in producing a copy of the report. The standard $25.00 fee charged by All States Mortgage was not based on a specific allocation of the indirect costs associated with producing a particular report, but, instead, was simply based upon an estimate of the costs involved. During the course of its operations, All States Mortgage would periodically receive funds that were to be held in escrow. These escrow funds were kept in an interest-bearing account that was used by All States Mortgage and All States Finance. (This account is hereinafter referred to as the "Commingled Account.") The escrow funds in this Commingled Account were mixed with other funds of All States Mortgage as well as money belonging to All States Finance. Respondents contend that the escrow funds were commingled with the other funds because the companies had only one interest bearing account and that account had limited check writing ability. Respondents transferred money between the interest bearing Commingled Account and their other operating accounts on a continuous basis. At the end of each month, Respondents attempted to perform a reconciliation as to the escrow balances in the Commingled Account. On several occasions during the period from July 1987 through May 1988, the balance in the Commingled Account was less than the total funds that Respondents were supposed to be holding in escrow. No evidence was introduced to indicate that Respondents' handling of the escrow funds and/or the Commingled Account ever resulted in a loss to any of their borrowers or customers. Thus, while the evidence does indicate that, on occasion, the balance of the Commingled Account was less than the funds that should have been in escrow, the difference on each occasion was ultimately corrected in the reconciliation process. Respondents failed to use good accounting principles in the handling of the escrow funds. The Department has not adopted any rules requiring a mortgage broker to handle escrow funds in a separate account. Prior to the initiation of this Administrative Complaint, Respondents were never informed that they were required to do so. The Department's examiners prepared a schedule indicating that Respondents had diverted some of the escrow funds to their own use. However, that schedule includes several loans that had already been sold to another company on the date listed. Thus, the schedule does not accurately reflect the funds that should have been in escrow on any particular day. Although Respondent Lynn Smith was only in the office approximately fifteen percent (15%) of the time while the Department's examiners were conducting their audit in May of 1988, insufficient evidence was introduced to establish the charge that Smith was not fully supervising or controlling the actions of the employees of All States Mortgage. The unrefuted testimony of Smith indicates that she often worked non-regular hours, that she reviewed all the documents for every transaction in which All States Mortgage was involved and she supervised the work of all of the employees of the company. Extenuating circumstances in May of 1988 caused her to be out of the office more than usual during regular business hours. However, this fact alone is insufficient to establish the charge that she was not fully supervising or controlling the actions of the company.
Recommendation Based upon the foregoing Findings of Facts and Conclusions of Law it is, it is RECOMMENDED that the Department of Banking and Finance enter a final order finding the Respondents guilty of violating Sections 494.055(1)(b), (d), (f), (h) and (k) and issue a reprimand to the Respondents and impose a fine of one thousand five dollars ($1,500.00). DONE and ORDERED this 9th day of July, 1990, in Tallahassee, Florida. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1990.
The Issue The issue in Case No. 94-2065 is whether National Mortgage Bankers, Inc. violated certain disciplinary proceedings governing mortgage brokers and, if so, what penalty should be imposed. The issue in Case No. 94-2066 is whether National Mortgage Bankers, Inc. is entitled to licensure as a correspondent mortgage lender.
Findings Of Fact As of September 3, 1992, the Department of Banking and Finance, Division of Finance (Department), issued a mortgage lender's license to National Mortgage Bankers, Inc. (NMB). At all material times, NMB acted as a mortgage broker, not a mortgage lender. NMB originated mortgaged loans, which were funded by third parties. NMB's principal place of business was in Pt. Charlotte. At all material times, Sheldon Voron was employed as the chief executive officer of NMB. Business was slow for NMB during the first few months after it acquired its mortgage lending license. NMB was operated by Mr. Voron, who supervised loan officers and the processing of loan applications, and Mark Asciutto, who handled bookkeeping, payroll, and the checking accounts, including the escrow account. Mr. Asciutto left the company in September 1993. By the end of 1992, the net worth of NMB was $89,115.23, according to an audited financial statement issued on February 12, 1993. The net worth deteriorated during 1993, dropping to $63,533 by December 31, 1993, according to an audited financial statement issued on March 7, 1994. At no time did NMB ever advise the Department that its net worth was below $250,000. In early 1993, business picked up from late 1992, and NMB hired a second loan processor. Refinancing activity in early 1993 required that NMB continually add new help. At this time, the approval of uncomplicated conventional loan applications took 30-45 days, and the operation ran smoothly. But business continued to increase. From March to June, NMB opened up offices in Naples and Sarasota. A branch in office in Englewood was opened and quickly closed due to its proximity to other offices. By April, the volume of business at NMB was increasing rapidly, aided in part by the addition of government loans. An average of 75 cases monthly during the first three months increased to 125 cases in April. Employing four to five loan processors, NMB continued to hire additional employees, but soon had problems finding qualified persons, as competition in the lending business was increasing due to considerable refinancing activity. Mr. Asciutto handled the escrow account during these busy months, until another employee assumed these duties in late July or August 1994. Mr. Asciutto routinely transferred money from the escrow account to the general operating account when Mr. Asciutto determined that NMB was entitled to retain the money, such as when customers had not been responsive to inquiries from NMB employees. The only such transfer for which a specific amount was identified at the hearing was $860, which was swept from escrow to general operations by check dated April 16, 1993. As is obvious from the trend in net worth, profitability did not increase in direct proportion to increases in business volume. In fact, total income increased from $82,716.01 in 1992 to $556,907 in 1993, but net income increased only from $30,714.88 to $43,528. NMB simply could not keep up with the business, as is evidenced by the experiences of its customers. In July 1993, William Zinser read an NMB advertisement in the newspaper offering an adjustable mortgage rate and a low fixed-rate mortgage. He called the number and set up an appointment to visit the office. He met with an employee of NMB, who discussed interest rates and closing fees. She assured Mr. Zinser that it would take only about 30 days to close the loan. Mr. Zinser submitted a loan application, and the employee said NMB would be back in touch with him. Mr. Zinser waited three or four weeks and heard nothing. He called and was told that there were no problems. On two or three occasions, an NMB employee requested from Mr. Zinser a profit and loss statement or a verification of his wife's income. However, NMB had the wife's income information since the start of the loan application process and twice had received the profit and loss statements. On January 4, 1994, Mr. Zinser applied for a loan with another lender. Shortly thereafter, an NMB employee called him and said that his loan was approved. When he said that he had gone elsewhere, she reminded him that he had obligated himself to pay a $1250 fee in connection with the loan. He refused to pay. On or about July 15, 1993, Janice Hamann first contacted NMB about refinancing her home. She applied for a mortgage, and an NMB employee asked for more information. She supplied it the following day, and the employee said everything was fine. The employee said that it would probably take 4-6 weeks to close. On August 13, 1993, Ms. Hamann called NMB to check on the status of the loan application. An NMB employee said that they would probably close when she returned from a week's vacation. On August 23, Ms. Hamann called and was told to provide some additional information on her payment history. She provided the requested information by September 20. For a second time, she had to provide verification of her husband's employment. On September 18, Ms. Hamann received notification from her homeowner's insurer that they had changed her insurance, evidently to show a new loss payee. No one from NMB had told her that the loan was ready to close. A couple of months later, surveyors showed up and surveyed the property that was to have been the subject of the loan and additional property. Ms. Hamann called NMB and informed them of the mistaken inclusion of additional property. On November 22, Ms. Hamann called NMB and said that she wanted her paperwork and was withdrawing her application. Ten days later, someone from NMB called her and said they were ready to close. Ms. Hamann restated her demand for her paperwork and refused to close. A few days later, she received a letter demanding $1500 in addition to the $300 that she had paid for the credit check, survey, and appraisal. She still receives bills from the surveyor. On September 9, 1993, Richard Chadbourne contacted NMB about refinancing a mortgage. At the first office visit, he completed an application and delivered a check to NMB in the amount of $300. An NMB employee said they would contact him for more information and said it would take 30-45 days to close his loan. At the first meeting, Mr. Chadbourne stated that he wanted the 3.259 percent variable rate mortgage with a six point cap, which NMB was offering. An NMB employee said that they could get him a 3.375 percent rate. On the one or two occasions that NMB contacted Mr. Chadbourne for more information, he provided it to them immediately. Repeated calls to NMB by Mr. Chadbourne or his agent were never returned. No one from NMB ever called Mr. Chadbourne to tell him whether his loan was approved or denied, and he never withdrew his application. On September 10, 1993, Katherine Healey and her husband visited the NMB office to apply for a refinancing loan. Responding to a newspaper advertisement for a 3.375 percent interest rate, the Healeys learned that they would have to pay $1250 in fees to obtain such a low rate. They agreed to pay the sum. They were asked only for salary information and certain documentation concerning their liabilities. An NMB employee said they could lock in the quoted rate when they returned from vacation in a couple of weeks. After returning from vacation, the Healeys called NMB repeatedly, but often could not find anyone to speak to or to return their calls. When they finally talked to someone about their loan, they were told they had to pay another $100 or $150 to lock in at 3.375 percent. They continued calling NMB without much success for two months after returning from vacation. They could not get a closing date, and nothing was happening. In response to their repeated requests to lock in an interest rate, they were told only that they could not lock in until two weeks before closing. By the end of November, the Healeys applied elsewhere for a refinancing loan. Shortly after the Healeys applied elsewhere for a loan, which closed about three weeks later, they received a call from an employee of NMB, who told them that they had a closing date. They said that they had decided to obtain a loan elsewhere. The employee demanded the $1250 fee, which the Healeys had not yet paid, and threatened to sue them if they did not pay. The Healeys refused to pay the fee and were able to use the appraisal, for which they had already paid, with their new application. However, they had to pay for a second credit report. In November 1993, Wendy Harrison contacted NMB for two mortgages--one on a home in Massachusetts and one on a home in Punta Gorda. She filed mortgage applications on or about December 15, 1993, but, by mutual agreement, she withdrew her application on the Florida home. Ms. Harrison subsequently left several telephone messages that were not returned. In January, she was assigned a new loan processor, who still did not return calls. Around this time, Ms. Harrison's husband received a notice from the mortgagee on the Florida property concerning a payoff amount. The Harrisons contacted NMB and told them that this was the wrong property. Mortgage rates began to increase in January. Ms. Harrison called repeatedly on the status of her mortgage refinancing from mid-January to mid- March. A new person assumed loan processing duties on her file. She called Ms. Harrison on or about March 9 and said that the credit report raised some problems. This was the first time either Mr. or Ms. Harrison had been told that there were problems with the credit report, which NMB had received in late December. Ms. Harrison mailed the requested explanatory documents on the following day. Two weeks later, after hearing nothing, Ms. Harrison called NMB and learned that the interest rate would be 8 percent annually, which was higher than the rate in effect when she initiated the loan approval process. The NMB employee explained that the higher rate was due to the fact that the Massachusetts property was a rental property, but NMB employees had known that from the start. However, the NMB employee assured Ms. Harrison that the file was complete and being forwarded to Miami for final approval. The following day, Ms. Harrison sent a certified letter withdrawing the application and asking for the appraisal and any other services for which she had already paid. NMB received the letter on March 26. On April 5, Ms. Harrison found in her mailbox an unstamped, uncancelled envelope that had evidently been hand- delivered by an NMB employee or agent. Inside was a rejection letter backdated to March 23, so as to look like the Harrison application had been rejected before it was withdrawn. Based on customer complaints, the Department financial examiner conducted an unannounced inspection of NMB from November 15-17, 1993. In addition to discovering a violation of the minimum net worth requirement imposed upon mortgage lenders, the examiner found several violations of requirements imposed upon mortgage brokers. At no time did NMB disclose in writing that it could not guarantee acceptance into a particular loan program and could not promise any specific loan conditions or terms. When taking applications, NMB failed to disclose the nature of the mortgage brokerage fee charged by NMB. The fee varied according to the terms of the loan, and NMB only disclosed a broad range of fees at the time of the application. NMB received monies from customers, but did not record check numbers for checks used to pay vendors on behalf of specific customers. NMB thereby failed to maintain an updated record of escrow account activity on an appropriate form. In fact, NMB had the Department-promulgated form, but, as discussed below, used it improperly to try to record mortgage brokerage transactions. NMB did not maintain supporting documentation for monies paid from its escrow account on behalf of customers. NMB often used courier prepayments to pay unrelated expenses. NMB did not record the dates and amounts paid out of escrow. NMB maintained a mortgage brokerage transaction journal, but it lacked the date the customer applied for the mortgage loan, the date of disposition of the application, the total amount of brokerage fees, and the name of the lender. NMB used the Department-promulgated form for escrow account activity and tried to adapt it for mortgage brokerage transactions, but failed to include the above-cited crucial items of information. Concerning NMB's application for a correspondent mortgage broker's license, there is evidence, in at least one case, of fraud or deceit. Ms. Harrison, who was very credible, described an act of fraud or dishonest dealing in the postdating and delivery of her rejection letter. The atmosphere of incompetence and neglect that prevailed at NMB might well have left a typed letter unmailed for days or even weeks. However, an employee or other agent committed a wilful act of deceit in driving the letter out to Ms. Harrison's home and leaving it in the mailbox, rather than simply dropping it in the mail.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Banking and Finance enter a final order revoking the mortgage lender's license of National Mortgage Bankers, Inc. and denying its application for licensure as a correspondent mortgage lender. ENTERED on November 3, 1994, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on November 3, 1994. COPIES FURNISHED: Hon. Gerald Lewis Comptroller The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, FL 32399-0350 Susan E. Steinberg Assistant General Counsel Office of the Comptroller 1313 Tampa St., Suite 615 Tampa, FL 33602-3394 Sheldon Voron 775 Tamiami Tr. Port Charlotte, FL 33953
The Issue Whether Mortgage Broker License No. 3534 should be suspended or revoked under Section 494.05, F.S. At the hearing, the Respondent filed an answer to the charges in the Petitioner's Administrative Complaint, incorporating therein affirmative defenses. Rule 28-5.25(2), Florida Administrative Code, provides that the party may file an Answer which may contain affirmative defenses within 20 days of service of the Petition. Respondent's basis for late filing was inadvertence and neglect of its counsel. The Answer contained a general denial of the allegations and set forth affirmative defenses asserting lack of jurisdiction of the Petitioner to pursue its claims for alleged actions which took place on or before October 19, 1974, which was prior to the issuance of the mortgage broker license to Respondent. Further defenses included the claim that the Administrative Charges and Complaint are vague and ambiguous, that Petitioner had taken written action against Respondent without a hearing and denied it due process of law prior to the filing of the Administrative Charges and Complaint, thereby constituting double jeopardy, that Petitioner has unilaterally and without hearing denied Respondent renewal of its license, therefore denying it due process of law and claiming that petitioner is estopped from proceeding on the ground that it violated Section 494.06(5), in not keeping confidential the examination and investigation of the Respondent by giving press releases designed to influence the outcome of the hearing. The Hearing Officer permitted the late filing of the Answer and Affirmative Defenses at the hearing, over the objection of the Petitioner who claimed lack of notice as to the affirmative defenses. Respondent made a motion at the hearing to quash or abate the charges on the grounds of lack of jurisdiction on the basis set forth in its aforesaid pleading and on the grounds that Section 494.05(1) permits the petitioner only to investigate actions of licensees and not to suspend or revoke such licenses. The motion was denied by the Hearing Officer under the authority granted to deny, suspend or revoke licenses pursuant to Section 494.05, F.S. From statements of counsel at the hearing, it appears that Respondent's application for yearly renewal of its license was denied by Petitioner on September 3, 1975. However premature such a denial might have been, the question is not in issue in the instant proceeding. Nor is any purported violation by Petitioner of Section 494.06(5), concerning confidentiality of its investigations of Respondent. Both parties made opening statements and closing arguments. The Petitioner presented its case through two witnesses and submitted documentary evidence. The Respondent did not call, any witnesses. Petitioner also called Frank H. Roark, Jr. President of Respondent Corporation as a witness. Mr. Roark, after being sworn, declined to testify on the grounds of possible self-incrimination. The Hearing Officer thereupon excused the witness. Upon a showing by the Petitioner that the books and records of Respondent Corporation had been requested by Subpoena Duces Tecum and its request that Mr. Roark be required to identify the corporate books and records in his capacity as an officer of the corporation, over objection of Respondent's counsel, the Hearing Officer permitted Mr. Roark to testify for this limited purpose.
Findings Of Fact The Department of Banking and Finance of the State of Florida issued Mortgage Broker License Number 3534 to Respondent on October 10, 1974 (Petition and Answer). The transactions of the Respondent which are the subject of the Administrative Charges and Complaint, concern the purchase by investors/lenders of corporate promissory notes issued by a land development company which are secured by mortgages on its land. The purpose of selling the note is for the land development company to raise funds for the development of real property. The sales of the notes were made by Respondent to individual investors. Usually these transactions were handled through what was termed a "Master Broker" who was a middle man between the land developer and the Respondent mortgage broker which actually made the individual sales of the notes. Typical of the manner in which Respondent conducted these transactions was to enter into an agreement with an investor termed an "Application To Purchase a Mortgage" for a certain face amount at a specified interest rate with interest payable monthly and with concurrent delivery by the investor to Respondent of the stated sum under the conditions that the note would be executed, the mortgage recorded, and the note and recorded mortgage delivered to the investor-purchaser. In due course, a promissory note issued by the land development corporation (the borrower), was delivered to the investor, along with a mortgage deed to specified real property to secure the note. Some notes were payable on an interest only basis and some on a principal and interest basis. Some involved the issuance of title insurance policies and others did not. In some cases, Respondent remitted funds involved in the transaction to the "Master Broker" and in some cases directly to the land developer, less an amount retained by Respondent, ostensibly for its fees, commissions, and/or other charges. The funds were placed into escrow bank accounts when they were received from the investors by Respondent and then sometimes on the same day or in most cases several days or weeks later, the funds less the amount retained by Respondent, were forwarded on to the "Master Broker" or directly to the developer (testimony of Mr. Hunt, Petitioner's Exhibits 1, 3 & 4). Acting upon a request of the State Comptroller to have all mortgage companies examined, in the latter part of July, 1975, Mr. Lawrence W. Hunt, a Financial Examiner Supervisor of Petitioner's Division of Finance along with three assistants went to the Respondent's office to examine its records and determine from the examination whether or not violations of the Mortgage Brokerage Act had been committed. Utilizing source documents from the company records, Mr. Hunt and his associates prepared a worksheet and listed thereon various items of information gleaned from these records (Petitioner's Exhibit 1). After preparation of the worksheet, overcharges as to the 402 transactions identified in the worksheet were computed by Mr. Joseph Ehrlich, Deputy Director of the Division of Finance, solely from the worksheet obtained by the examiners (Petitioner's Exhibit No. 2). Such overcharges were computed with respect to maximum fees or commissions which a broker could charge in accordance with the provisions of Rule 3-3.08, Florida Administrative Code, in consideration of the amount of funds retained by Respondent, Mr. Hunt is not a state auditor and his examination of records did not go into the depth of an audit such a compilation of financial statements. His work consists basically of an examination which involves obtaining information from corporate records and placing it on worksheets so it can be analyzed. During Mr. Hunt's visit to Respondent's place of business, he received full cooperation of its officers and employees and found the records to be in good order. He also had no reason to question any of the entries in any of the records that he observed. Neither he nor Mr. Ehrlich had received complaints from any individual or organization about Respondent's operations prior to his visit. He did not at any time contact any of the lenders or borrowers involved in Respondent's transactions (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibits 1 and 2). On October 11, 1974, the Division of Finance issued a "Memorandum to all Mortgage Brokers" in which it was stated that it had been brought to the Division's attention that a number of mortgage brokers in transactions (such as those under consideration here), were remitting investors' funds to the land developer rather than placing the funds in an escrow account, and that such funds were being remitted in anticipation of receiving a recorded mortgage and note. The Memorandum warned that this practice could result in substantial losses to the broker in repaying investors should the land developer fail and was also in violation of the Mortgage Brokerage Act and could lead to the suspension or revocation of a license under Section 494.05, (1)(f), Florida Statutes. This section concerns placement of funds received in escrow accounts where they shall be kept until disbursement thereof is properly authorized (Respondent's Exhibit A). The Memorandum was sent to Respondent among others Mr. Hunt, during his examination of Respondent's records, found that Respondent ,had changed its escrow procedures approximately the date that the bulletin was issued and that there were no discrepancies after that date concerning escrow monies. By further correspondence in December, 1974, and May and June of 1975, Respondent's President posed various questions to Mr. Ehrlich to clarify certain aspects of escrow account requirements and received replies thereto (Respondent Composite B - Respondent's Exhibit C, D, F and G. (Note: There is no Exhibit E) In 402 separate transactions conducted by Respondent during the years 1973, 1974, and 1975, the mortgages which were purchased by the investors were delivered to the investor within varying periods from one day from the sale date until almost two months from the sale date. Forwarding of funds by the Respondent to the "Master Broker" or to the land development company was also accomplished in these transactions within varying periods of time from the sale date. These ranged from the same date as the sale to periods of a month or so thereafter, but usually on the date of delivery of the mortgage to the investor. The amounts forwarded by Respondent consisted of the face amount of the note and mortgage, less a certain amount which was retained by the Respondent (Petitioner's Exhibit 1). No effort was made by Petitioner's examiner to determine either the basis for the amount retained by Respondent or its composition. For example, he did not determine whether there were any "points" for service charges or discounts of any sort included in the retained sum. The examination was made solely on the basis of examining the business records of Respondent which did not reflect a breakdown of the retained amount. However, it could be deduced from various documents in individual investor files that certain amounts had been paid by someone unknown for title insurance premiums, recording fees and intangible taxes. The dates of mortgage delivery shown by Mr. Hunt in his worksheet were dates which he assumed were correct but he had not verified by any person the exact dates the mortgage was delivered to the investors. Neither could he ascertain from the records whether or not an investor had authorized Respondent to disburse funds at a particular time. The overcharges were determined in accordance with the formula set forth in Rule 3- 3.08, F.A.C., which is on a "gross proceeds" loan in which the borrower indicates that he wished to borrow a specified amount with all fees and charges to come out of the gross amount, thereby resulting in a reduced amount being provided to the borrower. The overcharges were computed without knowledge of whether the amount retained by the Respondent, as shown in Petitioner's Exhibit 1, included payment for state intangible tax, documentary stamps, and recording fees (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibit 1 and 2). The overcharges set forth in Petitioner's Exhibit 2 were unrebutted by Respondent and are deemed correct. In a transaction between Respondent and Cary G. Anderson, who applied for purchase of a mortgage on May 7, 1974, in the face amount of $3,500.00, the file relating to the transaction did not reflect the amount of any costs to be paid by Respondent in the matter, nor did it reveal a specific figure for brokerage fee or commission charged by Respondent. The file did reflect a bill for title insurance premium in the amount of $45.00 and recording fees in the amount off $22.25, $5.25 documentary stamps, and $7.00 for intangible tax. The amount of overcharge was $175.46. In another $2,500 transaction with Mr. Anderson, the amount remitted to the land developer was $2,075.00. The amount retained by Respondent was $425.00. Petitioner's Exhibit number 2 establishes an overcharge from this transaction of $61.37. There was no copy of the mortgage in the file and therefore no information upon which to determine the payment of intangible taxes, documentary stamps and recording fees (Petitioner's Exhibit 3). In a $5,000 transaction between Walter L. and Thelma T. Beach and Respondent with application for purchase mortgage dated July 30, 1974, a check was written on Respondent's escrow account to Kingsland Development in the amount of $4,100. The maximum allowable brokerage fee or commission under the law would have been $590.90. The amount retained by Respondent was $900.00. The mortgage indicated that documentary stamps in the amount of $7.50 and intangible tax of $10.00 were paid. Assuming that Respondent paid the intangible taxes, and documentary stamps, the excess fee charged according to calculation under Rule 3-3.08, was $281.60 (Testimony of Mr. Hunt, Petitioner's Exhibits 1, 2 and 4). In respect to the above three transactions Petitioner's examiner did not find closing statements in the file, nor did he go to the Florida title ledger or Attorney's ledger of Respondent's records. However, he had, at the outset of his investigation, asked Respondent to make available all records concerning the transactions (Testimony of Mr. Hunt).
Findings Of Fact Respondent was issued Mortgage Broker License No. 3082 on September 3, 1974 by Petitioner. Respondent conducted certain transactions under its Mortgage Broker License during the period from September, 1973 until April, 1974. Respondent found client investors who had funds which they wished to invest in mortgages which would pay a greater return in interest than the average land mortgage. The transactions involved the purchase of a promissory note from a land development corporation secured by a mortgage deed on land ostensibly owned by the developer, in which the latter reserved the right and was authorized to convey the premises to a purchaser under an installment land contract subject to the lien of the mortgage. The deed further provided that the developer would deliver to a bank as an escrow agent a copy of any such agreement for deed and a quitclaim deed which would be held in escrow unless a default was established under the mortgage deed. What the investor would receive in such cases would be the developer's assignment of an agreement for deed collateralized by the mortgage deed. The issuance of these high interest notes were for the purpose of enabling the development company to make certain improvements on the land which they were obligated to do under sales contracts. In the transactions in question, Respondent dealt through Financial Resources Corporation of Ft. Lauderdale, Florida to which he remitted the investors funds, less an amount retained for fees or commissions. The land developer/borrower would then issue the note and mortgage in the face amount of the total investment made by the investor. The detailed procedure was that when an investor inquired concerning such mortgages, Respondent would determine from Financial Resources Corporation if any were available. It was the practice of Respondent's President then to look at the land development, determine if, in fact, the land was in development and had streets and the like, and to read pertinent documents concerning the development. He would then proceed to accept the full sum of the investment from the investor pursuant to an agreement by which the investor, in consideration of the stated sum, would authorize Respondent to use its best efforts to secure collateralized promissory notes at a minimum percentage of interest on the declining balance with principal and interest payable monthly if held to maturity. Respondent would then deposit the investor's check, usually on the same day as received, and then in several days send a notice to Financial Resources Corporation authorizing it to prepare and execute a self-amortizing monthly principal and interest promissory note with quitclaim deed in the amount of the investment, together with a check representing the proceeds of the Investment less the Respondent's fee or commission, and a sum for intangible tax on the transaction. Financial would thereafter return to Respondent a copy of the note and mortgage in exchange for the funds remitted. The recorded mortgages would be sent to Respondent within a month or so thereafter. Respondent had no agreements in writing with the land developer, nor with Financial Resources Corporation. Respondent claimed that its fees for services were set by Financial Resources Corporation which usually amounted to about 12 percent of the face amount of the investment, but which was sometimes more and frequently less than that authorized under the applicable statutes and regulations. Respondent did not maintain an escrow bank account and all funds received from investors were deposited into the corporate bank account of the firm. Respondent's agreements with investors set no specific term or period of time in which the secured promissory notes were to be obtained although its president would customarily tell investors that it would take some time for the transaction to be consummated, and that they could not expect to receive the recorded mortgages right away (testimony of Mr. Montague, Petitioner's Exhibits 2-10). Respondent discontinued transactions as described above in April, 1974 because he was dissatisfied with the business. He had been informed that certain lands under some of the mortgages had not been sold until after the mortgage had been executed and that this was in violation of State law. In the fall of that year, he received a memorandum from the State Comptroller on the subject of escrow accounts, dated October 11, 1974, which warned mortgage brokers in the state concerning the practice of remitting investors' funds to land developers in anticipation of receiving a recorded mortgage and note (testimony of Mr. Montague, Respondent's Exhibit 9). In 1975,a financial examiner from Petitioner's office was sent to the office of Respondent to examine his books and records. Pursuant to that examination, it was determined that Respondent had committed various violations of Chapter 494, F.S. on certain transactions. The following findings of fact are made with respect to the transactions in question: Allegation: That Respondent took and received deposits of money from Robert E. Creighton, Hazel R. Hardesty, J. Wilfred Caron, Rose A. Hoadley, Margaret A. Gregory and Willard A. Kotthaus, in the regular course of business, and failed to immediately place such said funds in an escrow or trust account as required by Section 494.05(1) , F.S. As heretofore stated, the Respondent did not maintain an escrow trust account with respect to any of the above-stated transactions. The above- mentioned individuals had authorized Respondent to disburse the funds immediately upon receipt (testimony of Mr. Montague, Supplemented by Exhibits 3- 8). Allegation: Respondent failed to maintain adequate records in violation of Section 494.06(3), F.S., in that its files contained no written agreements on transactions with Della W. Shaw, Lantana Sheet Metal and A.C. Inc., and another transaction with Lantana Sheet Metal. The agreement between Della Shaw and Respondent, although not present in Respondent's file at the time of examination of its records by Petitioner's representative, had been executed on October 15, 1975, and presently is contained in the records of the Respondent. It had been taken out temporarily by one of Respondent's associates who also had Della Shaw as a client. Respondent had entered into two transactions with the trustee of the pension fund and profit sharing plan of Lantana Sheet Metal, one for ten thousand dollars from the pension fund and one for three thousand dollars from the profit sharing plan. At the time of these investments there were written contracts which were executed by the parties. The books and records of both the pension fund and the profit sharing fund were maintained at Respondent's office by a firm which administered both plans. The agreements pertaining to the Lantana transactions were requested and withdrawn from Respondent's files by the trustee of the Lantana funds. Consequently, they did not appear in the records of the corporation at the time of examination by Petitioner's representative (Petitioner's Exhibits 2 and 4; Respondent's Exhibit 10). Allegation: Respondent failed on numerous loan purchase agreements to establish the term for which the agreement was to remain in force before the return of the deposit for nonper- formance could be required by the investor, in violation of Chapter 3-3.06, F.A.C. The transactions in question did not involve applications for mortgage loan, but agreements to purchase secured promissory notes. Respondent's clients were investors/purchasers, not borrowers (testimony of Mr. Montague; Petitioner's Exh. 2-10). Allegation: Respondent charged and accepted fees or commissions in excess of the maximum allowable in violation of Section 494.08(4), F.S., and Chapter 3-3.08(3) and (4), F.A.C., on trans- actions involving Rosa Eichelberger, overcharge of $10.90, Lantana Sheet Metal, overcharge of $62.60; Lantana Sheet Metal, overcharge of $10.91; Rose A. Hoadley, overcharge of $9.10; and Margaret A. Gregory, overcharge of $9.10.
Findings Of Fact FHFC administers the Multifamily Mortgage Revenue Bond Program (Bond Program) as set forth in Chapter 420, Part V, Florida Statutes, and related administrative rules. Worthwhile timely filed an application in the 1999 Bond Program cycle which was assigned number 99-040 to finance a development called Heritage Apartments in Collier County, Florida. FHFC initially deemed said application to be incomplete for the reasons set forth in a letter dated February 4, 1999. Worthwhile timely filed a Petition for Formal Hearing challenging FHFC's determination that application number 99-040 was incomplete, which Petition was referred to the Division of Administrative Hearings (DOAH) and assigned Case No. 99-1518. Upon further review by FHFC and in consideration of the deposition testimony of FHFC representatives in this cause, the parties stipulate and agree that: Worthwhile's application number 99-040 was not incomplete as initially determined by FHFC; Worthwhile's application number 99-040 is complete and must now be further processed pursuant to appropriate rules and procedures; and If it qualifies after further processing, application number 99-040 is to be funded with the next uncommitted bond proceeds made available to FHFC for allocation.
Recommendation Based upon the foregoing, it is hereby RECOMMENDED that FHFC enter a Final Order which finds and concludes that: Worthwhile's application number 99-040 was not incomplete as initially determined by FHFC; Worthwhile's application number 99-040 is complete and must now be further processed pursuant to appropriate rules and procedures; and If it qualifies after further processing, application number 99-040 is to be funded with the next uncommitted bond proceeds made available to FHFC for allocation. DONE AND ENTERED this 8th day of October, 1999, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1999. COPIES FURNISHED: James C. Hauser, Esquire Skelding, Labasky, Corry, Hauser, Jolly & Metz, P.A. 318 North Monroe Street Tallahassee, Florida 32301 David A. Barrett, Esquire Barrett & Pelham, P.A. Post Office Box 930 Tallahassee, Florida 32302-0930 Brad Baker, Executive Director Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32399-1329 Stephen M. Donelan, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32399-1329 Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Tallahassee, Florida 32301
Findings Of Fact On November 15, 1976, the Outrigger Club, Inc., a Florida corporation, through its president, Ervin Freeman, and its Secretary, Joan Dimon, executed a warranty deed conveying all right, title and interest, in and to certain property located at Northeast 135th Street and Biscayne Boulevard, North Miami, Florida, to Petitioner, Biscayne South, Inc. (hereafter Biscayne South), a Florida corporation. The warranty deed was recorded with the Clerk of the Circuit Court of Dade County, Florida, on November 16, 1976. On November 22, 1976, Biscayne South executed a mortgage deed in favor of Fidelity Mortgage Investors, a Massachusetts business trust, as a second mortgage on the same parcel of land to secure the payment of a promissory note in the principal sum of $1,500,000.00 which note was made by Outrigger Club, Inc., on the same date in favor of Fidelity Mortgage Investors. On November 22, 1976, Outrigger Club, Inc., as the "borrower" executed a future advance agreement with Fidelity Mortgage Investors as "lendor". The future advance agreement provides for the advancement of the sum of $1,500,000.00 to be secured by a prior mortgage dated October 27, 1972, executed by Outrigger Club, Inc., in favor of Fidelity Mortgage Investors, which mortgage provided for future advances. On November 22, 1976, a construction loan and disbursement agreement was executed by the parties thereto which provided that the $1,500,000.00 advance be paid to Miami National Bank as disbursement agent for the benefit of Biscayne South. On November 23, 1976, the mortgage deed and the future advance agreement were recorded in the public records of Dade County, Florida, and on that same date, the warranty deed was rerecorded in the public records of Dade County, Florida. Because the 1.5 million dollars was paid to Miami National Bank to be disbursed for future construction work on a draw-down basis, Outrigger Club, Inc., the grantor, never received the 1.5 million dollars. The warranty deed provides in paragraph 9 thereof that the conveyance is subject to: a second mortgage wherein the Outrigger Club Inc., is mortgagor and the trustees of Fidelity Mortgage Investors, a Massachusetts business trust, is mortgagee, dated the day of November, 1976, which said mortgage is given as additional collateral for payment of certain sums as provided under a settlement and release agreement between the Outrigger Club, Inc., a Florida corporation, and Lawrence F. Lee, Jr., and others as trustees of Fidelity Mortgage Investors, a Massachusetts business trust dated the 16th day of January, 1976. Neither the Department of Revenue nor Biscayne South have introduced evidence to establish that such a mortgage in fact exists or if it did, the value of such mortgage. The only mortgage in evidence is Respondent, Department of Revenue's Exhibit 2, which shows Biscayne South as mortgagor rather than the Outrigger Club, Inc., as recited in the warranty deed. However, the future advance agreement introduced as Respondent's Exhibit No. 3, establishes the existence of a mortgage encumbering the subject property in which the Outrigger Club, Inc., is mortgagor and Fidelity Mortgage Investors is mortgagee. Such mortgage is dated October 27, 1972, and not dated with the month of November, 1976, as recited in paragraph 9 of the warranty deed. As recited in the future advance agreement, the mortgage of October 27, 1972, secured an indebtedness of $7,214,000.00. The mortgage provided that future advances could be made to Outrigger Club, Inc., not to exceed in the aggregate $16,500,000.00. The future advance agreement provides that an additional advance of $1,500,000.00 is to be made to Outrigger Club, Inc., thereby increasing the indebtedness represented by the October 27, 1972, mortgage to the aggregate sum of $8,715,000.00. In other words, the buyer of the property sought to borrow an additional 1.5 million dollars. The lender, in order to achieve priority of lien to secure its loan, treated the funding as an advance against a preexisting mortgage originally binding the seller, but then delivered the 1.5 million dollars directly to Miami National Bank for the benefit of the buyer. Accordingly, the seller never received the proceeds of the loan but rather participated in a "book transaction" for the benefit of the buyer and the lender.
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
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.
