The Issue The issue in (License) Case No. 92-2942: Whether or not the application for licensure as a correspondent mortgage lender filed by BOYER MORTGAGE CORPORATION should be granted or denied. The issues in (Disciplinary) Case No. 92-2943: Whether or not any disciplinary action should be taken against the individual mortgage broker's license held by FREDDIE Z. BOYER and BOYER MORTGAGE CORPORATION for violating various sections of Chapter 494 F.S. pertaining to mortgage brokers and correspondent mortgage lenders.
Findings Of Fact The time frame material to both cases is November 1991 through January 1992. At all times material, and currently, Freddie Z. Boyer was licensed with DBF as an individual mortgage broker, but he was and is not currently formally associated with any licensed mortgage brokerage business, mortgage lender, or correspondent mortgage lender. Mr. Boyer was formerly associated with First Coastal Mortgage Corporation, Inc. (First Coastal) as its principal and qualifying broker. The foregoing facts are found despite Mr. Boyer's testimony that he considered himself associated with First Coastal at all times material and considered himself still associated with First Coastal as of the date of formal hearing. In making the foregoing findings of fact, the undersigned has not relied on Mr. Hancock's and Ms. Poff's testimony to the effect that they "had been told" that First Coastal no longer exists or went out of business; this was unsubstantiated hearsay. Nonetheless, Mr. Boyer's testimony is clear that he, personally, ceased to function as an individual mortgage broker for First Coastal in October 1991, after an internal dispute with the two other owners of First Coastal who hold/held two-thirds of the stock of First Coastal. Mr. Boyer was/is a one-third stockholder of First Coastal. Mr. Boyer also testified that he had used his individual mortgage broker license to apply for First Coastal's corporate mortgage broker or mortgage lender license (it is not clear which) and that such a license had been issued to First Coastal upon his application and that thereafter that license was converted to the name and use of his two other partners because he had withdrawn as qualifying broker for First Coastal. He has left his individual mortgage broker's license on record with First Coastal but admittedly was not brokering loans through First Coastal at any time material to the instant cases. Mr. Boyer further testified that he incorporated and commenced business operations of Boyer Mortgage Corporation on October 17, 1991 to originate, sell, service, and transfer residential mortgages in Florida. All of the exhibits in evidence involving solicitation of mortgage loans name Boyer Mortgage Corporation, not First Coastal, as the mortgage lender or as the entity making inquiries and list Freddie Z. Boyer as the loan officer or broker. On December 27, 1991, DBF received an application from Boyer Mortgage Corporation for licensure as a correspondent mortgage lender. The application disclosed that Mr. Boyer is the President-Secretary of Boyer Mortgage Corporation. At formal hearing, Mr. Boyer confirmed this to be true and that he also owns one-third of Boyer Mortgage Corporation. Question 7 on the application asks: Does the applicant have net worth of at least $25,000? (Documentation of net worth must be filed with this application. Audited financial statements prepared in accordance with generally accepted accounting principles by an independent certified public accountant are required.) This question was answered in the affirmative. The application filed by Respondent Boyer on behalf of Boyer Mortgage Corporation was accompanied by an October 15, 1991 audit letter and financial statements to show that the corporation had the required $25,000 net worth. The October 15, 1991 audit letter which was submitted with the application contained the alleged signature of John M. Chancellor, Jr., Certified Public Accountant (CPA). The audit letter and financial statements were prepared on letterhead stationery purportedly that of Mr. Chancellor and predated incorporation of the corporate applicant, Boyer Mortgage Corporation. Mr. Chancellor testified by deposition that he did not conduct an audit of Boyer Mortgage Corporation and did not prepare the audit letter or financial statements which were submitted by Mr. Boyer and Boyer Mortgage Corporation with the corporation's correspondent mortgage lender application to DBF. There is no dispute on this issue. Mr. Boyer testified that he, personally, prepared the audit letter and financial statements and signed John M. Chancellor, Jr.'s name to the audit letter. He also admitted he never contacted Mr. Chancellor to receive permission to sign his name. Mr. Boyer is a licensed CPA in the State of Florida. Although Mr. Boyer claimed at hearing that he had a current CPA business relationship with Mr. Chancellor which would permit Mr. Boyer to sign his "partner's" name to audits, Mr. Chancellor denied that any business relationship or any partnership existed between them as of the date of the audit, the financial statements, or the application for licensure by Boyer Mortgage Corporation. Although Mr. Chancellor admitted he had formed some type of CPA firm with Mr. Boyer in Louisiana in 1974 or earlier, Mr. Chancellor also testified that he, personally, had ceased to be licensed as a CPA in Louisiana in 1989. Mr. Chancellor has never been licensed as a CPA in Florida. Upon the foregoing, it is found that Mr. Boyer's assertion that he believed he had the legal right to audit his own business (Boyer Mortgage Corporation) and to sign Mr. Chancellor's name to the audit and financial statements upon which Boyer Mortgage Corporation's application for Florida correspondent mortgage lender licensure was based is neither credible nor legally correct. The fact that Boyer and Chancellor apparently never actually ran any CPA business out of a common location and had only sporadically seen each other over the last several years renders incredible Mr. Boyer's protestations that he always had a legal right to sign a partner's name to anything. Assuming, arguendo, that Mr. Boyer did not have actual knowledge that Mr. Chancellor had ceased to be licensed as a CPA when he signed Mr. Chancellor's name to the audit and financial statements submitted with Boyer Mortgage Corporation's application for licensure, Mr. Boyer still was not excused at law or by the dictates of common business sense from making reasonable inquiry to determine that fact. When Mr. Chancellor ceased to be licensed as a CPA in 1989, that fact alone terminated any CPA association he had with Mr. Boyer as of that date, and it is not necessary for the undersigned to go further and unravel all the non-dispositive sub-issues raised herein concerning whether or not Mr. Boyer or another person forged Mr. Chancellor's signature on a 1974 partnership agreement for the CPA firm or whether or not Mr. Chancellor was bound by that agreement to give Mr. Boyer 30 days written notice of Mr. Chancellor's withdrawal from their Louisiana CPA firm. The fact that Mr. Boyer and Mr. Chancellor may have had some other business relationship or operated out of some other corporation or partnership in the past is immaterial. Their other active business relationship also ended many years prior to the time frame and events relevant to this proceeding and has nothing to do with it. Mr. Boyer's self-serving testimony that some CPA Board authorized him to sign Mr. Chancellor's name is mere hearsay upon which no finding of fact may be based. Signing someone else's name in order to lead the DBF licensing authority to believe that an "independent certified public accountant" had audited Boyer Mortgage Corporation's financial statements when, in fact, Mr. Boyer himself merely "rubber stamped" his own work is clearly misleading and constitutes a material misstatement in connection with the application. Despite Mr. Boyer's protestations that generally accepted principles of CPA practice (GAAP) permit such camouflaging of the truth, no persuasive evidence to that effect was presented at formal hearing to rebut the clearly misleading nature of the materials themselves. It is noted that the accuracy or falsity of the financial statements themselves was not proven at formal hearing, but the falsification of the licensure application by way of Mr. Boyer's deliberately misleading the licensing agency into believing independent CPA materials were being submitted when these materials were not independent at all has been clearly and convincingly proven. During the period of November 1991 through January 1992, Boyer Mortgage Corporation and Mr. Boyer solicited and accepted approximately thirty-four applications for mortgage loans without Boyer Mortgage Corporation being licensed as a mortgage brokerage business, a mortgage lender, or a correspondent mortgage lender, and without Mr. Boyer being associated with First Coastal or any other mortgage brokerage business. As previously noted, all applications in evidence show involvement of Boyer Mortgage Corporation; none show involvement of First Coastal. Also, Boyer Mortgage Corporation's application for correspondent mortgage lender was not even filed with DBF until December 27, 1991 (See, Findings of Fact 1-2 supra). It is further noted, however, that upon being warned by the Comptroller's Office that he could not do business, Mr. Boyer was cooperative and did not "close" thirty-three of these potential loans. One loan was closed for Marc and Janice Gillard in November 1991, and Boyer Mortgage Corporation received an origination fee and a portion of the discount points therefor. Despite the prior warning from the Comptroller's Office, Mr. Boyer authorized one of his Boyer Mortgage Corporation subordinates to close the Gillard loan through another lending institution because "Mr. Gillard was a friend" and Mr. Boyer "did not want them to lose their home." Boyer Mortgage Corporation and Mr. Boyer charged and received fees for credit reports and appraisals on two of the thirty-four loan applications. With regard to those fees, Mr. Boyer and his corporation were essentially only a conduit to appraisers and credit reporting services for small amounts of money. Perhaps $150, at most, was retained by Respondents. Although the evidence falls short of any fraud against any of the loan applicants during that three month period of time, Boyer Mortgage Corporation and Mr. Boyer were also providing good faith estimates to applicants, obtaining appraisals and credit reports, submitting invoices, requesting verification of deposits from banks, and requesting verification of employment on the mortgage loan applicants. As such, Boyer Mortgage Corporation was acting as a mortgage broker without a current active license and Mr. Boyer was acting as a mortgage broker without being associated with a mortgage brokerage business in contravention of statute. The evidence, however, does not establish that either Respondent acted as a correspondent mortgage lender.
Conclusions The burden of proof in a license application case is upon the applicant. See, Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Herein, the parties adopted all of the evidence from DOAH Case No. 92-2943, the disciplinary case, and therefore all of the foregoing findings of fact and conclusions of law (except for the burden of proof) set out supra for DOAH Case No. 92-2943 are applicable to to DOAH Case No. 92-2942 as well. Boyer Mortgage Corporation's audit and financial statements were neither proven accurate nor inaccurate, so Boyer Mortgage Corporation cannot prevail in the license application case for that reason alone. Also, DBF has affirmatively proven that there was a material misstatement with regard to the independence of the CPA performing the audit and signing the financial statement and that these documents do not meet generally accepted accounting principles (GAAP). The foregoing findings of fact and conclusions of law constitute sufficient grounds for denying, in DOAH Case No. 92-2942, the application for licensure as a correspondent mortgage lender filed by Freddie Z. Boyer o/b/o Boyer Mortgage Corporation pursuant to Section 494.0072(1)(f) F.S. RECOMMENDATION IN CASE 92-2943 It is RECOMMENDED that the Department of Banking and Finance enter a final order: Finding Respondent Freddie Z. Boyer guilty of violating Sections 494.0033 and Section 494.0041(2)(p) and subject to discipline as provided in Section 494.0041(1) F.S. Finding Respondent Freddie Z. Boyer, guilty of violating Sections 494.0063, 494.0025(5), 494.0041(2)(c), (j) and (p) and 494.0072(2)(c), (j) and (p) F.S. and Rule 3D-40.250 F.A.C. and subject to discipline pursuant to Section 494.0041(1) and 494.0072(1) F.S. and revoking his individual mortgage broker's license; Finding the Respondent Boyer Mortgage Corporation, guilty of violating Section 494.0063, 494.0025(3) and (5), 494.0041(2) (k) and (p), 494.0072(2)(c) (j), and (p), and Rule 3D-40.250 F.A.C. and subject to discipline pursuant to Section 494.0041(1), 494.072(1) F.S. and ordering it to cease and desist all mortgage brokerage business. RECOMMENDATION IN CASE NO. 92-2942 It is RECOMMENDED that the Department of Banking and Finance enter a final order denying the application for licensure as a correspondent mortgage lender filed by Boyer Mortgage Corporation. DONE and RECOMMENDED this 29th day of September, 1992, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The De Soto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1992. APPENDIX TO RECOMMENDED ORDER DOAH CASE NOS. 92-2942 and 92-2943 The following constitute specific rulings, pursuant to Section 120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF) DBF's PFOF: 1-14 Accepted except to the degree they are unnecessary, subordinate or cumulative to the facts as found in the Recommended Order. The date in the PFOF has been corrected to correspond to the record. Boyer and Boyer Mortgage Corp.'s PFOF: Response to Post-hearing Order 1-2, 4-5 Accepted. 3, 6-7 Rejected as either not supported by the record or as unnecessary, subordinate, or cumulative to the facts as found in the Recommended Order. Rejected as legal argument. Rejected as not supported by the record and/or legalarguement. Statement One This seems to be legal argument or conclusions of law and has been treated as such without rulings pursuant to Sections 120.59(2) F.S. Statement Two Rejected as statements of another state's law, materials not in evidence, and misstatements concerning the content of John M. Chancellor's deposition. Statement Three Rejected as legal argument. COPIES FURNISHED: Margaret S. Karniewicz, Esquire Department of Banking and Finance Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Freddie Z. Boyer Boyer and Boyer Mortgage Corporation P. O. Box 5560 Destin, Florida 32540-5560 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Room 1302, The Capitol Tallahassee, Florida 32399-0350
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the request of petitioners to participate in the distribution of mortgage broker guaranty funds pertaining to First Fidelity Financial Services, Inc. be granted, and that they be paid their pro-rata portion of the fund in accordance with Section 494.044, Florida Statutes. It is further RECOMMENDED that the request of intervenors in Case No. 85- 3305 to be included in the above group of claimants for fund distribution purposes be denied unless they furnish the Division evidence of compliance with Subsections 494.043(1); (4) and (5), Florida Statutes (1985), by June 18, 1986. DONE and ORDERED this 17th day of February, 1986, in Tallahassee; Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1986.
Findings Of Fact Petitioner is charged with the responsibility of administering and enforcing the provisions of Chapter 494, Florida Statutes, including the duty to sanction those licensed under the Mortgage Brokerage Act (the Act) for violations of the Act. At all times pertinent to this proceeding, Respondent Joan N. Harnagel (Ms. Harnagel), was a registered mortgage broker in the State of Florida, holding license No. HA 517383319. There was no evidence that Ms. Harnagel's registration has been previously disciplined by Petitioner. Respondent Meridian Mortgage Group, Inc. (Meridian) first became a licensed mortgage broker in the State of Florida in September, 1988, with Respondent Joan N. Harnagel (Ms. Harnagel) serving as its vice-president and principal mortgage broker. Between September, 1988, and August, 1992, Meridian was a mortgage brokerage business in the State of Florida and held license No.HB 880000176-00. Meridian has held no active license as a Florida mortgage broker since August, 1992. There was no evidence that Meridian's registration has been previously disciplined by Petitioner. In September 1988, Meridian bought a Florida mortgage brokerage company named Bay Pointe Mortgage. At the time of this purchase, Ms. Harnagel was the principal mortgage broker and was responsible for the daily operations of Bay Pointe as its general manager. Upon Meridian's purchase of Bay Pointe, Ms. Harnagel served as Meridian's principal mortgage broker in Florida and continued her responsibility for the daily operation of Meridian's activities in Florida. Until July 15, 1989, Ms. Harnagel had no ownership interest in Meridian. The owners of Meridian between September 1988 and July 15, 1989, were Majorie Mohr and Larry Mohr of Carmel, Indiana. On July 15, 1989, Ms. Harnagel assumed ownership of Meridian and continued to serve as its principal mortgage broker and general manager responsible for daily operations. At all times pertinent to this proceeding, Ms. Harnagel was the principal mortgage broker of Meridian and was responsible for its daily operations, which included the hiring and firing of employees, the ordering of appraisals and credit reports for customers, and the preparation of good faith estimates. Petitioner conducted an examination of the Respondents Harnagel and Meridian for the period inclusive of January 1, 1989, through April 30, 1990. As a result of the investigation, Petitioner prepared and forwarded to Respondents a report of its investigation. Subsequently thereto, Petitioner prepared and served on Respondents an "Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights" which is the charging document for this proceeding. 1/ PAR PLUS VIOLATIONS There is a difference between a mortgage broker's origination fee and a lender's discount fee. A mortgage broker's origination fee is a fee charged by the mortgage broker for finding a loan for the applicant. A discount fee is a fee charged by the lender to a borrower for doing the paperwork on a loan and is usually expressed as a percentage of the amount borrowed. A discount may be considered as prepaid interest to the lender to cover the lender's expenses in making the loan. In the typical transaction that does not involve "par plus", the mortgage broker's origination fee is paid to the mortgage broker by the borrower at closing either by separate check or out of the proceeds of the closing. A "par plus" transaction is one in which the mortgage broker's origination fee is paid to the mortgage broker by the lender instead of by the borrower. Petitioner's Exhibit 1 is a composite exhibit and pertains to a transaction involving borrowers Oscar and Arlene Carlsen. Petitioner's Exhibit 2 is a composite exhibit and pertains to a transaction involving borrowers J. Richard and Sara Pooler. The first page of each exhibit is the good faith estimate that was completed by Ms. Harnagel. The good faith estimate is normally given to a borrower when the borrower first comes to the mortgage broker's office and applies for a loan. The purpose of the good faith estimate is to make full disclosure of what fees are going to be charged to the borrower. The second and third pages of Petitioner's Exhibit 1 and Exhibit 2 constitute the Settlement Statements for each transaction and was prepared by the respective closing agents for these transactions. The Settlement Statement should reflect all costs that were paid by the buyer and the seller in the transaction being financed. The Carlsen transaction was a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. The Pooler transaction was also a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. By failing to respond to requests for admissions, Respondents admitted 2/ that in the Carlsen transaction and in the Pooler transaction neither Meridian nor Ms. Harnagel disclosed to the borrowers Meridian's participation in a "par plus" program. Both the Carlsen and the Pooler transactions closed in December 1989. ESCROW FUND VIOLATIONS - RESIDENTIAL 3/ Respondents received the following sums from the following borrowers on the following dates: BORROWER AMOUNT DATE K. Carrol $525.00 06-07-89 R. Williams $400.00 11-28-89 J. Gentile $270.00 06-30-89 C. Saffer $270.00 05-15-89 J. Mark $270.00 02-22-89 G. Norton $275.00 07-14-89 F. Sloss $275.00 03-02-89 W. Nachman $275.00 02-27-89 E. Ward $270.00 04-26-89 H. Rosen $310.00 04-24-89 J. Morris $825.00 06-30-89 S. Lewis $270.00 03-24-89 E. Fuller $485.00 05-01-89 G. Fleming $270.00 03-30-89 J. Bishop $270.00 03-28-89 P. Bifulco $270.00 04-10-89 E. Zulueta $270.00 05-26-89 L. MacCalister $325.00 06-21-89 T. Nangle $275.00 01-26-89 I. Rybicki $270.00 03-31-89 I. Rybicki $275.00 03-07-89 The foregoing sums were received by Respondents from borrowers to pay for credit reports and appraisals. Respondents should have placed these funds in the escrow account Meridian maintained at Sun Bank. Instead of being used for the intended purpose, these funds were placed in Meridian's operating account at Sun Bank and were used to pay Meridian's overhead. At all times pertinent hereto Respondent Harnagel was the principal mortgage broker for Meridian and knew that these sums were not being placed in escrow, knew that the funds should have been placed in escrow, and knew that these funds were not being expended for credit reports and appraisal reports. Ms. Harnagel asserts that the practice of placing these funds in Meridian's operating account was dictated by Meridian's out-of-state owners. Ms. Harnagel knew this practice violated the Mortgage Brokerage Act and asserts that she repeatedly informed the Mohrs of this problem. Notwithstanding her acknowledged violation of the Act, she continued to collect these fees and continued to place these fees in Meridian's operating account. The great majority of these transactions occurred prior to Ms. Harnagel assuming ownership of Meridian on July 15, 1989. As a result of these practices, Meridian became indebted to at least two appraisal companies, Duffy and Associates (Duffy) and Diamond Realty and Appraisal Company (Diamond). Neither appraisal company had been fully repaid as of the time of the formal hearing. Duffy and Associates is owed a total of $4,000 by Respondents for work that was performed on the order of Respondents. At least six of the appraisals for which Duffy has not been paid were ordered after Ms. Harnagel assumed ownership of Meridian. In each of these transactions Respondents collected the amount necessary to pay for the appraisal, but, instead of paying for the appraisals, spent the amounts as part of the operating account on overhead expenses. Ms. Harnagel paid Diamond the sum of $1,500 as partial payment of the accumulated debt to Diamond. At the time of the formal hearing, Respondents owed Diamond the sum of $1,675 plus interest and attorney's fees. THE COMMERCIAL LENDER: VICTORY ENTERPRISES TRUST The proposed lender for each of the four commercial transactions at issue in this proceeding was an entity referred to as "Victory Enterprises Trust". The principals of this trust were Thomas Telford, Harold McDonnard, Harold Meridon, and a man identified as Mr. Carpenter. COMMERCIAL TRANSACTION ONE: GOLDEN HILLS Golden Hills is one of the four commercial projects that was at issue in this proceeding. A group of individuals including Robert Hastings, Doug Ollenberger, and Jeffery Kollenkark formed a partnership to purchase, refurbish, and develop a golf course and its surrounding property known as Golden Hills. This partnership, initially known as EBBCO Partnership and later incorporated under the name of Fore Golf Management, Inc., discussed with Ms. Harnagel the financing that would be required for the project. Ms. Harnagel suggested to this borrower a possible joint venture with a potential lender, the Victory Enterprises Trust, and requested a deposit in the amount of $12,000. Ms. Harnagel did not identify her lender to the borrower. This borrower deposited with Meridian the sum of $12,000 on or about September 28, 1989, with conditions that may be summarized as follows: The money was to be placed in Meridian's escrow account. The money was to be "100 percent refundable" if the joint venture partner did not fund the project or if terms of funding were not acceptable. Signatures from both parties to the joint venture would be required to release the funds from escrow. This money was not to be considered an application fee, but as a deposit for closing costs of the proposed joint venture. Any funds remaining were to be returned to Fore Golf Management, Inc. At no time did the Golden Hills borrowers authorize Ms. Harnagel to remove any of the funds from her trust account. On October 2, 1989, Ms. Harnagel wrote Robert Hastings a letter that included the following: Friday, September 29, 1989, Sun Bank received the Twelve Thousand Dollars ($12,000.00) and deposited in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring FORE GOLF MANAGEMENT, INC. an acceptable commitment. THE MONIES ARE REFUNDABLE if the commitment is not acceptable. (Emphasis in the original) On February 1, 1990, Mr. Hastings wrote Ms. Harnagel a letter that included the following: ... For about five months we have been attempting to put together a deal on Golden Hills. You have had our $12,000.00 since 9/29/89. To date no commitment has been brought to us. We do not mind continuing to try, but we do not wish to continue with this indefinitely. It is our wish that you suggest a time frame within which the project is completed and funded, or unless extended in writing by both parties, all agreements are null and void and all monies are refunded. On March 3, 1991, the Golden Hills borrowers demanded that Respondents return the $12,000 deposit, noting that the Golden Hills property had been sold to another entity approximately six months previously and that no commitment from Respondents or their lender had been forthcoming. Thereafter, the Golden Hills borrowers sent Dr. Kollenkark to Florida from California in an effort to collect the deposit from Respondents. On March 11, 1991, Ms. Harnagel wrote to Dr. Kollenkark a letter that provided, in part, as follows: The Trust does not want to return the monies as they felt they bought a commitment but that you were unable to obtain a viable contract. As I have said to you when we were told in December, 1990 that Golden Hills had definitely been sold. I told you that I would pay the $13,000 and get the money through the legal department. The reference to the Trust in Ms. Harnagel's letter of March 11, 1991, is to the Victory Enterprises Trust. The reference to the sum of $13,000 was an error and should have been $12,000. There was no evidence as to whether the deposit was transferred from Meridian's trust account to the proposed lender as implied by the letter of March 11, 1991. Ms. Harnagel testified that the money was transferred to Meridian's operating account and expended on Meridian's operating expenses. Ms. Harnagel admitted that the sum deposited by the Golden Hills borrowers should be refunded, but that she has been unable to do so. Her position that using the money to fund her operating expenses was authorized by the agreement with the Golden Hills borrowers is rejected as being contrary to the evidence. Although the record establishes that Ms. Harnagel expended considerable time and effort to secure funding for the Golden Hills borrowers, the record is equally clear that she was not entitled to use the deposit to fund her overhead expenses. COMMERCIAL TRANSACTION TWO: GENESIS CORPORATION The second commercial transaction involved the funding of two hotel projects with the Genesis Corporation as Respondents' borrower. By letter dated December 15, 1989, the Genesis Corporation deposited with Meridian the sum of $1,500. Paragraph two of the transmittal letter is as follows: 2. The Funding must be to Genesis Corp. satisfaction. The Application Fee of $1,500. is refundable, if Genesis Corp. is not Completely Satisfied with the Funding. The principals of Genesis Corporation did not provide certain financial statements requested by Respondents. Consequently, Respondents were unable to secure financing for the two hotel projects. After the request for the financial statements was made, Respondents did not hear further from the Genesis Corporation. Respondents expended the deposit made by the Genesis Corporation for its operating expenses. COMMERCIAL TRANSACTION THREE: RIVER RUN The third commercial transaction involved River Run Limited Partnership (River Run), which proposed to develop a golf course in North Carolina. As part of the transaction, Meridian required the borrower to pay an advance fee of $10,000.00 to be placed in Meridian's trust account. This deposit was subject to the following conditions: The deposited fee may be used by the lender (an unidentified trust) or by MERIDIAN MORTGAGE GROUP, INC. in conjunction with the lender to conduct an inspection of the property and for other prudent and reasonable expenses necessary to bring the BORROWER an acceptable loan commitment. For all monies spent a full accounting of such expenses will be made to BORROWER. If no loan commitment is offered within fifteen (15) days of the last signature date of this agreement, the entire application fee will be refunded unless otherwise agreed to by both parties to this agreement. Should an offer be made by the lender that, for any reason, is unacceptable to the BORROWER, the BORROWER shall have the right to reject such an offer and the entire application fee shall be refunded to the BORROWER. In such an event, the BORROWER shall be obligated to notify MERIDIAN MORTGAGE GROUP, INC. within five (5) working days of receipt of such offer that the offer is rejected, otherwise the deposited funds will be forfeited and will become the property of MERIDIAN MORTGAGE GROUP, INC. The foregoing agreement between Meridian and River Run was extended so that Meridian was given until November 15, 1989, to obtain the financing. The $10,000 deposit to Meridian was paid on behalf of River Run by Nate Bowman. No financing for River Run was secured by Respondents. Mr. Bowman demanded a refund of the deposit and subsequently obtained judgment against Respondents for the $10,000 deposit. As of the formal hearing, Respondents had not satisfied the Bowman judgment or otherwise refunded the deposit to River Run. Ms. Harnagel asserted that the following circumstances were the reason that the River Run transaction did not close: The trust that was to be the lender asked for financial statements that were not provided. There was a lawsuit between certain of the partners of River Run. A financial officer would not relinquish certain tax returns for one of the partners of River Run. There was a concern about River Run's ability to repay the money. Ms. Harnagel stated that of the $10,000 that was deposited into Meridian's trust account, she only retained the sum of $3,500 and that the balance went to the lending trust. The $3,500 that was retained by Ms. Harnagel was expended. There was no accounting for these expenditures. Likewise, there was no accounting for the sums paid to the lending trust. COMMERCIAL TRANSACTION FOUR: CHAPEL HILL The fourth commercial transaction involved a group of borrowers represented by Michael Grdina, an attorney in Ohio, who desired to obtain financing for the construction of a series of projects that will be referred to as the Chapel Hill complex. Subsequent to a telephone conversation between Mr. Grdina and Ms. Harnagel, Ms. Harnagel sent a letter dated November 16, 1989. This letter reflected that Respondents represented a Trust and that the Trust was interested in participating in a joint venture with Mr. Grdina's clients. The letter contained certain requirements imposed by the Trust and provided, in part, as follows: A Seventy-Five Hundred ($7,500.00) application fee be placed in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring Chapel Hill Commerce Center an acceptable commitment. If the commitment is not acceptable the monies are refundable. In response to that letter of November 16, 1989, Mr. Grdina wrote Ms. Harnagel a letter on behalf of his clients and enclosed a check for the sum of $7,500. Mr. Grdina's letter became the agreement between the parties as to the status of the $7,500 deposit paid to Respondents by Mr. Grdina. That letter omitted the language in Ms. Harnagel's letter of November 16, 1989, pertaining to the use of the deposit "for prudent business expenses". Mr. Grdina's letter of December 1, 1989, provided, in part, as follows: By wire transfer to Meridian's trust account the entities [Mr. Grdina's clients] have placed with you a Seven Thousand Five Hundred Dollars ($7,500.00) refundable good faith deposit. If an entity accepts a proposal for funding from sources identified by you, and such entity does not close the transaction for reason other than the fault of the lender, the good faith deposit will be forfeited as liquidated damages for expenses and fees incurred in the transaction. The initial agreement between Harnagel and Grdina contemplated that Harnagel's Trust would provide financing for Grdina's clients. By letter dated February 23, 1990, Mr. Grdina accepted the offer that the transaction be modified so that the Trust would secure 100 percent of the loan by a lending institution by depositing with the lending institution certificates of deposit. As additional consideration to the Trust, the Trust would become entitled to 25 percent equity participation in the construction project. The letter of February 23, 1990, did not modify the status of the deposit paid by Mr. Grdina on behalf of his clients. The loan to Mr. Grdina's clients did not close because the lending institution with whom Ms. Harnagel and Victory Trust dealt would not fund the loan. Thereafter, Mr. Grdina demanded return of the $7,500 deposit. As of the date of the formal hearing, that deposit has not been refunded. Although Ms. Harnagel argues that she was entitled to keep the deposit, that argument is without merit since none of the conditions precedent to her entitlement to the deposit occurred. CUSTOMER OVERCHARGE Respondents admitted that two customers were charged brokerage fees, origination fees, and/or discount fees which were greater than those disclosed on the Good Faith Estimates. On the Morris transaction, a fee of $450.80 was estimated, but the fee actually assessed at closing was $2,240, an overcharge of $1,790. On the Rosen transaction a fee of $1,773 was estimated, but the actual fee assessed was $1,871.50, for an overcharge of $98.50. Both overcharges resulted from charges imposed by a lending institution and neither overcharge resulted in inappropriate payments to Respondents. WALL STREET JOURNAL ADVERTISEMENT Respondents placed an advertisement in the Wall Street Journal on February 16, 1990. This advertisement did not contain the address of Meridian as required by law. The deletion of Meridian's address was the fault of the Wall Street Journal. INVESTIGATION OF LENDING SOURCE Ms. Harnagel testified without contradiction that she made efforts to verify the reliability of the Victory Enterprises Trust and its principals. She learned of this potential lender through an advertisement the Trust had placed in the Miami Herald. Neither the Trust or the principals were required to be licensed in Florida. Her efforts included having her attorney and her bank officer make inquiries to verify the reliability of the proposed lender. Petitioner argues that Respondents should have made further inquiry after the loan to the Golden Hills borrowers was not forthcoming from this lender. Petitioner has failed to establish by clear and convincing evidence that Respondents breached any standards imposed upon them to investigate the reliability of lenders so as to prove that Respondents are incompetent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all licenses and registrations issued either to Joan N. Harnagel or Meridian Mortgage Group, Inc., be revoked. It is further recommended that an administrative fine be imposed against Joan N. Harnagel in the amount of $25,000. It is further recommended that a separate administrative fine be imposed against Meridian Mortgage Group, Inc., in the amount of $25,000. DONE AND ENTERED this 22nd day of July, 1993, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of July, 1993.
The Issue Whether the application of the Respondent Melvin Haber for a mortgage broker's license should be approved or denied.
Findings Of Fact Respondent Melvin Haber applied for registration as a mortgage broker by filing an application for registration as a mortgage broker on December 20, 1976. On January 14, 1977, Petitioner issued to Respondent its Notice of Intent to Deny Respondent's Application for registration as a mortgage broker. The reasons for such denial were set forth in an accompanying document entitled "Administrative Charges and Complaint." Petitioner Division of Finance had determined that Respondent Melvin Haber did not meet the proper qualifications necessary to be licensed as a mortgage broker and that he had, through Guardian Mortgage and Investment Corporation, charged and received fees and commissions in excess of the maximum allowable fees or commissions provided by the Florida Statutes; and although he had stated otherwise on his application, Respondent in fact had been charged in a pending lawsuit with fraudulent and dishonest dealings; and had demonstrated a course of conduct which was negligent and or incompetent in the performance of acts for which he was required to hold a license. By letter dated January 19, 1977, to Mr. Joseph Ehrlich of the Comptroller's Office, Tallahassee, Florida, Petitioner received a request from the Respondent Melvin J. Haber in which he acknowledged receipt of his rejection for mortgage broker's license and stated, "I received notice today of my rejection for my mortgage broker's license. I would, therefore, withdraw my application and re- quest return of $75.00 as I will not answer the rejection as I can't afford an attorney at this time." A Special Appearance to Dismiss Complaint was entered on February 11, 1977. The grounds are as follows: "1. The Department of Banking and Finance does not have jurisdiction over this Respondent. There is no jurisdiction in any administrative proceeding over this Respondent. There is no pending application for any mortgage broker's license by this Respondent. The application originally filed for the mortgage broker's license was withdrawn on January 19, 1977. A copy of the letter withdrawing application is attached hereto as Exhibit A. The proceedings are moot and would serve no useful purpose. Permitting this tribunal to proceed on a non-existent request for broker's license would deny to the Respondent due process of law, equal protection of the law, and his rights under the State and Federal Constitutions applicable thereto." On March 4, 1977, the Division of Administrative Hearings received a letter from Eugene J. Cella, Assistant General Counsel, Office of the Comptroller, State of Florida, requesting a hearing in this cause be set at the earliest practical date, and enclosed in the letter requesting a hearing was a copy of the Division of Finance's Administrative Complaint and a copy of the Respondent's Special Appearance to Dismiss the Complaint. A hearing was set for April 22, 1977, by notice of hearing dated March 30, 1977. A letter was sent by Irwin J. Block, Esquire, informing the attorney for the Petitioner that the Respondent "intends to permit the matter to proceed solely upon the written Special Appearance to Dismiss Complaint heretofore filed." Evidence was submitted to show that between May 29, 1973 and continuing through November 25, 1976, Guardian Mortgage and Investment Corporation and Melvin Haber as Secretary/Treasurer charged and received fees and commissions in excess of the maximum allowed fees or commissions in violation of the Florida Statutes and the Florida Administrative Code. Respondent's application for registration as a mortgage broker indicated that Petitioner was not named in a pending lawsuit that charged him with any fraudulent or dishonest dealings. However, on August 5, 1976, a suit was filed in Dade County, Florida, which charged the Petitioner and others with fraud in violation of the Florida Securities Law. The application was filed by Respondent, was processed by Petitioner and a Notice of Intent to Deny Respondent's Application for Registration was filed together with Administrative Charges and Complaint. The Division of Administrative Hearings has jurisdiction upon request of a party for a hearing once an application has been received and the Division has investigated and fully considered the application and issued its Notice of Intent to Deny and filed a Complaint on the applicant. In this cause the question of whether the applicant is entitled to a refund of fees also must be resolved. An orderly procedure to finalize the resolution of the issues is desirable and necessary. The Proposed Order filed by the Petitioner has been examined and considered by the Hearing Officer in the preparation of this order.
Recommendation Deny the application of applicant Melvin Haber for a mortgage broker's license. Refund the Seventy-Five Dollar ($75.00) fee Respondent paid upon filing the application. DONE and ORDERED this 31st day of May, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Irwin J. Block, Esquire Fine, Jacobson, Block, Goldberg & Semet, P.A. 2401 Douglas Road Miami, Florida 33145
The Issue The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid. Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter- mined:
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' stipulations of fact, the following relevant facts are found: The petitioner Jose A. (Tony) Torres was employed by the respondent Office of the Comptroller, Department of Banking and Finance, Division of Finance from approximately June of 1963 until February of 1986. For about 13 years, he held the position of Area Financial Manager in the Tampa office and was responsible for and in charge of regulating mortgage brokerage businesses and licensees in ten counties along the west coast of Florida. By letter dated February 11, 1986, petitioner was notified of the respondent's intent to dismiss him from employment on the grounds that, in spite of prior warnings, he had obtained loans from licensed individuals and institutions he was responsible for regulating. Petitioner was given the opportunity to respond to this notice, did so and the respondent thereafter affirmed its intent to dismiss him. Petitioner did not contest or appeal his dismissal. On March 6, 1986, petitioner submitted to the respondent his application for registration as a mortgage broker. By Order dated and filed on May 23, 1986, respondent denied his application, concluding that petitioner does not have the requisite experience, background, honesty, truthfulness or integrity to act as a mortgage broker in Florida. The factual bases cited for this conclusion are that petitioner was arrested in September of 1979 for gambling; that he declared bankruptcy in 1980; and that he obtained loans in 1981, 1983, and 1984 from individuals and/or financial institutions which were licensed by the Division of Finance, and also that said loans have never been repaid. The Centro Asturiano Club is a private social club where gambling (poker) regularly occurs. On Friday, August 31, 1979, at approximately 3:00 p.m., petitioner and others were arrested for gambling at the Centro Asturiano. At the time of the arrest, the police seized certain items including a Smith and Wesson .38 caliber firearm and $670. A motion to suppress evidence and a motion to dismiss were ultimately granted and the petitioner was not convicted. The gambling arrest occurred on a regular business day in the Office of the Comptroller. Petitioner states that he was on annual leave at the time. An employee in his office observed petitioner's secretary make changes in the petitioner's leave slip forms on the afternoon of August 31, 1979. It was not established that such alterations were not proper. On May 30, 1980, petitioner filed a petition pursuant to Title 11, United States Code. An order for relief was entered under Chapter 7, with a Discharge of Debtor ordered on October 8, 1980, by the United States Bankruptcy Court for the Middle District of Florida (Bankruptcy No. 80-00750). At least six entities listed as creditors in petitioner's bankruptcy proceeding were licensees of the Department of Banking and Finance. At the time, petitioner was charged with examining and regulating those six entities in his capacity as the Area Financial Manager for the Division of Finance. In 1979 and/or 1980, petitioner's superiors in the Department admonished him to refrain from obtaining loans from the industry he regulated, and that such activity constituted a violation of Departmental policy and the Code of Ethics for Public Officers and Employees, Chapter 112, Florida Statutes. On March 1, 1983, petitioner obtained a signature loan of approximately $2,200 from the A. L. Machado, M.D. Pension Trust. Colonial Mortgage, Inc., which was then licensed with the Division of Finance as a mortgage broker, serviced the loan. Darrell T. DiBona, the director of Colonial, became licensed as an additional broker on June 19, 1983. The payment record on this loan, discovered during an examination by the Division of Finance in May of 1985, reflected that four interest payments had been made, but that the principal balance was still outstanding. Darrell T. DiBona made a check payable for one of the petitioner's interest payments owed to the Machado pension fund. The petitioner's version of the facts surrounding the Machado loan is not credible. He states that he had known Darrell T. DiBona for many years. DiBona handled petitioner's insurance needs, and petitioner, wishing to increase his coverage, had had a medical examination which indicated either an irregular heartbeat or fatty tissues in his blood. According to petitioner, he was having lunch with DiBona one day, and DiBona needed to stop by Dr. Machado's office on business. DiBona apparently handled pension funds for various physicians. While at Dr. Machado's office, the subject of petitioner's medical condition arose. Petitioner states that Dr. Machado offered to check his irregular heartbeat and gave him an EKG. During that examination petitioner asserts that he told Dr. Machado that he was having financial difficulties, and Dr. Machado offered to loan him $2,200. Petitioner insists that he made three or four payments on a note, and then paid it off in full in May or July of 1984. This latter payment, according to petitioner, was made in cash and handed to DiBona. Petitioner never received a receipt for the "$2,200 in cash plus the interest." Petitioner states that he subsequently asked for a receipt or the note on several occasions, but was told that it could not be found. The note and payment record were found by the respondent during an examination of Colonial Mortgage in May of 1985. As noted above, the payment record revealed that only three or four interest payments had been made. Dr. Machado has no recollection of examining petitioner in his office or otherwise discussing a loan with him. Had petitioner been examined by Dr. Machado, a ledger card or chart would have been prepared. No ledger card or chart for the petitioner could be discovered in Dr. Machado's office. Dr. Machado did not become aware that money from his pension fund was lent to petitioner until after DiBona's death. His office manager was then asked to write a letter stating that the petitioner's loan had been paid in full. Such a letter was written and petitioner picked up the letter from Dr. Machado's office. Although he had no knowledge concerning the loan, Dr. Machado agreed to sign the letter because he thought that petitioner could be one of DiBona's innocent victims. He, as well as other physicians, lost pension fund monies from accounts handled by Darrell DiBona. Beneficial Mortgage Company was licensed with the Division of Finance in November of 1984 as a mortgage broker. During that time, petitioner contacted the regional supervisor of Beneficial, who does not himself regularly take loan applications, regarding a home mortgage loan for his mother. On November 20, 1984, a $30,590 mortgage loan from Beneficial Mortgage was obtained, and petitioner co-signed the loan documents. The loan proceeds were utilized to pay off two prior mortgages, one of which was Colonial Mortgage. Petitioner's mother is elderly, speaks little English and petitioner often handled her financial affairs. According to the regional supervisor, petitioner was asked to co-sign the note in order to avoid any questions which might arise in the future regarding Mrs. Torres' competency to enter into such a transaction. As a co-signer, however, petitioner was guaranteeing the account. While the mortgage loan was for an amount less than the house was appraised and contained no preferential terms or rates, Beneficial required no standard credit report, income analysis or other financial documentation concerning the petitioner. Mrs. Torres' income and debt ratio were barely sufficient to make the monthly payments on the loan. Petitioner has two brothers and a sister who also live in Tampa. On December 6, 1984, petitioner obtained a $2,000 signature loan from N. D. Properties, Inc. N. D. Properties was solely owned at that time by Ben Langworthy, Jr., who also owned Diversified Mortgage Associates, Inc. At that time, both Diversified and Langworthy were licensed with the Department of Banking and Finance, Division of Finance. The petitioner made at least two loan payments directly to Ben Langworthy, who he knew was licensed by the Department. The $2,000 check given to petitioner was signed by Ben Langworthy. According to petitioner, Mr. Langworthy told him that N. D. Properties, Inc. was owned by two private investors. Petitioner's loan payment record with N. D. Properties shows that the loan has not been timely repaid.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Jose A. (Tony) Torres for registration as a mortgage broker in Florida be DENIED. Respectfully submitted and entered this 3rd day of June, 1987, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 1987. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-2473 The proposed findings of fact submitted by the petitioner and the respondent have been fully considered and have been accepted and/or incorporated in this Recommended Order, except as noted below. Petitioner p.1, last paragraph: Rejected; legal conclusion as opposed to factual finding p.2, 2nd paragraph, 2nd sentence: Rejected, irrelevant and immaterial p.2, 3rd paragraph: Rejected; immaterial p.2, 5th paragraph: Rejected; argumentative p.3, 1st two paragraphs: Rejected; argumentative p.3, paragraphs 7, 8 & 9: Accepted, but not included as irrelevant to ultimate disposition p.4, last four paragraphs: Rejected; contrary to the greater weight of the evidence p.5, paragraphs 3 - 5: Rejected; contrary to the greater weight of the evidence p.7, paragraphs 1 and 3: Rejected; not proper factual findings p.8, paragraphs 1 through 7: Rejected; argumentative and improper factual findings Respondent #6: Rejected; not supported by competent, substantial evidence #20 & 21: Rejected; not supported by competent, substantial evidence COPIES FURNISHED: Dick Greco, Esquire Molloy, James & Greco, P.A. 501 East Kennedy Boulevard Suite 910 Tampa, Florida 33602 Sharon L. Barnett Assistant General Counsel Office of the Comptroller 1313 Tampa Street, Suite 713 Tampa, Florida 33602-3394 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 Charles Stutts General Counsel Department of Banking and Finance The Capitol - Plaza Level Tallahassee, Florida 32399-0305 =================================================================
The Issue Whether petitioner's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes, should be approved.
Findings Of Fact Background Petitioner, Homesafe Mortgage Company (Homesafe), initially known as FMC Mortgage Company, a Florida corporation, was established on May 24, 1990, and has, since its inception, been owned by Orlando Monteagudo and his wife, Omaida. On September 16, 1990, Homesafe applied to respondent, Department of Banking and Finance (Department), for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's application was approved, and its mortgage brokerage business license was issued on October 24, 1990. A few days after Homesafe was licensed, the assets of another corporation wholly owned by Orlando and Omaida Monteagudo, First Miami Investments Corporation (FMIC), discussed more fully infra, were transferred to it, and Homesafe assumed the mortgage business of FMIC. At that time, FMIC became idle, and ceased doing business. On October 1, 1991, a new law, the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, became effective, which substantially changed the provisions of Chapter 494, Florida Statutes, and required businesses desirous of engaging in activities as mortgage lenders to be licensed as such. The Act also required such licensure for entities engaged in the business of servicing loans, if they proposed to service loans for more than four months, whereas previously no license was required for such activity. As a consequence of the amendments to chapter 494, Homesafe filed a timely application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. Pertinent to this case, that section provided: (1)(a) Any person in good standing who holds an active registration pursuant to former s. 494.039 . . . or any person who acted solely as a mortgage servicer on September 30, 1991, is eligible to apply to the department for a mortgage lender's license and is eligible for licensure if the applicant: 1. For at least 12 months during the period of October 1, 1989, through September 30, 1991, has engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both . . . . (Emphasis added) And, Section 494.001(17), Florida Statutes, defined a "person" to mean "an individual, partnership, corporation, association, or other group, however organized." Also pertinent to an evaluation of Homesafe's application by the Department was Rule 3D-40.202, Florida Administrative Code, which provided: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as defined s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. By letter of April 13, 1992, the Department notified Homesafe of its intention to deny Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause." The basis for the Department's denial was it conclusion that Homesafe had not "engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both" for "at least 12 months during the period of October 1, 1989, through September 30, 1991, as required by the "Saving Clause," and that the provisions of Rule 3D-40.202 were not applicable to Homesafe's circumstances, such that credit for FMIC's activities could be accorded Homesafe. Subsequently, the Department amended its notice of denial to include, as an additional basis for denial, its contention that Homesafe violated the provisions of Section 494.0072(2)(k), Florida Statutes, by acting as a mortgage lender subsequent to October 1, 1991, without a current, active license. Homesafe filed a timely request for formal hearing and disputed the bases upon which the Department proposed to deny its application. Homesafe's activities and those of its predecessor in interest, FMIC Orlando Monteagudo, the chief executive officer and co-owner of Homesafe, has personally held an active license as a mortgage broker since 1984, and has, through various entities, been active in the mortgage brokerage business since that date, without unfavorable incident. On July 20, 1989, Orlando and Omaida Monteagudo became the sole owners of OJM Enterprises, Inc. (OJM), then known as The R & M Group, Inc., a Florida corporation, through a structured buy out from his former partners, with whom Monteagudo apparently felt strong dissatisfaction. OJM was the parent company of First Mortgage Corporation (FMMC) and First Miami Investment Corporation (FMIC), both Florida corporations. FMMC had been licensed as a mortgage brokerage business since at least March 14, 1986; however, neither OJM nor FMIC were ever so licensed. 2/ In September 1990, Monteagudo, out of a desire to further distance himself from his former associates, and on the advice of his accountant as to the best way to wrap up the affairs of OJM, FMMC and FMIC, contemplated the merger of OJM and FMMC into FMIC by September 30, 1990, and the transfer of their assets and mortgage brokerage business activities to Homesafe, which until that time had been largely inactive. In furtherance of such plan, Homesafe, as heretofore noted, on September 16, 1990, applied to the Department for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's brokerage business license was issued on October 24, 1990. In the interim, a merger agreement was executed on September 29, 1990, on behalf of FMMC, FMIC and The R & M Group, Inc., whereby the parties agreed to merge The R & M Group, Inc., and FMMC into FMIC. [Use of the name "The R & M Group, Inc.," OJM's former name, was a mistake and would lead to a delay in filing with the Secretary of State as discussed infra.] Under the agreement, which was to have been effective September 30, 1990, FMIC would be the surviving entity, and "all the estate, property, rights, privileges, powers, franchises, and interests of each of the . . . corporations" would be vested in FMIC as the surviving corporation, without further act or deed. Considering the restructuring that was occurring, the proof is persuasive that at least by October 1, 1990, and more probably at some unidentifiable date shortly prior thereto, Homesafe began to service mortgage loans on behalf of FMIC. Thereafter, by October 30, 1990, following approval of its application for a mortgage brokerage business license, Homesafe received the assets of FMIC and assumed the mortgage brokerage business that had previously been operated through the corporate group, now FMIC. At that time, FMIC became idle and ceased doing business. Notwithstanding their efforts to effect a technical merger by September 30, 1990, the Secretary of State, by letter of January 4, 1991, rejected the merger agreement because The R & M Group, Inc., had changed its name on September 4, 1990, to OJM Enterprises, Inc. Accordingly, the parties were advised to correct their agreement to properly reflect the corporate parties if they desired the Secretary of State to accept such filing. Consequently, on January 14, 1991, the parties executed an amended merger agreement that properly reflected the corporate parties as FMMC, FMIC and OJM Enterprises, Inc. That agreement was duly filed with the Secretary of State on January 18, 1991, and FMIC became, technically, the surviving corporation that date. Under the terms of that agreement, as with the initial agreement, Orlando and Omaida Monteagudo, as the sole owners of OJM, became the sole owners of FMIC. The Department's Rule 3D-40.202 Pertinent to this case, Rule 3D-40.202, Florida Administrative Code, provides: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as deemed in s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. Here, the Department and Homesafe disagree as to the proper interpretation of the foregoing provision. The intent of the rule, according to the Department, was to permit those who were licensed as a mortgage brokerage business prior to the adoption of the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, but were not a corporate entity, to qualify under the "Saving Clause." Notably, under the amendments to chapter 494, only corporations are eligible for licensure as a mortgage lender. See Section 494.0061, Florida Statutes. Therefore, the Department interprets the rule to apply only when there has been an actual change in the form of the business entity, through incorporation of a sole proprietorship or partnership, and does not consider the rule applicable where, as here, a mere transfer of assets occurred between corporations. Contrasted with the Department's interpretation, Homesafe contends that the provisions of the rule are broad enough to cover the situation where, as here, the mortgage brokerage business of one corporation is assumed by another corporation, as long as the ownership interests remain the same. Under such interpretation, Homesafe and FMIC, the surviving corporation, would be considered the same "person" for purposes of determining eligibility under the "Saving Clause," and Homesafe could be credited, if necessary, with the time periods FMIC or its merged parts operated as a mortgage brokerage business to satisfy the "12-month" standard of the "Saving Clause." While Homesafe's interpretation may be a permissible interpretation of Rule 3D-40.202, so is the Department's. Indeed, the Department's interpretation of the rule is consistent with the intent of the rule and the doctrine of noscitur a sociis often applied as an aid to statutory construction. Under such circumstances, and for the reasons set forth in the conclusions of law, deference is accorded the agency's interpretation. Homesafe's activities subsequent to October 1, 1991 Pertinent to the Department's charge that Homesafe has acted as a mortgage lender subsequent to October 1, 1991, without a current, active license, the proof demonstrates that since October 1, 1991, Homesafe has made between 120-170 mortgage loans, sold those loans to investors, and thereafter serviced the majority of those loans. In response, Monteagudo retorts that Homesafe was entitled to licensure under the "Saving Clause," and that it was entitled to and needed to continue its business pending Department approval of its application.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered approving Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 28th day of April 1993. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of April 1993.
The Issue The issue in this case is whether the Petitioner’s application for licensure as a mortgage broker should be approved.
Findings Of Fact Petitioner resides in Riverwoods, Illinois. He has four children, and is married to Sharon Wheat-Hester. Petitioner received his undergraduate degree from Wake Forest University in North Carolina. Petitioner also received a master’s degree and doctorate degree in theology from Share-A- Prayer and Word Theological School in Whitewater, Wisconsin. Petitioner is currently employed as the director of a ministry called Marketplace Movement Network. The ministry provides advice to businesses on Chritian business ethics. In that regard, Petitioner has published one book on the subject of Christian ethics in business. Petitioner is also the President and shareholder of Hester International, Inc., a Florida Corporation that since 1995, provides mortgage brokerage services in the State of Illinois and several other states. The corporation’s principal office is located in Illinois. The business has an established client list and referral list. Additionally, Petitioner is currently licensed as a mortgage broker in the Illinois, California, North Carolina and Hawaii. He has not had any disciplinary action taken against him in those states. On January 25, 1996, prior to the present license application at issue here, Petitioner sought licensure as a mortgage broker in Florida with the Florida Department of Banking and Finance, Respondent’s predecessor agency. On the 1996 application Petitioner answered “no” to a question that asked whether he had ever had a license revoked. Petitioner’s 1996 application was denied for a material misrepresentation or omission. Petitioner did not challenge the 1996 denial. On February 16, 2004, also prior to the present application, Petitioner again applied for a mortgage broker license. On this application, question number six asked: Have you had a license, or the equivalent, to practice any profession or occupation denied, revoked, suspended, or otherwise acted against which involved fraud, dishonest dealing, or any other act of moral turpitude? Yes No A “Yes” answer to question six required the applicant to attach details, provide a copy of allegations, and also supply documentation of the final disposition of the case. In response to question number six, Petitioner appeared to have marked both the answers “yes” and “no”, but then circled “yes.” On the second page of the application, Petitioner explained his answer to question number six, stating that he had had a real estate license ten years ago and that he had been involved with a dispute for $2,500 and lost the case. The explanation further stated that Petitioner was moving to Illinois at the time, so he voluntarily surrendered his license. On April 1, 2004, without investigating the facts to refresh his memory, Petitioner provided the requested signed letter of explanation. Subsequently, he withdrew his February application because he did not have time to deal with the ongoing questions the agency had regarding his application. Around July 13, 2004, after discussing the February 2004 application with Respondent, Petitioner submitted a revised Application for Licensure as a Mortgage Broker in the State of Florida. In response to question six, Petitioner marked “no” based on his memory that his real estate agent’s license had been “voluntarily surrendered.” Petitioner also submitted character reference letters. Additionally, Petitioner discussed with Respondent any proof of rehabilitation since the “voluntary surrender” of his real estate license. On page two of the July application, Petitioner wrote that his “only blemish” was a voluntary surrender of a real estate license in 1992. Petitioner stated, “[t]his was ‘not’ an act of moral turpitude or fraud.” In a deficiency letter dated July 28, 2004, the Office requested additional information from the Petitioner, including a signed statement explaining his side of the occurrence. On September 30, 2004, the Office received the same statement the Petitioner had previously forwarded to the Office for his February 2004 application. Petitioner again did not avail himself of the opportunity to discover the true facts surrounding the claimed surrender of his license. In the second paragraph of this explanatory letter Petitioner stated that the disciplinary action that led to surrender of his real estate license arose out of a transaction involving one of his customers who rented property to a third- party renter. Petitioner stated that the rental transaction between his customer and the third-party renter occurred in the lobby of Petitioner’s office without his knowledge or help. According to Petitioner’s, somewhat confusing, explanatory letter, the customer did not have the right to rent the house, but collected $2,500 from the renter and then left the state. Later, Petitioner discovered that the customer had closed in escrow and gained temporary occupancy of the home, thereby enabling the customer to ostensibly rent the home. Petitioner further explained that the renter sued him for the $2,500 and prevailed because the transaction took place in Petitioner’s lobby. Petitioner stated he lost the case because his attorney, Scott Hester (also his brother), was unavailable to make the closing argument and Petitioner had to do his own summation. In fact, Petitioner’s brother never represented Petitioner in the renter’s case because he did not have time to undertake the case. Petitioner did not supply the names of the people referenced in the letter because he did not remember them. As will be seen, at the time of the explanatory letter, Petitioner’s memory of the facts surrounding his license surrender is, at best, faulty. On April 19, 2005, the Office issued its Denial Letter, denying Petitioner’s application for licensure as a mortgage broker. As grounds for denial under Section 494.041(2)(c), (g), (i) and (q), Florida Statutes, the letter stated in relevant part: The Office’s background investigation and information you provided revealed the following: You answered Question #6 on your application as “no”, when it asks if you have had a license, or the equivalent, to practice any profession or occupation denied, revoked, suspended, or otherwise acted against which involved fraud, dishonest dealing, or any other act of moral turpitude. On or about May 7, 1996, the Florida Department of Banking and Finance, Division of Finance, denied your application for a license as a mortgage broker for making a material misstatement of fact on their application. On or about December 8, 1992, after the State of Florida, Department of Professional Regulation, Division of Real Estate conducted an investigation, you surrendered your license with that agency and entered into a written agreement stating that you agreed to have your license revoked. Accordingly, the Real Estate Commission did revoke your license in their meeting of January 19, 1993 effective December 8, 1992. The Investigative Report attached to the Final Order to revoke reveals that you were sued for dishonest conduct and subsequently, on March 25, 1992, ordered to pay Johannes Fruhwirt $7,800 plus post- judgment interest. This order was by the County Court of Broward County as a result of a Final Judgment, Case #9103333 CC53 and a Writ of Execution. The investigation revealed that Hester left the State of Florida without leaving word of his whereabouts. Apparently, that judgment was never satisfied. On May 14, 1991 you promised to pay $3000 to Leonard Schoenfeld when closing occurred on a home Mr. Schoenfeld was purchasing. Closing occurred shortly afterward, and you have never made that payment. On or about July 17, 1995, the State of Illinois received an Application Form to Operate as a Residential Mortgage Licensee in the name of Hester International, Inc. on which you were listed as 50% owner. You signed the “Verification” portion of that form and your signature was notarized on June 20, 1995 indicating that you verified as being true all data entered onto that form. However, you responded “N/A” to Part III, Question #10 which asks that you list all licenses which you or your firm have applied for and been denied and/or any and all licenses issued to you or your firm which were subsequently suspended or revoked. You therefore failed to disclose the revocation of your license with the Florida Division of Real Estate that occurred in 1992. On the same application filed with the State of Illinois, in response to Part III, question 19(m), you did not disclose that a judgment had been entered against you on grounds of fraud, misrepresentation, or deceit. The renewal for Hester International Inc., with the State of Illinois, states under the section labeled, “Averment of License” in item “s” that the licensee will advise the Commissioner in writing of any changes to the information submitted on the most recent application for license within 30 days of said change. The State of Illinois reports that you never disclosed the denial of a mortgage broker license in 1996 with the State of Florida . (i) On November 18, 2004 in an electronic filing for corporation reinstatement for Hester International, Inc., you certified that as Registered Agent you maintained an office at 6278 N. Federal Highway, Suite #305 in Ft. Lauderdale, Florida. In fact, that address is a mail drop leased to one Carl Thames, CPA. The signage required by Section 48.091(2), Florida Statutes, does not appear, and you and Hester International, Inc. are unknown at this location. In pre-hearing interrogatories, the Office asked Petitioner to provide more information about the transaction involving the transaction that had led to the revocation of his real estate license, including the identity of those individuals. Even though the importance of accuracy was apparent since Petitioner was now in litigation, Petitioner, again, without investigating the facts and relying solely on his improving memory answered the interrogatories posed to him. In his answers, Petitioner identified the “customer” who had collected the money as Leonard Schoenfeld and the “renter” as Johannes Fruhwirt. Petitioner went on, in his answers, to describe the transaction with Mr. Schoenfeld and Mr. Fruhwirt. This description is similar to the explanation offered in the explanatory letters supplied for his earlier applications. In his response to Requests for Admissions, Petitioner denied that in May of 1991 he acted as a real estate broker in the auction of a home located at 14884 Equestrian Way in Wellington, Palm Beach County, Florida, and that he had been unable to deliver a mortgage at an agreed interest rate. Petitioner also denied that he had agreed to pay $3,000 for closing costs as deferred interest payments. Despite these denials, Petitioner admitted that he had signed an agreement to pay $3,000 to Mr. Schoenfeld. Petitioner explained these denials by claiming that these funds were never due because the agreement to pay $3,000 was contingent on closing. Since the real estate deal never closed, the $3,000 was never due. At his July 15, 2005, deposition, Petitioner essentially reaffirmed the inaccurate account of events in his interrogatory answers. At the deposition, Petitioner was asked to review documents related to the Schoenfeld transaction. Those documents included: (1) a copy of the May 14, 1991, agreement wherein he agreed to pay Mr. Schoenfeld $3,000, (2) a handwritten letter wherein he agreed to pay Mr. Schoenfeld the money that he owed him, and (3) a warranty deed on property purchased by Mr. Schoenfeld. When he was shown the May 14, 1991, agreement, Respondent testified that he did not know why he would have agreed to pay Mr. Schoenfeld $3,000. Even when he was shown the deed on the property and even though he had notarized the signatures on that deed, Petitioner maintained that the deal never closed and he never owed the $3000. At hearing, Petitioner’s various and growing explanations during discovery significantly differ from his testimony. Petitioner testified that throughout his various explanations he had confused and combined several individuals into one transaction. Even though he knew that the true facts of these transactions were important to consideration of his application and in answering discovery in this case, Petitioner did not make any real attempt to refresh his memory of these transactions until shortly before the hearing. In fact, the Schoenfeld and Fruhwirt transactions involved different real estate deals and had nothing to do with each other. The Schoenfeld transaction occurred in 1991 and involved the sale of real property located at 14884 Equestrian Way in Wellington, Florida. Mr. Schoenfeld was Petitioner’s customer. As part of the transaction, Petitioner guaranteed he could get a mortgage at a certain rate. After failing to get Mr. Schoenfeld a mortgage at a certain rate, Petitioner agreed to pay Mr. Schoenfeld $3,000 upon closing. When Petitioner failed to pay Mr. Schoenfeld the $3,000 on closing, he asked Mr. Schoenfeld if he could make payments of $200 a month. In a letter to Mr.Schoenfeld, Petitioner confirmed that he would pay Mr. Schoenfeld the amount that was owed. Petitioner made two payments and then stopped making payments. In a letter dated July 1, 1991, Mr. Schoenfeld complained about his dealings with Petitioner to the Division of Real Estate. A few days before Mr. Schoenfeld’s deposition on July 25, 2005, Petitioner paid Mr. Schoenfeld $2,600. Mr. Schoenfeld accepted the payment since the money was still owed to him. However, the payment had been delayed for 14 years and did not include interest for those years. Petitioner testified that he made the payment because, once he remembered the details of the transaction, he felt morally obligated to pay Mr. Schoenfeld what he had promised. However, fulfillment of this obligation also occurred with this litigation pending and after denials that any money was due Mr. Schoenfeld. In short, Petitioner did not pay Mr. Schoenfeld the money that was due him for 14 years until Petitioner was forced to acknowledge the true facts of the Schoenfeld transaction in this litigation. The Fruhwirt transaction involved a man named Mark Ritter who was a client of Petitioner. Mr. Fruhwirt met with Mark Ritter at a house he wanted to rent. Eventually, Mr. Ritter sent him to Petitioner to complete a lease agreement. Mr. Ritter did not know about leases and said Petitioner was a friend whose real estate office could set up the lease contract. Mr. Fruhwirt met Petitioner at his real estate office. Since it was lunchtime, they went to a nearby Burger King to finalize the lease. While at Burger King, Mr. Fruhwirt paid Petitioner $2,850 on the lease. Petitioner’s testified that he did not receive any money from Mr. Fruhwirt and did not accompany Mr. Fruhwirt to Burger King. Petitioner testified that Mr. Ritter and Mr. Fruhwirt met in his lobby and both went to Burger King to finalize the lease arrangement. However, given Petitioner’s past faulty memory, Petitioner’s testimony is not credible. At some point, Mr. Fruhwirt moved into the house. Subsequently, Mr. Fruhwirt received a letter from an attorney representing the real owner demanding that he vacate the premises. Mr. Fruhwirt then discovered that Mr. Ritter was not the owner and had to hire an attorney to sort out his continued occupancy of the property. Eventually Mr. Fruwhirt bought this property. Mr. Fruhwirt sued Petitioner and the real estate office for the recovery of the $2,850 he had paid to rent the house. Petitioner was found liable, but the real estate office was found not liable because the transaction happened off its premises at Burger King. On March 25, 1992, the Broward County Court entered a judgment of $7,800 against Petitioner, finding that Petitioner had “breached his duty to disclose that Mark Ritter was not the owner of the involved property.” After Mr. Fruhwirt obtained the judgment, Petitioner declared bankruptcy. Mr. Fruhwirt pursued an adversary action in Petitioner’s bankruptcy proceedings. Subsequently, the Bankruptcy Court cited “11 U.S.C. 523 A(2) and 11 U.S.C. 523 A(4)” and refused to discharge the judgment debt. The Bankruptcy Court’s Order refusing to discharge the debt clearly conflicts with Dr. Hester’s repeated implications and statements that this debt was discharged in bankruptcy. Unable to collect from Petitioner, Mr. Fruhwirt filed with the Florida Real Estate Recovery Fund. The fund paid $2,850 to Mr. Fruhwirt and suspended Petitioner’s license. Mr. Fruhwirt used the money to defray some of his legal expenses. To date, Petitioner has not paid Mr. Fruhwirt any money on the judgment. The Fruwhirt transaction led to the revocation of Petitioner’s real estate license and, on January 19, 1993, the Florida Real Estate Commission entered a final order revoking Petitioner’s real estate license. Despite Petitioner’s testimony that he never received a copy of the documents, the certificate of service for the final order indicates it was sent to Petitioner at 1101 Hidden Cove, Salem, SC 29676, which was the address where Petitioner was living at that time. Again, Petitioner’s testimony is not credible. The Final Order referenced a December 8, 1992, agreement in which Petitioner agreed that his license would be revoked. In the December 8, 1992 agreement, entitled “Affidavit for the Voluntary Surrender of License, Registration, Certificate/Permit for Revocation,” signed by Petitioner, he agreed to the revocation of his license and to not apply for a new real estate license for ten years from the effective date of revocation. In particular, the December 8, 1992 agreement stated, “[t]he effective date of the revocation shall be upon signing this document.” Notwithstanding the clear language revoking the license, at the hearing, Petitioner maintained that because he had voluntarily surrendered his license, he did not believe his license had been revoked. In referring to the agreement he had signed, he testified that the agreement said, “that my license will be inactive, not revoked” and denied ever seeing the other documents revoking his license. This testimony is simply not credible and demonstrates Petitioner’s propensity to see or remember things in a way that is more flattering to him, irrespective of reality. The affidavit signed by Petitioner clearly stated that Petitioner’s license would be and was revoked upon signing. In 1995, Hester International applied to operate as a residential mortgage licensee in Illinois. The application identified Petitioner as the vice president and Sharon Hester as the president. Page one of the application indicated the application had to be executed “by two officers or all directors if the applicant/licensee is a corporation.” The application was signed by Petitioner and his wife. Petitioner did not disclose to Illinois that a judgment had been entered against him in Florida or that his real estate license had been revoked or suspended. Question 10 in Part III of the Application asked: “LIST ALL LICENSES WHICH YOU OR YOUR FIRM HAVE APPLIED FOR AND BEEN DENIED AND/OR ANY AND ALL LICENSES ISSUED TO YOU OR YOUR FIRM WHICH WERE SUBSEQUENTLY SUSPENDED OR REVOKED.” Petitioner responded “N/A.” (Id.). Question 19(m) in Part III of the Application asked: UNDER PENALTY OF PERJURY, I(WE) STATE THAT ALL OF THE FOREGOING IS TRUE AND CORRECT TO THE BEST OF MY (OUR) KNOWLEDGE AND FURTHER STATE THAT AS THE APPLICANT/LICENSEE: . . . (m) Has not committed a crime against the law of this State, any other state or the United States, involving moral turpitude, fraudulent or dishonest dealing, and that no final judgment has been entered against it in a civil action upon grounds of fraud, misrepresentation or deceit which has not previously been reported to the Commissioner. The evidence did not demonstrate that the emphasized clauses in question 10 or the “I(WE)” in 19(m) direct such questions to individuals signing the application. One reasonable interpretation of the language is that the questions are directed to the business entity applying for the license. In short, the I(WE) language is simply language in a form meant to cover multiple types of business entities ranging from sale proprietorships to corporations. Therefore, Petitioner was not required by Illinois to disclose matters which involved him personally. To date, Illinois has not filed any disciplinary action against Petitioner or Hester International. Thus, the failure to disclose personal judgments or license actions to Illinois in a corporate application for licensure does not support a finding of dishonesty or denial of Respondent’s application at issue here. At some point, Hester International’s corporate status had to be reinstated in Florida. Petitioner reinstated the company’s corporate status in November of 2004. Petitioner filed as registered agent at 6278 North Federal Highway #305, Fort Lauderdale, Florida. Petitioner had not lived at this address for some 15 years, but had lived there for seven years with his girlfriend. The evidence showed that Petitioner simply forgot to change the registered agent’s address and was not acting dishonestly. Once he discovered his mistake, Petitioner amended his filing to reflect the appropriate address. Again, these facts do not form a basis to deny Petitioner’s license application. Finally, Petitioner testified that until Spring 2005, he and his wife were 50/50 owners of Hester International, Inc., as reflected on the application and license renewals in Illinois. In September 2004, Ms. Hester submitted Hester International, Inc.’s application for Florida licensure as a mortgage broker business. The Hester International business application was submitted after the Office had denied Petitioner’s license application in 1996 and was scrutinizing his July 2004 application. In the application, Ms. Hester identified herself as 100 percent owner of the Hester International. Petitioner did review this application, but he intentionally did not take part in its filing. The purported change in ownership was not adequately explained at hearing and appears to have been done in order to forestall any problems with licensure of the corporation due to Petitioner’s participation in the corporation. While the change of ownership is troubling, given Petitioner’s history, and also adds to the evidence that Petitioner is less than forthright in his memory and past business dealings, the change of ownership for the corporation’s licensure application does not, by itself, support a denial of Petitioner’s application. On the other hand, too many inconsistencies exist between Petitioner’s hearing testimony and his earlier accounts to conclude that Respondent can be trusted to hold a mortgage brokerage license. At worst, the evidence shows that Petitioner is not truthful or acts with integrity. At best, the evidence shows that Respondent has the ability to convince himself of facts that do not quite fit the truth, but are more flattering to him. Under either scenario, Petitioner’s appreciation of honesty, truthfulness and integrity are suspect. Neither Petitioner’s letters supporting his good character, nor his success in his ministry demonstrates sufficient rehabilitation to overcome what appears to be long-time evasive behavior. Therefore, Petitioner’s application for licensure as a mortgage broker should be denied.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: A Final Order be entered denying Petitioner’s application for licensure as a mortgage broker. DONE AND ENTERED this 4th day of November, 2005, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 4th day of November, 2005. COPIES FURNISHED: C. Scott Hester, Esquire 13843 Longs Landing Road East Jacksonville, Florida 32225 Robert H. Schott, Esquire Gregg Morton, Esquire Department of Financial Services 200 East Gaines Street Fletcher Building, Suite 526 Tallahassee, Florida 32399-0376 Carlos G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue is whether respondent acted as a mortgage lender within the meaning of Section 494.001(3), Florida Statutes, and thus is subject to Division licensure requirements.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Department of Banking and Finance, Division of Finance (Division), is a state agency charged with the responsibility of administering and enforcing the Florida Mortgage Brokerage and Lending Act which is codified in Chapter 494, Florida Statutes. Among other things, the Division regulates mortgage lenders and requires such persons or entities to secure a license. Respondent, White Pine Resouces, Inc. (WPR), is a Florida corporation formed in March 1986. Its sole shareholder is John R. Grass, a Pensacola attorney. Although the corporation was originally formed for a number of purposes, its primary activity is the real estate investment business. It holds no licenses issued by, or registrations with, the Division. WPR's current business address is 358-C West Nine Mile Road, Pensacola, Florida. WPR's principal source of money is Grass, or his professional association, who loan money to the corporation. In some cases, the money is used to acquire parcels of property for resale, make necessary repairs or improvements, and then provide owner financing to the buyer. In other cases, WPR loans money to persons needing to make improvements to their homes or rental property and takes back a second mortgage from the borrower. These types of transactions, which occurred during the years 1992-95, are found in documents offered in evidence as petitioner's exhibits 1-5. Respondent has also stipulated that several other transactions of this nature occurred during that same period of time. In every case, WPR was investing its own money or that of its principal. In 1992, a Division examiner analyst noted the following listing in the Yellow Pages section of the Pensacola telephone directory under the heading of "Mortgages": White Pine Resources Having Trouble With Financing Residential & Land Fast Service on 1st Mortgages The advertisement also contained respondent's street address and telephone number. In the 1993-94 telephone directory, WPR carried the following advertisement under the "Mortgages" section of the Yellow Pages: White Pine Resources Specialists! Bad Credit - We Can Help Vacant Land Loans In the 1995-96 telephone directory, WPR placed the following advertisement in the "Mortgages" section of the Yellow Pages: White Pines Resources A Private Investor Not a Mortgage Broker Specialists! We Can Help Vacant Land Loans Although the Division first noted one of WPR's Yellow Page advertisements in 1992, for some reason it did not conduct a formal investigation of respondent's activities until February 28, 1994. On that day, an examiner analyst made an unannounced visit to respondent's office for the purpose of inspecting its records to determine if WPR was acting as a mortgage lender. However, WPR's principal, John R. Grass, was not in the office, and the analyst simply left his business card and a message for Grass to contact him. The next morning, Grass telephoned the analyst's supervisor and advised him that since WPR was merely a private investor, and not a mortgage lender, it was not subject to the Division's regulation, and hence it would not provide copies of its records. A subpoena duces tecum was then issued by the Division, records were produced pursuant to the subpoena, and this controversy ensued. The parties agree, however, that this action was not prompted by complaints from consumers or other persons having dealings with WPR. The record indicates that a mortgage lender differs from a private investor in several material respects. An important distinction is that a private investor uses its own funds rather than those of another party. Also, a private investor does not buy or sell paper, does not escrow taxes, does not split or broker commissions, and does not close its own loans. In all of these respects, WPR had the attributes of a private investor. When mortgage brokerage firms are involved in transactions with private investors, they must supply the private investor with certain documents that are not provided to an institutional investor. Among others, they include a disclosure agreement, receipt of recorded instruments, an appraisal or waiver of the same, and title insurance. In addition, Division rules require that a mortgage brokerage firm record its transactions with private investors in a log journal known as DBF-MB-888. The evidence shows that for transactions between WPR and at least two mortgage brokerage firms during the years in question, the two firms recorded those transactions on DBF-MB-888. They also provided WPR with documents typically given to private investors. The Division has adopted Rule 3D-40.290(2), Florida Administrative Code, which provides that a person is deemed to be holding himself out to the public as being in the mortgage lending business if he advertises in a manner "which would lead the reader to believe the person was in the business of buying, making or selling mortgage loans." The rule has not been challenged and, for purposes of resolving this controversy, is presumed to be valid. In view of the representations that WPR provided "Fast Service on 1st Mortgages" and "Vacant Land Loans," it is fair to infer that the Yellow Page advertisements made by WPR would reasonably lead the reader to believe that WPR was in the business of buying, making or selling mortgage loans. Therefore, by virtue of advertising in the Yellow Pages, WPR is deemed to be holding itself out to the public as being in the mortgage lending business. During the years 1993-95, the Division routinely sent WPR questionnaires regarding various WPR transactions with licensed lenders. The transmittal letter accompanying the questionnaire noted that the Division was conducting "a routine examination" of the licensed lender (and not WPR), and WPR's comments would "be of material assistance to (the Division) in determining compliance with the Florida Mortgage Brokerage Act." By way of an estoppel defense, WPR has essentially contended that the questionnaires constituted a representation by the Division that WPR was merely a private lender. It further contends that, to its detriment, it relied upon that representation. But there is nothing in the documents that states that the Division considered WPR to be a private lender. Nor is there any evidence that the Division made any other oral or written representations to WPR that it did not need to secure a license. Finally, assuming arguendo that such a representation occurred, there was no showing that WPR relied to its detriment on such an alleged "misstatement of fact." WPR also raises the defense of laches arguing that it was severely prejudiced by the Division's delay in prosecuting this action. Except for testimony that respondent was forced to secure the services of an attorney to defend against this action, and its principal was required to attend a hearing, there was no showing of prejudice on the part of WPR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order requiring respondent to cease and desist from engaging in the mortgage lending business without a license. DONE AND ENTERED this 17th day of June, 1996, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 95-0290 Petitioner: Because petitioner's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. Respondent: Because respondent's post-hearing filing is more in the nature of a memorandum of law containing argument rather than proposed findings of fact, specific rulings have not been made. COPIES FURNISHED: Honorable Bob Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry L. Hooper, III, Esquire Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Clyde C. Caillouet, Jr., Esquire 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 John T. Reading, Jr., Esquire 358-C West Nine Mile Road Pensacola, Florida 32534-1818
The Issue Whether Respondent's license as a mortgage broker in Florida should be disciplined because the Respondent had acted as a mortgage brokerage business without being licensed to do so in that Respondent solicited mortgage loan applications in his own name and directed his clients to make their checks in payment of application, credit report, and appraisal fees payable to Respondent individually; accepted those fees without a written brokerage agreement and without adequate disclosures; failed to place the fees received into a segregated account; failed to refund fees; and converted the funds obtained to his own uses; all in violation of various sections of Chapter 494, Florida Statutes.
Findings Of Fact Petitioner, the Department of Banking and Finance, is the state agency in Florida responsible for the regulation and licensing of mortgage brokers and the regulation of mortgage brokerage activities in this State. Its responsibilities include the duty to sanction those licensed under the Act for violations of the Act. At all times relevant, Respondent was a licensed mortgage broker and possessed license #HA 264194420 issued by the Department on May 31, 1990. Except for two brief periods of time in 1991, Respondent's mortgage broker license was active from May 31, 1990 until September 1, 1993. Respondent's license became inactive on September 1, 1993 for failure to timely renew the license. Respondent's license is presently inactive and will remain in an inactive status unless renewed on or before August 31, 1995 when the license will expire. Respondent's license can be reactivated at any time before its expiration date by filing an application for reactivation and payment of reactivation and renewal fees to the Department. Respondent has never been licensed by the Department as a mortgage brokerage business. In January and February 1992, Respondent was not associated with any mortgage brokerage business, nor was he an employee or an independent contractor for any mortgage brokerage business. In January and February 1992, Respondent was not an employee of American Fidelity Mortgage Corporation, a licensed mortgage lender. American Fidelity never provided Respondent with any indicia of employment such as a written employment agreement, nor employee IRS withholding forms, nor an office, nor business cards. At Respondent's request and as an accommodation to a lender with which American Fidelity did a volume business, John Combs, President of American Fidelity agreed to act as a conduit for submitting Respondent's loans to the lender while Respondent established his own mortgage brokerage business and establish a history with the lender. As a mortgage lender involved in a lending transaction, American Fidelity was obligated under Chapter 494 to provide loan applicants with lender disclosure forms. Respondent claims that he had an oral understanding with John Combs, the President of American Fidelity Mortgage Corporation and that Respondent understood he was employed by that company to solicit mortgage loans. Respondent's claim is based on having received several copies of American Fidelity's standard loan application packages and having provided John Combs with a copy of his mortgage broker license. Respondent's claim is not credible. In January and February 1992, Respondent solicited and accepted mortgage loan applicants from ten to fourteen individuals for the purpose of refinancing their residential properties. Not all of the loan applications Respondent obtained were delivered to American Fidelity Mortgage Corporation. Of the ten to fourteen mortgage loan applications Respondent admits having solicited, four were delivered to American Fidelity Mortgage Corporation. Those four applications were identified as the Biron, Schauman, Tapscott and Phillips loan applications. Two of those mortgage loan applicants were Thomas Hall and Caroline Marks. The Hall and Marks loan applications were never delivered to American Fidelity Mortgage Corporation. The remaining loan applications are unaccounted for. Respondent claims to have delivered all the loan applications he solicited to American Fidelity Mortgage Corporation, and that Combs must have lost or destroyed the remaining applications. This claim is not credible. American Fidelity Mortgage Corporation as a lender keeps a log of those applications it receives and the date on which they are received in compliance with Chapter 494, Florida Statutes. The Hall and Marks loans are not listed among the loan applications received by American Fidelity Mortgage Corporation. Respondent did not provide his clients with a mortgage broker agreement. Respondent claims the reason he did not provide a mortgage broker agreement was due to American Fidelity Mortgage Corporation's policy of not providing a mortgage brokerage agreement until some time later in the transaction. This claim is not credible in that American Fidelity Mortgage Corporation is a licensed lender. Mortgage lenders, as distinguished from mortgage brokers, are not required under the provisions of Chapter 494 to provide borrowers with a mortgage brokerage agreement. Respondent did not provide any of clients with a good faith estimate of the costs for their mortgage financing transaction. Respondent solicited and accepted mortgage loan fees in his own name. Respondent claims to have collected these fees in his name based on American Fidelity Mortgage Corporation's instructions to him. This claim is not credible. Respondent directed both Hall and Marks to make their checks in payment of their loan application fees, credit report and appraisal fees in the amount of three hundred fifty dollars ($350.00) payable to himself personally. He indicated to them he would use these funds to pay for various costs and services when and as necessary. Mr. & Mrs. Phillips also paid loan application fees and deposits to Respondent in the approximate amount of three hundred fifty dollars ($350.00). Respondent obtained application fees and deposits from each of his clients but never provided a mortgage brokerage agreement nor good faith estimate. No portion of the three hundred fifty dollars ($350.00) for fees and deposits obtained by Respondent from his clients was used for payment of credit report or appraisal costs. Respondent collected an additional fee of fifty dollars ($50.00) from each of his clients. Pursuant to Respondent's alleged agreement with American Fidelity, Combs required a fifty dollar ($50.00) deposit for credit report costs with each application. Respondent told his clients this was the lender's lock- in fee. Respondent directed some clients to make the check payable to American Fidelity Mortgage Corporation. Some of those checks were delivered with the loan applications to American Fidelity Mortgage Corporation. Others, such as the check from Hall, were not. Hall's check was never cashed. The Marks' check was made payable to Respondent. American Fidelity Mortgage Corporation was unable to process the four loans Respondent submitted due to Respondent's failure to provide for an appraisal. The Tapscott loan did close some months later after American Fidelity Mortgage Corporation made arrangements for an appraisal. Tapscott was obligated to pay the appraiser at the time the appraisal was done in accordance with American Fidelity Mortgage Corporation's standard procedure. In effect, Tapscott paid twice for an appraisal. No portion of the deposit monies accepted by Respondent from his clients were ever placed in a segregated account. The fees and deposits Respondent obtained from his clients were not continuously held in any account. Respondent admits that he did not refund the monies obtained from his clients despite their demands for the return of those deposits. Respondent converted the funds he obtained from his clients to his own use. On or about August 31, 1994, two and a half years after obtaining these deposits and after the initiation of the instant action by the Department, Respondent did refund substantially all of the funds he took from his clients. The only address in the licensing files was Respondent's home address, located at 1038 Green Road, Rockledge, Florida 32955. Respondent moved from the license address on file with the Department and failed to provide the Department with any notice of his change of address. Respondent refused to make his mortgage broker's records available to the Department for examination by making himself and consequently his records unavailable. Various liens had been filed against Respondent including federal liens. Respondent also filed a petition for bankruptcy under Chapter 13 of the Bankruptcy Code some time in late 1991. That petition for bankruptcy was dismissed on January 10, 1992 for failure to make payments to creditors under the payment plan. The order dismissing Respondent's petition for bankruptcy also lifted the automatic stay against creditors. The creditor matrix in this matter number thirty-four (34) creditors. Respondent at no time notified the Department of his bankruptcy filing.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Dean A. Danner's mortgage broker license be revoked. It is also RECOMMENDED that a fine be imposed against Dean A. Danner in the amount of eight thousand dollars ($8,000.00). DONE and ENTERED this 27th day of September, 1994, in Tallahassee, Florida. DANIEL M. KILBRIDE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1994. APPENDIX Petitioners Proposed findings of fact Accepted in substance: paragraphs 1-9, 10 (in part), 11-20, 21 (in part), 22, 23, 24 (in part), 25 (in part), 26 (in part), 28, 29. Rejected as subsumed, irrelevant or immaterial: paragraphs 10 (in part), 21 (in part) 24 (in part), 25 (in part), 26 (in part), 27. Respondent did not submit proposed findings of fact. COPIES FURNISHED: Dean A. Danner 986 Kings Post Road Rockledge, Florida 32955 Josephine A. Schultz, Esquire Office of the Comptroller 400 West Robinson Street, Suite S225 Orlando, Florida 32801 Honorable Gerald E. Lewis Comptroller, State of Florida Department of Banking & Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking & Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350
