Findings Of Fact Having heard the testimony and considered the evidence presented at the hearing, the undersigned finds as follows: At all relevant times, respondent was a licensed mortgage broker, holding license number 3256. (Exhibit A) On November 26, 1974, Carl Sciacca and George Williams, the general partners of a limited partnership known as University Professional Plaza Ltd., entered into a written contract with respondent to procure a mortgage loan commitment. Mr. Sciacca first went to respondent because respondent had been highly recommended to him. The amount of the mortgage was to be $2,450,000.00 and the commitment was to be procured "on or before 21 days from date all required exhibits are presented...". The agreement further provided that University would pay to respondent a brokerage fee in the amount of $24,500.00 upon funding of the loan. (Exhibit B) On the same date, November 26, 1974, University delivered to respondent a check in the amount of $7,500.00. This check bears the notation "For partial brokerage commission to be held in escrow." (Exhibit C) On November 27, 1975, respondent used said check to purchase a cashier's check and the money was never placed in escrow by respondent. While some correspondence from someone denoting an interest in the loan did transpire, the loan was never consummated. Sometime after the expiration of 21 days from November 26, 1974, Mr. Sciacca requested respondent to refund the deposit. A dispute arose between respondent and University regarding whether or not respondent had received from University all the required documents pertaining to the procurement of the loan. Respondent stated that University had not acted in good faith and thus was not entitled to a refund of the deposit. When attorneys were brought into the picture, it was learned that respondent no longer had all the deposit money. Respondent still has not refunded the $7,500.00 to University, however, respondent and University have now entered into an agreement whereby respondent and his wife executed a mortgage note to University in the amount of $9,000.00 secured by a second mortgage on their condominium apartment. This arrangement is satisfactory to University and represents complete settlement of the $7,500.00 owed to University, along with attorney There is some dispute in the evidence as to the parties' understanding of both the disposition to be made of the $7,500.00 deposit when the check was delivered to respondent and the actual terms of the mortgage loan commitment agreement. It was Sciacca's and William's opinion that all necessary documents for the procurement of the loan had been delivered to respondent and that if a loan were not procured within 21 days, the deposit was to be returned to University. It was respondent's opinion that the 21 days was to run from the date of receipt. of all necessary documents and that respondent had never received from University an accurate financial statement. Respondent further testified that he informed Mr. Sciacca of some problems involved with procuring the loan and that he would need some of the $7,500.00 to straighten out those problems. It was respondent's testimony that, despite the notation on the check "to be held in escrow", Sciacca told respondent to use whatever he needed to procure a loan.
Recommendation Based upon the findings of fact and conclusions of law set forth herein, it is recommended that: Respondent be found not guilty of violations of F.S. Section 494.05(1)(a) , (b) , or (c) or Section 494.05(2); Respondent be found guilty of violations of F.S. Section 494.05(1)(e) , (f) , and (g) and F.A.C. Rule 3-3.06(7) recognizing that the latter two statutes and the Rule involve the same offense - the failure to place the deposit in a trust fund or escrow account; and The Division of Finance issue, in such manner as it deems appropriate, a public reprimand or censure regarding respondent's violations as set forth above. Respectfully submitted and entered this 31st day of October, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Joseph M. Ehrlich, Esquire Department of Banking and Finance Division of Finance The Capitol Tallahassee, Florida 32304 Barry Chapnick, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Legal Annex Tallahassee, Florida 32304 Attorney for Division of Finance Steve E. Moody, Esquire MOODY & JONES 207 E. Broward Boulevard Suite 200 Fort Lauderdale, Florida 33301 Jack E. London, Esquire 2134 Hollywood Boulevard Hollywood, Florida 33020 Attorney for Carl Sciacca and George Williams, members of the general public
Findings Of Fact The facts which the Department asked Respondents to admit by Petitioner's Second Request for Admissions (Pet. Ex. 3) and Paragraphs 1-32 and each odd-numbered paragraph from 33-117, inclusive, of Petitioner's First Request for Admissions (Pet. Ex. 2) are conclusively established. Rather than recite all of those undisputed facts as findings, this Recommended Order will summarize those facts as necessary and make additional findings on the relatively few disputed issues of fact which were raised during the final hearing. The Financial Transactions Between February 1, 1980, and October 31, 1982, Davide, Inc., brokered 43 real estate mortgage loans which consisted of a wraparound second mortgage securing a promissory note in an amount equal to (1) the amount of "new money actually advanced to the borrower out of the wraparound mortgagee's pocket, plus the amount of the principal balance remaining on the first mortgage. There was no evidence how the interest rate on any of the 43 wraparound mortgage loans compared to the interest rate on the corresponding first mortgage loan. All 43 loans included, as an addendum to the wrap- around mortgage, the following agreements between the wrap- around mortgagee and the borrower: Mortgagor shall pay the taxes and insurance deposits required by Senior Mortgagee. The Mortgagor shall comply with all of the terms and provisions of the Senior Mortgage other than with respect to the payments of the principal and interest due. If the Mortgagor shall fail to so comply with all of the terms, provisions and conditions of the Senior Mortgage so as to result in a default under it (other than with respect to pay ments due upon the note secured by the Senior Mortgage) that failure on the part of the Mortgagor shall constitute a default under this mortgage and shall entitle the Mortgagee, at its option, to exercise any and all rights and remedies given the Mortgagee in the event of a default under this Mortgage. The Mortgagee agrees to pay to the holder of the Senior Mortgage the unpaid principal balance of the mortgage together with all interest accruing under it as and when required by the terms of the Senior Mortgage; therefore, by paying the constant monthly installments each provided to be paid from the date of funding this mortgage to and including the date the Note secured hereby becomes due at which time the Mortgagee's payment obligation shall terminate. At such time of termina tlon of the Mortgagee's obligation, the balloon balance due upon [sic] the Note secured hereby shall be credited for an amount aggregating the principal then owing upon the Senior Mortgage plus all sums which were paid as principal to the Senior Mortgage by the Mortgagee. All those payments provided to be paid by the Mortgagee pursuant to the provisions of paragraph 3 above shall be made by the Mortgagee before the expira tion of the applicable grace periods provided for those payments as contained in the Senior Mortgage. The Mortgagee does not assume any of the obligations of the Mortgagor under the Senior Mortgage except as provided above with respect to principal and interest payments due after this mortgage has been funded. If the Mortgagee shall default in making any required payment of principal or interest under the Senior Mortgage, the Mortgagor shall have the right to advance the funds necessary to cure that default and all funds so advanced by the Mortgagor, together with interest at the rate of 18 percent per annum shall be credited against the next installment(s) of interest and prin cipal due under the Note secured by the mortgage. The Mortgagor and the Mortgagee covenant and agree not to enter into any agreement with the holder of the Senior Mortgage modifying or amending any of the provisions dealing with payment of princi pal or interest under the Senior Mortgage without the prior written consent of the other. All 43 loans are short-term loans which are designed, by their terms, to become due before the first mortgages were, by their payment terms, to be paid in full. The loan application statements and closing statements related to each of the 43 wraparound mortgage loans show the first mortgage balance as, respectively, part of the amount of the loan and part of the disbursements to the borrowers. But both make clear that those items which refer to the amount of the balance on the first mortgage which the wraparound mortgagee agreed, in the addendum, to pay during the life of the wraparound mortgage. The first mortgage balances were not paid off by the wraparound mortgagee, nor was cash in the amount of the first mortgage balance disbursed to the borrower out of the wraparound mortgagee s pocket. In each of the 43 wraparound mortgage loans, the mortgage brokerage fee or commission would exceed the maximum allowable by law if computed only on the "new money," but would not exceed the maximum allowable by law if computed on the total face amount of the promissory note secured by the wraparound mortgage. If they were excessive fees, the total amount of the excess would be $22,508.29, and the Department's report of examination (Pet. Ex. 1) would identify the amount of the excess that should be refunded to each borrower. Finally, the mortgage brokerage fee actually charged on each of the 43 loans much more closely approximates what would be the maximum fee if computed on "new money" than what would be the maximum fee if computed on the face amount of the promissory note secured by the wraparound mortgage. B. The Department's Actions The Department apparently has not had the occasion to apply the law, which is now codified as Section 494.08(3), Florida Statutes (1983), and the Department's rules promulgated under it, to precisely the financial transactions shown by the evidence in this case. But since at least 1973, the Department consistently has interpreted the law and rules in various cases involving wraparound mortgages as requiring the maximum mortgage brokerage commission or fee to be computed on the new money" rather than on the total amount of the promissory note secured by the wraparound mortgage. In 1979, the Department considered two similar financial transactions: One was a specific refinancing wraparound second mortgage in which the wraparound mortgagee was obligated to make payments due on the first mortgage "out of sums paid hereunder"; the other was the generic purchase money wraparound second mortgage transaction in which the seller/wraparound mortgagee remains liable on the first mortgage. The Department concluded that, in both cases, the maximum fee should be computed on the "new money." The conclusion in the latter case was based upon the complete absence of any assumption by the wraparound mortgagee of a preexisting indebtedness of the borrower on the first mortgage. In the case of a purchase money wrap- round second mortgage, the wraparound mortgagee always was and simply remains liable on the first mortgage. The conclusion in the former case is based upon a determination: (1) that the wraparound mortgagee's assumption of the obligation to pay the first mortgage was not unconditional, but rather was conditioned upon the wrap- around mortgagee's receipt of payments on the wraparound mortgage; and (2) that the first mortgagee acquired no cause of action against the wraparound mortgagee. The Department acknowledged at the time that its interpretation was based upon the two sets of facts under consideration and that the Department was not foreclosing the possibility of reaching the opposite conclusion on other sets of facts. In recent years, Department personnel consistently have advised mortgage brokers of its position regarding computation of maximum fees on wraparound mortgage loans, as summarized above. Department personnel have on occasion attended meetings of Florida mortgage brokers in Miami and elsewhere in which the subject has been discussed and the Department's position publicly stated. There is no evidence whether Davide or any representative of Davide, Inc., attended any of those meetings or became aware of the Department's position before June, 1982. Although Davide attended the final hearing, he did not testify. In June, 1982, the Department and Respondents began communications regarding the maximum brokerage commission or fee on wraparound mortgage loans. The Department advised Respondents that it believed the maximum fee should be computed on the "new money." C. Respondents' Response Since approximately May 5, 1981, Respondent had relied on advice of counsel that the maximum mortgage brokerage commission or fee should be computed on the entire face amount of a wraparound mortgage. Counsel qualified his opinion, acknowledging that there was no judicial construction of the statute and that his interpretation could be wrong. Counsel's opinion did not mention, and apparently did not even consider, any Department rule interpreting the statute. Rather, the opinion was based primarily upon counsel's assessment that any other interpretation of the statute would render it unconstitutionally vague and ambiguous. On or about September 27, 1982, Respondents' counsel wrote a letter to the Department and seemed to agree that Respondents would conduct an audit and refund any excess fees charged on the wraparound mortgages. The Department completed its audit on December 3, 1982, and sent Respondents a copy on December 13, 1982. The audit specified alleged excess fees charged on the 43 wrap- around mortgages and on seven straight" mortgages. (Pet. Ex. 1) Respondents' counsel responded by January 10, 1983, letter, again seeming to indicate that Respondents agreed to refund excess fees "as applicable." But by January 20, 1983, letter, Respondents' counsel again wrote the Department to advise that Respondents would refund excess fees on the seven "straight" mortgages, but not on the 43 wraparound mortgages. Based on the above facts, I find that the Department did not mislead Respondents concerning the Department's position. Specifically, Respondents were not misled by the erroneous reference in Rule 3D-40.00(3), Florida Administrative Code, to Section 494.08(4), instead of Section 484.08(3), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED THAT: Petitioner, Department of Banking and Finance, enter a final order requiring Respondents, Davide & Associates, Inc., and Salvatore G. Davide, to refund to each of the first 43 borrowers identified in the report of examination (Pet. Ex. 1) as "Mortgagor(s)" the amounts identified therein as "Overcharge" to the borrower. RECOMMENDED this 5th day of March, 1984, in Tallahassee, Florida. COPIES FURNISHED: Walter W. Wood, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Herman T. Isis, Esquire Post Office Box 144567 Coral Gables, Florida 33114 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of March, 1984.
The Issue The issues for determination in this proceeding are whether Respondents, Samuel T. Henson and DuPont Funding Corporation, committed multiple acts in violation of applicable statutes and administrative rules and, if so, what, if any, penalties should be imposed.
Findings Of Fact Petitioner is the administrative agency charged with responsibility for administering and enforcing the provisions of Chapter 494, Florida Statutes.3 Respondent, DuPont Funding Corporation ("DuPont") is a Florida corporation engaged in the mortgage brokerage business at a single location at 7300 West Camino Real Drive, Boca Raton, Florida 33442. DuPont is registered with Petitioner under registration number HB 592710662. Respondent, Samuel T. Henson, ("Henson"), is the principal mortgage broker for DuPont. Henson is licensed by Petitioner as a mortgage broker pursuant to license number HA 247542864. As the mortgage broker for DuPont, Henson is responsible for his compliance with Chapter 494, Florida Statutes, as well as that of DuPont. Petitioner examined and investigated Respondents in response to five complaints received by Petitioner. The investigation involved events allegedly occurring between January 1, 1989 through August 31, 1990. Misuse And Misapplication Of Deposits The Smith Transaction Respondents failed to refund a deposit in the amount of $1,493.00 to Mr. J. W. Smith (the "Smith transaction"). Mr. Smith deposited $1,493.00 with Respondents to pay the costs of a mortgage applied for by the purchaser of commercial property owned by Mr. Smith. According to the terms of the Mortgage Loan Agreement and Application, the deposit was refundable if Respondents were unable to obtain financing for the proposed transaction. After Respondents were unable to obtain the financing applied for, they refused to refund Mr. Smith's deposit. Mr. Smith owned the Esmeralda Inn in Chimney Rock, North Carolina (the "Inn"). The Inn was listed for sale with Daniel Murr of First Commercial Brokers in Asheville, North Carolina, in the amount of $650,000.00. In October, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. and Mrs. William C. Robeck. Mr. and Mrs. Robeck were represented by a Mr. Castaldi as the their agent. The terms of the offer required Mr. and Mrs. Robeck to pay $25,000.00 and for Mr. Smith to carry a second mortgage in the amount of $185,000.00. The balance of the purchase price was to be paid in the form of a first mortgage in the amount of $440,000.00. Mr. Smith did not accept the offer of purchase from Mr. and Mrs. Robeck because he considered the amount of the cash invested by the purchasers to be insufficient. Sometime in December, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. Andrew Okpych. The terms of the offer required Mr. Okpych to pay $100,000.00 and for Mr. Smith to carry a second mortgage in the amount of $200,000.00. The Branch Bank and Trust Company in Asheville, North Carolina agreed to provide a first mortgage in the amount of $350,000.00. Mr. Smith wanted to minimize the amount of his second mortgage. He was advised by Mr. Daniel Murr that Respondents had represented to Mr. Murr that they could obtain a first mortgage for the purchase in the amount of $440,000.00 to finance the Smith-to-Okpych transaction. This financing proposal would reduce the second mortgage held by Mr. Smith to $110,000.00. Mr. Smith authorized Mr. Murr to contact Respondents. Henson contacted Mr. Smith by telephone to discuss the proposed financing in the amount of $440,000.00 on or about December 19, 1989. During that telephone conversation, Henson represented to Mr. Smith that Henson had located a lender which had already approved the needed $440,000.00 loan. Henson refused repeated requests by Mr. Smith to identity the lender. Henson insisted that Mr. Smith sign an agreement to pay the costs of the loan transaction and deposit $1,500.00 with Respondents before Henson would identify the lender which had pre-approved the loan in the amount of $440,000.00. Mr. Smith and Mr. Okpych signed a Mortgage Loan Agreement and Application (the "agreement") with Respondents on January 5, 1990. Mr. Okpych signed the agreement as borrower and Mr. Smith signed as the person responsible for all expenses incurred in connection with the agreement. The agreement was signed by Henson on January 5, 1992, and sent by facsimile to Mr. Smith and Mr. Okpych from the office of Mr. Smith's attorney. Mr. Smith and Mr. Okpych made several changes to the agreement and initialed the changes. One such change made the deposit from Mr. Smith a refundable deposit by deleting the prefix "non-" from the word "non-refundable" in the typed form of the agreement. Mr. Smith and Mr. Okpych sent the modified agreement to Henson by facsimile on the same day. Mr. Smith telephoned Henson on January 5, 1992, to advise Henson that the modified agreement had been sent by facsimile. Henson stated that he had received the agreement and stated that the modifications were acceptable. Henson directed Mr. Smith to wire transfer the $1,500.00 deposit. Mr. Smith wired $1,500.00, less the $7.00 charge for the wire transfer, on January 10, 1990. The wire transfer in the amount of $1,493.00 was sent to the account of Dupont Funding Corporation, account number 3601345943, NCNB, Deerfield Beach, Florida. Henson notified Mr. Smith by telephone on or about January 15, 1992, that he could not procure the needed financing. The reason given by Henson was that the lender did not want to make the loan because the property was located in North Carolina. Henson still refused to identify the lender to Mr. Smith, but suggested that the needed financing may be obtainable from "General Electric." See Exhibit 12 at 24. The next day, Henson telephoned Mr. Smith and stated that the loan was not available from any lender and that the deposit of $1,493.00 would be refunded to Mr. Smith later in the week. After repeated requests and written demands, Mr. Smith's deposit in the amount of $1,493.00 has not been refunded. The Robeck Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. and Mrs. William C. Robeck (the "Robeck transaction"). Mr. and Mrs. Robeck deposited $2,500.00 with Respondents when the Robeck's applied for a mortgage in the amount of $440,000.00 on October 11, 1989, in their unsuccessful attempt to purchase the Inn from Mr. Smith. When Mr. Robeck questioned whether the deposit was refundable, Henson changed the typed form of the Mortgage Loan Agreement and Application (the "loan application") by deleting the prefix "non-" in the typed word "non-refundable". The modified loan agreement was signed by the Robeck's and Henson. Respondents were unable to obtain financing for the proposed transaction. After the Robecks were unable to obtain financing, Respondents refused to refund the Robeck's deposit. Mr and Mrs. Robeck made an offer to purchase the Inn from Mr. Smith sometime in October, 1989. The offer was rejected, and the Robeck's asked Henson to refund their deposit sometime in January, 1990. Henson refused to refund the deposit and told Mr. Robeck to find another bed and breakfast inn. Mr. Robeck found another bed and breakfast inn for sale in Franklin, North Carolina. He offered to acquire the inn by lease-purchase. His offer was accepted, but Mr. Robeck later found approximately $1,000,000.00 in stolen property on the premises. The owner was arrested, and the lease-purchase transaction was not consummated. Mr. Robeck again requested the refund of his deposit, and Henson again refused the request. Mr. Robeck has never been refunded any portion of his deposit. The Shuster Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. Sanford Shuster (the "Shuster transaction"). Mr. Shuster deposited $2,500.00 with Respondents when he applied for a mortgage in the amount of $3,500,000.00 on February 8, 1990, to finance the acquisition of an Assisted Care Living Facility ("ACLF"). Henson changed the typed form of the Mortgage Loan Agreement and Application (the "mortgage application") by deleting the prefix "non-" in the typed word "non-refundable". The modified mortgage application was signed by Mr. Shuster and Henson. Mr. Shuster was unable to obtain financing, and Respondents refused to refund Mr. Shuster's deposit. Mr. Shuster made repeated attempts to obtain his refundable deposit from Respondents including several telephone conversations with Henson and two written demands for payment on April 10, 1990, and on June 2, 1990. In every instance, Henson agreed to refund the deposit but never did so. Mr. Shuster and Henson entered into a compromise agreement on September 10, 1990. Pursuant to the terms of the compromise agreement, Henson agreed to pay Mr. Shuster $2,000.00 in full settlement of the $2,500.00 claim by Mr. Shuster. Henson paid none of the $2,000.00 required under the settlement agreement with Mr. Shuster. Mr. Shuster sued Henson in Palm Beach County Court and obtained a Final Judgment against Henson on January 31, 1992, in the amount of $2,058.75. On May 7, 1991, Henson paid Mr. Shuster $100.00 toward the amount due under the Final Judgment, but made no other payments. Mr. Shuster has never received the balance of the deposit owed to him and has a claim pending with the Mortgage Brokerage Guaranty Fund. The Linker Transaction Respondents failed to refund deposits totaling $22,500.00 to Mr. Gerald Linker (the "Linker transaction"). Mr. Linker deposited $22,500.00 with Respondents when he applied for a mortgage in the amount of $1,250,000.00 in May, 1990, to finance the acquisition of an alcohol and drug abuse center (the "center"). Henson obtained a written loan commitment from Nationwide Funding, Inc. ("Nationwide"), on May 23, 1990. Neither Nationwide nor Respondents performed in accordance with the terms of the commitment. Mr. Linker never received his loan and never received his deposits. Mr. Linker's attorney made repeated attempts to have Mr. Linker's deposits refunded to him. Mr. Linker's attorney filed suit in the Circuit Court of the 15th Judicial Circuit in Palm Beach County, Florida, and obtained separate judgments against Henson and Dupont in the respective amounts of $69,023.01 and $69,520.78. Respondents paid none of the $138,543.79 owed to Mr. Linker. Mr. Linker has a claim pending with the Mortgage Brokerage Guaranty Fund. The Barth Transaction Respondents failed to return a refundable deposit in the amount of $10,000.00 to Mr. Andrew J. Barth (the "Barth transaction"). Mr. Barth deposited $10,000.00 with Respondents when he applied for financing in connection with the purchase of the Cardinal Retirement Village in Bradenton, Florida, on November 17, 1989. Mr. Barth was to assume an existing mortgage of approximately $9,800,000.00 in the transaction. Respondents agreed to arrange the assumption. The owners of the Cardinal Retirement Village refused to proceed and Respondents never refunded Mr. Barth's deposit. The agreement between Mr. Barth and Respondents provided in relevant part: The deposit will be refunded no later than thirty (30) days from this date if this real estate and mortgage transaction is not successfully completed and closed. Mr. Barth made repeated attempts to have his deposit refunded to him. In May, 1990, Mr. Barth's attorney negotiated a Pay Back Agreement with Respondents in which Respondents agreed to pay $1,500.00 a month to Mr. Barth to refund the deposit with interest. Respondents paid only $3,000.00 to Mr. Barth. Mr. Barth has never received the balance owed to him for his refundable deposit. Failure To Maintain Escrow Accounts Respondents failed to maintain an escrow account during 1988 and 1989 and failed to place deposits in escrow. Respondents failed to place deposits in escrow for the Smith, Robeck, Shuster, Linker, and Barth transactions. The accounts to which the monies were deposited by Respondents were not escrow accounts. Respondents failed to place deposits from numerous other transactions in escrow. Respondents failed to deposit in escrow the following amounts: an appraisal fee of $250.00 and a credit report fee of $150.00 collected from Mr. Eric Jason prior to closing a mortgage for $101,650.00 on November 30, 1989; an appraisal fee of $250.00 and a credit report fee of $50.00 collected from Francis J. and Barbara A. Lynch prior to closing a mortgage for $50,000.00 on February 5, 1990; a deposit of $2,000.00 in part payment of the brokerage fee collected from Mr. Nicholas A. Paleveda and Ms. Marjorie Ewing prior to closing a mortgage for $356,400.00 on April 20, 1990; a deposit of $350.00 collected from Mr. Richard L. Trombley prior to closing a mortgage for $40,000.00 on November 2, 1990; and a deposit of $350 collected from the Sun Bay Development Corporation prior to closing a mortgage for $292,500.00 on February 6, 1990. Excessive, Duplicate, And Undisclosed Charges Respondents imposed excessive, duplicate, or undisclosed charges in numerous mortgage transactions. The costs itemized and collected from borrowers in these transactions were not supported by actual expenditures. Respondents collected $625.00 from Mr. and Mrs. Ernest L. Sego for an appraisal that cost $250.00. Mr. and Mrs. Sego paid $325.00 for an appraisal report at the time they executed a Mortgage Brokerage Agreement on August 17, 1988, for a mortgage in the amount of $151,000.00. At the closing on April 7, 1989, Mr. and Mrs. Sego were charged an additional $300.00. Respondents collected $50.00 from Mr. and Mrs. Sego for a credit report at the time the Mortgage Brokerage Agreement was executed. At the closing, Mr. and Mrs. Sego were charged an additional $45.00 for a credit report. Respondents underestimated the closing costs for: Mr. Jason in the amount of $590.00; The Lynch's in the amount of $492.50; and Mr. and Mrs. Sego in the amount of $1,140.00. Failure To Disclose Respondents failed to disclose costs incurred by numerous borrowers. Respondents failed to disclose changes in the cost of title insurance which occurred between the time the borrowers signed Good Faith Estimate forms and the time the mortgage transactions closed. The estimated cost for title insurance for the Lynch's was $460.00 while the actual cost was $637.50. The estimated cost of title insurance for Mr. and Mrs. Sego was $200.00 and the actual cost was $263.00. The Mortgage Brokerage Agreement/Good Faith Estimate was not signed by two borrowers in separate transactions. Neither Mr. and Mrs. Knowlton nor Mr. Trombley signed those documents. Respondents failed to disclose payments made to a co- broker in two separate transactions. Mr. Nicholas Cancel was hired by Respondents to process loans. Loan processing is limited to preparing the documentation necessary to close a loan. Mr. Cancel is a licensed mortgage broker who was employed by a broker other than Respondents. Respondents failed to disclose payments made to Mr. Cancel in his capacity as an independent broker in the mortgage loans to the Lynch's and Mr. Jason. Failure To Maintain Books And Records And Failure To Cooperate Respondents failed to maintain books and records at the principal place of business. Respondents maintained only one business location. When Petitioner's investigator visited Respondents' office and asked for the books and records, Henson told the investigator that there were no books and records at the office. Petitioner subsequently served Respondents with a subpoena to produce Dupont's books and records. Respondents produced 57 mortgage files and some banking records. The files produced by Respondents were incomplete. Most contained only brochures. No files were produced on the Shuster and Linker transactions. During the investigation Henson represented to the investigator that he was neither president nor a corporate officer of Dupont. However, Henson repeatedly signed loan application and loan closing documents as president of Dupont including the Smith, Robeck, and Shuster transactions. Henson also entered into numerous co-brokerage arrangements as president of Dupont including arrangements with Mr. Cancel and Ms. Patricia Towers, president of Towers Mortgage Corporation, 6971 North Federal Highway, Boca Raton, Florida 33487. Fraud, Deceit, Misrepresentation, And Gross Negligence Respondents' intent to defraud and deceive the public is evidenced by a consistent pattern and practice of incompetence, gross negligence, misrepresentation, and failure to disclose material facts in multiple transactions over an extended period of time. Respondents knew or should have known that the acts committed by them constituted violations of law. Respondents violations resulted in financial loss to numerous individuals and to the public generally. Respondents failed to comply with agreements voluntarily executed by them and failed to pay amounts due under judgments duly entered against them by Florida courts. Respondents failed to cooperate with state investigators and failed to maintain books, records, and escrow accounts required by law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Petitioner issue a final order revoking the license of Respondent, Henson, and revoking the registration of Respondent, Dupont. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of September 1992. DANIEL MANRY 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 29th day of September 1992.
The Issue The issue is whether PMF, Inc.’s (PMF), mortgage broker license should be revoked and an administrative fine imposed on PMF’s principal loan originator, Scott Cugno, for the reasons stated in an Administrative Complaint (Complaint) issued by the Office of Financial Regulation (OFR) on January 18, 2017.
Findings Of Fact Background OFR is the state agency charged with administering and enforcing the provisions of chapter 494, which regulates loan originators, mortgage lenders, and mortgage brokers. Rules implementing the statutory law are found in chapter 69V-40. To ensure compliance with the law, OFR conducts periodic audits of the records and activities of all licensees. In early 2012, Mr. Cugno assumed ownership of PMF. From January 25, 2012, until January 1, 2015, PMF was a licensed mortgage lender with its principal office located at 142 West Platt Street, Suite 118, Tampa. Besides the principal office, PMF operated five branch offices. As a mortgage lender, PMF could offer credit to an applicant, make the mortgage loan, and close the loan in its own name. § 494.001(23), Fla. Stat. To settle an earlier disciplinary action, PMF surrendered its lender license in December 2014. Pet’r Ex. 5. On December 30, 2014, PMF was issued mortgage broker license number MBR 1689, which still remains active. A mortgage broker conducts loan originator activities through one or more licensed loan originators employed by the broker. § 494.001(22), Fla. Stat. A broker shops an applicant’s credit and loan application to different lenders, but unlike a mortgage lender, it cannot close loans in its own name. § 494.001(17), Fla. Stat. Mr. Cugno is the sole owner of PMF and its principal loan originator. By definition, he is the control person of PMF. § 494.001(6)(a), (b), and (f), Fla. Stat. A control person is subject to administrative penalties if the broker or lender engages in prohibited acts set forth in section 494.00255(2). An audit of PMF’s business records and activities was conducted by OFR for the period July 1, 2014, through April 30, 2015. After the audit was concluded, a formal Report of Examination (Report) was forwarded to Mr. Cugno on February 25, 2016. Pet’r Ex. 1. The Report stated that it contained a series of findings “that may be violations of Chapter 494, Florida Statutes.” Therefore, it recommended that management thoroughly review the matter and promptly respond in writing stating any exceptions or disagreements it had, any action taken to correct the possible violations, and any mitigating evidence. A written response was filed by Mr. Edgar, PMF’s independent consultant, who interacted with the auditors on behalf of PMF during the examination and responded to document requests. Pet’r Ex. 2. After receiving Mr. Edgar’s response, the Complaint was issued by OFR on January 18, 2017. Although the Report contains 13 findings that may be violations of chapter 494, the Complaint relies on only eight. Based upon the scope and nature of the violations, the charging document seeks to revoke PMF’s mortgage broker license and to impose a $53,300.00 administrative fine on Mr. Cugno, as the control person of the lender and broker. No action is proposed regarding Mr. Cugno’s loan originator license. The thrust of the Report is the failure of Mr. Cugno to have complete control over the operations of the business. In determining the merits of the charges, the undersigned has considered: a) Mr. Cugno’s responses to OFR’s Requests for Admissions, which admit the allegations in five Counts3/; b) Mr. Edgar’s written response to the Report, which essentially admits all of the violations and outlines the proposed corrective action that PMF intends to implement; and c) the evidence in the record. The Charges Count I Count I alleges that during the audit period, PMF operated a branch office in Delray Beach, Florida, without a license. Each branch office is required to be separately licensed. § 494.0011(2), Fla. Stat.; Fla. Admin. Code R. 69V- 40.036. A branch office is defined in section 494.001(3) as a location, other than a mortgage lender’s or mortgage broker’s principal place of business, where business is conducted under chapter 494, and one of the following is true: Business cards, stationery, or advertising references a licensee’s name associated with a location that is other than the licensee’s principal place of business; Advertising, promotional materials, or signage using a licensee’s name suggests that mortgage loans are originated, negotiated, funded, or serviced at a location that is other than the licensee’s principal place of business; or Mortgage loans are originated, negotiated, funded or serviced by the licensee at a location that is other than its principal place of business. The Delray Beach location was not licensed as a branch office. Without a license, PMF was not authorized to use the Delray Beach address on any materials used in its mortgage business or to originate loans from that location. During the audit period, a PMF employee, Bryan J. Mittler, then a recently admitted attorney who had worked for PMF since around 2012, was using business stationery and business cards under the name of PMF that referenced his name and the Delray Beach location, 2236 Bloods Grove Circle. Pet’r Ex. 10. The printed material contained statements such as “We’re your key to financing your new home” and “For a free no-obligation consultation and instant pre-approval call us anytime!” Id. Another business card identifies Mr. Mittler as an attorney and branch manager of PMF. Id. None of these materials mention the address of the principal office in Tampa. They support a finding that Mr. Mittler was using promotional materials to originate, negotiate, fund, or service mortgage loans at the Delray Beach location. Other indicia of operating a branch office are found in Mr. Mittler’s response to a written inquiry by the auditor in September 2015, in which he signed the letter as “Branch Manager.” Pet’r Ex. 8. Mr. Mittler’s letter states in part that “[w]e became a branch in November 2012 with the first loan disposition in December 2012.” Id. He also acknowledges that “[o]ur branch’s loan files are maintained at 2236 Bloods Grove Circle, Delray Beach, FL.” Id. In yet another letter to the auditor, Mr. Mittler identifies himself as Branch Manager. Pet’r Ex. 10. The Delray Beach office also maintained its own bank account and identified it as a branch bank account. Pet’r Ex. 11. Finally, internet advertising by PMF during the audit period states that Mr. Mittler “was chosen to head our new, Delray Beach branch office.” Pet’r Ex. 13. In response to a request by the auditor that PMF provide a list of all PMF employees, on September 29, 2015, Mr. Edgar submitted a list of employees as of that date, which identifies Mr. Mittler as the branch manager of the Delray Beach office. It describes his duties as “manag[ing] all operations of branch office [and] Originating Mortgages.” Pet’r Ex. 7. Finally, Mr. Edgar’s response to the Report states that “I am surprised to find that the Delray Beach office was not licensed as a branch.” Pet’r Ex. 2. He characterizes this as “negligence” on the part of PMF and represents that PMF intends “to license this branch and be in full compliance.” Id. PMF was eventually issued a branch license for the Delray Beach office in March 2016. At hearing, Mr. Cugno denied that PMF was operating a branch office in Delray Beach. He testified that even though there was no branch office, Mr. Mittler was allowed to use the title of branch manager because Mr. Mittler did not want to be given a less important title. Mr. Cugno also explained that a “statute” or “regulation,” later identified in Respondents’ PRO as Rule 1-3.3, The Rules Regulating the Florida Bar, required Mr. Mittler to provide his Delray Beach address on all documents and materials that he prepared or was using. While the rule requires that an attorney’s official bar name “be used in the course of a member’s practice of law,” it does not specifically require that a member’s address be reflected on all documents prepared. Assuming that the rule imposes this requirement, nothing in the record suggests, much less proves, that Mr. Mittler’s activities on behalf of PMR were part of his practice of law, he was employed as an attorney for PMF, or a law office was even located at the Delray Beach address. The PRO contends the Delray Beach location “may” have been a law office which caused confusion in PMF’s “paperwork.” These arguments have been rejected. By clear and convincing evidence, OFR has established that during the audit period, the Delray Beach location was a branch office within the meaning of section 493.001(3), and it operated without a license. Count II Each mortgage broker and lender must maintain a Mortgage Brokerage and Lending Transaction Journal (Journal) which, at a minimum, contains the name of the mortgage loan applicant, date of the application, disposition of the application, and the name of the lender, if applicable. § 494.0016(1), Fla. Stat.; Fla. Admin. Code R. 69V-40.265(1). Count II alleges that during the audit period, PMF violated the statute and rule by failing to maintain a complete and accurate Journal of all transactions at its Tampa office. PMF’s response to the Report states that, to correct the deficiency described in Count II, the firm would begin “implementing controls” and making “periodic audits” to ensure that a current Journal would be maintained in the future. Pet’r Ex. 2. Also, in its response to the Requests for Admissions, PMF admits that it maintained separate Journals for each of the branch offices, and the principal office Journal was incomplete or inaccurate. Finally, unrefuted testimony by the auditor at hearing established that an examination of PMF’s Journal revealed that certain loans were not listed and “entries that were part of the requirements of the loan journal were not made.” Notably, out of more than 470 transactions identified in PMF’s mortgage loan report (a quarterly report that must be filed by licensed companies indicating their loan activity), the Journal listed only 182 loans. Pet’r Ex. 20. At hearing, Mr. Cugno testified that PMF did not know how to fill out a journal, and efforts by his former compliance manager to get instructions from OFR were unsuccessful. However, this does not excuse the violation. By clear and convincing evidence, the charge in Count II is sustained. Count III A mortgage broker is required to maintain at its principal place of business the complete documentation of each mortgage loan transaction/application for three years from the date of the original entry. § 494.0016(1), Fla. Stat.; Fla. Admin. Code R. 69V-40.175(8). The Complaint alleges that PMF violated this requirement by failing to maintain at its principal office all records of email and electronic communications between PMF and its borrowers. The evidence shows that during the audit period, complete documentation of every application/transaction was not maintained at the Tampa office. For example, some loan originators at branch offices had individual email accounts through which they were communicating and transmitting documents for loan files, but they did not copy those email communications to the principal office. Pet’r Ex. 23 and 24. In his response to the Requests for Admissions, Mr. Cugno admitted that certain documentation for loan applications was kept at locations other than their Tampa office. In his response, Mr. Edgar also acknowledged that PMF did not comply with the statute and rule and represented that PMF would utilize a new “email usage policy and procedure” to correct the problem. While Respondents allege the information from the Tampa and branch offices was available on-line, this does not satisfy the requirement that complete documentation be maintained at the principal office. By clear and convincing evidence, the allegations in Count III have been established. Count IV Section 494.00165(2) requires that a licensee maintain a record of samples of each of its advertisements for examination by OFR for two years after the date of publication or broadcast. The purpose of this requirement is to enable the auditor to verify that the licensee’s advertisements are not deceptive or misleading. To comply with the statute, PMF was required to maintain for two years in a central file a copy of each advertisement. During the examination, the auditor requested that PMF provide its complete file of advertisements during the audit period. PMF initially responded that there was no corporate advertising and therefore no samples were kept on file. Pet’r Ex. 12. A subsequent audit of the branch offices revealed that business cards, flyers, placards, posters, and internet were used by the branch offices for advertising purposes. Pet’r Ex. 10, 11, 13, 15, and 17. The auditor also found entries on PMF’s books reflecting advertising expenses of over $200,000.00 during the audit period. In his response to the Report, Mr. Edgar admitted that due to operating the business as a “decentralized model,” PMF did not have proper supervision of the marketing activities of loan officers. Mr. Edgar went on to state that he was “surprised” to learn that “several Loan Officers appear to have engaged in either limited advertising campaigns or hosting their own independent activities.” He promised that PMF would “begin to exercise more control over the marketing activities of all employees” and to ensure that all documentation related to advertising would be sent to the Tampa office for centralized storage. At hearing and in their PRO, Respondents took a different tack and argued that: it is technically impossible to provide the auditor with every single copy of material that could be characterized as a marketing activity; the $200,000.00 advertising expense on their books was a “coding error”; and during the audit period, Respondents misunderstood what OFR considers to be advertising, and once this misconception was cleared up, they submitted “a more fulsome response.” These arguments have been considered and rejected as being contrary to the clear and convincing evidence. By clear and convincing evidence, the charge has been sustained. Count V Section 494.00165(1)(e) prohibits licensees from engaging in misleading advertisements regarding mortgage loans, brokering services, or lending services. Count V alleges that after January 1, 2015, PMF continued to advertise itself as a lender even though its lender license had been surrendered.4/ As of January 1, 2015, PMF was a licensed mortgage broker and no longer held a mortgage lender license. Advertising by the Fort Myers branch office after January 1, 2015, identified PMF as a “full correspondent lender” and listed the old mortgage lender license number. Pet’r Ex. 15. Also, as late as February 2016, advertising posters were on the windows at the Tampa office, visible to the public, reflecting that PMF was an approved VA lender. Pet’r Ex. 17. Finally, OFR witness Slisz testified that as of March 30, 2018, the Fort Myers branch office still was advertising itself as a full correspondent lender. By advertising in this manner, PMF implied to consumers that it would originate the loan, negotiate the terms of the loan, and determine the fees that would be charged, things it could not do as a broker. In his response to the Report, Mr. Edgar admitted that PMF did not comply with the statute “due entirely to [its] negligence in updating PMF’s logo and promotional materials after the change in licensing that occurred [on January 1, 2015].” Pet’r Ex. 2. However, he asserted there was no intent to deceive or mislead customers. In their PRO, Respondents also concede “there were a few months where this advertisement occurred,” but maintain there is no evidence that any consumer had been impacted. Finally, in their response to the Requests for Admissions, Respondents admit that after January 1, 2015, PMF continued to represent itself as a licensed mortgage lender. In mitigation, Mr. Cugno pointed out that no customer was harmed. Also, he blamed the advertising signs in the windows at PMF’s Tampa office on the building manager, who he says put the signs up for a few days to block the sun while new blinds were being installed. By clear and convincing evidence, OFR has established that the charges in Count V are true. Count VI Section 494.0025(7) provides that a licensee cannot “pay a fee or commission in any mortgage loan transaction to any person or entity other than a licensed mortgage broker or mortgage lender, or a person exempt from licensure under this chapter.” The statute is designed to ensure that every person receiving fees in a transaction is licensed. Count VI alleges that during the audit period, Respondents paid commissions or fees from mortgage loan transactions to entities that were not licensed brokers or lenders. During the audit period, several loan originators established separate entities that were not licensed but were paid fees or commissions for various transactions. Pet’r Ex. 18. In its response to the Report, Mr. Edgar conceded that such fees were paid incorrectly because PMF “mistakenly believed” that its practice of paying a loan officer’s separate business entity was equivalent to paying the loan officer personally. The response added that in the future, “only licensed individuals will be paid commissions on mortgage loan transactions” and “no separate loan entities will be compensated any amount for any work performed on mortgage loan transactions.” Pet’r Ex. 2. Respondents also acknowledge in their response to the Requests for Admissions that they paid fees, costs, and expenses to persons or entities that did not hold loan originator licenses. Finally, at hearing, Mr. Cugno admitted that unlicensed entities were “definitely” paid, but there was no intent to deceive customers. By clear and convincing evidence, OFR has established that the allegation in Count VI is true. Count VII Section 494.00665(1) requires each mortgage lender business to be operated by a principal loan originator who is to have full charge, control, and supervision of the business. The Complaint alleges that Mr. Cugno was not in full charge, control, and supervision of PMF when it held a mortgage lender license. PMF was a licensed mortgage lender during the first six months of the audit period, July 1, 2014, through December 30, 2014. During that time, Mr. Cugno was PMR’s principal loan originator. The Complaint alleges that while Mr. Cugno was the control person in 2014, PMF engaged in two or more of the following acts: Operated a branch office without a license; Failed to maintain complete and accurate Mortgage Lending Transaction Journal; Failed to maintain complete documentation at its principal place of business; and Advertised without maintaining a record of samples of each advertisement. The significance of having committed “two or more” violations was not explained. As previously found, however, all of these charges have been established by clear and convincing evidence. Respondents contend they did not have proper notice as to which of the four acts OFR relies upon to prove this charge. But items (a) through (d) simply track Counts I through IV in the Complaint. In his response to the Requests for Admissions, except for the branch office allegation, Mr. Cugno admitted that the other allegations are true. The response to the Report states that Respondents are “embarrassed” by the auditor’s findings and that new policies and procedures will be implemented to address the deficiencies. The response acknowledges that PMF “has been without a committed and proactive compliance professional in a full time capacity for some time,” and represents that Mr. Edgar will become PMF’s Vice President of Compliance and Human Resources and apply for a license as a loan originator. Pet’r Ex. 2. At hearing, Mr. Cugno did not directly respond to the charges. Instead, he testified that he would defer to the undersigned’s judgment in deciding whether the charges are true. By clear and convincing evidence, the allegations in Count VII have been proven. Count VIII Section 494.0035(1) requires each mortgage broker business to be operated by a principal loan originator who is to have full charge, control, and supervision of the mortgage broker. PMF was a licensed mortgage broker during the last four months of the audit, January 1, 2015, through April 30, 2015. During this same time period, Mr. Cugno was the principal loan originator. The Complaint alleges that Mr. Cugno was not in full charge, control, and supervision of PMF when it engaged in two or more of the following acts: Operated a branch location without a license; Failed to maintain complete and accurate Mortgage Brokerage Transaction Journals; Failed to maintain complete documentation at its principal place of business; Advertised without maintaining a record of samples of each advertisement; Inaccurately advertised themselves as a lender; and Paid fees or commission from mortgage loan transactions to entities that were not licensed mortgage brokers or mortgage lenders. Items (a) through (f) are the six violations described in Counts I through VI of the Complaint. Although the significance of having committed “two or more” violations was not explained, each of these allegations has been proven by clear and convincing evidence. Even the response to the Report admits that Mr. Cugno did not exercise full control over the operations of the business during the audit period. By clear and convincing evidence, the allegations in Count VIII have been proven. Disciplinary Guidelines Rule 69V-40.111 adopts by reference a range of penalties that may be imposed on a mortgage loan originator and mortgage entity for violating each of the 102 statutory provisions that OFR enforces. See Form OFR-494-14. Depending on the nature of the violation, the administrative fines are categorized as Level A ($1,000.00 to $3,500.00), B ($3,500.00 to $7,500.00), and C ($7,500.00 to $10,000.00). In determining an appropriate penalty that falls within the penalty guidelines, OFR must consider the mitigating and aggravating factors set forth in subsection (3) of the rule. Mitigating factors to be considered are as follows: If the violation rate is less than 5% when compared to the overall sample size reviewed; No prior administrative actions by the Office against the licensee or control person within the past 10 years; If the licensee detected and voluntarily instituted corrective responses or measures to avoid the recurrence of a violation prior to detection and intervention by the Office; If the violation is attributable to a single control person or employee, and if the licensee removed or otherwise disciplined the individual prior to detection or intervention by the Office; If the licensee is responsive to the Office’s requests or inquiries or made no attempt to impede or delay the Office in its examination or investigation of the underlying misconduct; or Other control, case-specific circumstances. Aggravating factors to be considered in assessing a penalty are as follows: If the violation rate is more than 95% when compared to the overall sample size reviewed (sample size must be equal to or greater than 25 transactions and cover a date range of at least 6 months); The potential for harm to the customers or the public is significant; Prior administrative action by the Office against the licensee or an affiliated party of the licensee within the past 5 years; If the licensee’s violation was the result of willful misconduct or recklessness; The licensee attempted to conceal the violation or mislead or deceive the Office; or Other control relevant, case-specific circumstances. In its PRO, OFR maintains that PMF’s broker license should be revoked, and an administrative fine in the amount of $53,300.00 should be imposed on Mr. Cugno. On the other hand, Respondents’ PRO contends that revocation of the broker license is not warranted, and “a fine of no more than $10,000.00 total for all matters in the Administrative Complaint is a fair outcome.” The worksheet used by OFR in determining the proposed penalties would be helpful, but it is not in the record. Also, at hearing, neither party addressed in detail the mitigating and aggravating factors. However, testimony by OFR’s Director of the Division of Consumer Finance, Mr. Oaks, briefly explained the rationale for OFR’s proposed disciplinary action. For operating a branch office without a license, the rule calls for a penalty of $1,000.00 per day, with a maximum penalty of $25,000.00. Because this violation occurred every day during the 304-day audit period, Mr. Oaks explained that OFR is proposing the maximum penalty of $25,000.00. For failing to maintain a complete and accurate Journal at the principal office, the guidelines call for a penalty ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. Mr. Oaks testified that after reviewing all mitigating and aggravating circumstances, the maximum penalty of $3,500.00, and license revocation, are appropriate for the violations described in Count II. For failing to maintain at its principal place of business the complete documentation of each mortgage loan transaction/application for three years from the date of original entry, the disciplinary guidelines call for a fine ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. Mr. Oaks testified that OFR is extremely dependent on records when conducting a compliance examination. If complete and accurate records are not kept at the principal place of business, OFR cannot ensure that the business is operating in a lawful manner. Where there is an absence of records, there is potential for great consumer harm. Given the circumstances presented here, he proposes a $2,700.00 penalty and revocation of the license. For failing to maintain a record of samples of each advertisement for a period of two years, the disciplinary guidelines call for a fine ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. In this case, PMF had no samples of advertisements at its principal office. When no samples are maintained, OFR is unable to determine whether a licensee is engaging in misleading or deceptive advertising. For this reason, Mr. Oaks proposes a fine of $3,500.00 and revocation of the license. For engaging in misleading advertising, the disciplinary guidelines call for a fine ranging from $3,500.00 to $7,500.00 and suspension or revocation of the license. Mr. Oaks characterized PMF’s advertising after January 1, 2015, as “completely misleading” because it erroneously represented to the public that PMF was a correspondent lender. For this reason, he proposes the maximum penalty of $7,500.00 and revocation of the license. For paying a fee or commission in any transaction to a person or entity other than a lender or broker, the disciplinary guidelines call for a fine ranging from $3,500.00 to $7,500.00 and suspension or revocation of a broker’s license. Mr. Oaks explained that the licensing process is designed to protect consumers from unlicensed individuals and to ensure that only licensed individuals will be involved in the transaction. For violating the statute, Mr. Oaks proposes a fine of $4,100.00 and revocation of the license. If a principal loan originator fails to have complete control over the operations of a mortgage lender, the disciplinary guidelines call for a penalty ranging from $1,000.00 to $3,500.00. Because of the number and nature of violations, Mr. Oaks concluded that Mr. Cugno did not have control of his business and did not take adequate steps to ensure that the business was “being run lawfully.” Besides Mr. Oaks’ testimony, OFR witness Slisz, the Tampa area financial manager, also concluded there was a lack of complete control by Mr. Cugno based on loan originators “using emails not on the company server”; an “unlicensed location”; “loan originators taking freedom to advertise on their own without approval”; and PMF’s inability “to produce a log of the loans that the company received applications for.” OFR seeks the maximum penalty of $3,500.00. If a principal loan originator fails to have complete control over the operations of a broker, the disciplinary guidelines call for a penalty ranging from $1,000.00 to $3,500.00. For the reasons enunciated by Mr. Oaks and witness Slisz, OFR seeks the maximum penalty of $3,500.00. Besides the foregoing testimony, the evidence shows that there was a potential for harm to customers or the public; most of the violations proven were “serious”; PMF has one prior disciplinary action in December 2014, which was resolved by PMF surrendering its lender license and paying a $2,500.00 fine; and PMF was issued a notice of non-compliance regarding its late filing of quarterly reports for the year 2012. Pet’r Ex. 4. In mitigation, there is no evidence that any specific customer was harmed or misled. There is no evidence that the violations were the result of willful misconduct or recklessness on the part of Respondents, or that they attempted to conceal a violation or mislead or deceive OFR. The violations cited by the auditor appear to be due to a lack of oversight by management, neglect, or a failure to understand OFR regulations. Although Respondents did not detect or voluntarily institute corrective action or measures prior to the audit, there is evidence that beginning with his assumption of control of the business in 2012, and during the audit, Mr. Cugno occasionally contacted the Tampa district office seeking advice on how to comply with OFR statutes and rules. Finally, there is no evidence that PMF attempted to impede or delay the examination or investigation of the underlying misconduct, or that any customer was harmed. Considering the aggravating and mitigating factors on which the parties presented evidence, the undersigned determines that the mortgage broker license should be suspended for six months and a $20,000.00 administrative fine imposed on Mr. Cugno. Procedural Issues In their PRO, Respondents focus largely on the argument that Mr. Cugno was not qualified to represent himself or PMF, and therefore the case should be reopened to allow Respondents, with the assistance of counsel, “to make [their] record and better present the facts and the circumstances.” PRO at 16. Mr. Cugno is the owner and president of the corporation. As such, he may represent the corporation in an administrative proceeding, even though he is not an attorney. See The Magnolias Nursing & Convalescent Ctr. v. Dep’t of Health & Rehab. Servs., 428 So. 2d. 256, 257 (Fla. 1st DCA 1982)(“it is clear that self-representation by corporations is permissible in administrative hearings”). Because Mr. Cugno is not a “qualified representative” under rule 28-106.106, there is no requirement that a preliminary determination be made that he is "qualified" to represent his corporation. Likewise, the rule does not require that a preliminary determination be made that an individual, acting pro se, is qualified to represent himself. Mr. Cugno is an experienced operator of a mortgage business, having been in that field for 22 years. Besides PMF’s operations in Florida, Mr. Cugno testified that he operates “businesses” in Alabama, Tennessee, Kentucky, Minnesota, and Georgia. Mr. Cugno acknowledged receipt of the Complaint on February 6, 2017. After initially requesting that an informal telephonic hearing under section 120.57(2) be conducted to contest the application of the law, on September 28, 2017, he asked that he be given a formal hearing under section 120.57(1) to contest the factual findings in the Complaint. During the seven-month informal phase of this proceeding, Mr. Cugno elected to represent himself and the corporation. After the proceeding was converted to a formal proceeding, an Initial Order was issued on September 29, 2017, which informed Mr. Cugno that a “party may appear personally or be represented by an attorney or other qualified representative.” Notwithstanding this information, Mr. Cugno voluntarily decided to continue to represent himself and the corporation. Prior to the hearing, he participated in three depositions taken by OFR; he deposed OFR witness Quaid; he responded to discovery requests; and he served discovery on OFR. At hearing, he engaged in extensive cross-examination of the OFR auditor. Finally, in a letter to OFR dated August 19, 2015, Mr. Cugno stated that PMF has its own “legal department,” see Petitioner’s Exhibit 12; and, at hearing, he testified that PMF employed three attorneys, on at least a part-time basis, as loan originators. If these representations are true, legal advice was not far away. In any event, Respondents are not entitled to a second hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order sustaining the charges in Counts I through VIII; suspending PMF’s mortgage broker license for six months; and imposing an administrative fine on Mr. Cugno in the amount of $20,000.00. DONE AND ENTERED this 29th day of June, 2018, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2018.
The Issue The issue in these cases is whether petitioners are entitled to payment from the mortgage brokerage guaranty fund, and if so, in what amounts. A further issue is in what order of priority the claims should be paid. Based upon all of the evidence, including the pleadings filed in this cause, the following findings of fact are deter- mined:
The Issue Whether the 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
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Banking and Finance, (Department), was the state agency in Florida responsible for the regulation and licensing of mortgage brokers in this state, and Respondent, Harriet Ijames, was a licensed mortgage broker. On February 17, 1989, Respondent entered into a Stipulation, Consent Agreement and Final Order with the Department whereby she was placed on probation for 2 years for misconduct relating to the misappropriation of mortgage application fees, with the further requirement that she not act independently but under the supervision of a broker acceptable to the Department. On October 2, 1991, the Department filed a complaint against the Respondent alleging she had violated the terms of the prior Consent Order by conducting business as a mortgage broker without the requisite supervision. Thereafter, on April 29, 1992, Respondent entered into another Stipulation, Consent Agreement and Final Order with the Department regarding the October, 1991 complaint by which she was again placed on probation conditioned upon her operating only under the supervision of an approved broker. This latter Order provided that any violation thereof would be automatic grounds for immediate and summary revocation of her license and also imposed an administrative fine of $2,000.00. The Final Order incorporating that agreement was issued by the Department on July 13, 1992. In May, 1992, Respondent was contacted by Rhudine M. McGhee, a resident of Tampa, who had been referred to her by a mutual acquaintance. Mrs. McGhee indicated she was interested in purchasing another house. Somewhat later, Respondent contacted Mrs. McGhee and told her of a friend who had a house for sale. She also gave Mrs. McGhee the addresses of some other houses in the area which were for sale. Mrs. McGhee did not like any of them. Thereafter, Respondent advised Mrs. McGhee that she was a mortgage broker and not a real estate broker, and that she would have a real estate broker contact her. Respondent also offered to provide Mrs. McGhee with listings of Resolution Trust Corporation foreclosures in the desired price range. Some time later, the broker referred by Respondent showed Mrs. McGhee a house she liked and she signed a contract to buy it. In the interim, Respondent had taken a credit application from the McGhees over the phone and followed up with a visit to the McGhee home. On May 13, 1992, during the visit to the McGhee residence, Respondent had Mrs. McGhee sign a loan application. On that same visit, she solicited and received from Mrs. McGhee a check for $300.00, payable to the Respondent and subsequently endorsed and cashed by her, which reflected the check was the application fee for a loan. She specifically asked that the check be made to her, personally. When Mrs. McGhee asked Respondent about the check, she was told it would be credited to the purchase price at time of closing. This was not done and it was only later, after a complaint was filed with the Department, that Mr. Brigliadora, the mortgage broker with whom she was affiliated, repaid the fee from his company's funds. Though at hearing Respondent denied she took a loan application fee or that the check she received was for that purpose or bore any notation to that effect when received, Mrs. McGhee is quite certain she put that notation on the check at her husband's direction at the time she gave it to Respondent. Respondent claimed the check was for finding the house but Mr. McGhee specifically recalls Respondent indicating the check was to be an application fee to be credited against the purchase price. It is so found. On June 1, 1992, Respondent again returned to the McGhee home to have them sign a second loan application. This time Mr. McGhee was not at home and Respondent suggested to Mrs. McGhee that she sign her husband's name to the application. This was done. Respondent did not give the McGhees copies of the applications they signed but said she would bring them copies at a later date. This was never done. Though Respondent also denies soliciting the second application, her apparent signature appears on both application forms and it is found she did both solicit and sign the forms and the application fee check. The first application was for a loan of $80,000.00 at 8.5 percent. The second was for $36,000.00 at 8.625 percent. At the time of the solicitation, Respondent was employed by Frank Brigliadora, a licensed mortgage broker and owner of the Money Tree Mortgage Co. However, neither Respondent nor Mr. Brigliadora had notified the Department of their arrangement or obtained Departmental approval of the supervisory relationship. Clearly, Respondent knew the taking of an application fee, as the evidence indicates she did here, was inappropriate. Sometime in mid 1992, Respondent approached George Banks, a licensed mortgage broker in Tampa and owner of his own brokerage company, with a view toward working for him. In their conversation about that, they discussed the practice of application fees. Respondent indicated she wanted to take a fee of $200.00 to $300.00 up front, but Banks felt this was not proper, advised her so, and declined to accept her as a broker. Even when she claimed that other brokers took fees of this nature, he demurred, claiming he did not endorse the practice. Respondent worked for Mr. Brigliadora, a licensed mortgage broker, at his firm, Money Street Mortgage, for approximately 3 months during 1992. At the time she went to work for him, Respondent did not tell him she was under sanctions by the Department to have strict supervision and at no time did he agree to the Departmental supervision program. Mr. Brigliadora did not receive the $300.00 check Respondent obtained from the McGhees nor did he ever get the money it represented from the Respondent. It was only just before or at the closing on the property that he first became aware of the deposit. When he refunded the money to the McGhees, Respondent agreed to reimburse him but she never did. Normally, Money Street Mortgage does not take application fees on residential loans, and Mr. Brigliadora denies he ever approved or suggested to Respondent that she solicit them. When Respondent gave him the documentation on the McGhee loan application it did not include the required good faith estimate found in the brokerage agreement nor did the application form or any other document make the required disclosures. The application he got from Respondent does not constitute a brokerage agreement and Mr. Brigliadora never got one from the Respondent on this loan. What he received is no more than an application for a loan. Mr. James, the Department's Area Financial Manager, whose job includes the assignment of examiners and the review of investigations by examiners, knows Respondent as a licensed mortgage broker under Chapter 494, Florida Statutes. He is aware of prior complaints received by the Department about the Respondent in the past. Two of them relate to the Final Orders previously mentioned herein. In the instant case, he recalls receiving a telephone call regarding a deposit of $300.00 given to Respondent and commenced an investigation into the incident. The current Administrative Complaint which resulted in this hearing was the outcome of that investigation. Based on his evaluation of the matters discovered in the investigation, he concluded that Respondent took a fee from a client without having a brokerage agreement with that client; failed to make the required full disclosure to a client; and misappropriated a fee which she received from a client; all of which are violations of various provisions of Chapter 494. In his official capacity with the Department, Mr. James had the duty to approve a supervisory mortgage broker for the Respondent as called for in the two prior Final Orders referred to previously herein. Neither Money Street Mortgage nor Mr. Brigliadora were submitted by Respondent for approval by the Department even though Respondent knew she was required to do so. Respondent claims she made it very clear to Mrs. McGhee that she was a mortgage broker and not a real estate broker. Nonetheless, Mrs. McGhee, she claims, insisted Respondent help her and offered to pay her for her efforts. Respondent claims that all Petitioner's witnesses lied about her and forged documents relating to her alleged activities. She denies she would ever cheat or disobey the rules because she knows she would lose her license if she did. Claiming she is well respected in the community, she asserts the Department did not thoroughly investigate the allegations against her and is, therefore, destroying her reputation over something which did not happen as alleged. Her assertions are not accepted, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: Recommended that a Final Order be entered in this case finding her guilty of the offenses alleged in the Administrative Complaint filed herein; revoking Harriett Ijames' license as a mortgage broker in Florida; and imposing an administrative fine of $5,000.00. RECOMMENDED this 24th day of May, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 1993. COPIES FURNISHED: Lisa L. Elwell, Esquire Office of the Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Harriett Ijames 8341 Paddlewheel Street Tampa, Florida 33617 Gerald Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302 The Capitol Tallahassee, Florida 32399-0350
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.
Findings Of Fact 1. Prior to September 1, 1986, mortgage brokers in Florida who worked for several companies were issued separate licenses for each company. P. Ex. 10, P. The Respondent, Dennis C. Young, had several such licenses, the first having been issued on March 26, 1982. Id., P. 9. Prior to September 1, 1986, mortgage broker's licenses were issued for only one year and expired annually on August 31st. P. Ex. 10, P. 9-10. During the period from September 1, 1985, through August 31, 1986, the Respondent had only one mortgage broker license HA 0006667 as an additional broker for American Financial Consultants of Central Florida. R. Ex. 1, P. Ex. 10, P. 10-11. That license expired on August 31, 1986. Id. at P. 14. On January 22, 1986, the Respondent applied to the Petitioner, the Department of Banking and Finance, Division of Finance, for registration as a mortgage broker under Chapter 494, Florida Statutes. P. Ex. 7. This application was for a license with Southern States Mortgage Company. P. Ex. 10, P. 12. On April 18, 1986, Petitioner denied the application of the Respondent for registration as a mortgage broker. The basis of the denial was a finding by the Petitioned of a number of statutory violations by the Respondent as a mortgage broker for American Financial Consultants of Central Florida. P. Ex. 10, P. 13. On July 11, 1986, or shortly thereafter, the Petitioner advised the Respondent that his request for a formal administrative hearing with respect to the denial of his application for registration as a mortgage broker was denied because not timely filed, and advised the Respondent that he had thirty days from July 11, 1986, in which to file an appeal, if he so desired, to the Fifth District Court of Appeal. The Respondent contacted the attorney for the petitioner. The attorney for the petitioner in fact told the Respondent that he could reapply for a license, and if his application was again denied, the Respondent could then seek a formal administrative hearing and judicial review. The Respondent was also told that the petitioner would not forego or abate the final order denying the application, but was advised to "let sit" the final order denying his January 22, 1986, application. T. 100. The Respondent did not file a judicial appeal from the July 11, 1986, order. During the period from September 1, 1986, to November 12, 1987, the Respondent was not a licensed mortgage broker licensed by the Department of Banking and Finance, Division of Finance. P. Ex. 6, P. Ex. 10, P. 15. Between January 22, 1986, and June 12, 1987, the Respondent did not file any application with the Petit loner for licensure as a mortgage broker. P. Ex. 10, p. 15. In about December, 1986, the Respondent was hired by Independence One Mortgage Corporation as a builder's loan representative for a builder that Independence One Mortgage Corporation was then servicing. The builder was building and selling homes in the Williamsburg subdivision. T. 33, 35-37, 64. The Respondent's office was located at the building site. Independence One Mortgage Corporation hired the Respondent to offer to the clients of the builder the type of mortgage that Independence One Mortgage Corporation was then offering, and in so doing, to handle all aspects of negotiating mortgage loan commitments, from initial interview, making quotes of daily mortgage rates to the builder's customers, and following up on the application from the beginning to closing of the mortgage. T. 37. The Respondent told Independence One Mortgage Corporation that he held a current valid mortgage broker's license with Investor's Home Mortgage Company and showed the agent of Independence One a "license" that the Respondent claimed was his and was then valid. T. 37. This statement was untrue. The agent for Independence One Mortgage Corporation who hired the Respondent had known the Respondent several years earlier as an aggressive mortgage solicitor. T. 36 Independence One Mortgage Corporation thought that the Respondent then held a valid mortgage broker's license, and would not have hired the Respondent if he had not represented that he was a licensed mortgage broker. T. 37-38. While employed by Independence One Mortgage Corporation, the Respondent negotiated mortgage loans. He quoted mortgage rates to prospective borrowers, received and processed applications from prospective borrowers, prepared good faith estimates of settlement charges, and closed mortgage loans. T. 42-56, 96-97; P. Exs. 1, 2, 4, and 5. During his employment with Independence One Mortgage Corporation, the Respondent negotiated over 40 mortgage loans. T. 55. From December, 1986, to May, 1987, the Respondent was paid a salary by Independence One Mortgage Corporation. In May, 1987, due to a lack of mortgage demand, Independence One placed the Respondent on a commission basis only. About two weeks later, the Respondent resigned his employment with Independence One. T. 55-57, 65-66. At about the same time, Independence One Mortgage Corporation learned that the Respondent did not have a valid mortgage broker's license. T. 57-59. On June 12, 1987, the Respondent filed another application for licensure as a mortgage broker. P. Ex. 9. In answer to question number 6, which asked whether he had ever had his license "denied, suspended or revoked," he answered no. This answer was not true. P. Ex. 10, P. 16. The Respondent testified that he answered question number 6 in the negative because he thought that he would be afforded a right to contest the previous denial of his application if the new application was denied. At the time that the Respondent stated in his application that he had never had a license previously denied, the Respondent knew that statement was not true. He knew that he might again reapply and in such reapplication contest the basis for denial, but he also knew that the denial of the first application was final and that he had lost his right to appeal. See findings of-fact 5 through 8. If the Respondent had answered yes to question 6, he was required by the application form to identify the agency that denied the application for licensure and to provide the names of the complaining parties. P. Ex. 9. By failing to truthfully answer question 6, the Respondent failed to notify the Petitioner of the existence of the prior dispute concerning his licensure. This was a material misstatement of fact. If the Respondent had been candidly pursuing the option of making a second application in order to gain another appeal right, he would have candidly disclosed to the Petitioner in his second application that a prior application had been denied. In that manner, the Respondent would have laid the issue squarely on the table. By answering no to question 6, the Respondent affirmatively sought to mislead the Petitioner so that the prior basis of denial might not become the basis for denial of the second application. The Petitioner construes the provisions of Chapter 120, Florida Statutes, as mandating that a license be issued if not denied within ninety days from the filing of the application. P. Ex. 10, pp. 20-23. During the period in which the June 12, 1987, application was pending, the Petitioner did not independently verify the answers to questions on the license application, and assumed that the answer to question 6 was correct. P. Ex. 10, pp. 16 and 20. Had it known that the Respondent had previously been denied a mortgage broker's license, the Petitioner would have denied the application of June 12, 1987, for a material misrepresentation of facts. P. Ex. 10, P. 23. For these reasons, and since the ninety day period had expired, the Petitioner issued mortgage broker license HA 261088342 to the Respondent on November 12, 1987. P. Ex. 6. In July, 1987, Colony First Mortgage Corporation was looking for a branch manager for its Mount Dora, Florida, office. The company wanted a branch manager who held a mortgage broker's license to solicit business, as well as to hire and supervise other loan officers. T. 25. The Respondent applied for the job, and Colony First Mortgage Corporation asked for his mortgage broker's license. T. 93. The Respondent told Colony First Mortgage Corporation that he had a mortgage broker's license. T. 26. This statement was untrue. In July, 1987, the Respondent was employed by Colony First Mortgage Corporation as a branch manager in the Mount Dora, Florida, office. T. 24-25, 59-60. Colony First Mortgage paid the Respondent a salary with an override of the branch's mortgage loan production. It was also possible for the Respondent to have been paid a small commission for mortgage loans that he might personally have solicited, but there is no evidence in the record (one way or the other) that any commissions were ever paid or not paid. T. 26, 28. The Petitioner requires that licensed mortgage brokers who change employment file an "application for endorsement" to change the registration of that license to the new employment. T. 72# At some time shortly before August 11, 1987, the Respondent filed with the Petitioner an "application for endorsement" for endorsement of a mortgage broker's license to work for Colony First Mortgage Corporation. P. Ex. 8. Colony First Mortgage Corporation required the Respondent to file this application as a condition of the Respondent's employment. The application bears the signature of a William D. Tharpe, dated August 11, 1987, representing himself as the principal broker for the Respondent, and stating that the Respondent was employed on July 6, 1987, as a mortgage broker. The Respondent submitted the application for endorsement 50 that he would be licensed as a mortgage broker working as a mortgage broker for Colony First Mortgage Corporation. The Respondent characterized his own activity at Colony First Mortgage as operation as a mortgage broker for Colony First Mortgage. T. 10. But he denied that he personally solicited loans, T. 109, and characterized his work as supervision of loan officers, who did solicit and negotiate mortgage loans. T. 109-111. In his employment at Colony First Mortgage, the Respondent hired staff, since all prior staff had left, and trained and supervised loan officers. T. 110-111. There is no evidence that the Respondent personally solicited or negotiated mortgage loans. Toward the end of October, 1987, Colony First Mortgage learned that the Respondent did not have a mortgage broker's license. The company removed the Respondent from his manager's position and subsequently terminated his employment. T. 27# Directly under the heading of the Respondent's application for endorsement is the statement: "Use this form only if currently licensed." Two lines under that statement is the following statement in bold print: "CURRENT LICENSE MUST BE RETURNED WITH THIS APPLICATION." The Respondent signed the form and stated in part I of the form that he had license number HA 001637. Another license number appears above the first number, and is HA 0016329. P. Ex. 8. The application for endorsement is used only if the applicant has a current license. Neither license number was a valid license currently or previously held by the Respondent. Thus, the representation on the application for endorsement, P. Ex. 8, as to license numbers was untrue. T. 114. The Respondent admits placing the first number on the form and denies placing the second number on the form. The Respondent asserts that the first number he placed on the form was his guess as to the correct number, and that he thought the petitioner would correct it if it were incorrect. He further asserts that he represented that he was licensed because he thought that since he had reapplied, the prior denial of licensure was still a pending issue, and that he could rely on earlier licenses that had expired. He further stated that he intended the number to represent the number of one of his earlier licenses. T. 115. The Respondent did hold license number HA 0016329, which expired on August 31, 1985, and license number HA 0006667, which expired on August 31, 1986. R. Ex. 1 and 2. It is credible that the Respondent was trying to use one of his expired license numbers, notably, the one that expired on August 31, 1985, HB 0016329, which is similar to the number he used, HA 001637. But it is not credible that the Respondent thought that he was "currently licensed" as required by the form. The Respondent knew that his prior licenses expired automatically each year. T. 116. He knew that his January 22, 1986, application had been denied. He knew he was not currently licensed. T. 102. He only had pending an application for a license, and had no currently active license number. Thus, it is concluded that the Respondent knew that he did not have a valid license number when he placed the number HA 001637 on the application for endorsement. This was a material misstatement of fact. See findings of fact 38, 39, and 47. The Respondent denies that he placed the second license number HA 0016329 upon the application. The second series of numbers is written in larger script than the first one. While there are some similarities in some of the numbers compared to other numbers written by the Respondent on the application (the 6 is the same as the 6 in the Respondent's social security number and telephone number, the 2 is the same as the first 2 in the telephone number), there is insufficient evidence in this record to conclude that the Respondent placed the second license number on the application. P. Ex. 8. The Petitioner relied upon the statements in the application for endorsement, P. Ex. 8, when it issued the mortgage broker's license to the Respondent on November 12, 1987. p. Ex. 10, P. 20.
Recommendation For these reasons, it is recommended that the State of Florida, Department of Banking and Finance, Division of Finance, enter its final order finding that Dennis C. Young committed the violations described above and revoking license number HA 261088342 issued to him on November 1, 1987. DONE and ENTERED this 11th day of October, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of October, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2273 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix are adopted as additional findings of fact. Findings of fact proposed by the Petitioner: 1. The phrase "due to fiat of operation of law" is a conclusion of law, not fact. 2, 5, 6, 7, 22, 23, 39, 46 (second sentence) 49, 50, and 55. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 14 (first sentence). The fact that a witness "testified" in a certain way is not a relevant finding of fact. The subject matter of the Respondent's testimony, that he in fact filed another application in May or June of 1986, is rejected as not proven by credible evidence. The Department had no evidence of any application between January 22, 1986, and June 12, 1987. The testimony of the Respondent on this point was not supported by a copy of the alleged application. Due to the Respondent's evasiveness as to other material points at issue in this case, the testimony of the Respondent is rejected as not credible and unsupported. Findings of fact proposed by the Respondent: 1.C. This proposed finding of fact is contrary to the credible evidence. 1.E. While these proposed findings of fact are true, they are irrelevant. A "mortgage broker" is defined by law (section 494.02(3), F1a. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." The relevant issue is what the Respondent in fact did, not what the titles on the form said. 1.F-H. These proposed findings of fact are contrary to the credible evidence. 2.D.and G. A "mortgage broker" is defined by law (section 494.02(3), Fla. Stat.) to include any person, who for compensation or gain, "directly or indirectly" "negotiates" "a mortgage loan or mortgage loan commitment." As discussed in the conclusions of law, the Respondent indirectly negotiated mortgage loans through his supervision of loan officers at Colony First Mortgage Corporation. 2.F. This proposed finding of fact is contrary to the credible evidence. See P. Ex. 8. 3.A.1-3. The Respondent admitted that Mr. Berkowitz told him to "let sit" the denial of his January 22, 1986, application, and the Respondent admitted that Mr. Berkowitz, on behalf of the Petitioner, would not abate or forgo the decision of denial. T. 100. Thus, it is clear that the Respondent knew that his application had been denied. This, coupled with receipt of P. Ex. 7, makes any contrary belief not credible. 3.B.4. There was intent to deceive. The Respondent knew he was not currently licensed. He knew the earlier license (the one which he tried to place by number on application) had expired. He knew that his last application had been finally denied. He only had a pending application (June 12, 1987), and had no decision on that yet. The Respondent told Colony First Mortgage Corporation that he was currently licensed. If the Respondent had no intent to deceive, he would have clearly mentioned on the application for endorsement the denial of his January 22, 1986, application, and his theory of the continued "existence" of his expired license. COPIES FURNISHED: Elise M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller 400 West Robinson Street, Suite 501 Orlando, Florida 32801 Dennis C. Young 4050 Gallagher Loop Post Office Box 771 Casselberry, Florida 32707 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact At all times relevant hereto, James W. McKibbon was not licensed as a mortgage broker in Florida (Exhibit 1). MorBanc Financial Corporation was initially registered as a mortgage broker in Florida on February 27, 1989, and remained registered through June 15, 1990 (Exhibit 1). In August 1988, Respondent was employed by Sovereign Savings Bank to procure qualified home purchases needing mortgage money to be lent by Sovereign. MorBanc Financial Corporation was incorporated circa 1988 to become a mortgage brokerage firm. It opened a bank account and an office from funds contributed by its organizers. Respondent was offered shares in MorBanc and was elected president of the company. No evidence was submitted that Respondent was an investor in MorBanc. Thomas Pollak moved to Florida in 1988 and contracted to purchase a residence. The real estate agent with whom he was working recommended he seek a loan through MorBanc which was located in the same building with the real estate agent. Pollak assumed that MorBanc was a licensed mortgage broker in Florida. McKibbon's business card shows him as President of MorBanc Financial Corporation and lists FHA-VA-Conventional -- presumably loans that can be brokered by MorBanc. Respondent never told Pollak that he or MorBanc were mortgage brokers, and no applications for a mortgage loan completed by Pollak contained the name MorBanc. Instead, all of the application forms used were those used by Sovereign Savings Bank, and the loan application was submitted to Sovereign Savings Bank. The bank paid Respondent for procuring loans. MorBanc, prior to becoming registered as a mortgage broker, processed no loans from clients procured by Respondent McKibbon and paid McKibbon no commission or other compensation.
Recommendation It is recommended that the charges against James W. McKibbon that he acted as a mortgage broker without being licensed to do so in Florida be dismissed. ENTERED this 20th day of July, 1990, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of July, 1990. APPENDIX Petitioner's Proposed Findings Not Accepted. 2. Respondent helped set up the furniture in the office that was provided by one of the financial founders of MorBanc. Not accurate to call Respondent "instrumental" in this task. Teresa Tyler was the real estate agent procuring the contract with Pollak. No evidence was submitted that she was Respondent's real estate salesperson. While Pollak testified that Respondent mentioned he (Respondent) could work with more than one lender, the only lender mentioned by Respondent was Sovereign, and the loan was processed through Sovereign. COPIES FURNISHED: Stephen M. Christian, Esquire Office of Comptroller 1313 Tampa Street, Suite 615 Tampa, FL 33602-3394 William G. Reeves General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350 James W. McKibbon 5770 Dartmouth Avenue St. Petersburg, FL 33710 Honorable Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, FL 32399-0350 =================================================================
