Findings Of Fact 1. On January 8, 1975, the United States District Court, District of Delaware, entered a "judgment and probation/commitment order," finding petitioner guilty of violating Title 18, United States Code, Sections 1010 and 371. These charges involved, inter alia, making, passing, uttering and publishing false statements and forged instruments in connection with the obtaining of mortgage insurance under the provisions of the National Housing Act. Petitioner was fined $2,500.00 and sentenced to serve three years imprisonment, the remainder to be suspended after six months and petitioner to be placed on probation for the remaining thirty months. On or about July 9, 1976, petitioner applied to respondent for registration as a mortgage solicitor. For the reason that petitioner was found guilty as described in paragraph one above, respondent determined that petitioner did not meet the proper qualifications to be licensed and issued its notice of intent to deny said license. In his answer and request for a hearing, petitioner admitted the material factual allegations of the complaint. Petitioner did not appear and therefore offered no evidence in his own behalf.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that petitioner's application for registration as a mortgage solicitor be DENIED. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 13th day of April, 1977. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of April, 1977 COPIES FURNISHED: Mr. David L. Pierce 891 West Tropical Way Plantation, Florida 33317 Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Joseph M. Ehrlich Deputy Director Division of Finance Department of Banking and Finance 335 Carlton Building Tallahassee, Florida 32304 Comptroller Gerald A. Lewis The Capitol Tallahassee, Florida 32304
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.
The Issue The issue in this proceeding is whether Petitioner's loss of a real estate broker's license by a stipulated disciplinary suspension in 1983 is a proper bar to his mortgage broker application as principal broker for Center State Mortgage Company.
Findings Of Fact Terry E Christensen ("Christensen") was first licensed as a mortgage solicitor in 1983, under Chapter 494, Florida Statutes. In 1984, he obtained his mortgage broker's license. The licenses were renewed in 1984 and 1985. His employer was Cenflorida Mortgage Corporation in Altamonte Springs, Florida, where he served as principal broker and vice president. (Testimony of Christensen, Petitioner's Exhibit #1.) Christensen left Cenflorida Mortgage Corporation in April 1986, and started his own company, Center State Mortgage Corporation in Longwood, Florida. He immediately filed his application with the Department of Banking and Finance ("Department") for registration as principal mortgage broker with the new company. That application was denied by letter dated May 13, 1986, for violations of Section 494.05(1)(h) and (k), Florida Statutes. The letter provides, in pertinent part: The application is denied by the determi- nation of the Division of Finance that Section 494.05(1)(h) and (k is [sic] being violated. Section 494.05(1)(h) of the Mortgage Brokerage Act states that conduct of an applicant would be cause for denial of a license. Section 494.05(1)(k) states that a licensee may be denied a license if they currently have a real estate broker or salesman license under suspension. In your particular case, our records indicate that your real estate license has been suspended for a five year period, starting June 21, 1983. (Testimony of Christensen, Petitioner's Exhibits #1 and #2.) On June 29, 1983, the Florida Real Estate Commission suspended Christensen's real estate broker's license for a period of five years. Christensen first told the Department about his real estate broker's license suspension when he applied for license as a mortgage solicitor in 1983. (Testimony of Christensen.) Subsection 494.05(1)(k), Florida Statutes, was added to the statutes effective October 1, 1985. (Chapter 85-271, Laws of Florida.) Around the same time the new law took effect, the Department commenced revocation proceedings against Christensen. By its notice docketed on September 27, 1985, and its amended notice dated March 4, 1986, the Department informed Christensen that it intended to suspend or revoke his mortgage broker's license under Chapter 494 on the basis of his prior activities as a real estate broker. Those prior activities were the subject of a civil consent judgement against Christensen and his realty company and resulted in the stipulated suspension of his real estate broker's license addressed above. The Department's administrative proceeding #85-28-DOF was referred to the Division of Administrative Hearings and was assigned DOAH Case No. 86-0328. (Petitioner's Exhibits #3 and #4.) The parties stipulated to the facts, and on June 10, 1986, DOAH Hearing Officer, J. Lawrence Johnston, issued his Recommended Order recommending dismissal of the complaint. The Recommended Order provides: * * * 3. In this case, Petitioner, Department of Banking and Finance (Department), has not established in the evidentiary record or anywhere else in the official record of this case that the real estate broker license of Respondent, Terry E. Christensen (Christensen), was suspended based on fraud, misrepresentation, or deceit. As seen in the Procedural Background, Christensen sufficiently generally placed in issue whether suspension of his real estate broker's license was based on fraud, misrepresentation, or deceit. The Department did not succeed in pre-hearing procedures to specifically eliminate the issue. The facts stipulated by the parties are not sufficient to prove that the suspension of Christensen's real estate broker license was based on fraud, misrepresentation, or deceit. Although a copy of the Administrative Complaint in the Florida Real Estate commission case was referred to in the copy of the Florida Real Estate Commission Stipulation that was filed in this case, it was not attached to the Stipulation or otherwise made part of the evidentiary or official record in this case. This Hearing Officer is therefore given no choice but to conclude that the Department has not proven its case. * * * (Petitioner's Exhibit #5.) The Department adopted the Recommended Order in its entirety and dismissed the case. (Petitioner's Exhibit #7.) From 1983 until mid-1986, Christensen processed approximately five hundred mortgage loan applications with an approximate value of $50,000,000.00. To his knowledge, no complaints have ever been made to the Department regarding Christensen's activities as a mortgage solicitor or broker. (Testimony of Christensen, Petitioner's Exhibit #6.)
Recommendation Based on the foregoing, it is recommended that a Final Order be issued granting the mortgage broker's license to Terry Christensen. DONE and ORDERED this 7th day of November, 1986, in Tallahassee, Florida. MARY CLARK 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 7th day of November, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2498 The following constitute my specific rulings on the proposed findings of facts submitted by the parties. PETITIONER'S FINDINGS OF FACT 1-3. Adopted in Paragraph #1. 4-5. Adopted in Paragraph #5. Rejected as irrelevant. Adopted in Paragraph #3. 8-12. Adopted in Paragraph #4. 13. Rejected as unnecessary. 14-15. Adopted in Paragraph #4. 16-18. Rejected as unnecessary. RESPONDENT'S FINDINGS OF FACT 1. Adopted in Paragraph #1. 2-4. Adopted in Paragraph #4. 5. Rejected as unnecessary. 6-8. Adopted in Paragraph #4. 9. Rejected as immaterial. 10-11. Adopted in Paragraph #2. 12-16. Rejected as immaterial. 17. Adopted, as to the first sentence, in paragraphs #3 and #4; otherwise, rejected as immaterial. COPIES FURNISHED: Gorham Rutter, Jr., Esquire Suite D 338 North Magnolia Avenue Orlando, Florida 32801 Robert Good, Esquire Suite 501 400 West Robinson Street Orlando, Florida 32801 Honorable Gerald Lewis, Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32301 Charles Stutts, Esquire General Counsel Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32301
Findings Of Fact Petitioner presented one witness that had audited the books and records of Respondent. This audit revealed that Respondent had handled some 350 transactions involving mortgages and that on approximately 50 of those transactions the Respondent had withheld a commission more than authorized by statute or department rule. The witness testified to only a few of those transactions shown on his work sheet attached to a deposition admitted into evidence. Thereafter Respondent stipulated that if asked about all of the other transactions shown on the work sheet, this witness, and the auditor who performed the balance of the audit, would testify the same for those other transactions, viz. that the worksheet figures were extracted from the records of Respondent and the authorized commissions shown thereon were computed using either the statutory method or the rule method and that both methods would give the same results. These figures show that the Respondent overcharged the borrower on approximately 50 transactions as alleged. On approximately 2/3 of the transactions the funds were remitted to a master broker, and on the other 1/3 the funds were remitted to the borrower. Further, that the notes and mortgages were received by Respondent for delivery to his client some 4 to 6 weeks after he had disbursed the money from his trust account. Upon expiration of Petitioner's case Respondent renewed his motions for dismissal and further moved for dismissal on the grounds that the funds for a majority of the transactions involved were remitted to another broker, and for those remitted directly to the borrower (developer) the charges were not excessive but those actually proposed by the borrower-developer. This motion was denied and Respondent then testified in his own behalf. Richard Zaloudek percent has been a licensed mortgage broker since 1960 and is also a licensed real estate broker. He has been in the mortgage brokerage business since 1948. Prior to obtaining his mortgage broker's license he dealt in FHA mortgages which were exempt. He renewed his license automatically each year until September, 1975 when he received no response from the Comptroller's Office to his application for renewal. Since a valid license is required to operate as a mortgage broker, Respondent has been unable to so act since the expiration of his license in September, 1975. When Respondent was approached by the master broker representing Mortgage Development Corporation to sell mortgages for it, he questioned the legality of such transactions. He was presented with a copy of the opinion of the office of the Comptroller, Division of Securities, dated January 10, 1973. This indicated that the notes secured by mortgages that he was being solicited to sell complied with the statutes and rules affecting securities. Thereafter he advertised in the news media that he had these high interest paying notes secured by mortgage for sale. When a client came into his office to invest he would take their investment, deposit same in his trust account, and then forward to the master broker or borrower the deposit less the commission the borrower and master broker had authorized him to deduct. Thereafter the note and mortgage was mailed to Respondent who presented it to the investor. As a result of many people losing money in investments in promissory notes secured by mortgages on land, newspaper coverage of various facets of the land development industry became widespread. In several cases the various mortgage brokers, such as Respondent herein, were named in these articles in the newspapers; and press reports were issued by the Comptroller's Office that certain licenses, including that of Respondent, had been revoked. Because of the adverse publicity, not only did Respondent's mortgage brokerage business drop off and stop completely when his license was not renewed in September, 1975, but also his business as a real estate broker suffered. Respondent's testimony that he lost real estate listings totaling some two million dollars was not rebutted. Nor was his testimony that this represented a loss of some $70,000 in income.
Findings Of Fact At all times material to these proceedings, the Respondent Cline was licensed by the State of Florida as a mortgage broker and held license number HB 0017832 from January 13, 1986 through May 31, 1987. During this period of time, Respondent Cline was president and principal mortgage broker for MAC at the 4045 Tamiami Trail, Port Charlotte location. The Respondent was a director and shareholder of the corporation. The Respondent Henderson was also licensed as a mortgage broker and held license number HA 0007460 from March 29, 19856 through June 19, 19889. Respondent Henderson conducted business through MAC as the corporation's vice president. The Respondent was a director and shareholder of the corporation. In response to a consumer complaint, the Department initiated an examination of the books and records maintained at the Port Charlotte location of MAC on April 21, 1987. The conduct of the Respondents in their business dealings as mortgage brokers with MAC was investigated as part of the Department's review process. The examination and investigation involved the time period from March 1, 1986 to June 1, 1987. The written examination report prepared by the Department's financial examiner concludes that the Respondents, as officers and directors of MAC, financially compensated MAC employees who were not licensed under the Mortgage Brokerage Act for soliciting or negotiating mortgage loans. Six alleged mortgage solicitors were named in the report. The loan packages of seventeen mortgages, along with MAC's commission reports, were submitted as evidence to support the conclusion. A review of the documentation, along with a review of the commission checks and the testimony of Kimberly L. Johnson (nee Steed) revealed that the documents identified as "commission reports" were not indicators of commission funds received by the six employees named in the complaint. These employees were paid on a set salaried basis. They were hired by MAC to perform the ministerial acts of taking or typing applications for loans under the direction of a mortgage broker. The use of these employees' names in the commission reports incidentally shows which employee assisted in the completion of forms that resulted in commissions to the licensed brokers who completed the mortgage financing transactions. This interpretation of the "commission reports" is clearly supported by the first page of the reports, Petitioner's Exhibits 17 and Commission checks on the loans, were issued to the licensed mortgage brokers. The evidence demonstrates that Rebecca Henderson, who was one of the employees performing ministerial acts, on one occasion acted beyond her authority and "locked in" the interest rate for a mortgage applicant while she was completing the application. The Department did not present evidence to show that either Respondent Henderson or Respondent Cline had actual knowledge of the employee's actions. Neither licensee was the mortgage broker directing the employee at the time the incident occurred. During the course of the Department's examination, the conclusion was reached that MAC advertised in a newspaper that the corporation was a "mortgage banker" and a "FNMA lender." The Department alleges that MAC is not a "mortgage banker" and a "FNMA lender." At hearing, Kenneth Moulin, a former shareholder of MAC, testified that the goal of MAC was to become a bank. The corporation had money which was used to fund two mortgage loans with MAC as mortgagor. Petitioner's Exhibit 34, which was loan documentation on the residential loan application of William T. Martel and Lora A. Martel, names MAC as the lender. The documents also include FNMA forms used by FNMA lenders. The examination report concluded that MAC did not maintain records for a five-year period. The company started doing business in March 1986. Records were continuously maintained from MAC's inception. An advertisement placed in the newspaper, The Monday Sun, which was published on April 28, 1986, failed to include the phrase that MAC was a "licensed mortgage broker." The advertisement was placed by Respondent Henderson. In mitigation, it should be noted that Respondent Henderson had his mortgage brokerage license for less than one month and was new to the business as it is regulated by the Department. There was no evidence provided to demonstrate that Respondent Cline was aware of the improper advertisement. Other documents provided which purported to be advertisements were not authenticated. They lacked mastheads or headings which could sufficiently identify the place, date or kind of publication. As part of the mortgage financing transactions involved in the sampling of mortgages conducted by the Department, MAC collected fees from applicants for the preparation of documents and reports. Specific fees were quoted to applicants and receipts were clearly marked to demonstrate that the fees were non-refundable to applicants. In its bookkeeping entries, MAC continuously failed to maintain ledger entries which showed that the fees had been assessed on each application, and that the monies had been used for the intended purposes for which they had been collected. In the sampling of mortgages reviewed by the Department, MAC retained money assessed for discount points. The money was not used to reduce the interest rate on mortgages closed, as represented to the borrowers by MAC. Instead, the mortgages were immediately assigned and the discount assessment was retained by MAC for its own, undisclosed use.
Recommendation Based upon the foregoing, it is RECOMMENDED: That Respondent Henderson be issued a reprimand for failure to place the words "licensed mortgage broker" in the April 28, 1986 advertisement. That all other charges against the Respondents be dismissed. DONE and ENTERED this 27th day of November, 1989, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerkk of the Division of Administrative Hearings this 27th day of November, 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-2202 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. See HO #2. Accepted. See HO #1. Accepted. See HO #2. Rejected. See HO #2. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. See HO #1. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. See HO #3. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Document speaks for itself. Also, this is established as proper evidence under Section 494.051, Florida Statutes, so these findings are redundant. Rejected. Report speaks for itself. Accepted. Accepted. Reject the phrase "negotiation." Contrary to fact. See HO #5. Reject the phrase "negotiate." Contrary to fact. See HO #5. 21.-24. Rejected. Contrary to fact. Kimberly L. Johnson is the same person as Kimberly L. Steed who has been licensed as a mortgage broker since September 29, 1986. 25.&26. Rejected. Contrary to fact. See above. This rendering of the testimony is rejected by the fact finder. Accepted. &29. Rejected. Contrary to fact. See HO #5 and HO #6. Accepted. Rejected. See HO #5. Contrary to fact. Accepted. Rejected. Contrary to fact. See HO #5. Accepted. Rejected. Contrary to fact. See HO #5. Rejected. Contrary to fact. Steed completed ministerial acts. See HO #5. Accept the first sentence. Reject the rest as contrary to fact. See HO #5. Rejected. Improper legal conclusion. See HO #12. Rejected. Contrary to fact. See HO #12. Rejected. Cumulative. Rejected. Repetitive. See HO #12. Rejected. Contrary to fact. See HO #12. Accepted. See HO #13. Accepted. Accepted. Rejected. Improper legal conclusion. Appli- cation fees were not set up as entrusted funds. See HO #12. Rejected. Contrary to fact. See HO #8 and #9. Accepted. Accepted. Rejected. See HO #8. Contrary to fact. Accepted. Accepted. Accepted. Accepted. Rejected. Repetitive. Rejected. Contrary to fact. Cline was not the mortgage broker on any of the transactions presented at hearing. Accepted. Accepted. Accepted. Accepted. Rejected. See HO #8 and #9. Accepted. See HO #13. Accepted. See HO #13. Accepted. See HO #13. Respondent Cline's proposed findings of fact are addressed as follows: Accepted. See HO #1. Accepted. Accepted. Rejected. The records presented were found to be reliable when compared with the originals presented simultaneously by Respondent Henderson, although those were not officially placed in evidence. Rejected. See above. Accepted. See Conclusions of Law. Accepted. See HO #3. Accepted. Accepted. Accepted. See HO #5. Accepted. See HO #5. Rejected. Calls for legal conclusion. Rejected. See Section 494.051, Florida Statutes. Accepted. Accepted. Accepted. See HO #8 and #9. Accepted. See Conclusions of Law. Rejected. Irrelevant. See Section 494.051, Florida Statutes. However, the competency of the examiner was considered in the factual determinations made by the Hearing Officer. Accepted. Not listed as factual finding. As a Conclu- sion of Law, the Hearing Officer cannot rule on this matter. Respondent Henderson's proposed findings of fact are addressed as follows: Accepted. Accepted. See preliminary matters. Accepted. Accepted. See HO #2. Rejected. Improper legal conclusion. Unable to rule on proposed finding. Insufficient. 7. Accepted. See HO #5. 8. Accepted. See HO #8. 9.&10. Reject. Insufficient. 11. Accepted. See HO #12. 12. Rejected. Insufficient. 13. Accepted. 14. Accepted. See HO #12. 15. Accepted. See HO #2. 16. Rejected. Conclusionary. 17. Accepted. 18. Accepted. 19.-30. Not listed as factual findings. As Conclusions of Law, Hearing Officer cannot rule on these matters. COPIES FURNISHED: Elsie M. Greenbaum, Esquire Assistant General Counsel Office of the Comptroller 400 West Robinson Street Suite 501 Orlando, Florida 33801 Ann Mitchell, Esquire GERALD DUNCAN ENGVALSON & MITCHELL Foxworthy Professional Building Suite 101 1601 Jackson Street Fort Myers, Florida 33902 Floyd G. Henderson Post Office Box 2875 Port Charlotte, Florida 33949 Charles L. Stutts, Esquire General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32399-0350 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact Petitioner is charged with the responsibility of administering and enforcing the provisions of Chapter 494, Florida Statutes, including the duty to sanction those licensed under the Mortgage Brokerage Act (the Act) for violations of the Act. At all times pertinent to this proceeding, Respondent Joan N. Harnagel (Ms. Harnagel), was a registered mortgage broker in the State of Florida, holding license No. HA 517383319. There was no evidence that Ms. Harnagel's registration has been previously disciplined by Petitioner. Respondent Meridian Mortgage Group, Inc. (Meridian) first became a licensed mortgage broker in the State of Florida in September, 1988, with Respondent Joan N. Harnagel (Ms. Harnagel) serving as its vice-president and principal mortgage broker. Between September, 1988, and August, 1992, Meridian was a mortgage brokerage business in the State of Florida and held license No.HB 880000176-00. Meridian has held no active license as a Florida mortgage broker since August, 1992. There was no evidence that Meridian's registration has been previously disciplined by Petitioner. In September 1988, Meridian bought a Florida mortgage brokerage company named Bay Pointe Mortgage. At the time of this purchase, Ms. Harnagel was the principal mortgage broker and was responsible for the daily operations of Bay Pointe as its general manager. Upon Meridian's purchase of Bay Pointe, Ms. Harnagel served as Meridian's principal mortgage broker in Florida and continued her responsibility for the daily operation of Meridian's activities in Florida. Until July 15, 1989, Ms. Harnagel had no ownership interest in Meridian. The owners of Meridian between September 1988 and July 15, 1989, were Majorie Mohr and Larry Mohr of Carmel, Indiana. On July 15, 1989, Ms. Harnagel assumed ownership of Meridian and continued to serve as its principal mortgage broker and general manager responsible for daily operations. At all times pertinent to this proceeding, Ms. Harnagel was the principal mortgage broker of Meridian and was responsible for its daily operations, which included the hiring and firing of employees, the ordering of appraisals and credit reports for customers, and the preparation of good faith estimates. Petitioner conducted an examination of the Respondents Harnagel and Meridian for the period inclusive of January 1, 1989, through April 30, 1990. As a result of the investigation, Petitioner prepared and forwarded to Respondents a report of its investigation. Subsequently thereto, Petitioner prepared and served on Respondents an "Administrative Complaint, Notice of Intent to Issue Order to Cease and Desist, Intent to Revoke Licenses and Notice of Rights" which is the charging document for this proceeding. 1/ PAR PLUS VIOLATIONS There is a difference between a mortgage broker's origination fee and a lender's discount fee. A mortgage broker's origination fee is a fee charged by the mortgage broker for finding a loan for the applicant. A discount fee is a fee charged by the lender to a borrower for doing the paperwork on a loan and is usually expressed as a percentage of the amount borrowed. A discount may be considered as prepaid interest to the lender to cover the lender's expenses in making the loan. In the typical transaction that does not involve "par plus", the mortgage broker's origination fee is paid to the mortgage broker by the borrower at closing either by separate check or out of the proceeds of the closing. A "par plus" transaction is one in which the mortgage broker's origination fee is paid to the mortgage broker by the lender instead of by the borrower. Petitioner's Exhibit 1 is a composite exhibit and pertains to a transaction involving borrowers Oscar and Arlene Carlsen. Petitioner's Exhibit 2 is a composite exhibit and pertains to a transaction involving borrowers J. Richard and Sara Pooler. The first page of each exhibit is the good faith estimate that was completed by Ms. Harnagel. The good faith estimate is normally given to a borrower when the borrower first comes to the mortgage broker's office and applies for a loan. The purpose of the good faith estimate is to make full disclosure of what fees are going to be charged to the borrower. The second and third pages of Petitioner's Exhibit 1 and Exhibit 2 constitute the Settlement Statements for each transaction and was prepared by the respective closing agents for these transactions. The Settlement Statement should reflect all costs that were paid by the buyer and the seller in the transaction being financed. The Carlsen transaction was a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. The Pooler transaction was also a "par plus" transaction since Meridian's mortgage brokerage fee was paid by the lender. By failing to respond to requests for admissions, Respondents admitted 2/ that in the Carlsen transaction and in the Pooler transaction neither Meridian nor Ms. Harnagel disclosed to the borrowers Meridian's participation in a "par plus" program. Both the Carlsen and the Pooler transactions closed in December 1989. ESCROW FUND VIOLATIONS - RESIDENTIAL 3/ Respondents received the following sums from the following borrowers on the following dates: BORROWER AMOUNT DATE K. Carrol $525.00 06-07-89 R. Williams $400.00 11-28-89 J. Gentile $270.00 06-30-89 C. Saffer $270.00 05-15-89 J. Mark $270.00 02-22-89 G. Norton $275.00 07-14-89 F. Sloss $275.00 03-02-89 W. Nachman $275.00 02-27-89 E. Ward $270.00 04-26-89 H. Rosen $310.00 04-24-89 J. Morris $825.00 06-30-89 S. Lewis $270.00 03-24-89 E. Fuller $485.00 05-01-89 G. Fleming $270.00 03-30-89 J. Bishop $270.00 03-28-89 P. Bifulco $270.00 04-10-89 E. Zulueta $270.00 05-26-89 L. MacCalister $325.00 06-21-89 T. Nangle $275.00 01-26-89 I. Rybicki $270.00 03-31-89 I. Rybicki $275.00 03-07-89 The foregoing sums were received by Respondents from borrowers to pay for credit reports and appraisals. Respondents should have placed these funds in the escrow account Meridian maintained at Sun Bank. Instead of being used for the intended purpose, these funds were placed in Meridian's operating account at Sun Bank and were used to pay Meridian's overhead. At all times pertinent hereto Respondent Harnagel was the principal mortgage broker for Meridian and knew that these sums were not being placed in escrow, knew that the funds should have been placed in escrow, and knew that these funds were not being expended for credit reports and appraisal reports. Ms. Harnagel asserts that the practice of placing these funds in Meridian's operating account was dictated by Meridian's out-of-state owners. Ms. Harnagel knew this practice violated the Mortgage Brokerage Act and asserts that she repeatedly informed the Mohrs of this problem. Notwithstanding her acknowledged violation of the Act, she continued to collect these fees and continued to place these fees in Meridian's operating account. The great majority of these transactions occurred prior to Ms. Harnagel assuming ownership of Meridian on July 15, 1989. As a result of these practices, Meridian became indebted to at least two appraisal companies, Duffy and Associates (Duffy) and Diamond Realty and Appraisal Company (Diamond). Neither appraisal company had been fully repaid as of the time of the formal hearing. Duffy and Associates is owed a total of $4,000 by Respondents for work that was performed on the order of Respondents. At least six of the appraisals for which Duffy has not been paid were ordered after Ms. Harnagel assumed ownership of Meridian. In each of these transactions Respondents collected the amount necessary to pay for the appraisal, but, instead of paying for the appraisals, spent the amounts as part of the operating account on overhead expenses. Ms. Harnagel paid Diamond the sum of $1,500 as partial payment of the accumulated debt to Diamond. At the time of the formal hearing, Respondents owed Diamond the sum of $1,675 plus interest and attorney's fees. THE COMMERCIAL LENDER: VICTORY ENTERPRISES TRUST The proposed lender for each of the four commercial transactions at issue in this proceeding was an entity referred to as "Victory Enterprises Trust". The principals of this trust were Thomas Telford, Harold McDonnard, Harold Meridon, and a man identified as Mr. Carpenter. COMMERCIAL TRANSACTION ONE: GOLDEN HILLS Golden Hills is one of the four commercial projects that was at issue in this proceeding. A group of individuals including Robert Hastings, Doug Ollenberger, and Jeffery Kollenkark formed a partnership to purchase, refurbish, and develop a golf course and its surrounding property known as Golden Hills. This partnership, initially known as EBBCO Partnership and later incorporated under the name of Fore Golf Management, Inc., discussed with Ms. Harnagel the financing that would be required for the project. Ms. Harnagel suggested to this borrower a possible joint venture with a potential lender, the Victory Enterprises Trust, and requested a deposit in the amount of $12,000. Ms. Harnagel did not identify her lender to the borrower. This borrower deposited with Meridian the sum of $12,000 on or about September 28, 1989, with conditions that may be summarized as follows: The money was to be placed in Meridian's escrow account. The money was to be "100 percent refundable" if the joint venture partner did not fund the project or if terms of funding were not acceptable. Signatures from both parties to the joint venture would be required to release the funds from escrow. This money was not to be considered an application fee, but as a deposit for closing costs of the proposed joint venture. Any funds remaining were to be returned to Fore Golf Management, Inc. At no time did the Golden Hills borrowers authorize Ms. Harnagel to remove any of the funds from her trust account. On October 2, 1989, Ms. Harnagel wrote Robert Hastings a letter that included the following: Friday, September 29, 1989, Sun Bank received the Twelve Thousand Dollars ($12,000.00) and deposited in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring FORE GOLF MANAGEMENT, INC. an acceptable commitment. THE MONIES ARE REFUNDABLE if the commitment is not acceptable. (Emphasis in the original) On February 1, 1990, Mr. Hastings wrote Ms. Harnagel a letter that included the following: ... For about five months we have been attempting to put together a deal on Golden Hills. You have had our $12,000.00 since 9/29/89. To date no commitment has been brought to us. We do not mind continuing to try, but we do not wish to continue with this indefinitely. It is our wish that you suggest a time frame within which the project is completed and funded, or unless extended in writing by both parties, all agreements are null and void and all monies are refunded. On March 3, 1991, the Golden Hills borrowers demanded that Respondents return the $12,000 deposit, noting that the Golden Hills property had been sold to another entity approximately six months previously and that no commitment from Respondents or their lender had been forthcoming. Thereafter, the Golden Hills borrowers sent Dr. Kollenkark to Florida from California in an effort to collect the deposit from Respondents. On March 11, 1991, Ms. Harnagel wrote to Dr. Kollenkark a letter that provided, in part, as follows: The Trust does not want to return the monies as they felt they bought a commitment but that you were unable to obtain a viable contract. As I have said to you when we were told in December, 1990 that Golden Hills had definitely been sold. I told you that I would pay the $13,000 and get the money through the legal department. The reference to the Trust in Ms. Harnagel's letter of March 11, 1991, is to the Victory Enterprises Trust. The reference to the sum of $13,000 was an error and should have been $12,000. There was no evidence as to whether the deposit was transferred from Meridian's trust account to the proposed lender as implied by the letter of March 11, 1991. Ms. Harnagel testified that the money was transferred to Meridian's operating account and expended on Meridian's operating expenses. Ms. Harnagel admitted that the sum deposited by the Golden Hills borrowers should be refunded, but that she has been unable to do so. Her position that using the money to fund her operating expenses was authorized by the agreement with the Golden Hills borrowers is rejected as being contrary to the evidence. Although the record establishes that Ms. Harnagel expended considerable time and effort to secure funding for the Golden Hills borrowers, the record is equally clear that she was not entitled to use the deposit to fund her overhead expenses. COMMERCIAL TRANSACTION TWO: GENESIS CORPORATION The second commercial transaction involved the funding of two hotel projects with the Genesis Corporation as Respondents' borrower. By letter dated December 15, 1989, the Genesis Corporation deposited with Meridian the sum of $1,500. Paragraph two of the transmittal letter is as follows: 2. The Funding must be to Genesis Corp. satisfaction. The Application Fee of $1,500. is refundable, if Genesis Corp. is not Completely Satisfied with the Funding. The principals of Genesis Corporation did not provide certain financial statements requested by Respondents. Consequently, Respondents were unable to secure financing for the two hotel projects. After the request for the financial statements was made, Respondents did not hear further from the Genesis Corporation. Respondents expended the deposit made by the Genesis Corporation for its operating expenses. COMMERCIAL TRANSACTION THREE: RIVER RUN The third commercial transaction involved River Run Limited Partnership (River Run), which proposed to develop a golf course in North Carolina. As part of the transaction, Meridian required the borrower to pay an advance fee of $10,000.00 to be placed in Meridian's trust account. This deposit was subject to the following conditions: The deposited fee may be used by the lender (an unidentified trust) or by MERIDIAN MORTGAGE GROUP, INC. in conjunction with the lender to conduct an inspection of the property and for other prudent and reasonable expenses necessary to bring the BORROWER an acceptable loan commitment. For all monies spent a full accounting of such expenses will be made to BORROWER. If no loan commitment is offered within fifteen (15) days of the last signature date of this agreement, the entire application fee will be refunded unless otherwise agreed to by both parties to this agreement. Should an offer be made by the lender that, for any reason, is unacceptable to the BORROWER, the BORROWER shall have the right to reject such an offer and the entire application fee shall be refunded to the BORROWER. In such an event, the BORROWER shall be obligated to notify MERIDIAN MORTGAGE GROUP, INC. within five (5) working days of receipt of such offer that the offer is rejected, otherwise the deposited funds will be forfeited and will become the property of MERIDIAN MORTGAGE GROUP, INC. The foregoing agreement between Meridian and River Run was extended so that Meridian was given until November 15, 1989, to obtain the financing. The $10,000 deposit to Meridian was paid on behalf of River Run by Nate Bowman. No financing for River Run was secured by Respondents. Mr. Bowman demanded a refund of the deposit and subsequently obtained judgment against Respondents for the $10,000 deposit. As of the formal hearing, Respondents had not satisfied the Bowman judgment or otherwise refunded the deposit to River Run. Ms. Harnagel asserted that the following circumstances were the reason that the River Run transaction did not close: The trust that was to be the lender asked for financial statements that were not provided. There was a lawsuit between certain of the partners of River Run. A financial officer would not relinquish certain tax returns for one of the partners of River Run. There was a concern about River Run's ability to repay the money. Ms. Harnagel stated that of the $10,000 that was deposited into Meridian's trust account, she only retained the sum of $3,500 and that the balance went to the lending trust. The $3,500 that was retained by Ms. Harnagel was expended. There was no accounting for these expenditures. Likewise, there was no accounting for the sums paid to the lending trust. COMMERCIAL TRANSACTION FOUR: CHAPEL HILL The fourth commercial transaction involved a group of borrowers represented by Michael Grdina, an attorney in Ohio, who desired to obtain financing for the construction of a series of projects that will be referred to as the Chapel Hill complex. Subsequent to a telephone conversation between Mr. Grdina and Ms. Harnagel, Ms. Harnagel sent a letter dated November 16, 1989. This letter reflected that Respondents represented a Trust and that the Trust was interested in participating in a joint venture with Mr. Grdina's clients. The letter contained certain requirements imposed by the Trust and provided, in part, as follows: A Seventy-Five Hundred ($7,500.00) application fee be placed in MERIDIAN MORTGAGE GROUP, INC. TRUST ACCOUNT. These monies are used for prudent expenses needed to bring Chapel Hill Commerce Center an acceptable commitment. If the commitment is not acceptable the monies are refundable. In response to that letter of November 16, 1989, Mr. Grdina wrote Ms. Harnagel a letter on behalf of his clients and enclosed a check for the sum of $7,500. Mr. Grdina's letter became the agreement between the parties as to the status of the $7,500 deposit paid to Respondents by Mr. Grdina. That letter omitted the language in Ms. Harnagel's letter of November 16, 1989, pertaining to the use of the deposit "for prudent business expenses". Mr. Grdina's letter of December 1, 1989, provided, in part, as follows: By wire transfer to Meridian's trust account the entities [Mr. Grdina's clients] have placed with you a Seven Thousand Five Hundred Dollars ($7,500.00) refundable good faith deposit. If an entity accepts a proposal for funding from sources identified by you, and such entity does not close the transaction for reason other than the fault of the lender, the good faith deposit will be forfeited as liquidated damages for expenses and fees incurred in the transaction. The initial agreement between Harnagel and Grdina contemplated that Harnagel's Trust would provide financing for Grdina's clients. By letter dated February 23, 1990, Mr. Grdina accepted the offer that the transaction be modified so that the Trust would secure 100 percent of the loan by a lending institution by depositing with the lending institution certificates of deposit. As additional consideration to the Trust, the Trust would become entitled to 25 percent equity participation in the construction project. The letter of February 23, 1990, did not modify the status of the deposit paid by Mr. Grdina on behalf of his clients. The loan to Mr. Grdina's clients did not close because the lending institution with whom Ms. Harnagel and Victory Trust dealt would not fund the loan. Thereafter, Mr. Grdina demanded return of the $7,500 deposit. As of the date of the formal hearing, that deposit has not been refunded. Although Ms. Harnagel argues that she was entitled to keep the deposit, that argument is without merit since none of the conditions precedent to her entitlement to the deposit occurred. CUSTOMER OVERCHARGE Respondents admitted that two customers were charged brokerage fees, origination fees, and/or discount fees which were greater than those disclosed on the Good Faith Estimates. On the Morris transaction, a fee of $450.80 was estimated, but the fee actually assessed at closing was $2,240, an overcharge of $1,790. On the Rosen transaction a fee of $1,773 was estimated, but the actual fee assessed was $1,871.50, for an overcharge of $98.50. Both overcharges resulted from charges imposed by a lending institution and neither overcharge resulted in inappropriate payments to Respondents. WALL STREET JOURNAL ADVERTISEMENT Respondents placed an advertisement in the Wall Street Journal on February 16, 1990. This advertisement did not contain the address of Meridian as required by law. The deletion of Meridian's address was the fault of the Wall Street Journal. INVESTIGATION OF LENDING SOURCE Ms. Harnagel testified without contradiction that she made efforts to verify the reliability of the Victory Enterprises Trust and its principals. She learned of this potential lender through an advertisement the Trust had placed in the Miami Herald. Neither the Trust or the principals were required to be licensed in Florida. Her efforts included having her attorney and her bank officer make inquiries to verify the reliability of the proposed lender. Petitioner argues that Respondents should have made further inquiry after the loan to the Golden Hills borrowers was not forthcoming from this lender. Petitioner has failed to establish by clear and convincing evidence that Respondents breached any standards imposed upon them to investigate the reliability of lenders so as to prove that Respondents are incompetent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all licenses and registrations issued either to Joan N. Harnagel or Meridian Mortgage Group, Inc., be revoked. It is further recommended that an administrative fine be imposed against Joan N. Harnagel in the amount of $25,000. It is further recommended that a separate administrative fine be imposed against Meridian Mortgage Group, Inc., in the amount of $25,000. DONE AND ENTERED this 22nd day of July, 1993, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of July, 1993.
The Issue Whether petitioner's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes, should be approved.
Findings Of Fact Background Petitioner, Homesafe Mortgage Company (Homesafe), initially known as FMC Mortgage Company, a Florida corporation, was established on May 24, 1990, and has, since its inception, been owned by Orlando Monteagudo and his wife, Omaida. On September 16, 1990, Homesafe applied to respondent, Department of Banking and Finance (Department), for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's application was approved, and its mortgage brokerage business license was issued on October 24, 1990. A few days after Homesafe was licensed, the assets of another corporation wholly owned by Orlando and Omaida Monteagudo, First Miami Investments Corporation (FMIC), discussed more fully infra, were transferred to it, and Homesafe assumed the mortgage business of FMIC. At that time, FMIC became idle, and ceased doing business. On October 1, 1991, a new law, the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, became effective, which substantially changed the provisions of Chapter 494, Florida Statutes, and required businesses desirous of engaging in activities as mortgage lenders to be licensed as such. The Act also required such licensure for entities engaged in the business of servicing loans, if they proposed to service loans for more than four months, whereas previously no license was required for such activity. As a consequence of the amendments to chapter 494, Homesafe filed a timely application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. Pertinent to this case, that section provided: (1)(a) Any person in good standing who holds an active registration pursuant to former s. 494.039 . . . or any person who acted solely as a mortgage servicer on September 30, 1991, is eligible to apply to the department for a mortgage lender's license and is eligible for licensure if the applicant: 1. For at least 12 months during the period of October 1, 1989, through September 30, 1991, has engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both . . . . (Emphasis added) And, Section 494.001(17), Florida Statutes, defined a "person" to mean "an individual, partnership, corporation, association, or other group, however organized." Also pertinent to an evaluation of Homesafe's application by the Department was Rule 3D-40.202, Florida Administrative Code, which provided: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as defined s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. By letter of April 13, 1992, the Department notified Homesafe of its intention to deny Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause." The basis for the Department's denial was it conclusion that Homesafe had not "engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both" for "at least 12 months during the period of October 1, 1989, through September 30, 1991, as required by the "Saving Clause," and that the provisions of Rule 3D-40.202 were not applicable to Homesafe's circumstances, such that credit for FMIC's activities could be accorded Homesafe. Subsequently, the Department amended its notice of denial to include, as an additional basis for denial, its contention that Homesafe violated the provisions of Section 494.0072(2)(k), Florida Statutes, by acting as a mortgage lender subsequent to October 1, 1991, without a current, active license. Homesafe filed a timely request for formal hearing and disputed the bases upon which the Department proposed to deny its application. Homesafe's activities and those of its predecessor in interest, FMIC Orlando Monteagudo, the chief executive officer and co-owner of Homesafe, has personally held an active license as a mortgage broker since 1984, and has, through various entities, been active in the mortgage brokerage business since that date, without unfavorable incident. On July 20, 1989, Orlando and Omaida Monteagudo became the sole owners of OJM Enterprises, Inc. (OJM), then known as The R & M Group, Inc., a Florida corporation, through a structured buy out from his former partners, with whom Monteagudo apparently felt strong dissatisfaction. OJM was the parent company of First Mortgage Corporation (FMMC) and First Miami Investment Corporation (FMIC), both Florida corporations. FMMC had been licensed as a mortgage brokerage business since at least March 14, 1986; however, neither OJM nor FMIC were ever so licensed. 2/ In September 1990, Monteagudo, out of a desire to further distance himself from his former associates, and on the advice of his accountant as to the best way to wrap up the affairs of OJM, FMMC and FMIC, contemplated the merger of OJM and FMMC into FMIC by September 30, 1990, and the transfer of their assets and mortgage brokerage business activities to Homesafe, which until that time had been largely inactive. In furtherance of such plan, Homesafe, as heretofore noted, on September 16, 1990, applied to the Department for registration as a mortgage brokerage business under the provisions of Section 494.039, Florida Statutes (1989). Homesafe's brokerage business license was issued on October 24, 1990. In the interim, a merger agreement was executed on September 29, 1990, on behalf of FMMC, FMIC and The R & M Group, Inc., whereby the parties agreed to merge The R & M Group, Inc., and FMMC into FMIC. [Use of the name "The R & M Group, Inc.," OJM's former name, was a mistake and would lead to a delay in filing with the Secretary of State as discussed infra.] Under the agreement, which was to have been effective September 30, 1990, FMIC would be the surviving entity, and "all the estate, property, rights, privileges, powers, franchises, and interests of each of the . . . corporations" would be vested in FMIC as the surviving corporation, without further act or deed. Considering the restructuring that was occurring, the proof is persuasive that at least by October 1, 1990, and more probably at some unidentifiable date shortly prior thereto, Homesafe began to service mortgage loans on behalf of FMIC. Thereafter, by October 30, 1990, following approval of its application for a mortgage brokerage business license, Homesafe received the assets of FMIC and assumed the mortgage brokerage business that had previously been operated through the corporate group, now FMIC. At that time, FMIC became idle and ceased doing business. Notwithstanding their efforts to effect a technical merger by September 30, 1990, the Secretary of State, by letter of January 4, 1991, rejected the merger agreement because The R & M Group, Inc., had changed its name on September 4, 1990, to OJM Enterprises, Inc. Accordingly, the parties were advised to correct their agreement to properly reflect the corporate parties if they desired the Secretary of State to accept such filing. Consequently, on January 14, 1991, the parties executed an amended merger agreement that properly reflected the corporate parties as FMMC, FMIC and OJM Enterprises, Inc. That agreement was duly filed with the Secretary of State on January 18, 1991, and FMIC became, technically, the surviving corporation that date. Under the terms of that agreement, as with the initial agreement, Orlando and Omaida Monteagudo, as the sole owners of OJM, became the sole owners of FMIC. The Department's Rule 3D-40.202 Pertinent to this case, Rule 3D-40.202, Florida Administrative Code, provides: Eligibility for Application for Mortgage Lender License Pursuant to the Saving Clause. A mortgage brokerage business licensee which changes their business entity, such as the incorporation of a sole proprietorship or partnership, shall be deemed the same "person" as deemed in s. 494.001(17), FS., for the purpose of determining eligibility pursuant to s. 494.0065, FS., provided the applicant is owned by the same person(s) holding the same ownership interest as the mortgage brokerage business licensee prior to any change in the resulting business entity. Here, the Department and Homesafe disagree as to the proper interpretation of the foregoing provision. The intent of the rule, according to the Department, was to permit those who were licensed as a mortgage brokerage business prior to the adoption of the "Mortgage Brokerage and Mortgage Lending Act," Chapter 91-245, Laws of Florida, but were not a corporate entity, to qualify under the "Saving Clause." Notably, under the amendments to chapter 494, only corporations are eligible for licensure as a mortgage lender. See Section 494.0061, Florida Statutes. Therefore, the Department interprets the rule to apply only when there has been an actual change in the form of the business entity, through incorporation of a sole proprietorship or partnership, and does not consider the rule applicable where, as here, a mere transfer of assets occurred between corporations. Contrasted with the Department's interpretation, Homesafe contends that the provisions of the rule are broad enough to cover the situation where, as here, the mortgage brokerage business of one corporation is assumed by another corporation, as long as the ownership interests remain the same. Under such interpretation, Homesafe and FMIC, the surviving corporation, would be considered the same "person" for purposes of determining eligibility under the "Saving Clause," and Homesafe could be credited, if necessary, with the time periods FMIC or its merged parts operated as a mortgage brokerage business to satisfy the "12-month" standard of the "Saving Clause." While Homesafe's interpretation may be a permissible interpretation of Rule 3D-40.202, so is the Department's. Indeed, the Department's interpretation of the rule is consistent with the intent of the rule and the doctrine of noscitur a sociis often applied as an aid to statutory construction. Under such circumstances, and for the reasons set forth in the conclusions of law, deference is accorded the agency's interpretation. Homesafe's activities subsequent to October 1, 1991 Pertinent to the Department's charge that Homesafe has acted as a mortgage lender subsequent to October 1, 1991, without a current, active license, the proof demonstrates that since October 1, 1991, Homesafe has made between 120-170 mortgage loans, sold those loans to investors, and thereafter serviced the majority of those loans. In response, Monteagudo retorts that Homesafe was entitled to licensure under the "Saving Clause," and that it was entitled to and needed to continue its business pending Department approval of its application.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered approving Homesafe's application for licensure as a mortgage lender pursuant to the "Saving Clause," Section 494.0065, Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 28th day of April 1993. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of April 1993.
The Issue The issue presented is whether Petitioner achieved a passing grade on the September 28, 1993, mortgage broker examination.
Findings Of Fact On September 28, 1993, Petitioner took the mortgage broker examination. To pass the examination, a candidate must receive a minimum score of 75. Petitioner was advised that she had achieved a score of only 74. Petitioner was afforded an opportunity to review the examination questions and her answers thereto, and she did so on October 15, 1993. She questioned her failure to receive credit for ten of her answers on that examination and provided written explanation for why she believed her answers to those questions were correct. Petitioner's written challenges and explanations regarding her answers to those ten questions were reviewed by a subject matter expert and by a psychometrician employed by National Assessment Institute, the company responsible for creating and administering the Florida mortgage broker examination. Both experts determined that Petitioner's answers to those ten questions were incorrect and that her explanations therefor were without merit. Petitioner was advised that she was entitled to no extra credit for her answers on that examination, and this proceeding ensued. At the final hearing in this cause, Petitioner admitted and agreed that the answers which she had chosen for questions numbered 2, 20, and 23 of the examination were incorrect. Petitioner, accordingly, withdrew her challenge to the grading of her answers to those three questions and proceeded forward regarding her answers to seven questions only. Petitioner chose answer "D" to question numbered one. The correct answer was "A". Petitioner was not able to correctly answer that question because she was unfamiliar with a term used in the question. That term is found in the "Fannie Mae" guidelines. Petitioner's answer is not correct. Petitioner chose answer "A" to question numbered 19, but the correct answer is "C". Petitioner's suggestion that both answers are correct is not persuasive. Petitioner chose only part of the correct answer, and multiple choice "C" contained all of the information necessary for a correct answer. Partial credit is not given for partial answers on the mortgage broker examination; rather, to receive credit for an answer, a candidate must choose the answer which completely responds to the question. Since Petitioner's chosen answer was an incomplete answer, her answer was not correct. Petitioner thought that "C" was the correct answer to question numbered 33, but only answer "A" was correct. That basic question regarding title insurance and the correct answer were taken from the Handbook of the Florida Association of Mortgage Brokers, one of the required reference materials. Petitioner chose answer "D" for question numbered 35, but only answer "C" was correct. As with question numbered 33, Petitioner based her answer on her experience as a real estate broker in New York. The question and answer, however, can be found in the "Fannie Mae" guidelines. As her answer to question numbered 36, Petitioner chose answer "A". However, the only correct answer was answer "C". Petitioner's answer involved a different type of insurance than the kind involved in the question. Petitioner believed that choice "B" was the correct answer to question numbered 59. However, the correct answer was choice "D". The question tested Petitioner's understanding of the definitions found in Chapter 494, Florida Statutes. Petitioner's choice of a more generic term was incorrect. As her answer to question numbered 98, Petitioner chose "C", but only "B" was a correct answer. This question used the same term found in question numbered one. Since Petitioner did not understand that term, which is found in the "Fannie Mae" guidelines, she did not know the correct answer to either question numbered one or question numbered 98. Petitioner is not entitled to extra credit for her answers to any of the questions challenged in this proceeding. Petitioner failed to achieve a passing grade on the September 28, 1993, mortgage broker examination.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding that Petitioner failed to achieve a passing score on the September 28, 1993, mortgage broker examination and denying Petitioner's application for licensure as a mortgage broker. DONE and ENTERED this 31st day of March, 1995, at Tallahassee, Florida. LINDA M. RIGOT 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 31st day of March, 1995. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4a have been rejected as not constituting findings of fact but rather as constituting argument. Respondent's proposed findings of fact numbered 9, 11, 16, 17, 20, 23, 26, 29, 32, 35, 38, and 39 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed findings of fact numbered 6, 8, 10, 12-15, 18, 19, 21, 22, 24, 25, 27, 28, 30, 31, 33, 34, 36, 37, 40, and 41 have been rejected as being subordinate to the issues herein. Respondent's proposed finding of fact numbered 7 has been rejected as not constituting a finding of fact but rather as constituting a conclusion of law. COPIES FURNISHED: Helena Weisfeld Chirico c/o Robert Weisfeld 2739 Parkview Drive Hallandale, Florida 33009 Helena Weisfeld Chirico Post Office Box 800 Hunter, New York 12442 John D. O'Neill, Esquire Assistant General Counsel The Comptroller's Office 111 Georgia Avenue, Suite 211 West Palm Beach, Florida 33401 Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
