Findings Of Fact At no time pertinent to the issues herein was Rebecca Love Henderson licensed by the State of Florida, Department of Banking and Finance as a mortgage broker under the provisions of Chapter 494, Florida Statutes. The Department of Banking and Finance is the state agency responsible for licensing and supervising mortgage brokers and associated persons in this state. In early January, 1987, Ms. Henderson began working for MAC, a mortgage banking concern, at its office located at 4045 Tamiami Trail, Pt. Charlotte, Florida. In March, 1987, Carol May Wilson went to MAC's office to see about getting the adjustable rate mortgage then currently existing on her residence changed to a fixed rate mortgage, because her research indicated that MAC had the best mortgage rates available at the time. Ms. Wilson entered the office without an appointment and spoke to the receptionist who called Ms. Henderson to speak with her. On that visit, Ms. Henderson gave Ms. Wilson a pamphlet which contained the then existing mortgage rates and discussed with her the terms and rates, the amount of payment required both as a down payment and as monthly payments, and similar matters. After that discussion, Ms. Wilson left with the pamphlet without making application. After discussing what she had been told by Ms. Henderson with her husband, Ms. Wilson and her husband went back to MAC's office where they again spoke with Ms. Henderson. In this latter conversation, they again discussed the applicable rates and filled out an application for a mortgage. At that time they also paid a $300.00 fee to cover the cost of an appraisal on their property, and several other costs and fees. At this time, Ms. Henderson helped the Wilsons fill out the form and, in addition, prepared and delivered to them a "Good Faith Estimate", and discussed the appraisal costs, points, and the need for a termite inspection. On this second visit, Ms. Henderson gave the Wilsons a rate option form which they and she signed, which locked in the interest rate at 8 1/2 percent. She also gave them a receipt for the appraisal fee they had paid. Both forms reflect Ms. Henderson as a "loan officer." The Wilsons went to MAC on their own. They had not been solicited by Ms. Henderson or any other employee of the firm but came in on the basis of the firm's advertisements. While in the facility, they noticed a display board which indicated the current rates and points being charged and the rate and points reflected on that board were those charged by Ms. Henderson on behalf of MAC. She did not negotiate, or attempt to negotiate any change to either the rates or the points. During her conversation, Ms. Henderson explained the various types of loans available and the various options available but did not urge one over the other. At least one of the forms, the Good Faith Estimate form, was mailed to the Wilsons sometime after their visit and was sent with a cover letter from another employee of the firm. Neither Mr. nor Mrs. Wilson asked to speak with anyone else during either of their visits to MAC. Consequently, they do not know whether they could have done so had they desired. The documentation they received from Ms. Henderson appeared complete and they were satisfied with the service on their mortgage. At some time in early 1987, Donald R. Mullin, accompanied by his wife, went to MAC to refinance his mortgage and on that visit, spoke with Ms. Henderson. Mr. Mullin had previously filled out a loan application form which he had received from Floyd Henderson, also of MAC. Mr. Mullin was referred to MAC by a friend at work. He was not solicited by Respondent. During this meeting, the Mullins presented the forms they had filled out and paid the various appraisal and other fees required. The receipt given them by Ms. Henderson for these fees reflects her as a loan officer. At this meeting, Ms. Henderson did not indicate whether the loan would be approved or not. The only point for negotiation during the Mullin interview was with regard to the appraisal fee. Mr. Mullin had just had an appraisal done for his newly acquired mortgage and did not feel it necessary to have another one. During their conversation, Ms. Henderson agreed to see if the prior appraisal could be used and if so, the fee would be refunded. In fact it was refunded. The loan did not close because Mr. Mullin was not considered to have sufficient income to support the payments. However, at no time during their discussions, did Ms. Henderson make any commitments on behalf of MAC, nor did she offer to change points or rates. Herbert Roshkind and his wife were referred to MAC by their real estate broker and dealt exclusively with Ms. Henderson in all their dealings with the company. She gave them all the specifics relating to their potential loan, including interest rates. She explained that the rates varied weekly and that they could either lock in or not, as they chose. She also discussed the relevant fees for appraisal, credit report, etc., which she made clear were not refundable, and discussed the difference between a fixed rate and a variable rate mortgage. She also advised them of the various terms a loan could be taken for Their loan was complicated to the extent that Mr. Roshkind was retired. His income came from real estate and other investments which could not easily be verified. As a result, Mr. Roshkind was contacted frequently by Ms. Henderson in the course of preparation of the loan documents, requesting additional information. On one occasion, she came to his home to get additional information and to get his signature on a document just prior to closing. Ms. Henderson did not help the Roshkinds fill out their application. She gave them a package which they took home and filled out themselves. In the package was a list of 19 items which would be required to support the application, and her repeated requests for information related to these items. Mr. Roshkind at no time asked to speak with anyone else. He feels, however, that had he desired to do so, he could have. The rates for mortgages were posted on a board in the office and at no time did Ms. Henderson offer to negotiate either rates or points. Further, from the time the Roshkinds first came in to pick up the application package until they returned it to the MAC office filled in, they received no solicitation or any contact at all from Ms. Henderson or MAC. When the loan was finally approved, in May, 1987, they received a commitment form that was signed by George Emery on behalf of MAC but which was delivered by Ms. Henderson. Kimberly Lynn Johnson worked for MAC from May, 1986 to August, 1986 and during that period became familiar with Ms. Henderson and her father, Floyd D. Henderson, one of the principals in the company. During the period she worked there, the office was run by C. F. Cline and Mr. Henderson. Ms. Johnson started work as a secretary-receptionist and progressed up through clerking duties until she was trained to act as a loan processor. At that point, though she was not licensed as a mortgage broker, she began accepting loan applications and dealing with prospective clients just as did Ms. Henderson. When she took loan applications, she would receive the form from the prospective borrower, get the information required, and turn it over to a processor who would send out requests for the verifications required, do or order the credit report, and order an appraisal. At no time during this period was she a licensed mortgage broker nor did she know she had to be such to legally do what she was doing. She found this out only when she began studying for the broker's test approximately a year later. During the period Ms. Johnson worked at MAC, Ms. Henderson was a loan officer and also worked for Monroe Title Company. It was during this period of time, Ms. Johnson observed Ms. Henderson doing much the same type of thing she was doing involving the interviewing of applicants, and discussing with them the application forms, rates, points, fees, and the like, as well. This same type of activity was also done by other loan officers who, as she understood it, were licensed, and who, in addition to their in-office work, also visited builders, realtors, and other possible sources of business for the firm. Ms. Johnson recalls quite clearly that Ms. Henderson was engaged in this outside activity as well. On numerous occasions as she left the office, Ms. Henderson would advise Ms. Johnson where she was going, or her name would appear on the list of builders to be seen by herself and other loan officers. When Ms. Johnson first started with the company, walk-in clients would be referred to a loan officer on a rotating basis. Ms. Henderson and other, licensed, loan officers were on that list for rotation. When she served as a loan officer, Ms. Johnson would stay with her client all the way from application through closing and on almost every occasion, once trained, she would complete the process without any help from a licensed loan officer. The same applied to Ms. Henderson. Ms. Johnson was told by Mr. Cline that it was all right for her to act as a loan officer without a license as a mortgage broker as long as she didn't take a bonus or commission or did not solicit outside the office. Ms. Johnson was paid an hourly wage only. She does not know how Ms. Henderson was paid nor was any evidence admitted to define that. However, considering the fact that Mr. Moulin and Mr. Stillweaa both complained because their income was reduced as a result of Ms. Henderson's grabbing clients and her sharing of Moulin's builder clients, it can be inferred she was, at least in part, paid by commission. Based on representations made by Mr. Cline, Ms. Johnson continued working without question until an inspector from the Department came in for an audit. At this point, she figured that something was wrong and subsequently found that only a loan officer in a commercial bank can take loan applications without being licensed as a mortgage broker. MAC was listed on it's business cards as a mortgage banker. Though Ms. Henderson indicated from time to time she was going out to visit with builders, Ms. Johnson never saw her in negotiations with either builders or realtors. At the time in issue, Ms. Henderson's mother was terminally ill and had to be taken to the hospital and doctor's office on a regular basis. Ms. Johnson agrees it is possible Ms. Henderson could have been performing that service when ostensibly out on a call, but specifically recalls her saying she was, from time to time, going to visit a builder or realtor. She cannot say with certainty what Ms. Henderson did; only what she said she was going to do. Considering the state of the evidence, it is clear that Ms. Henderson did visit builders, and notwithstanding her assertion she may have gone there merely to drop off advertising materials, the likelihood is, and it is so found, she went for the purpose of soliciting business. It also is clear that with the exception of Ms. Henderson and Ms. Johnson, the individuals who processed applications and met with clients were properly licensed as mortgage brokers and were identified as loan officers. Both Mr. Cline and Mr. Henderson were licensed mortgage brokers and supervised, on a routine basis, the files of the other loan officers including Ms. Henderson and Ms. Johnson. In addition, either Mr. Cline or Mr. Henderson was available for consultation if necessary at all times, as was Mr. Gerber, the underwriter. All loans written by the loan officers, licensed or otherwise, had to conform to the same standards. Subsequent to leaving MAC, Ms. Johnson applied for and was, after testing, issued a license as a mortgage broker in Florida by the Department. This occurred after she was identified as operating as an unlicensed broker similar to Ms. Henderson. She, however, was never cited with a Cease and Desist Order. Mr. Kenneth Moulin worked for MAC from December, 1985 through April, 1987 and, along with his family, owned a 20% interest in the stock of the company. He worked in the Pt. Charlotte office along with Ms. Henderson. His primary job as a licensed loan officer and mortgage broker, was to solicit builders and realtors to refer potential customers. Mr. Moulin was licensed as a mortgage broker in February, 1986. Prior to getting his license, he was not allowed to negotiate with clients or to solicit business from builders or realtors. Because he had been previously engaged in the construction business, the majority of his contacts were in the building industry and he had a list of builders he regularly visited. Shortly after Ms. Henderson came to work at MAC, Mr. Cline gave half of the builders on Mr. Moulin's list to her as her source list. This had a negative impact on Moulin's income since at about the same time, his salary was discontinued and his compensation was based solely on commission, doubled in rate at that time. 24 Once half of Moulin's builders list was given to Ms. Henderson, she began calling on them, and he was told by many friends in the building industry, that she was soliciting them for referrals. In March, 1987, Mr. Moulin and Mr. Stillwell, another loan officer, requested of Mr. Cline a different split of the walk-in traffic because Ms. Henderson, whose office was right near the entrance, was pulling in as many of the walk-ins as she could to the exclusion of the other loan officers. After this complaint, Cline arranged a rotating schedule for walk-ins so that each loan officer would get a proportionate share of opportunity. In Mr. Moulin's opinion, based on his observations of Ms. Henderson and her activities, she, though unlicensed, did much the same type of work he did under his license. She solicited business from builders and realtors outside the office and handled walk-in clients from application through closing. He was not allowed to do any of this prior to being licensed, and he stands by this assertion notwithstanding the fact that numerous forms introduced by Ms. Henderson reflect that prior to the date of his license, he was referred to as loan officer. He explains this as occurring when Cline put his name on forms prepared for other people's loans so that he could get credit for them. Considering the nature of the operation as it appears from the general line of testimony, it is found that this did happen. Mr. Moulin initiated the investigation which culminated in this hearing because he felt he was being unfairly treated when cases were taken from him and he did not receive the commissions to which he felt he was entitled. In his letter to the Department, he identified Ms. Henderson as an "unlicensed mortgage solicitor." This appears to be an accurate description. Marcus Combs, testifying for Ms. Henderson, was sent to MAC by a real estate salesman whose broker was reportedly a major owner of the company. As did the others, Mr. Combs observed the rates and points posted on a board in the office lobby and was referred to Ms. Henderson, who he did not previously know, by the receptionist. During their initial interview, Ms. Henderson discussed the items required for the application and gave him a forms package. At this time, Ms. Henderson was in training and there was a man present throughout the meeting as an observer. At no time during their relationship, did Ms. Henderson attempt to negotiate rates or points, nor did she attempt to sell a particular type of loan. At no time did she solicit Mr. Combs to apply for a mortgage and, because he was having difficulty qualifying for a loan, suggested he look elsewhere for the mortgage. She actually referred him to another lending institution from which he ultimately got his mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued by the Department sustaining the Cease and Desist Order entered herein and the denial of Ms. Henderson's application for registration as an associated person with Triple Check Financial Services, Inc. RECOMMENDED this 24th day of October, 1989, 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 October. 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-3203 and 89-3769 The following constitutes my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the partiesto this case. For the Department: Accepted and incorporated herein. & 3. Accepted and incorporated herein. 4. - 8. Accepted. Accepted and incorporated herein. - 12. Accepted. Accepted and incorporated herein. - 17. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. - 23. Accepted and incorporated herein. Either hearsay evidence or not supported by the record. Accepted. & 27. Accepted and incorporated herein. 28. - 30. Accepted. 31. - 34. Accepted and incorporated herein. 35. - 43. Accepted and incorporated herein. 44. - 52. Accepted and incorporated herein. For Ms. Henderson: Not a Finding of Fact but a statement of legal authority. Not a Finding of Fact, (except as to dates of alleged infractions), but a Conclusion of Law. Not a Finding of Fact. Not a Finding of Fact but a comment on the Department's legal basis for filing. Not a Finding of Fact. 5a. - 5e. Not Findings of Fact but comments on the sufficiency of the evidence. & 7. Not a Finding of Fact but a comment on the sufficiency of the evidence. Accepted and incorporated herein. Not a Finding of Fact but a comment on the state of the Department's evidence. - 12. Accepted and incorporated herein, except to the second sentence of 12 which is unsupported. First and second sentences accepted. Third sentence is rejected as contra to the weight of the evidence. Accepted as to the issue of signing of statements but rejected as to the allegation of inaccuracy. COPIES FURNISHED: Robert K. Good, Esquire Office of the Comptroller 400 W. Robinson Street, Suite 501 Orlando, Florida 32801 Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson Street, Suite 501 Orlando, Florida 32801 Rebecca Love Henderson 5635 Bryner Drive Jacksonville, Florida 32244 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 Plaza Level, Room 1302 Tallahassee, Florida 32399 =================================================================
Findings Of Fact Respondents Phillip A. Banks (Banks) was at all times Material hereto a licensed real estate broker in the State of Florida, having been issued license number 0324865. Banks was the qualifying broker for Respondent, Abode Realty, Inc., which was at all tines material hereto registered as a real estate broker in the State of Florida, having been issued license number 0232550. On August 24, 1985, Respondents received in escrow $2,200 from Patricia Turner, as a deposit on her agreement to purchase a home located at 1300 Westview Drive, Miami, Florida. Pertinent to this case, the agreement was conditioned on Ms. Turner's ability to qualify for and obtain a first mortgage, insured by the FHA or guaranteed by the VA, in an amount not less than $40,837. Ms. Turner's application for the subject mortgage was duly submitted to American International Mortgage Company (American International). That application was, however, denied because the property did not appraise at the contract price. Following the denial of her application for mortgage financing on the first house, Ms. turner entered into an agreement through Respondents, dated November 20, 1985, to purchase another home located at 2501 Northwest 155 Terrace, Miami, Florida. At that time, Respondents returned to Ms. Turner the $2,200 deposit on the first contract, and she in turn deposited such sums with Respondents as a deposit on her agreement to purchase the second home. Pertinent to this case, the agreement was conditioned on Ms. Turner's ability to qualify for and obtain a first mortgage, insured by the FHA or guaranteed by the VA, in an amount not less than $39,867. The agreement further provided: When this contract is executed by the Purchaser and the Seller and the sale is not closed due to any default or failure on the part of the Purchaser, Purchaser shall be liable to Broker for full amount of brokerage fee. The agreed brokerage fee was 7 percent of the purchase price, or $2,800. The second home was owned by Independent Properties, Inc., a corporation owned, at least in part, by Banks. This ownership interest was, however, fully disclosed to Ms. Turner at the time the agreement was executed. Ms. Turner's application for the mortgage on the second home, as with the first home, was processed by American International. While that loan was being processed, Ms. Turner contracted to purchase and purchased, unbeknown to Respondents or American International, a different home (the third home). When a American International discovered this fact, Ms. Turner's application was disapproved because she lacked sufficient resources to afford two homes and because she could not comply with the FHA regulation which required that the buyer reside in the home. But for Ms. Turner's purchase of the third home, she would have qualified for the mortgage contemplated by the second agreement. Ms. Turner entered into the agreement to purchase the third home on or about January 20, 1986, and her application for the mortgage on the second home was disapproved by American International on April 1, 1986. In the interim, on January 30, 1986, Ms. Turner secured a loan of $1,000 from Banks on the pretext that her uncle had been charged with a criminal offense and the monies were needed to secure his release. The proof established, however, that Ms. Turner had no intention of fulfilling her agreement to purchase the second home, and that the pretext she used to secure $1,000 from Banks was but a subterfuge to secure the return of some of her deposit. Ms. Turner made no demand for the return of any of her deposit monies. She did, however, file a civil action in January 1987 to recover such monies. That action was dismissed on motion of Respondents, but faced with the threat of continued litigation Respondents offered to settle with her for $1,100. Ms. Turner rejected Respondents' offer, and commenced a second civil action. That action resulted in the entry of a final judgment in her favor for $1,100 and costs. Respondents are ready, willing and able to satisfy such judgment, and have attempted to satisfy such judgment through Ms. Turner's counsel without success.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final order be entered dismissing the Administrative Complaint. DONE and ENTERED this 11th day of January 1988, in Tallahassee, Florida. WILLIAM J. KENDRICK 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 a Division of Administrative Hearings this 11th day of January 1988. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate Legal Section 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Brian M. Berman, Esquire SMITH & BERMAN, P.A. 2310 Hollywood Boulevard Hollywood, Florida 33020 William O'Neil, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Darlene F. Keller Acting Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802
The Issue The issue presented for decision herein is whether or not Respondent unlawfully refused to honor a subpoena issued by Petitioner as is more particularly set forth hereinafter in detail.
Findings Of Fact Respondent, ASPEC, Inc., is a Florida Corporation engaged in the business of Mortgage Brokerage in Florida. Shanker S. Agarwal is President of ASPEC, Inc. Mr. Agarwal has been licensed by the Department as a Mortgage Broker since May 24, 1985 and currently holds License No. HB-0016435 which expired, by its terms, August 31, 1986. On February 14, 1986, the Department received a consumer complaint about ASPEC, Inc., and pursuant to its investigation of Respondent's brokerage activities, the Department sent a certified letter to ASPEC, Inc., on March 21, 1986, to the attention of President Agarwal requesting that an appointment be scheduled with its Area Financial Manager, Division of Finance, Paul Richman. The returned service of the referenced letter was postmarked April 14, 1986. President Agarwal, or an officer from Respondent failed to schedule an appointment with Paul Richman as requested. On May 22, 1986, the Department served Respondent a subpoena duces tecum on May 23, 1986, by its then Financial Examiner Analyst I, Kevin J.C. Gonzales. (Petitioner's Exhibit 1, pp 9-10.) The subpoena issued to President Agarwal requested that the custodian of records, an officer, director, employee or member of ASPEC, Inc. appear before Paul Richman on May 30, 1986, at 9:00 a.m. at the Department's Miami Office and produce all books, papers and documents (of ASPEC, Inc.) from its inception to April 29, 1986, so that the Department could determine ASPEC's compliance with Chapter 494, Florida Statutes. President Agarwal, or a representative on behalf of ASPEC, Inc., failed to appear at the date and time specified on the subpoena, or thereafter, at the designated place to produce the requested documents. Respondent has challenged on constitutional and other procedural grounds, the Department's authority to conduct an investigation of Respondent as a licensee under the Mortgage Brokerage Act. Respondent's challenges were determined to be either beyond the authority of the Hearing Officer or lacked merit, and rulings to this effec were made during the course of the hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: Petitioner enter a Final Order suspending the Mortgage Brokers License No. HB-0016435 issued to Respondent for a period of (1) year. RECOMMENDED this 8th day of May 1987, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 8th day of May 1987. COPIES FURNISHED: Miles J. Gopman Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399 Mr. Shanker S. Agarwal, President ASPEC, INC 6912 Stirling Road Hollywood, Florida 33024 Ronald P. Glantz, Esquire 320 Southeast 9th Street Fort Lauderdale, Florida 33316 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 =================================================================
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: Petitioner's application to take the examination to be licensed as a mortgage broker be DENIED. DONE and ORDERED this 28th day of January, 1988, in Tallahassee, Florida. JAMES E. BRADWELL 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 29th day January, 1988. COPIES FURNISHED: Scott William Katz 361 Midpines Road Palm Springs, Florida 33461 Lawrence S. Krieger Assistant General Counsel Department of Banking and Finance Office of Comptroller 111 Georgia Avenue West Palm Beach, Florida 33401-5293 Honorable Gerald Lewis, Comptroller, State of Florida The Capital Tallahassee, Florida 32399-0350 Charles L. Sutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue The issue in Case No. 90-4722 was whether B & B Mortgage Equity, Inc. was entitled to licensure as a mortgage broker in the State of Florida. As discussed in more detail below, B & B Mortgage Equity subsequently withdrew its application for licensure and that case is now moot. The issue in Case No. 90- 6577 is whether Respondents committed the offenses alleged in the Amended Administrative Complaint filed in that case, and, if so, what disciplinary action should be imposed.
Findings Of Fact At all times pertinent hereto, B & B Investors was registered with the Department as a mortgage broker pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Investors was 1481 N.W. 7th Street #1, Miami, Florida 33125. B & B Investors' registration number is HB 592369518. On or about July 5, 1990, B & B Investors filed a petition for relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 9090-14587-SMW. Yanks was the president and principal mortgage broker for B & B Investors until May 10, 1989. Yanks is a licensed mortgage broker in Florida having been issued license number was 262788177. He has been licensed since 1980 or 1981. There is no evidence of any prior disciplinary action against him or B & B Investors. At all times pertinent hereto, Yanks was also the President of B & B Equity. B & B Equity has never been registered pursuant to Chapter 494, Florida Statutes. Until June 15, 1990, the business address for B & B Equity was also 1481 N.W. 7th Street #1, Miami, Florida 33125. At all times pertinent hereto, Hernandez-Yanks was married to Yanks and was the Vice President and Secretary of B & B Equity. Hernandez-Yanks is an attorney, but she has never been licensed pursuant to Chapter 494, Florida Statutes. On or about March 15, 1990, Hernandez-Yanks filed a Petition for Relief under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Florida, Case No. 90-11654-BKC-AJC. On or about January 1, 1990, B & B Equity filed an Application for Registration as a Mortgage Brokerage Business (the "Registration Application"). Paragraph 6 of the Registration Application stated in part: List all officers, directors, partners, joint-ventures, and ultimate equitable owners. Ultimate equitable owner means natural person who owns 10 percent or more of applicant. NAME ADDRESS TITLE Barry Yanks 1481 NW 7 St. Pres. Ana Hernandez-Yanks 1481 NW 7 St. VP/Scty Yanks was designated as the principal mortgage broker on the Registration Application. The Department denied the Registration Application by notice dated June 4, 1990. CALVARY CHAPEL TRANSACTION At the time of the hearing in this matter, Marie Hall was 66 years old. She was last employed in 1988 by the Broward County School System as an adult vocational education instructor teaching students how to operate sewing machines. Her husband, the late Reverend Arthur Hall, died on March 22, 1988, at the age of 75. Because of health problems, he had been unable to work since 1962. The late Reverend Hall had very little education. Prior to the transactions involved in this case, the only other real estate deal in which the late Reverend and Mrs. Hall had been involved was the purchase of their home many years ago. In the summer of 1987, the late Reverend and Mrs. Hall sought to purchase Mount Bethel Baptist Church (the "Church"). To assist in their effort to purchase the Church, the Halls contacted Reverend Frank Lloyd. Reverend Frank Lloyd was the pastor of Hope Outreach, Church of God in Christ and the Chairman of the State of Florida Prison Ministry. Reverend Lloyd was also engaged in a consulting business through a company called Professional Proposal and Financial Consultants, Inc. ("PPFC"). In the summer of 1987, the Halls entered into an agreement with PPFC pursuant to which they paid PPFC $800 for PPFC's assistance in securing a loan of $250,000 to purchase the church. The agreement called for an interest rate of approximately 11 3/4 percent. The Halls deposited a total of $15,000 in escrow with Reverend Lloyd and/or PPFC. At the time the first $10,000 was deposited with PPFC, the parties entered into an agreement which provided as follows: ...This money is not to be used for down payment, or services rendered. It is to be escrowed only. At the closing of the loan this entire amount is to be returned to Elder Hall or his designate. If in the event no loan is secure [sic] all funds is [sic] to be returned to Elder Arthur Hall, President Calvary Chapel Church of God in Christ or his designate. Reverend Lloyd attempted to obtain a mortgage for the Halls from several companies including Ft. Lauderdale Mortgage and Horizon Development Mortgage ("Horizon"). The Halls decided not to pursue a loan from Horizon because Horizon wanted a non-refundable $3,000 up-front fee. There was also some question whether either company would handle a loan for a church. Reverend Lloyd introduced the late Reverend and Mrs. Hall to Yanks because Reverend Lloyd knew that Yanks had successfully obtained loans for other churches. The Halls met with Yanks on a couple of occasions in late 1987 and early 1988. Other members of the Hall's congregation attended some of these meetings. During those meetings, the need for some of the other church members to sign on the loan and/or pledge additional collateral was discussed. Yanks advised the late Reverend and Mrs. Hall that he might be able to secure a loan for them to purchase the Church, but the amount of the loan would be smaller and the interest rate would be higher than they had anticipated in their agreement with PPFC. Yanks did not require an up-front loan application fee. On January 14, 1988, the late Reverend and Mrs. Hall met with Reverend Lloyd and Yanks at the office of B & B Investors in Miami. As noted above, the Halls were initially seeking a loan of $250,000. During the January 14, 1988 meeting, Yanks advised the representatives of Calvary Chapel that he could arrange a loan of $162,000 at 17 percent if additional collateral was provided. At the January 14 meeting, the late Reverend and Mrs. Hall executed a mortgage loan application (the "Loan Application") with B & B Investors. The Halls executed the Loan Application on behalf of Calvary Chapel Church of God in Christ, Inc. (hereinafter Calvary Chapel). Yanks executed the Loan Application on behalf of B & B Investors. The Loan Application was for a $162,000 loan and stated that the loan origination fee would be $4,860.00 and the loan discount fee would be $4,860.00. The Loan Application did not indicate when those fees would be due or to whom they would be paid. The Loan Application noted that there would be an appraisal fee of $600.00 and attorneys' fees of $750.00. The evidence established that, in the mortgage brokerage business, a loan origination fee is often considered synonymous with a broker's fee. The origination fee is traditionally charged at closing. However, the agreement between a mortgage broker and a client determines when the mortgage broker is entitled to his fee. In certain circumstances, a mortgage broker may be entitled to payment upon obtaining a firm commitment for a loan irrespective of whether the loan closes. Although there was no statutory or rule requirement at the time of this transaction, it was customary in the industry for a mortgage broker to set forth in writing the terms as to when he is to be paid. The Application in this case did not state when the fees were to be considered as earned. The Loan Application also provided in part: If the above commitment or a commitment in an amount and/or upon terms acceptable to the undersigned is obtained and said mortgage loan is not closed because (I)(We) have not fulfilled our part of this agreement. (I)(We) agree to pay $ , the application deposit being a part, for obtaining said commitment. If an acceptable commitment is not obtained, the mortgage application deposit will be refunded, except $ to cover expenses actually incurred. A loan discount fee is the cost to the lender to discount the interest rate on a mortgage loan for sale in the secondary market. The discount fee is owed to the lender or investor and was collected at closing. A broker is not entitled to a loan discount fee. Yanks tries to ignore the terminology used in the Loan Application he prepared and claims that all parties knew that he and/or B & B Investors would receive both the loan origination fee and loan discount fee. He contends that he explained to the late Rev. Hall and Mrs. Hall that the loan origination fee and the loan discount fees were fees that would be paid to him when he arranged a firm commitment for a loan at the agreed upon terms. However, the more persuasive evidence established that the late Rev. Hall and Mrs. Hall did not understand that the loan origination fee and/or discount fee would be paid to Yanks irrespective of whether the loan actually closed. Moreover, Yanks has provided no credible explanation as to why he would ever be entitled to receive the loan discount fee. At the January 14, 1988 meeting, Yanks orally arranged a deal with Alan Greenwald, a private investor with whom Yanks had worked in the past, to fund a $162,000 loan at 17 percent. At the time of this transaction, there was no statutory requirement that loan commitments be made in writing. No written confirmation of the commitment was provided even though it was common in the industry for commitments to be given in writing in order to bind the lender to the transaction and to provide evidence of the terms of the commitment. The only written evidence of the loan commitment is a letter from Yanks to the attorney for Alan Greenwald. That letter states that Mr. Greenwald had asked for additional collateral. During the January 14, 1988 meeting, the late Rev. and Mrs. Hall agreed to put up their house as additional collateral. In addition, two other members of the congregation who were present at the meeting, Effie Davis and Cleveland Foreman, agreed in principal to permit a mortgage to be placed on their houses as additional collateral to secure the loan. Yanks contends that, as a result of his efforts in securing a commitment from Alan Greenwald as noted above, he was entitled to receive the loan origination fee and loan discount fee set forth in the Loan Application. After the January 14, 1988 meeting, Rev. Lloyd released to Yanks $10,000 of the $15,000 that he had been holding in escrow for the late Rev. and Mrs. Hall. The $10,000 check was made payable to B & B Investors. The $10,000 was not placed in an escrow or trust account upon receipt. Yanks apparently arranged for $1,000 of the money to be paid to Debbie Landsberg, the attorney for Alan Greenwald, as an advance on the legal fees and costs that were expected to be incurred in closing the transaction. At the time the $10,000 was transferred to B & B Investors, all of the parties to the transaction expected the loan to close and no one contemplated or anticipated that the loan would not go through. While both Yanks and Rev. Lloyd claim that the late Rev. Hall approved the release of the $10,000 as payment to Yanks for services in securing a commitment from Alan Greenwald, this testimony is rejected as not credible. The more persuasive evidence clearly established that at no time did the late Rev. and Mrs. Hall understand that if the loan did not close Yanks would keep the $10,000. After the January 14, 1988 meeting, the parties initiated the steps necessary to close the deal. These efforts were complicated by the illness of the attorney for the seller, the marriage of the attorney for the lender and the difficulty in locating the abstracts for the properties involved. Moreover, a number of title deficiencies regarding the Church were discovered and had to be corrected. The arrangements for financing the purchase of the Church changed several times. Initially, the Seller had indicated that it would take back a second mortgage for $50,000 in order to facilitate a closing. However, as the parties got closer to closing, the Seller changed its mind regarding the second mortgage. Ultimately, in September of 1988, the Seller agreed to take back a second mortgage of $35,000. Sometime during the summer of 1988, Greenwald reduced to $110,000 the amount he was willing to lend on the deal. That amount was to be secured solely by the Church property. Yanks claims that he arranged for another investor to lend between $40,000 to $45,000 with the residences of certain congregation members, including the Halls, Effie Davis and Cleveland Foreman, serving as collateral. These modifications were never memorialized in writing. As preparations for a closing proceeded, it became apparent that Effie Davis' house could not be used as security for the loan. While there is conflicting evidence as to why Effie Davis' house could not be used for additional collateral, the more persuasive evidence indicates that the presence of one or more existing liens on the property rendered it of minimal value as additional collateral. As a result of the inability to use Ms. Davis' house as part of the collateral for the loan, Yanks advised Calvary Chapel that the amount of the loan would have to be decreased from $162,000 to $150,000. Yanks also advised Calvary Chapel that an additional cash deposit of $14,000 was necessary to demonstrate to the lender that sufficient funds were available to conclude the deal. The additional money was paid in two parts. On or about August 23, 1988, Calvary Chapel paid $10,000 to the Ana-Hernandez-Yanks Trust Account. Shortly thereafter, on or about September 1, 1988, Calvary Chapel paid an additional $4,000 to the Ana Hernandez-Yanks Trust Account. These sums were received by Ana Hernandez-Yanks in trust as the attorney for the B & B Investors. No written escrow agreement was executed. No written amendment to the Loan Application was provided to reflect the new terms for the anticipated loan nor was there any written commitment letter. As noted above, the late Rev. Hall died in March of 1988. Reverend Phillip Hall, the son of the late Rev. Hall, was appointed the pastor of Calvary Chapel in April of 1988. At the time of his appointment, Rev. Phillip Hall was living in Nashville. He commuted between Nashville and Fort Lauderdale for a while before moving to Fort Lauderdale on July 31, 1988. Yanks suggests that the Reverend Philip Hall did not like the deal his parents had entered into and refused to honor it. More specifically, Yanks contends that Calvary Chapel and the seller made alternate arrangements for the sale of the property in order to avoid paying him. The evidence does not support such a conclusion. The Seller was obligated to provide clear title before the sale could close. The evidence established that the Seller was never able to provide all of the documents necessary to clear title. There is no persuasive evidence that Calvary Chapel failed to meet its obligations under the contract to purchase the Church. Instead, it appears that Calvary Chapel did everything in its power to go through with the transaction. Sometime in the fall of 1988, the seller, Mount Bethel Baptist Church, rescinded the contract to sell the Church. At some point thereafter, Calvary Chapel began occupying the Church under a lease/purchase arrangement, the terms of which have not been established in this case. As noted above, there is no persuasive evidence that the Rev. Phillip Hall and/or Calvary Chapel conspired to cheat Yanks out of his fees. In any event, even if Calvary Chapel decided for economic reasons not to go forward with the loan that Yanks was trying to arrange, it is concluded that neither Yanks nor B & B Investors had the contractual right to retain any of the money that had been advanced. After the deal failed to close, Rev. Lloyd returned to Calvary Chapel the remaining $5,000 he had been holding in escrow for the Halls. By letter dated September 19, 1988, Holly Eakin Moody, an attorney for Calvary Chapel, wrote to Yanks demanding the return of all the money that had been advanced. The letter stated: Please be advised that I have been retained by Calvary Chapel Church of God in Christ, Inc., to begin the appropriate legal action against you and your wife, Ana Hernandez-Yanks, for return of my clients [sic] escrow funds in the amount of $24,000. On or about December 24, 1988, Hernandez-Yanks tendered a check in the amount of $14,000 to Calvary Chapel. On the back of the check, the following release language was written: Full and Final Settlement of all claims against B & B Mortgage and Barry Yanks or Ana Hernandez- Yanks. Hernandez-Yanks wrote a letter dated February 7, 1989 to Holly Eakin Moody stating in part: Please be advised that as per your client's request, on December 24, 1988 I mailed them my trust account check in the amount of $14,000. I have checked numerous times with the bank and said check has not been presented for payment. I am hereby depositing said monies with the Registry of the Court. If you should have any questions, please contact me. It does not appear that Hernandez-Yanks ever deposited any money in the Registry of the Court in accordance with that February 7 letter. By letter dated March 14, 1989, Holly Eakin Moody returned the check containing the accord and satisfaction language to Hernandez-Yanks and reiterated a demand for a return of the entire $24,000. Ultimately, Hernandez-Yanks paid Calvary Chapel $14,000 by check dated March 6, 1990 on account number 020051156008 at the TransAtlantic Bank. A review of the bank records indicates that the $14,000 advanced by Calvary Chapel to B & B Investors in late August and early September of 1988 was not held in escrow. On or about September 1, 1988, $10,000 was deposited in the trust or escrow account of Hernandez-Yanks at Continental Bank (the "Continental Trust Account"). An additional $4,000 was deposited in the Continental Trust Account on or about September 6, 1988. On or about October 4, 1988, the Continental Trust Account was closed with a closing balance of or about $13,553.06. On or about October 4, 1988, Hernandez-Yanks opened a trust or escrow account at Ocean Bank (the "Ocean Trust Account"). The beginning balance of the Ocean Trust Account on or about October 4, 1988, was $13,000. On or about December 7, 1988, the balance in the Ocean Trust Account was $2,437. On or about December 15, 1988, Hernandez-Yanks opened a trust or escrow account at United National Bank (the "United Trust Account"). On or about January 19, 1990, the cash balance in the United Trust Account was $2,236.29. On or about January 5, 1990, Hernandez-Yanks opened a trust or escrow account at TransAtlantic Bank (the "TransAtlantic Trust Account"). The beginning balance of the TransAtlantic Trust Account on or about January 5, 1990, was $10,000. By check dated March 6, 1990, Calvary Church was paid $14,000 from the TransAtlantic Trust Account. There is no evidence that Yanks, Hernandez-Yanks and/or B & B Investors had any other escrow accounts. Based upon the foregoing, it is concluded that Yanks failed to ensure that monies received in trust were properly placed in escrow in a transaction wherein he acted as a mortgage broker. Moreover, Yanks failed to ensure that the $14,000 received by Hernandez-Yanks was returned expeditiously to Calvary Chapel. Yank's explanation that he does not tell his wife, who is an attorney, "how to run her business" does not excuse his failure to ensure that money placed in escrow with his company was promptly returned when the transaction was terminated. Yanks refused to repay any of the remaining $10,000 that was paid to B & B Investors claiming that he was entitled to keep the money as fees earned for processing a mortgage commitment from Allan Greenwald. As set forth above, the contention that the late Rev. Hall authorized payment in full of Yanks' fees is rejected as not credible. The more persuasive evidence established that the principals of Calvary Chapel did not understand that Yanks and/or B & B Investors were to be paid their fee even if the loan did not close. Since there was no agreement specifying when Yanks was to be paid, he had no legal right to retain the $10,000. Arguably, Yanks was entitled to some reimbursement for the expenses he incurred, including perhaps the $1,000 he supposedly paid to the investor's attorney. However, the evidence clearly established that Yanks was not entitled to retain the entire $10,000. 52 After the Department began its investigation of this case, Yanks offered to repay the loan discount fee of $4,860 to Calvary Chapel. As of the date of the hearing, Yanks was still refusing to repay the $4,860 loan origination fee which he claims he has earned. While Yanks' claim to the $10,000 was legally insufficient and should have been recognized as such, the evidence did not establish that Yanks was attempting to defraud the Halls and/or Calvary Chapel. There were clearly some misunderstandings between the parties. Many of these problems could have been avoided if Yanks had properly documented his fee arrangement in writing. Yanks spent a good bit of time trying to put the deal together and felt slighted when the transaction he structured fell apart, especially when Calvary Chapel ended up occupying the Church anyway. Yanks overreacted in his attempts to obtain compensation for his services. The evidence was insufficient to establish that his actions should be characterized as fraudulent. VAZQUEZ-CASTILLO TRANSACTION In approximately mid-December of 1988, Ana Vazquez began working for Yanks. Vazquez was hired by Yanks to assist in the processing of mortgages. Prior to becoming employed by Yanks, she had little experience in real estate transactions. Vazquez was employed by Yanks for only about two or three weeks. Thereafter, she was employed by Hernandez-Yanks as a secretary. Both Yanks and Hernandez-Yanks occupy space in the same building. As noted above, Hernandez- Yanks is an attorney. On or about February 27, 1989, Pura Castillo entered into a contract (the "Sales Contract") with Vazquez for the purchase of a condominium owned by Vazquez and located in Dade County, Florida, at 7440 Harding Avenue, Unit 301, Miami Beach, Florida (the "Condominium"). The sales price was $70,000. Pursuant to the Sales Contract, Vazquez was to convey title free and clear of all encumbrances, by a good and sufficient Warranty Deed. "Free and clear of all encumbrances" meant that the title being transferred from Ana Vazquez to Pura Castillo was not to be encumbered by any mortgages, judgments or other liens. The Sales Contract was not made contingent upon Pura Castillo obtaining new financing. The relationship between Ana Vazquez and Pura Castillo is not entirely clear. They were obviously well acquainted with each other. The evidence suggests that Pura Castillo's common law husband, Joseph Hardisson, was a close friend of the father of Ana Vazquez. While Pura Castillo and Joseph Hardisson were visiting with Vazquez, they began discussing the possible purchase of the Condominium by Pura Castillo. Yanks first learned about the possible sale of the Condominium to Pura Castillo when Vazquez asked Hernandez-Yanks to represent her. Hernandez-Yanks indicated that she would represent Vazquez in the sale. Vazquez also requested Yanks' assistance in obtaining a loan for Pura Castillo. Yanks advised Vazquez that he did not process loan applications for employees. He suggested that she contact one of the mortgage lenders with whom he did business. Vazquez contacted one such company, Inter-Mortgage Corporation, and obtained a loan application package. Shortly thereafter, a loan application was submitted with InterMortgage Corporation in the name of Pura Castillo. The circumstances surrounding the completion and submittal of that loan application are not entirely clear nor are they necessarily pertinent to this proceeding. The evidence did establish that the loan application contained some false information regarding Pura Castillo's residence and employment. InterMortgage contacted Yanks' office and advised that there were some problems with the application. Vazquez went to InterMortgage's office and retrieved the application. The evidence did not establish that Yanks was aware of the filing of the application with InterMortgage and/or that he knew the application contained any false information. It appears that a similar application with false information may also have been filed with another lender, Dixie Mortgage. There is no indication that Yanks was aware of the filing of this application and/or that he knew it contained false information. The Condominium was subject to a $42,000 mortgage from Standard Federal to Vazquez (the "Standard Federal Mortgage"). The Standard Federal Mortgage was a typical Fannie Mae mortgage and included a commonly used due-on- sale clause in Clause 17. That clause provided for a default by the borrower upon sale of the property unless the mortgagee had consented to the assumption of the mortgage by the purchaser. There were no federal or state laws in existence at the time prohibiting the enforceability of Clause 17. Vazquez had a contract to purchase another home which was contingent upon the sale of her Condominium. Thus, she was under some time pressure to close the sale of the Condominium. When it became apparent that a quick loan could not be arranged for Pura Castillo, Ana Vazquez turned to Yanks for advice. While there is conflicting evidence as to the discussions that took place, the more persuasive evidence established that Yanks agreed to structure a deal that would enable Ana Vazquez to sell the Condominium to Pura Castillo. As discussed in more detail below, Yanks structured a complicated and confusing arrangement whereby Pura Castillo was to make her monthly payments to B & B Equity, which was to play the role of a servicing agent and distribute the payments to the first mortgagee, Standard Federal. While Yanks now claims that after the Standard Federal Mortgage payment was made, the remainder of the monthly payments received by B & B Equity were going to be paid to Vazquez, there is no written agreement confirming this arrangement. It is the usual practice in the industry for mortgage brokers to determine whether there are outstanding mortgages on the property to be sold and to see to it that an existing mortgage is paid off or otherwise taken care of at the time of closing. It is the responsibility of the mortgage broker to contact the institution holding the mortgage to find out if it is assumable. If an existing mortgage has a due-on-sale clause, the mortgage broker would characteristically contact the first lien holder and get an estoppel letter to determine the balance of the loan. The mortgage broker might also seek a waiver from the lender so that the sale could be made without paying off the loan. Without such a waiver, a due-on-sale clause would entitle the original lender to declare the entire original loan due upon sale of the property. Yanks never obtained an estoppel letter or a waiver of the due-on-sale clause from Standard Federal. While Yanks claims that he contacted various persons regarding the enforceability of due-on-sale clauses, he never contacted Standard Federal about the specific clause in its mortgage to Vazquez. There is conflicting evidence regarding the discussions between Yanks and Vazquez regarding the structuring of the transaction. It is clear that Vazquez was more concerned with concluding the transaction rather than understanding the intricacies of it. As discussed in more detail below, the transaction structured by Yanks included several unexplained and/or inappropriate charges. In addition, the loan documentation was confusing and sometimes conflicting and/or contradictory. Vazquez indicated to Yanks that Pura Castillo was prepared to go forward with the sale and a closing was scheduled for June 16, 1989. In preparation for the closing of the sale of her condominium, Vazquez incurred several expenses. On or about March 31, 1989, she paid $275 to have the condominium appraised. On or about April 5, 1989, Vazquez paid $200 to National Title Abstract Company for an update of the abstract. On or about June 15, 1989, she paid $150 to Ticor Title Co. She also paid for a credit report on Pura Castillo. On June 16, 1989, Pura Castillo arrived at the office of Yanks and B & B Investors at 1481 N.W. 7th Street, Miami, Florida, to close on the purchase of the Condominium in accordance with the Sales Contract. Yanks and/or Hernandez- Yanks prepared the closing documents used at the closing. Much of the closing was conducted in Spanish. Yanks is not fluent in Spanish. Hernandez-Yanks, who speaks Spanish, acted as the closing agent and remained throughout the process. Yanks and Vazquez were in and out of the room throughout the closing. During the closing, Pura Castillo was told that B & B Equity was going to be the lender for the transaction. Pura Castillo inquired whether it was necessary for her to have her own attorney. Hernandez-Yanks replied that she could represent all parties and that it was not necessary for Pura Castillo to have her own attorney. At the closing, Pura Castillo presented cashiers checks for $5,800, $7,250 and $5,900 all made payable to the order of Ana Hernandez-Yanks, Trust Account. In addition, either Yanks or Hernandez-Yanks was given a check from Parker Realty in the amount of $2,800 which was the balance of the $7,000 deposit after payment of the $4,200 real estate commission. From the $21,750 brought to the closing, $14,000 was disbursed to Ana Vazquez. As noted above, Vazquez had already paid for the abstract, appraisal and credit report. In addition, as part of her mortgage payment, she had contributed approximately $1,281 to an escrow for taxes and insurance for which she was entitled to be reimbursed. Thus, the net cash that she received from the closing was less than $12,000 from the sale of a $70,000 condominium with a $42,000 mortgage. At the closing, Vazquez executed an "Agreement for Deed" in favor of Pura Castillo. An agreement for deed is a conditional sales contract pursuant to which a seller agrees to sell property to a buyer over a period of time. The seller retains the legal ownership of the property until the full consideration for the purchase is paid. After all the conditions have been met, the seller delivers a deed conveying ownership of the land to the buyer. The Agreement for Deed in this transaction provided as follows: That if said Buyers shall first make the payments and perform the covenants herein mentioned on their part to be performed, the said Sellers hereby covenant and agree to convey and assure to the Buyers or their heirs or assigns, in fee simple, clear of all encumbrances whatever, by good and sufficient Warranty Deed...[the condominium] And the Buyers hereby covenant and agree to pay to the Sellers the sum of $70,000 to be paid as follows: $19,073.12 cash in hand, the receipt of which is hereby acknowledged, and $704.32 or more per month on or before the 16th day of each and every month after the date of this instrument, to be mailed to the Sellers' address given herein, with interest at the rate of 11 percent, per annum on the whole sum remaining from time to time unpaid,... Arguably, the Agreement for Deed required Pura Castillo to make monthly payments to Vazquez of $704.32 plus interest on the outstanding balance. However, at the closing, Yanks provided Pura Castillo with a letter which explained that her monthly payments of $704.32 included $499.97 for principal and interest, $142.35 for real estate taxes and $62 for insurance. At the closing, Pura Castillo executed a mortgage (the "Mortgage") in favor of B & B Equity as mortgagee. The Mortgage stated that it secured an indebtedness of $52,500 and a promissory note for that amount was executed by Pura Castillo to B & B Equity at the closing. The Mortgage was similar in form and content to a Fannie Mae or a Freddie Mac mortgage form, except it included some additional provisions stating that it was a "Wraparound Mortgage." A wraparound mortgage is a financing device that is sometimes used when a seller of a piece of property agrees to take back and finance a portion of the difference between an existing first mortgage which is not being assumed or satisfied and the sales price for the property. Typically, the mortgagor on the first mortgage is the seller of the property and the mortgagee on the wraparound mortgage. The wraparound mortgage becomes a second or other junior mortgage behind the existing mortgage. The mortgagee of the wraparound mortgage agrees to continue making payments on the existing primary mortgage, at least so long as payments are made under the wraparound mortgage. Page 8 of the Mortgage included the following language: This is a Wraparound Mortgage. This wraparound mortgage is a second mortgage. It is inferior to certain mortgage [sic], herein called the first mortgage which covers the above described property at the time of execution of this wraparound mortgage. The wraparound mortgagee shall be excluded from any terms or conditions of the prior mortgagees. The wraparound mortgagee's obligation to pay the prior mortgages is limites [sic] to funds received from the wraparound mortgagor. For a number of reasons, the use of a wraparound mortgage in this transaction was totally inappropriate. The first page of the mortgage included a number of warranties including the following: The mortgagor hereby covenants with and warrants to the Mortgagee that the Mortgagor is indefeasibly seized with the absolute and fee simple title to said property. This warranty is inconsistent with the ownership interest that the Mortgagor, Pura Castillo, had as a result of this transaction. Pura Castillo's only claim to title was via the Agreement for Deed and she was not indefeasibly seized with the fee simple title. As noted above, the Mortgage states that it secures an indebtedness of $52,500 and a promissory note (the "Note") for that amount was executed by Pura Castillo to B & B Equity at the closing. That Note required Pura Castillo to make payments directly to B & B Equity. However, the Agreement for Deed calls for Pura Castillo to make payments to Vazquez. Moreover, Pura Castillo signed the Note obligating herself to make payments on a $52,500 indebtedness to B & B Equity even though the Standard Federal Mortgage was not satisfied and had a remaining balance of $42,000. In other words, the result of this transaction, at least as it appeared on the public records, is that a $70,000 condominium was encumbered by two separate mortgages (the Standard Federal Mortgage and the "Wraparound Mortgage") securing separate promissory notes totalling more than $94,000. At no time prior to or during the closing did Yanks or Hernandez-Yanks explain to Pura Castillo that an Agreement for Deed was being utilized in this transaction and that she would not obtain full legal title until all of the mortgages were paid off. Furthermore, neither Yanks or Hernandez-Yanks explained to Pura Castillo that the mortgage she signed in favor of B & B Equity was a wraparound second mortgage. While Yanks contends that Pura Castillo had plenty of opportunity to review the documents and ask questions regarding them, she was clearly an unsophisticated buyer who was incapable of deciphering the confusing and ambiguous documentation for this clumsily crafted transaction. In sum, the use of an agreement for deed and a wraparound mortgage in the same transaction was redundant, confusing and illogical. Moreover, Yanks' efforts in this transaction clearly violated the due-on-sale clause (Clause 17) in Standard Federal's existing first mortgage. The Department has suggested that the transaction was a calculated fraud with some undefined goal. After considering all the evidence, the transaction can more accurately be described as an awkward attempt at creative financing which included a number of hidden and inappropriate charges for the benefit of Yanks and/or B & B Equity. Yanks contends that Vazquez was desperate to close the sale and authorized him to proceed with whatever financing he could arrange so long as she netted $14,000 from the sale. He claims that she agreed to the wraparound mortgage as the only way to proceed with the deal under the circumstances. Under this arrangement, he contends that B & B was authorized to retain any additional proceeds as compensation for serving as a servicing agent on the wraparound mortgage. Even if this explanation is accepted, there are a number of problems with the actions of Yanks and B & B Equity in this transaction. First of all, there was no written servicing agreement setting forth the obligations of the servicing agent nor is there any delineation of the amount of money to be paid for servicing the wraparound mortgage. Moreover, the Agreement For Deed and the Promissory Note call for Pura Castillo to make payments of slightly more than $700 per month. These payments exceed the monthly payments due under the Standard Federal Mortgage. However, there is no written delineation of how the additional payments received each month were to be disbursed. Finally, the servicing arrangement was never explained to Pura Castillo and the documentation for the transaction was very confusing and often contradictory. There is no closing statement for the transaction that accurately reflects all of the disbursements made from the proceeds of the closing. Petitioner's Exhibit 23 is a closing statement signed by both Vazquez and Pura Castillo and purports to delineate certain expenses paid from the proceeds of the sale. Petitioner's Exhibit 7 is an unsigned closing statement which Yanks contends he prepared for use at the closing of the loan. He claims that, after the closing, he found out that Vazquez substituted Petitioner's Exhibit 23 for the closing statement that he intended to be used because she thought it more accurately depicted the fees as she had discussed them with Pura Castillo. This explanation is rejected as not credible. Petitioner's Exhibit 23 was the only closing statement signed by both the buyer and seller. As noted above, Vazquez was in and out during the closing. Hernandez-Yanks was present throughout the closing. The more credible evidence established that Petitioner's Exhibit 23 was the closing statement presented at the closing and executed by the participants. Neither closing statement accurately explains how all of the funds from the sale were disbursed. Thus, it is impossible to determine conclusively how much money Yanks and/or B & B Equity received from the closing. Both statements include some charges which are inappropriate or questionable. Furthermore, it is clear that Yanks and/or B & B received more than either statement indicated. Both closing statements reflect a payment of $600 for title insurance. However, the evidence established that no title insurance policy was ever issued. Vazquez paid for a title insurance commitment prior to the closing. Such a commitment is typically issued by a title insurance company prior to a real estate transaction and is a contractual agreement by the title insurer to issue a policy of title insurance upon compliance with certain terms and conditions. The actual title insurance policy is not issued until after the transaction has closed. The title insurance policy, not the commitment, insures the main insured against certain defects in title. The $600 charge for title insurance reflected on both closing statements was totally inappropriate in this case since no title policy was ever issued. Petitioner's Exhibit 23 includes a number of charges assessed to the buyer which were wholly inappropriate to this transaction. For example, the closing statement included a $500 charge for FNMA underwriting. This fee is charged by the institution underwriting a mortgage loan for compliance with Fannie Mae guidelines. Since the Mortgage in this case was clearly not intended to be sold to a Fannie Mae pool, the FNMA charge was not appropriate. Similarly, the closing statement included a $250 charge for a warehouse fee. This is a fee paid to institutions to cover the cost of a warehouse line of credit and is totally inapplicable to the transaction involved in this case. The closing statement also included a photo fee of $25, a lender's inspection fee of $150 and a survey fee of $225. There is no indication that any photos were taken, an inspection was conducted or a survey was prepared. Petitioner's Exhibit 23 also included a loan origination fee of $1,375 and brokerage fees of $1,575. Petitioner's Exhibit 7 included a lump sum brokerage fee of $5000, but did not include any of the other charges listed in this paragraph. There is no dispute that Yanks and/or his firm were paid mortgage brokerage fees out of the proceeds of the closing. These fees are reflected on both of the closing statements (Petitioner's Exhibits 7 and 23). A mortgage broker is paid a fee to negotiate a mortgage loan transaction for another party. In other words, he is retained to find a lender for a potential borrower. Under a mortgage servicing agreement, the servicer is paid a fee to handle the collection and disbursement of payments on a mortgage loan. Any fees paid for servicing a loan should be separately itemized and disclosed. It is not appropriate for a person who is to service a loan to receive what has been disclosed as a broker fee. Irrespective of which closing statement is deemed authentic, the evidence established that Yanks and/or B & B Equity received significantly more money from the closing than was reflected on either closing statement. As indicated above, $21,750 cash was presented at the closing, of which $14,000 was paid to Vazquez. According to Petitioner's Exhibit 7, there was $6,123.35 in closing costs (including a $5,000 brokerage fee). Thus, there is at least $1,626.65 in cash that is not reflected on the closing statement. Yanks contends that Vazquez told him to keep this money in return for servicing the loan. This contention is rejected as not credible. Similarly, Petitioner's Exhibit 23 indicates closing costs of $6,379 (including the charges in paragraph 89 above). Thus, there is $1371 unaccounted for. Moreover, it is clear that Yanks and/or B & B received in excess of $6,500 which is not readily discernible from the face of the closing statement. Subsequent to the closing, B & B Equity received at least five monthly payments of $704.32 on the Wraparound Mortgage from Joseph L. Hardisson, the common law husband of Pura Castillo. B & B Equity apparently distributed some of these funds in accordance with its claimed role of "servicing agent." However, on at least one occasion in late 1989, a check issued by B & B Equity to pay the Standard Federal Mortgage was returned for insufficient funds. In addition, a check issued by B & B Equity in the amount of $700 to Ana Vazquez in December of 1989 bounced. At some point in late 1989 or early 1990, Pura Castillo became concerned when she learned that the Standard Federal Mortgage had not been paid off. In January or February 1990, Pura Castillo and her husband came to Florida and attempted to contact Yanks regarding the transaction and the irregularities surrounding it. Ultimately, Pura Castillo filed a complaint with the Department and also filed a civil suit in Circuit Court seeking cancellation of the Mortgage and the issuance of a warranty deed in her favor. On April 17, 1990, Vazquez executed a warranty deed to Pura Castillo. Vazquez states that she felt obligated to convey all of her interest in the property to Pura Castillo in view of the confusing and unfair circumstances surrounding the initial transaction. On October 23, 1990, Yanks and B & B Equity entered into a Settlement Agreement with Pura Castillo pursuant to which they paid Pura Castillo $12,000 and the wraparound mortgage was cancelled of record. The Settlement Agreement also resulted in the dismissal of the civil suit and called for Pura Castillo to withdraw her complaint filed with the Department. Despite this withdrawal, the Department has chosen to proceed with this administrative action.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: A Final Order be entered finding Respondents B & B Investors, Yanks and Ana Hernandez-Yanks guilty of the violations alleged in Counts I, II, III, and IV of the Amended Administrative Complaint, finding them not guilty of Count VI and imposing an administrative fine of $5,000 which should be payable jointly and severally. Yanks and B & B Investors should also be required to repay $9,000 to Calvary Chapel within 30 days after the rendition of the Final Order. Failure to repay this sum should be a basis for the imposition of additional penalties, including revocation. The mortgage brokerage licenses of Yanks and B & B Investors should be suspended for one (1) year for their actions in connection with the Calvary Chapel transaction. A Cease and Desist Order should also be entered against Ana Hernandez- Yanks prohibiting her from any future violations of Chapter 494, Florida Statutes, from engaging in any act within the jurisdiction of the Department pursuant to Chapter 494, Florida Statutes, and from being an ultimate equitable owner of a business license pursuant to Chapter 494, Florida Statutes. The facts surrounding her trust account should be reported to the Florida Bar for investigation. A Final Order should also be entered finding Yanks, Hernandez-Yanks, and B & B Equity guilty of the violations alleged in Counts VIII, IX, and XI, finding Yanks and B & B Equity guilty of the violations alleged in Counts XII and finding Hernandez-Yanks guilty of violations alleged in Count XIII of the Amended Administrative Complaint. The Final Order should find the Respondents not guilty of the violations alleged in Counts X and XIV. Based upon the foregoing, the Department should impose an administrative fine of $5,000. The mortgage brokerage license of Yanks should be suspended for a period of three years to run consecutively with the suspension issued in connection with the Calvary Chapel transaction. Respondents should also be required to repay $6,040.12 to Ana Vazquez for inappropriate and undisclosed charges made at the closing. The collection of all fines and/or assessments against Ana Hernandez- Yanks and/or B & B Investors should be suspended pending approval of the Bankruptcy Court. In view of the Voluntary Dismissal filed on November 9, 1993, the Final Order should formally dismiss the Application Case. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of August 1994. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of August 1994.
The Issue The Respondents have been charged with multiple violations of Chapter 494, (1987), the Florida Mortgage Brokerage Act, and administrative rules promulgated pursuant to the act. The violations, described in an amended administrative complaint dated April 16, 1990, are as follows: Rule 3D-40.006(5), F.A.C.: Respondents failed to issue a statement signed by both parties, when receiving a deposit on a mortgage loan, regarding disposition of the deposit and other matters. Section 494.08(10), F.S. and Rule 3D-40.091(2), F.A.C.: Respondents failed to provide a written statement with a summary of limits and conditions for recovery from the Mortgage Broker Guaranty Fund. Section 494.055(1)(b), F.S. and Rule 3D-40.008(1), F.A.C.: Respondents assessed fees for credit reports, phone calls, appraisals and courier services, which fees were not supported by the files. Section 494.055(1)(0), F.S. and Rule 3D-40.006(4), F.A.C.: The department had to issue a subpoena for compensation records. Section 494.055(1)(g) and (p), and Section 494.08(5), F.S.: Borrowers were required to pay higher closing costs than were disclosed on the good faith estimate form. Section 494.08(5), F.S.: Respondents failed to secure executed modified mortgage loan applications from the borrowers or to return excess monies to the borrowers. Section 494.08(5), F.S. and Rule 3D-40.091(1), F.A.C.: Respondents accepted deposits from loan applicants but failed to obtain executed mortgage broker agreements which would disclose the cost of the loans. Sections 494.055(1)(b) and (g), and Sections 494.093(3)(a), (b), (c), and (4), F.S.: Respondents failed to disclose that they would retain both origination fees and discount points as their compensation, and failed to disclose compensation received from the lender in addition to brokerage fees assessed the borrowers on the closing statements. Section 494.055(1)(b), F.S., Section 494.08(5), F.S. and Sections 494.093(3)(a), (b), (c) and (4), F.S.: Respondents collected a servicing release fee from the borrowers when the Respondents were not the lender, and failed to disclose the collection. Section 494.055(1)(e), F.S. and Rule 3D-40.006(b)(a), F.A.C.: Respondents failed to maintain an escrow account.
Findings Of Fact Inlet Mortgage Company, Ltd. ("IMC") is a mortgage brokerage business operating under license #HB65002147500. Its place of business is 700 Virginia Avenue, Suite 105, Ft. Pierce, Florida 34982. John Davis is the principal mortgage broker of Respondent IMC, operating under license #HA246700273. He has been licensed in Florida since approximately 1987, and opened his business in February 1988. As authorized by Section 494.065(1), F.S. (1987), the Department of Banking and Finance ("department") conducted an examination of the affairs of the Respondents for the time period February 1988 through June 1, 1988. The examination was completed on July 5, 1988, with a written report. At the time of the examination Respondents had closed only four loans and had another six in progress. The audit was conducted because a loan processor working for IMC had applied for her mortgage broker license, and her application seemed to imply that she was already practicing mortgage brokering. The audit cleared up this question and the processor was not found to be operating improperly. However, Timothy Wheaton, the department examiner, found other violations by IMC. When an audit or review is conducted by the department, the agency staff first interviews the person in charge to explain the review and to learn about the company. The staff then looks at the licenses, reviews files of closed and active loans, and examines books and accounts, payroll records, and the like. Generally, a sampling of loan files is selected from the broker's loan log, but in this first review all loans were reviewed, as so few existed. The staff writes a preliminary report and conducts an exit interview to let the broker know its findings. Later, a formal report is completed and provided to the broker, who has thirty days to respond. Timothy Wheaton conducted his review of IMC and John Davis at the company office in Ft. Pierce on June 3, 1988 and June 7, 1988. At some point on June 3rd, Wheaton was reviewing compensation records to determine how the broker, his partner and the loan processor were paid. Davis had checkbooks available, but the accountant had not prepared his books as the office had just opened. Wheaton had questions as to whether the checkbooks were all that was available; when he asked for the payroll records, Davis told him he would have to subpoena them. Wheaton returned on Monday with a subpoena and was given the same records as before. Davis admits that he made the demand for the subpoena. He was piqued because he was very busy when the audit staff arrived, and when he suggested they return later, he felt they wrongfully impugned his motives and accused him of hiding something. Respondent Davis has admitted to several "technical" violations or oversights in the loan files at the time of the first review. A summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund was not being provided, but has been provided since the first audit. Deposits for credit report, appraisal fees and other costs were collected from the borrowers, but the files did not include a statement, signed by the borrowers, describing disposition of the funds in the event that the loan was not consummated, or the term of the agreement. After the first audit Davis has provided such a form statement and has included it in each file. On three closed loans, and one that was still pending, the files did not include documentation to support minimal (i.e., $25.00, $10.00, $6.56) fees for phone calls and courier fees, or fees were collected which exceeded the documentation in the file. Davis explained that these are charges made by the closing attorney, and the files now document those expenses. The difference between what was collected for a credit report and what was spent was returned to the borrower. (For example, $20.30 was returned to borrower, G. Stewart). In three loans closed at the time of the first audit, Davis and IMC received as compensation both the origination fee and a portion of the discount points. In the McCurdy loan, IMC received its 1 percent origination fee ($600.00), plus one half of the 1 percent discount fee ($300.00). In the Alexander loan, IMC received its 1 percent origination fee ($469.00), plus a .75 percent discount fee ($351.75). In the Stewart loan, IMC received its 1 percent origination fee ($612.00), plus 1/2 percent discount fee ($306.00). In each case, the Good Faith Estimate form provided to the borrowers disclosed the fees separately and did not break out which portion of the loan discount would be paid to the lender and which portion would be paid to IMC. The origination fee is sometimes called the broker's fee, although some banks also collect the fee when a mortgage broker is not involved. Discount points are a one-time payment to a lender to increase its yield on the loan. They are a percentage of the loan, paid up front, to reduce the interest rate over the term of the loan. These are distinctly different forms of charges to the borrower. Davis claims that he explained orally to each borrower how much compensation he would receive. The borrowers do not remember the specifics of that explanation, but rather consider the total origination fee and discount fee as their cost of the loan. They knew that the broker was going to be compensated for his services and understood that compensation would come from those fees in some unspecified manner. Davis claims that he checked with some lenders who told him that it was standard practice for part of the broker's compensation to be called a "discount" fee. He considered it a tax advantage to the borrower, as discount fees could be deductible, just as interest is deductible. During the audit, Davis discussed his compensation practice with the agency staff, who explained that, whatever it is called, the broker's compensation had to be fully disclosed to the borrower at the time of application on the Good Faith Estimate form. Between June 3rd and June 7th, Davis attempted to redisclose his compensation to the borrowers, but this resulted in unsigned disclosure forms in the file when the agency review staff returned on June 7th to complete the audit. At the time of the first audit, Davis and IMC maintained an escrow account for the deposits received from applicant/borrowers for audit reports, appraisal fees and other costs. Davis later closed his escrow account because he felt it was costing him money and because he did not consider the funds he received at the time of application to be escrow deposits. In most cases, the credit report and appraisal and other relevant services were ordered the same day as the loan application. Whether the loan was eventually consummated, the customer was still responsible for paying the charge if the services were provided. This is disclosed in a statement at the bottom of the Good Faith Estimate form and in a separate "Notice to Borrower", signed by the applicant which, since the first audit, is maintained in the loan file. According to the Notice to Borrower, if the loan is cancelled or denied, and the services have not been performed, the funds will be returned to the customer, less any cancellation charge by the appraisal or credit firm. These funds are deposits. When the escrow account was closed, Davis deposited the money for appraisals and credit report in his operating account. After services were rendered and an invoice received, he would pay the bill. Barbara Janet (Jan) Hutchersien, conducted the department's second audit of IMC in January 1990. This review covered the period from July 1, 1988 through December 31, 1989. John Davis provided the boxes of loans and bank records and loan log. The auditor used the logs to review a sample of loans from each lender with whom IMC works. The bank records were used to trace funds reflected in the loan files. Ms. Hutchersien found, and noted in her examination report, that no escrow account was maintained, although deposits were received in a sample of loan applications. In the Fishman loan, which closed on 4/11/89, closing costs were disclosed by IMC as $1,822.00 on the Good Faith Estimate form dated 1/12/89, yet those costs actually amounted to $2,075.00, disclosed at closing on the U.S. Housing and Urban Development (HUD) Settlement form, for a difference of $253.00. In determining consistency between a good faith estimate and actual closing costs, the agency staff looks at items which are predeterminable costs. In the Fishman case, the estimate for survey was $225.00, but the actual cost was $400.00, due, according to John Davis, to an oddly-shaped lot. In two loans financed by Greentree Mortgage Corporation, IMC received a substantial fee from the lender, which fee was not disclosed on the Good Faith Estimate form, on the HUD Settlement form, or anywhere in writing to the borrower. File documents call these fees "discount for pricing". In the Meslin loan, closed on 8/11/89, the fee from the lender to broker was $432.00; in the Krueger loan, closed on 7/21/89, the payment was $820.00. These paybacks are called "par plus pricing", a relatively new (within the last five years) form of loan pricing. Par plus pricing allows a borrower who does not wish to pay cash at closing, but who would qualify for a higher interest rate in terms of monthly payments, to avoid paying discount points fee at closing. Instead, the lender pays the points to the broker, and the borrower gets a higher interest rate. This is contrasted with the discount point system where the borrower pays cash points at closing in return for a lower interest rate. Par plus pricing can work to the advantage to all parties: The borrower avoids a large cash outlay at closing, the lender enjoys a higher interest rate over the term of the loan, and the broker receives his money from the lender. The borrower, however, should understand his options, including the option to pay cash at closing for a lower interest rate. Davis did not disclose the payback from the lender in writing because that is the way he says he was told to handle the loan by Greentree's representative. Davis told the borrowers that he was getting his money from the lender. He did not, however, explain that the borrower would be paying a higher interest rate in return, and Roger Krueger did not understand why his loan was at 10 1/4 percent, rather than 9 3/4 percent, which he thought was the going rate at the time of closing. IMC also received funds from the lender in the Barnes loan, closed on 12/30/88. Cobb Financial Partners was the original lender, yet they paid IMC a service release fee ordinarily paid by one lender to another for release of servicing a loan. Although the fee from Cobb to IMC was not disclosed in writing to the borrowers, the Barnes' were told that the fee for IMC's services would come from the lender, rather from them. They were told, and it is disclosed on the Good Faith Estimate form, and on the HUD Settlement Form, that Cobb Partners Financial was paid $900.00 (1.25 percent loan discount) by the borrowers. Of this, $810.00 was returned by Cobb to IMC. John Davis concedes that Cobb, not IMC, was the lender and was not "comfortable" with how Cobb told him to handle his fee. He has not done business with Cobb since this loan and was simply trying to avoid having to charge his fee to Barnes, who had just arrived in town to become the newspaper editor. The borrowers who were the subject of the files in which the agency found violations generally did business with Davis and IMC because they thought he would get the best deal for them. They were financially unsophisticated and trusted him to represent them. They understood that he was being paid for his services and felt that he should be paid. Except for Mr. Krueger, they were generally satisfied with their mortgage rates. The mortgage broker's fiduciary responsibility is to the borrower, rather than the lender, although he must deal fairly and honestly with the lender. The service that the broker provides to the borrower is his knowledge and his ability to shop for the best product. Par plus pricing and other mechanisms by which the broker receives his fee in whole or part from the lender are not considered by the department to be a violation of standards governing the practice of mortgage brokerage, so long as the customer is fully apprised of his options and is informed of the role of those payments in the product or service they are receiving. The Barnes' and Kruegers clearly were not so apprised, nor does the record establish that the Meslins were informed, although they did not testify. Categorizing brokerage fees or compensation as "discount points" is patently misleading, as discount points are used to buy down an interest rate. When the points are diverted instead to the broker, the consumer does not receive the loan for which he has paid. John Davis admits certain technical violations, but unequivocally denies that he wilfully misled his customers or committed fraud. Since the second audit, he has restored his escrow account. He now discloses his compensation as brokers fees rather than discount points, and has learned how to disclose in writing the par plus pricing loans. In considering certain violations as "technical", and in recommending a penalty in this case, the undersigned has considered Respondents' willingness to correct the errors addressed by the department and Respondents' inexperience at the time of the first audit. Although he was involved in banking, insurance, and accounting, John Davis had not practiced mortgage brokering before moving to Florida and starting his business. In his early practice, as evidenced by his own testimony, he was willing to rely on the advice of lenders, rather than to seek guidance from his licensing authority. He misconceived his role as being jointly responsible to the borrowers and lenders with whom he worked, rather than a primary fiduciary duty to the borrowers, his clients. Although the concealment of compensation as discount points was a willful misrepresentation, the record establishes a pattern of ignorance, albeit inexcusable, rather than fraud.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered, finding that Respondents violated Sections 494.055(1)(e), (o), and (q), F.S. (1987); Sections 494.08(5) and (10), F.S. (1987); and Section 494.093(4), F.S. (1987), and imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency. DONE AND RECOMMENDED this 30th day of July, 1990, in Tallahassee, Leon County, Florida. MARY CLARK, 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 30th day of July, 1990. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings of Facts Rejected as unnecessary. Adopted in paragraphs 3 and 6. Adopted in paragraphs 5 and 6. Rejected as redundant. - 8. Rejected as unsupported by the weight of evidence except as found in paragraph 6. The department was required to obtain a subpoena due to Respondents' feigned or real refusal to produce certain records. Rejected as unnecessary. Adopted in substance in paragraph 13. Adopted in substance in paragraph 7. Adopted in substance in paragraph 7. - 18. Rejected as unnecessary. Adopted in summary in paragraph 8. Rejected as immaterial. The telephone charges were incurred by the closing agent, not Respondents. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in summary in paragraph 7. and Rejected as unnecessary and - 48. Adopted in summary in paragraph 8. 49. - 52. Adopted in summary in paragraph 14. Adopted in paragraph 15. Rejected as unnecessary. Adopted in paragraph 13. and Rejected as unnecessary. Adopted in paragraphs 16 and 20. 59 - 74. Adopted in summary in paragraphs 16-19. Rejected as unnecessary. The conclusion that the handling of "par plus pricing" was fraudulent is rejected as contrary to the weight of evidence. 77. - 81. Adopted in summary in paragraphs 20 and 21. 82. Rejected as contrary to the weight of evidence. 83. Adopted in paragraphs 10 and 12. 84. Adopted in paragraph 10. 85. - 89. Rejected as unnecessary. 90. Adopted in paragraph 22. 91. - 93. Rejected as unnecessary. 94. Adopted in part in paragraph 26. Respondent's Proposed Findings of Fact Adopted in paragraphs 1 and 2. Rejected as unnecessary. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Adopted in paragraph 3. Adopted in paragraph 13. - 9. Adopted in summary in paragraph 7. Rejected as contrary to the evidence. Liability for payment occurs when the service is rendered, as reflected in Respondent's "Notice to Borrower". Rejected as unnecessary. Adopted in paragraph 12. Rejected as unnecessary and immaterial. Rejected as unnecessary. - 19. Adopted in summary in paragraph 8. 20. - 22. Rejected as unnecessary. Adopted in paragraph 14. Adopted in substance in paragraph 13. Adopted in substance in paragraph 16. Adopted in substance in paragraph 19. Rejected as unnecessary. - 29. Rejected as contrary to the weight of evidence. Included in conclusion of law number 9. Rejected as immaterial. - 33. Rejected as contrary to the evidence. The terms implied that the loans would be at a discounted rate, but were not, because the "discount" (partial) went to the broker. Adopted in paragraphs 19 and 20. Rejected as immaterial. COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson St., Suite 501 Orlando, FL 32801 John O. Williams, Esquire Renaissance Square 1343 East Tennessee St. Tallahassee, FL 32308 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 William G. Reeves General Counsel Dept. of Banking & Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350 =================================================================
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Banking and Finance, (Department), was the state agency in Florida responsible for the regulation and licensing of mortgage brokers in this state, and Respondent, Harriet Ijames, was a licensed mortgage broker. On February 17, 1989, Respondent entered into a Stipulation, Consent Agreement and Final Order with the Department whereby she was placed on probation for 2 years for misconduct relating to the misappropriation of mortgage application fees, with the further requirement that she not act independently but under the supervision of a broker acceptable to the Department. On October 2, 1991, the Department filed a complaint against the Respondent alleging she had violated the terms of the prior Consent Order by conducting business as a mortgage broker without the requisite supervision. Thereafter, on April 29, 1992, Respondent entered into another Stipulation, Consent Agreement and Final Order with the Department regarding the October, 1991 complaint by which she was again placed on probation conditioned upon her operating only under the supervision of an approved broker. This latter Order provided that any violation thereof would be automatic grounds for immediate and summary revocation of her license and also imposed an administrative fine of $2,000.00. The Final Order incorporating that agreement was issued by the Department on July 13, 1992. In May, 1992, Respondent was contacted by Rhudine M. McGhee, a resident of Tampa, who had been referred to her by a mutual acquaintance. Mrs. McGhee indicated she was interested in purchasing another house. Somewhat later, Respondent contacted Mrs. McGhee and told her of a friend who had a house for sale. She also gave Mrs. McGhee the addresses of some other houses in the area which were for sale. Mrs. McGhee did not like any of them. Thereafter, Respondent advised Mrs. McGhee that she was a mortgage broker and not a real estate broker, and that she would have a real estate broker contact her. Respondent also offered to provide Mrs. McGhee with listings of Resolution Trust Corporation foreclosures in the desired price range. Some time later, the broker referred by Respondent showed Mrs. McGhee a house she liked and she signed a contract to buy it. In the interim, Respondent had taken a credit application from the McGhees over the phone and followed up with a visit to the McGhee home. On May 13, 1992, during the visit to the McGhee residence, Respondent had Mrs. McGhee sign a loan application. On that same visit, she solicited and received from Mrs. McGhee a check for $300.00, payable to the Respondent and subsequently endorsed and cashed by her, which reflected the check was the application fee for a loan. She specifically asked that the check be made to her, personally. When Mrs. McGhee asked Respondent about the check, she was told it would be credited to the purchase price at time of closing. This was not done and it was only later, after a complaint was filed with the Department, that Mr. Brigliadora, the mortgage broker with whom she was affiliated, repaid the fee from his company's funds. Though at hearing Respondent denied she took a loan application fee or that the check she received was for that purpose or bore any notation to that effect when received, Mrs. McGhee is quite certain she put that notation on the check at her husband's direction at the time she gave it to Respondent. Respondent claimed the check was for finding the house but Mr. McGhee specifically recalls Respondent indicating the check was to be an application fee to be credited against the purchase price. It is so found. On June 1, 1992, Respondent again returned to the McGhee home to have them sign a second loan application. This time Mr. McGhee was not at home and Respondent suggested to Mrs. McGhee that she sign her husband's name to the application. This was done. Respondent did not give the McGhees copies of the applications they signed but said she would bring them copies at a later date. This was never done. Though Respondent also denies soliciting the second application, her apparent signature appears on both application forms and it is found she did both solicit and sign the forms and the application fee check. The first application was for a loan of $80,000.00 at 8.5 percent. The second was for $36,000.00 at 8.625 percent. At the time of the solicitation, Respondent was employed by Frank Brigliadora, a licensed mortgage broker and owner of the Money Tree Mortgage Co. However, neither Respondent nor Mr. Brigliadora had notified the Department of their arrangement or obtained Departmental approval of the supervisory relationship. Clearly, Respondent knew the taking of an application fee, as the evidence indicates she did here, was inappropriate. Sometime in mid 1992, Respondent approached George Banks, a licensed mortgage broker in Tampa and owner of his own brokerage company, with a view toward working for him. In their conversation about that, they discussed the practice of application fees. Respondent indicated she wanted to take a fee of $200.00 to $300.00 up front, but Banks felt this was not proper, advised her so, and declined to accept her as a broker. Even when she claimed that other brokers took fees of this nature, he demurred, claiming he did not endorse the practice. Respondent worked for Mr. Brigliadora, a licensed mortgage broker, at his firm, Money Street Mortgage, for approximately 3 months during 1992. At the time she went to work for him, Respondent did not tell him she was under sanctions by the Department to have strict supervision and at no time did he agree to the Departmental supervision program. Mr. Brigliadora did not receive the $300.00 check Respondent obtained from the McGhees nor did he ever get the money it represented from the Respondent. It was only just before or at the closing on the property that he first became aware of the deposit. When he refunded the money to the McGhees, Respondent agreed to reimburse him but she never did. Normally, Money Street Mortgage does not take application fees on residential loans, and Mr. Brigliadora denies he ever approved or suggested to Respondent that she solicit them. When Respondent gave him the documentation on the McGhee loan application it did not include the required good faith estimate found in the brokerage agreement nor did the application form or any other document make the required disclosures. The application he got from Respondent does not constitute a brokerage agreement and Mr. Brigliadora never got one from the Respondent on this loan. What he received is no more than an application for a loan. Mr. James, the Department's Area Financial Manager, whose job includes the assignment of examiners and the review of investigations by examiners, knows Respondent as a licensed mortgage broker under Chapter 494, Florida Statutes. He is aware of prior complaints received by the Department about the Respondent in the past. Two of them relate to the Final Orders previously mentioned herein. In the instant case, he recalls receiving a telephone call regarding a deposit of $300.00 given to Respondent and commenced an investigation into the incident. The current Administrative Complaint which resulted in this hearing was the outcome of that investigation. Based on his evaluation of the matters discovered in the investigation, he concluded that Respondent took a fee from a client without having a brokerage agreement with that client; failed to make the required full disclosure to a client; and misappropriated a fee which she received from a client; all of which are violations of various provisions of Chapter 494. In his official capacity with the Department, Mr. James had the duty to approve a supervisory mortgage broker for the Respondent as called for in the two prior Final Orders referred to previously herein. Neither Money Street Mortgage nor Mr. Brigliadora were submitted by Respondent for approval by the Department even though Respondent knew she was required to do so. Respondent claims she made it very clear to Mrs. McGhee that she was a mortgage broker and not a real estate broker. Nonetheless, Mrs. McGhee, she claims, insisted Respondent help her and offered to pay her for her efforts. Respondent claims that all Petitioner's witnesses lied about her and forged documents relating to her alleged activities. She denies she would ever cheat or disobey the rules because she knows she would lose her license if she did. Claiming she is well respected in the community, she asserts the Department did not thoroughly investigate the allegations against her and is, therefore, destroying her reputation over something which did not happen as alleged. Her assertions are not accepted, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: Recommended that a Final Order be entered in this case finding her guilty of the offenses alleged in the Administrative Complaint filed herein; revoking Harriett Ijames' license as a mortgage broker in Florida; and imposing an administrative fine of $5,000.00. RECOMMENDED this 24th day of May, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 1993. COPIES FURNISHED: Lisa L. Elwell, Esquire Office of the Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Harriett Ijames 8341 Paddlewheel Street Tampa, Florida 33617 Gerald Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302 The Capitol Tallahassee, Florida 32399-0350
The Issue The central issue in this case is whether the Respondents are guilty of the violations alleged in the Amended Administrative Complaint; and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: The Department of Banking and Finance, Division of Finance, is charged with the responsibility of administering the provisions of Chapter 494, Florida Statutes. At all times material to the allegations in this case, Diko Investments, Inc. ("Diko") conducted business as a mortgage broker in Palm Beach County, Florida. At all times material to the allegations in this case, Dieter Kolberg ("Kolberg") was an officer, director, and acted as principal mortgage broker for Diko. Kolberg passed the mortgage broker's examination on May 28, 1985. Diko was issued a license as a mortgage broker with Kolberg as its principal broker on June 26, 1985 (license NO. HB-16568) Prior to May 28, 1985, Diko ran advertisements soliciting investors for mortgage opportunities. These ads included Kolberg's home telephone number. Prior to May 28, 1985, Kolberg/Diko entered into a business relationship with Michael D. Cirullo, a licensed mortgage broker, to "co-broke" mortgage transactions. Pursuant to their agreement, Cirullo represented the borrower/mortgagor while Kolberg obtained and represented the lender/mortgagee. Kolberg and Cirullo solicited and negotiated at least two loans prior to May 28, 1985. Kolberg acted in expectation of being paid as a mortgage broker. Cirullo remitted 50 percent of the commissions earned on these transactions to Diko. Diko stationery included the phrase "Licensed Mortgage Bankers." Neither Diko nor Kolberg has been licensed as a "mortgage banker." In August and September of 1985, investors, Marcel and Ida Barber, responded to a Diko advertisement which offered a 16 percent interest mortgage loan secured by prime residential real estate. The Barbers were interested in a safe, high interest yielding investment and requested more information from Diko. On September 23, 1985, Kolberg wrote to the Barbers to outline the following business policies of Diko: The first objective of the Diko lending program was "The Safety of the Investor's Capital." Any investment was to be secured by a mortgage on prime residential real estate clear of all liens with the exception of a first mortgage where a second mortgage would be given. Investors would be issued mortgagee title insurance to insure against loss due to defects in title to the mortgaged property. Investors would be issued fire and hazard insurance to cover any losses in the event of fire or storm. Subsequent to the receipt of the aforesaid letter, the Barbers decided to invest $25,000 in a mortgage through Diko/Kolberg. This initial transaction proceeded satisfactorily and the objectives addressed in paragraph 10 above were met. In late December, 1985, the Barbers advised Kolberg that they would be willing to invest an additional $50,000 in early January, 1986. The Barbers expected the transaction to be handled in the same manner as their prior investment through Diko. After reviewing two or three loan proposals, the Barbers chose to invest in a loan to Tony Medici/Automatic Concrete, Inc. The loan was to be secured by a second mortgage on property at 713-717 "L" Street, West Palm Beach, Florida. The "L" Street property consisted of a 24-unit apartment complex and an adjacent laundry facility. Kolberg accompanied the Barbers to view the property. During discussions with the Barbers regarding the proposed investment, Kolberg made the following false material representations: That the property had a high occupancy; That rental payments were guaranteed or subsidized by a government program; That the asset-to-debt ratio for the property was acceptable; and That a proposed expansion of the laundry facility would further enhance the security of the loan. Financial statements of the borrower (Medici/Automatic Concrete, Inc.) did not include all obligations against the "L" Street property. Diko/Kolberg did not give the Barbers an accurate or complete statement of the financial condition of the "L" Street investment. Kolberg knew the information on the statement was incomplete. Diko/Kolberg did not disclose to the Barbers the high rate of crime in the area which compromised the security of the "L" Street investment. Kolberg knew of the crime problem in the area. Diko/Kolberg did not disclose to the Barbers that foreclosure proceedings had been instituted against the "L" Street property. Kolberg knew of the foreclosure action as well as the delinquency on other obligations. Kolberg did not disclose to the Barbers that he represented, as trustee, a Kolberg family company which would directly benefit from the Barber loan. The Barber loan would satisfy a mortgage held by Kolberg, as trustee, on the subject property, which mortgage was in default and in the process of foreclosure (the Ropet Anlagen foreclosure). Kolberg did not disclose to the Barbers that another mortgage held on the "L" Street property (David Marsh loan) was also in default. A subordination agreement was required to be executed by Marsh in order for the Barber/Medici loan to close. Marsh agreed to subordinate his mortgage position for approximately $3,000 in arrear payments. Marsh was owed approximately $125,000 but chose to subordinate because by doing so he was able to recoup a small amount of what he considered a lost investment. Kolberg knew of Marsh's situation and did not advise the Barbers. The Barber loan to Medici/Automatic Concrete, Inc. closed on January 18, 1986. The Barbers delivered a check for $53,000 payable to the title company chosen by Diko. Neither Diko nor Kolberg gave the title company, Manor Title, closing instructions to protect the lenders' interests. Kolberg did, however, instruct the title company to list expenses relating to the Ropet Anlagen foreclosure against the Medici loan. Proceeds from the closing, in the amount of $50,000 were paid to Kolberg, as trustee for "Ropet Anlagen," and deposited to an account by that name. The name "Ropet Anlagen" translates to "Ropet Investments." Kolberg handles all transactions for this Kolberg family company in the United States. (Kolberg has two sons, Robin and Peter, from a former marriage. The name "Ropet" may derive from their names.) Kolberg's former wife, Patricia Kolberg, owns an interest in Ropet Anlagen. Regular monthly payments were made by Kolberg to Patricia Kolberg on a Ropet Anlagen account. Many of the checks drawn on the Ropet Anlagen account were for personal expenses of Kolberg or his business. The first mortgage on the "L" Street property was 45 days overdue on January 13, 1986. Kolberg knew of this delinquency but did not advise the Barbers. To the contrary, Diko gave the Barbers an estoppel notice from a prior closing showing the first mortgage to be current. The first mortgagee ultimately foreclosed its mortgage and the Barbers lost their entire investment. The Barbers did not receive a fire and hazard insurance policy to cover losses in the event of fire or storm for the "L" Street property. The Barbers did not receive a mortgagee title insurance policy until March, 1986, by which time the first mortgage was further in default. Additionally, the mortgagee policy disclosed a financing statement and a collateral assignment of rents recorded prior to the Barbers' mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Banking and Finance, Office of the Comptroller, enter a Final Order revoking the mortgage broker license issued to Dieter Kolberg and Diko Investments, Inc. DONE and RECOMMENDED this 30th day of November, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 1987. APPENDIX Rulings on proposed Findings of Fact submitted by Petitioner: Paragraphs 1, 2, 3, 4 and 5 are accepted. Paragraph 6 is accepted; however, Kolberg's interest when financing with funds he controlled was only on a temporary, interim basis. The activities were conducted with Diko to receive a commission, therefore requiring a license. Paragraphs 7-15 are accepted. Paragraph 16 is accepted to the extent addressed in findings of fact paragraphs 12, 13. Paragraphs 17-18 are accepted to the extent addressed in findings of fact paragraphs 14, 18, 22. Paragraphs 19-27 are accepted. Paragraph 28 is rejected as immaterial and unnecessary. Paragraphs 29-42 are accepted. The detail of Petitioner's finding is unnecessary to the conclusions reached herein. Paragraphs 43-45 are accepted but unnecessary. Paragraph 46 is accepted. Paragraph 47 is rejected as unnecessary and immaterial. Paragraphs 48-52 are accepted. Paragraph 53 is rejected as unnecessary. Paragraph 54 is accepted. Paragraph 55 is accepted to the extent found in findings of fact paragraphs 20, 21. Paragraphs 56-57 are accepted. Paragraph 58 is accepted to the extent addressed in finding of fact paragraph 21. Paragraphs 59-63 are accepted but unnecessary. Paragraphs 64-65 are accepted. Rulings on proposed Findings of Fact submitted by Respondents: Paragraph 1 is accepted. Those portions of paragraph 2 which set forth Respondent's dates of testing and licensure are accepted, the balance is rejected as an erroneous conclusions of law. Paragraph 3 is rejected as contrary to the weight ofevidence. Paragraph 4 is accepted but irrelevant to the issue. Paragraph 5 is rejected as the transaction was solicited with Kolberg's company, Diko, participating as a mortgage broker. Paragraph 6 is accepted but irrelevant to the issue. Paragraph 7 is rejected as contrary to the weight of theevidence and law. Paragraph 8 is accepted but does not mitigate, as a matter of law, Respondent's improper useage of the phrase. Paragraphs 9-11 are accepted; however the detail of thefindings is unnecessary and immaterial to the issues of thiscause. Paragraphs 12-14 are accepted to the extent addressed in findings of fact paragraphs 12, 13 the balance is rejected as unnecessary and immaterial. Paragraph 15 is rejected as unnecessary, relevant portions having previously been addressed. Paragraph 16 is accepted. Paragraph 17 is accepted but is unnecessary. Paragraph 18 is rejected to the extent it qualifies Barber as a "Sophisticated Investor." The record is clear Mr. Barber was experienced in the laws of France; however, he relied on Kolberg completely as to both transactions which took place in Palm Beach. Moreover, Mr. Barber's useage and understanding of the English language was suspect. He could hardly be considered a "sophisticated investor" in light of the total circumstances. Paragraph 19 is rejected as contrary to the weight of the evidence. Paragraph 20 is accepted to the extent addressed in finding of fact paragraph 13, the balance is rejected as contrary to the weight of evidence. Moreover, it is found that the only times of capacity occupancy (which were limited) were due to temporary, transient, undesirable tenants who may have directly affected the crime problem. Paragraph 21 is accepted. Paragraph 22 is rejected as contrary to the weight of evidence. Paragraphs 23-24 are rejected as contrary to the weight of evidence. Paragraph 25 is accepted but is unnecessary. The crime problem was there prior to closing and was undisclosed to Barber. That it worsened after closing only assured the disclosure should have been made. Paragraphs 26-35 are rejected as contrary to the weight of the evidence. Many of the facts asserted here are based on testimony given by Kolberg. Respondents presume that testimony to be truthful, accurate, and candid. I found the opposite to be true. Paragraph 36 is accepted but does not mitigate Respondents' responsibilities to have completed the items at closing. Paragraph 37 is accepted with same proviso as above paragraph 36, ruling #22). Paragraphs 38-39 are rejected. See ruling #21. Paragraph 40 is accepted. Paragraph 41 is accepted but see findings of fact paragraph 21 as to Kolberg's useage of Ropet funds for personal expenses. Paragraphs 42-43 are rejected as contrary to the weight of the evidence. COPIES FURNISHED: Lawrence S. Krieger, Esquire 111 Georgia Avenue, Suite 211 West Palm Beach, Florida 33401 Keith A. Seldin, Esquire 1340 U.S. Highway #1, Suite 106 Jupiter, Florida 33469 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
The Issue Whether petitioner's application for a mortgage broker's license should be granted or denied.
Findings Of Fact Application and Reasons for Denial Applicant is a 52-year-old former mortgage broker who resides in Dade County, Florida. He was first licensed as a mortgage broker in Florida in 1959. His license remained in effect until it expired in 1976. He reapplied for registration as a mortgage broker in December, 1976. In June, 1977, the Department denied his application despite Applicant's attempt to withdraw his application in January, 1977. (P-1, R-6, R-7.) On March 18, 1981, Applicant filed another application with the Department for a license to act as a mortgage broker. That application is the subject of this proceeding. The Department seeks to deny it on grounds that the Applicant is insolvent; that he had a final judgment entered against him in a civil action on grounds of fraud, misrepresentation, or deceit; and that he lacks the requisite competence, honesty, truthfulness, and integrity to act as a mortgage broker in Florida. II. Insolvency Applicant is insolvent and deeply in debt. His insolvency arises out of his association with a company known as Guardian Mortgage and Investment Corporation ("Guardian Mortgage"), a mortgage brokerage firm operating in Dade County. He was secretary/treasurer and one of several mortgage brokers who worked for that company. Prior to its going out of business in 1976, it and its several brokers were accused of numerous financial misdealings. Between 1974 and 1980, over 31 civil lawsuits were filed against Applicant concerning financial transactions in which he was involved; most of the transactions occurred in connection with his employment at Guardian Mortgage. As a result of these lawsuits, and his failure to defend against them (on advice of counsel) , final judgments in excess of $500,000 have been entered against him and remain unpaid. Applicant has not attempted to pay off any of these judgments, although his codefendant, Archie Struhl, has made efforts to satisfy some of them. (Testimony of Lipsitt, Haber; R-4, R-5, R-6.) After Guardian Mortgage ceased operations, Applicant ran a hotel and orange grove operation in Central America. His wife was a preschool teacher. He has not earned any money beyond that necessary to meet his basic needs. (Testimony of Haber.) In the past, the Department has ordinarily refused to issue mortgage broker licenses to applicants who are insolvent. The reason for this policy is that the public "could be injured if a man [mortgage broker] did not have sufficient monies to back him up . . ." Tr. 144.) The only exception to this policy of denying applications on grounds of insolvency is when an applicant has shown that he is making an honest effort to satisfy and pay off the outstanding judgments. (Testimony of Ehrlich.) III. Civil Judgment of Fraud Entered Against Applicant In April, 1977, a civil action was filed by Murray Ritter against three codefendants: Applicant, Archie Struhl, and Guardian Mortgage. (Circuit Court of Dade County, Case No. 77-10849, Division II.) Count II of the complaint alleged that the defendants committed fraud by failing to invest $10,000 in a first mortgage and, instead, converted the money to their own use. On July 20, 1977, the circuit court, upon plaintiff's motion, entered a Final Summary Judgment in favor of plaintiff and against the three defendants. The judgment awarded plaintiff $10,000 in compensatory damages, $5,000 in punitive damages, and court costs of $63, for a total of $15,063. (R-5, R-6.) IV. Experience, Honesty, Truthfulness, Integrity, Competency, and Background of Applicant Applicant was a licensed mortgage broker for many years. The Department acknowledges that his experience in mortgage financing is adequate. (Testimony of Ehrlich.) Applicant denies that he ever engaged in wrongdoing as a mortgage broker, that he knew of improprieties occurring at Guardian Mortgage, or participated in a cover-up. He denies that he ever misrepresented facts or acted dishonestly as a mortgage broker. The evidence is insufficient to establish that Applicant lacks honesty, truthfulness, or integrity. (Testimony of Haber.) However, Applicant has not demonstrated that he has the requisite background and competence to engage in financial transactions involving mortgage financing. Civil judgments were entered (by the Circuit Court of Dade County) against Applicant in the following cases, each of which involved mortgage financing, unsecured loan transactions, or real estate investments negotiated by Applicant: Irvings S. Philipson, et al. v. Venus Development Corporation, et al., Case No. 74-1320. Dr. Seymour Z. Beiser, et al. v. Guardian Mortgage and Investment Corporation, et al., Case No. 76-24374. Dade Federal Savings and Loan Association of Miami v. Brenda Alexander, et al., Case No. 75-16230. City National Bank of Miami v. Guardian Mortgage and Investment Corporation, et al., Case No. 75-39444. Leon Earler, et al. v. Venus Development Corporation, et al., Case No. 76-22138. Jesus Suarez v. Leonard Gordon, et al., Case No. 76-26381. John J. Nussman, et al. v. Melvin J. Haber, et al., Case No. 76-30569 (12). County National Bank of North Miami Beach v. Sid Shane, et al., Case No. 77-27909 (14). Herman Mintzer, et al. v. Guardian Mortgage and Investment Corporation, Case No. 76-16842. Melvin Waldorf, et al. v. Guardian Mortgage and Investment Corporation, Case No. 76-16344. Florence Margen v. Guardian Mortgage and Investment Corporation, et al., Case No 76-39412. Biscayne Bank v. Guardian Mortgage and Investment Corporation, et el., Case No. 76-39857 (8). Harry Jolkower, et al. v. Archie Struhl, et al., Case No. 77-19172. Hilliard Avrutis v. Archie Struhl, et al., Case No. 32494. Julius Wladawsky, et al. v. Melvin J. Haber, et al., Case No. 76-22554 (14). Taken as a whole, these judgments support an inference that Applicant lacks the competence and background necessary to act as a responsible mortgage broker in Florida. 2/ (Testimony of Ehrlich; R-4, R-5.)
Recommendation Based on the foregoing, it is RECOMMENDED: That the application for a mortgage broker's license be DENIED. DONE AND RECOMMENDED this 15th day of January, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. 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 15th day of January, 1982.
