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
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 Mortgage Broker License No. 3534 should be suspended or revoked under Section 494.05, F.S. At the hearing, the Respondent filed an answer to the charges in the Petitioner's Administrative Complaint, incorporating therein affirmative defenses. Rule 28-5.25(2), Florida Administrative Code, provides that the party may file an Answer which may contain affirmative defenses within 20 days of service of the Petition. Respondent's basis for late filing was inadvertence and neglect of its counsel. The Answer contained a general denial of the allegations and set forth affirmative defenses asserting lack of jurisdiction of the Petitioner to pursue its claims for alleged actions which took place on or before October 19, 1974, which was prior to the issuance of the mortgage broker license to Respondent. Further defenses included the claim that the Administrative Charges and Complaint are vague and ambiguous, that Petitioner had taken written action against Respondent without a hearing and denied it due process of law prior to the filing of the Administrative Charges and Complaint, thereby constituting double jeopardy, that Petitioner has unilaterally and without hearing denied Respondent renewal of its license, therefore denying it due process of law and claiming that petitioner is estopped from proceeding on the ground that it violated Section 494.06(5), in not keeping confidential the examination and investigation of the Respondent by giving press releases designed to influence the outcome of the hearing. The Hearing Officer permitted the late filing of the Answer and Affirmative Defenses at the hearing, over the objection of the Petitioner who claimed lack of notice as to the affirmative defenses. Respondent made a motion at the hearing to quash or abate the charges on the grounds of lack of jurisdiction on the basis set forth in its aforesaid pleading and on the grounds that Section 494.05(1) permits the petitioner only to investigate actions of licensees and not to suspend or revoke such licenses. The motion was denied by the Hearing Officer under the authority granted to deny, suspend or revoke licenses pursuant to Section 494.05, F.S. From statements of counsel at the hearing, it appears that Respondent's application for yearly renewal of its license was denied by Petitioner on September 3, 1975. However premature such a denial might have been, the question is not in issue in the instant proceeding. Nor is any purported violation by Petitioner of Section 494.06(5), concerning confidentiality of its investigations of Respondent. Both parties made opening statements and closing arguments. The Petitioner presented its case through two witnesses and submitted documentary evidence. The Respondent did not call, any witnesses. Petitioner also called Frank H. Roark, Jr. President of Respondent Corporation as a witness. Mr. Roark, after being sworn, declined to testify on the grounds of possible self-incrimination. The Hearing Officer thereupon excused the witness. Upon a showing by the Petitioner that the books and records of Respondent Corporation had been requested by Subpoena Duces Tecum and its request that Mr. Roark be required to identify the corporate books and records in his capacity as an officer of the corporation, over objection of Respondent's counsel, the Hearing Officer permitted Mr. Roark to testify for this limited purpose.
Findings Of Fact The Department of Banking and Finance of the State of Florida issued Mortgage Broker License Number 3534 to Respondent on October 10, 1974 (Petition and Answer). The transactions of the Respondent which are the subject of the Administrative Charges and Complaint, concern the purchase by investors/lenders of corporate promissory notes issued by a land development company which are secured by mortgages on its land. The purpose of selling the note is for the land development company to raise funds for the development of real property. The sales of the notes were made by Respondent to individual investors. Usually these transactions were handled through what was termed a "Master Broker" who was a middle man between the land developer and the Respondent mortgage broker which actually made the individual sales of the notes. Typical of the manner in which Respondent conducted these transactions was to enter into an agreement with an investor termed an "Application To Purchase a Mortgage" for a certain face amount at a specified interest rate with interest payable monthly and with concurrent delivery by the investor to Respondent of the stated sum under the conditions that the note would be executed, the mortgage recorded, and the note and recorded mortgage delivered to the investor-purchaser. In due course, a promissory note issued by the land development corporation (the borrower), was delivered to the investor, along with a mortgage deed to specified real property to secure the note. Some notes were payable on an interest only basis and some on a principal and interest basis. Some involved the issuance of title insurance policies and others did not. In some cases, Respondent remitted funds involved in the transaction to the "Master Broker" and in some cases directly to the land developer, less an amount retained by Respondent, ostensibly for its fees, commissions, and/or other charges. The funds were placed into escrow bank accounts when they were received from the investors by Respondent and then sometimes on the same day or in most cases several days or weeks later, the funds less the amount retained by Respondent, were forwarded on to the "Master Broker" or directly to the developer (testimony of Mr. Hunt, Petitioner's Exhibits 1, 3 & 4). Acting upon a request of the State Comptroller to have all mortgage companies examined, in the latter part of July, 1975, Mr. Lawrence W. Hunt, a Financial Examiner Supervisor of Petitioner's Division of Finance along with three assistants went to the Respondent's office to examine its records and determine from the examination whether or not violations of the Mortgage Brokerage Act had been committed. Utilizing source documents from the company records, Mr. Hunt and his associates prepared a worksheet and listed thereon various items of information gleaned from these records (Petitioner's Exhibit 1). After preparation of the worksheet, overcharges as to the 402 transactions identified in the worksheet were computed by Mr. Joseph Ehrlich, Deputy Director of the Division of Finance, solely from the worksheet obtained by the examiners (Petitioner's Exhibit No. 2). Such overcharges were computed with respect to maximum fees or commissions which a broker could charge in accordance with the provisions of Rule 3-3.08, Florida Administrative Code, in consideration of the amount of funds retained by Respondent, Mr. Hunt is not a state auditor and his examination of records did not go into the depth of an audit such a compilation of financial statements. His work consists basically of an examination which involves obtaining information from corporate records and placing it on worksheets so it can be analyzed. During Mr. Hunt's visit to Respondent's place of business, he received full cooperation of its officers and employees and found the records to be in good order. He also had no reason to question any of the entries in any of the records that he observed. Neither he nor Mr. Ehrlich had received complaints from any individual or organization about Respondent's operations prior to his visit. He did not at any time contact any of the lenders or borrowers involved in Respondent's transactions (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibits 1 and 2). On October 11, 1974, the Division of Finance issued a "Memorandum to all Mortgage Brokers" in which it was stated that it had been brought to the Division's attention that a number of mortgage brokers in transactions (such as those under consideration here), were remitting investors' funds to the land developer rather than placing the funds in an escrow account, and that such funds were being remitted in anticipation of receiving a recorded mortgage and note. The Memorandum warned that this practice could result in substantial losses to the broker in repaying investors should the land developer fail and was also in violation of the Mortgage Brokerage Act and could lead to the suspension or revocation of a license under Section 494.05, (1)(f), Florida Statutes. This section concerns placement of funds received in escrow accounts where they shall be kept until disbursement thereof is properly authorized (Respondent's Exhibit A). The Memorandum was sent to Respondent among others Mr. Hunt, during his examination of Respondent's records, found that Respondent ,had changed its escrow procedures approximately the date that the bulletin was issued and that there were no discrepancies after that date concerning escrow monies. By further correspondence in December, 1974, and May and June of 1975, Respondent's President posed various questions to Mr. Ehrlich to clarify certain aspects of escrow account requirements and received replies thereto (Respondent Composite B - Respondent's Exhibit C, D, F and G. (Note: There is no Exhibit E) In 402 separate transactions conducted by Respondent during the years 1973, 1974, and 1975, the mortgages which were purchased by the investors were delivered to the investor within varying periods from one day from the sale date until almost two months from the sale date. Forwarding of funds by the Respondent to the "Master Broker" or to the land development company was also accomplished in these transactions within varying periods of time from the sale date. These ranged from the same date as the sale to periods of a month or so thereafter, but usually on the date of delivery of the mortgage to the investor. The amounts forwarded by Respondent consisted of the face amount of the note and mortgage, less a certain amount which was retained by the Respondent (Petitioner's Exhibit 1). No effort was made by Petitioner's examiner to determine either the basis for the amount retained by Respondent or its composition. For example, he did not determine whether there were any "points" for service charges or discounts of any sort included in the retained sum. The examination was made solely on the basis of examining the business records of Respondent which did not reflect a breakdown of the retained amount. However, it could be deduced from various documents in individual investor files that certain amounts had been paid by someone unknown for title insurance premiums, recording fees and intangible taxes. The dates of mortgage delivery shown by Mr. Hunt in his worksheet were dates which he assumed were correct but he had not verified by any person the exact dates the mortgage was delivered to the investors. Neither could he ascertain from the records whether or not an investor had authorized Respondent to disburse funds at a particular time. The overcharges were determined in accordance with the formula set forth in Rule 3- 3.08, F.A.C., which is on a "gross proceeds" loan in which the borrower indicates that he wished to borrow a specified amount with all fees and charges to come out of the gross amount, thereby resulting in a reduced amount being provided to the borrower. The overcharges were computed without knowledge of whether the amount retained by the Respondent, as shown in Petitioner's Exhibit 1, included payment for state intangible tax, documentary stamps, and recording fees (Testimony of Mr. Hunt, Mr. Ehrlich, Petitioner's Exhibit 1 and 2). The overcharges set forth in Petitioner's Exhibit 2 were unrebutted by Respondent and are deemed correct. In a transaction between Respondent and Cary G. Anderson, who applied for purchase of a mortgage on May 7, 1974, in the face amount of $3,500.00, the file relating to the transaction did not reflect the amount of any costs to be paid by Respondent in the matter, nor did it reveal a specific figure for brokerage fee or commission charged by Respondent. The file did reflect a bill for title insurance premium in the amount of $45.00 and recording fees in the amount off $22.25, $5.25 documentary stamps, and $7.00 for intangible tax. The amount of overcharge was $175.46. In another $2,500 transaction with Mr. Anderson, the amount remitted to the land developer was $2,075.00. The amount retained by Respondent was $425.00. Petitioner's Exhibit number 2 establishes an overcharge from this transaction of $61.37. There was no copy of the mortgage in the file and therefore no information upon which to determine the payment of intangible taxes, documentary stamps and recording fees (Petitioner's Exhibit 3). In a $5,000 transaction between Walter L. and Thelma T. Beach and Respondent with application for purchase mortgage dated July 30, 1974, a check was written on Respondent's escrow account to Kingsland Development in the amount of $4,100. The maximum allowable brokerage fee or commission under the law would have been $590.90. The amount retained by Respondent was $900.00. The mortgage indicated that documentary stamps in the amount of $7.50 and intangible tax of $10.00 were paid. Assuming that Respondent paid the intangible taxes, and documentary stamps, the excess fee charged according to calculation under Rule 3-3.08, was $281.60 (Testimony of Mr. Hunt, Petitioner's Exhibits 1, 2 and 4). In respect to the above three transactions Petitioner's examiner did not find closing statements in the file, nor did he go to the Florida title ledger or Attorney's ledger of Respondent's records. However, he had, at the outset of his investigation, asked Respondent to make available all records concerning the transactions (Testimony of Mr. Hunt).
Findings Of Fact For the purposes of these proceedings, Jager Industries, Inc. and Castle Realty Ltd. are synonymous as Petitioner. Through name changes, Castle Realty Ltd. became Jager Industries, Inc. Under the provisions of the Mortgage Brokerage Act, Chapter 494, Florida Statutes, the Office of the Comptroller, Department of Banking and Finance (Department), is charged with the responsibility and duty of administering the Mortgage Brokerage Guaranty Fund (Fund) which includes the duty to approve or deny applications for payment from the Fund, as set forth in Section 494.042, Florida Statutes. At all times material hereto, 1st Federated Realty Mortgage, Inc. (1st Federated) was licensed as a mortgage broker in this state pursuant to Chapter 494, Florida Statutes, having license number HE 7896. On or about January 8, 1981, 1st Federated filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida, Tampa, Division. Thereafter, on or about December 16, 1981, 1st Federated was dissolved. On January 29, 1985, the Department received a letter dated January 25, 1985, by regular mail, requesting payment from the Fund on behalf of Castle Realty Ltd. Attached to the letter was a final judgment entered on April 21, 1982, in the Circuit Court for Pinellas County against 1st Federated in the principal amount of $50,000 based upon a violation of Section 494.042(2)(d), Florida Statutes, a Writ of Execution returned unsatisfied and an Affidavit of Reasonable Search. Thereafter on May 17, 1987, the Department received by certified mail a copy of the Complaint filed against 1st Federated and supporting documents including a copy of the Master Loan Commitment, Affidavit and Acceptance of Service. Pursuant to the Master Loan Commitment, Castle Realty paid $50,000 to 1st Federated as a Master Commitment Fee in exchange for a promise by 1st Federated to fund up to $4,000,000 for individual condominium loans. The individual commitments and closing of loans were subject to the lender approving the borrower's credit; however, approvals could not be unreasonable withheld. Timely notice of the institution of the action by Petitioner against 1st Federated as required by s. 494.043(5), Florida Statutes (1985), was waived by Respondent. No evidence was submitted regarding the number of claims involving 1st Federated and the amount of those claims that have been paid by Respondent from the Fund. Accordingly, no recommendation is made regarding the amount of Petitioner's claim that may be paid from the Fund pursuant to the limitations contained in s. 494.044, Florida Statutes (1985). By Notice of Intent to Deny Payment from the Mortgage Brokerage Guaranty Fund dated May 22, 1987, Respondent entered findings of fact, conclusions of law and denied Petitioner's claim. As grounds therefor, Respondent concluded that the 1985 and 1986 amendments to Chapter 494 were applicable in this case as those amendments were remedial or procedural in nature and should be given retrospective application. Thereafter, Petitioner requested formal proceedings by petition filed June 16, 1987, and this request was forwarded to the Division of Administrative Hearings by the Comptroller's letter dated July 23, 1987.
The Issue Whether Respondent's license as a mortgage broker in Florida should be disciplined because the Respondent had acted as a mortgage brokerage business without being licensed to do so in that Respondent solicited mortgage loan applications in his own name and directed his clients to make their checks in payment of application, credit report, and appraisal fees payable to Respondent individually; accepted those fees without a written brokerage agreement and without adequate disclosures; failed to place the fees received into a segregated account; failed to refund fees; and converted the funds obtained to his own uses; all in violation of various sections of Chapter 494, Florida Statutes.
Findings Of Fact Petitioner, the Department of Banking and Finance, is the state agency in Florida responsible for the regulation and licensing of mortgage brokers and the regulation of mortgage brokerage activities in this State. Its responsibilities include the duty to sanction those licensed under the Act for violations of the Act. At all times relevant, Respondent was a licensed mortgage broker and possessed license #HA 264194420 issued by the Department on May 31, 1990. Except for two brief periods of time in 1991, Respondent's mortgage broker license was active from May 31, 1990 until September 1, 1993. Respondent's license became inactive on September 1, 1993 for failure to timely renew the license. Respondent's license is presently inactive and will remain in an inactive status unless renewed on or before August 31, 1995 when the license will expire. Respondent's license can be reactivated at any time before its expiration date by filing an application for reactivation and payment of reactivation and renewal fees to the Department. Respondent has never been licensed by the Department as a mortgage brokerage business. In January and February 1992, Respondent was not associated with any mortgage brokerage business, nor was he an employee or an independent contractor for any mortgage brokerage business. In January and February 1992, Respondent was not an employee of American Fidelity Mortgage Corporation, a licensed mortgage lender. American Fidelity never provided Respondent with any indicia of employment such as a written employment agreement, nor employee IRS withholding forms, nor an office, nor business cards. At Respondent's request and as an accommodation to a lender with which American Fidelity did a volume business, John Combs, President of American Fidelity agreed to act as a conduit for submitting Respondent's loans to the lender while Respondent established his own mortgage brokerage business and establish a history with the lender. As a mortgage lender involved in a lending transaction, American Fidelity was obligated under Chapter 494 to provide loan applicants with lender disclosure forms. Respondent claims that he had an oral understanding with John Combs, the President of American Fidelity Mortgage Corporation and that Respondent understood he was employed by that company to solicit mortgage loans. Respondent's claim is based on having received several copies of American Fidelity's standard loan application packages and having provided John Combs with a copy of his mortgage broker license. Respondent's claim is not credible. In January and February 1992, Respondent solicited and accepted mortgage loan applicants from ten to fourteen individuals for the purpose of refinancing their residential properties. Not all of the loan applications Respondent obtained were delivered to American Fidelity Mortgage Corporation. Of the ten to fourteen mortgage loan applications Respondent admits having solicited, four were delivered to American Fidelity Mortgage Corporation. Those four applications were identified as the Biron, Schauman, Tapscott and Phillips loan applications. Two of those mortgage loan applicants were Thomas Hall and Caroline Marks. The Hall and Marks loan applications were never delivered to American Fidelity Mortgage Corporation. The remaining loan applications are unaccounted for. Respondent claims to have delivered all the loan applications he solicited to American Fidelity Mortgage Corporation, and that Combs must have lost or destroyed the remaining applications. This claim is not credible. American Fidelity Mortgage Corporation as a lender keeps a log of those applications it receives and the date on which they are received in compliance with Chapter 494, Florida Statutes. The Hall and Marks loans are not listed among the loan applications received by American Fidelity Mortgage Corporation. Respondent did not provide his clients with a mortgage broker agreement. Respondent claims the reason he did not provide a mortgage broker agreement was due to American Fidelity Mortgage Corporation's policy of not providing a mortgage brokerage agreement until some time later in the transaction. This claim is not credible in that American Fidelity Mortgage Corporation is a licensed lender. Mortgage lenders, as distinguished from mortgage brokers, are not required under the provisions of Chapter 494 to provide borrowers with a mortgage brokerage agreement. Respondent did not provide any of clients with a good faith estimate of the costs for their mortgage financing transaction. Respondent solicited and accepted mortgage loan fees in his own name. Respondent claims to have collected these fees in his name based on American Fidelity Mortgage Corporation's instructions to him. This claim is not credible. Respondent directed both Hall and Marks to make their checks in payment of their loan application fees, credit report and appraisal fees in the amount of three hundred fifty dollars ($350.00) payable to himself personally. He indicated to them he would use these funds to pay for various costs and services when and as necessary. Mr. & Mrs. Phillips also paid loan application fees and deposits to Respondent in the approximate amount of three hundred fifty dollars ($350.00). Respondent obtained application fees and deposits from each of his clients but never provided a mortgage brokerage agreement nor good faith estimate. No portion of the three hundred fifty dollars ($350.00) for fees and deposits obtained by Respondent from his clients was used for payment of credit report or appraisal costs. Respondent collected an additional fee of fifty dollars ($50.00) from each of his clients. Pursuant to Respondent's alleged agreement with American Fidelity, Combs required a fifty dollar ($50.00) deposit for credit report costs with each application. Respondent told his clients this was the lender's lock- in fee. Respondent directed some clients to make the check payable to American Fidelity Mortgage Corporation. Some of those checks were delivered with the loan applications to American Fidelity Mortgage Corporation. Others, such as the check from Hall, were not. Hall's check was never cashed. The Marks' check was made payable to Respondent. American Fidelity Mortgage Corporation was unable to process the four loans Respondent submitted due to Respondent's failure to provide for an appraisal. The Tapscott loan did close some months later after American Fidelity Mortgage Corporation made arrangements for an appraisal. Tapscott was obligated to pay the appraiser at the time the appraisal was done in accordance with American Fidelity Mortgage Corporation's standard procedure. In effect, Tapscott paid twice for an appraisal. No portion of the deposit monies accepted by Respondent from his clients were ever placed in a segregated account. The fees and deposits Respondent obtained from his clients were not continuously held in any account. Respondent admits that he did not refund the monies obtained from his clients despite their demands for the return of those deposits. Respondent converted the funds he obtained from his clients to his own use. On or about August 31, 1994, two and a half years after obtaining these deposits and after the initiation of the instant action by the Department, Respondent did refund substantially all of the funds he took from his clients. The only address in the licensing files was Respondent's home address, located at 1038 Green Road, Rockledge, Florida 32955. Respondent moved from the license address on file with the Department and failed to provide the Department with any notice of his change of address. Respondent refused to make his mortgage broker's records available to the Department for examination by making himself and consequently his records unavailable. Various liens had been filed against Respondent including federal liens. Respondent also filed a petition for bankruptcy under Chapter 13 of the Bankruptcy Code some time in late 1991. That petition for bankruptcy was dismissed on January 10, 1992 for failure to make payments to creditors under the payment plan. The order dismissing Respondent's petition for bankruptcy also lifted the automatic stay against creditors. The creditor matrix in this matter number thirty-four (34) creditors. Respondent at no time notified the Department of his bankruptcy filing.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Dean A. Danner's mortgage broker license be revoked. It is also RECOMMENDED that a fine be imposed against Dean A. Danner in the amount of eight thousand dollars ($8,000.00). DONE and ENTERED this 27th day of September, 1994, in Tallahassee, Florida. DANIEL M. KILBRIDE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1994. APPENDIX Petitioners Proposed findings of fact Accepted in substance: paragraphs 1-9, 10 (in part), 11-20, 21 (in part), 22, 23, 24 (in part), 25 (in part), 26 (in part), 28, 29. Rejected as subsumed, irrelevant or immaterial: paragraphs 10 (in part), 21 (in part) 24 (in part), 25 (in part), 26 (in part), 27. Respondent did not submit proposed findings of fact. COPIES FURNISHED: Dean A. Danner 986 Kings Post Road Rockledge, Florida 32955 Josephine A. Schultz, Esquire Office of the Comptroller 400 West Robinson Street, Suite S225 Orlando, Florida 32801 Honorable Gerald E. Lewis Comptroller, State of Florida Department of Banking & Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking & Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact The pleadings in this case, Petitioner's Notice of Intention to Suspend" and Respondent's "Petition for Formal Hearing" establish the following uncontroverted facts: William D. McCaffrey is a mortgage solicitor holding license number HK0007207. The Department of Banking and Finance is charged with the responsibility and duty of administering and enforcing the provisions of the Mortgage Brokerage Act, including the duty to suspend the license of those persons registered under the act for violations of the terms therein. William D. McCaffrey has been convicted of a federal offense and is presently in federal custody at the Federal Correctional Institute in Montgomery, Alabama. On November 13, 1985, Respondent pled guilty to "Interstate transportation of fraudulently obtained credit cards, in violation of title 15 U.S. Code, Section 1644(b) as charged in count 6 of the Indictment". (Petitioner's Exhibit #2) Count 6 of the indictment provides: Count Six On or about December 13, 1982, defendants WILLIAM D. McCAFFREY and WILLIAM BARTRAM III did knowingly, with unlawful and fraud- ulent intent, transport and cause to be transported in interstate commerce from Clarkston, Georgia, by way of Nevada, to the District of Arizona, a fraudulently obtained American Express Credit Card in the name of William Smith, knowing said credit card to have been fraudulently obtained. All in violation of Title IS, United States Code, Section 1644(b), and Title 18, United States Code, Section 2. (Petitioner's Exhibit #1) The U.S. District Court for the District of Arizona in case #CR 85-53 PHX adjudged William D. McCaffrey guilty as charged and convicted, sentenced him to imprisonment for 5 years, and ordered that he pay a fine of $10,000 and make restitution to American Express in the amount of $5,481.27. (Petitioner's Exhibit #2 Judgement and Probation/Commitment Order)
Recommendation Based upon the foregoing it is recommended that a final order be entered suspending Respondent's mortgage solicitor's license for a period of two years. DONE AND ORDERED this 23rd day of October 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 23rd day of October, 1986. COPIES FURNISHED: Robert K. Good, Esquire Office of the Comptroller 400 West Robinson Street Orlando, Florida 32801 Clyde Taylor, Jr., Esquire 1105 Hays Street Tallahassee, Florida 32301
Findings Of Fact At all times relevant hereto, respondent, Elliot Rosen Realty, Inc. was a licensed corporate real estate broker having been issued license number 0218821 by petitioner, Department of Professional Regulation Division of Real Estate. Respondent Elliot Rosen held real estate broker's license number 0075258 issued by petitioner and was the qualifying officer of Elliot Rosen Realty, Inc. Respondents Stanleigh M. Franklin and Maria C. Franklin were licensed real estate salesmen in Rosen's office having been issued license numbers 0318042 and 0370308, respectively. The firm is located at 8120 Coral Way, Miami, Florida 33155. On an undisclosed date Robert W. and Carol A. Bush listed for sale with Elliot Rosen Realty, Inc., a residential property located at 8295 Southwest 153rd Street, Miami. The initial asking price was $119,000, but this was later reduced to $112,000. In April 1984, Joseph and Maria Yanes were in the process of selling their home and were consequently seeking to purchase a new residence. Both are educated persons, and Mr. Yanes has a college degree. Mr. Yanes read a real estate advertisement which advertised the Bush's property. They contacted Rosen Realty, Inc. and spoke with Maria Franklin. After inspecting the house with Maria, the Franklins met with the Yanes on April 15, 1985, for the purpose of preparing and executing an offer to purchase the house. Joseph Yanes made clear to Stanleigh Franklin that his primary concern was obtaining a mortgage with monthly payments that did not exceed $1000 per month. Otherwise, he would not be able to purchase the property. Stanleigh was familiar with a new mortgage loan program offered by a local lender (American International Mortgage Company) known as the "7.5 magnet mortgage" which offered a monthly payment for the first three years at a 7.5 percent interest rate. Stanleigh computed the principal and interest payments under this plan to be $711.55 per month. When estimated taxes and insurance were added in the total payment came to approximately $850 per month. He also advised that a mortgage insurance premium would be charged each month, which he estimated to be $50 to $60 per month. This still totaled less than the $960 or $970 which the Yanes stated their existing mortgage to be. The Yanes were told that because of the low interest rate (7.5 percent) during the first 36 months, there would be negative amortization during that period of time. In other words, the principal amount owed would actually increase rather than decrease during the first three years since interest on the note was accruing at a higher rate (13 percent). Finally, Franklin advised the Yanes that a 5 percent down payment was required with this type of mortgage and that their deposit should equal this amount to qualify for the loan. The Yanes did not indicate any dissatisfaction with this type of financing, or that they did not understand how the plan worked, particularly with respect to the negative amortization. They agreed to make an offer of $107,000 on the property, to give a $500 deposit that day, and an additional $4850 later on which equated to 5 percent of the purchase price. The contract itself made no reference to the 7.5 percent financing, but provided only that the buyers would obtain a new first mortgage for the balance owed on the $107,000 purchase price. Throughout these negotiations, there was no misrepresentation of facts by Franklin concerning the mortgage or amount of deposit required. The Yanes' offer was quickly presented by the Franklins to the sellers who accepted the offer within the next few days. The Yanes then gave an additional $4850 deposit around May 1 which was deposited in Rosen's escrow account. On May 7, they filed a loan application with American International Mortgage Company and gave a check in the amount of $185 to have an appraisal made and a credit report prepared. At that time, the loan officer explained to Joseph Yanes in detail how the magnet mortgage program worked and that there would be negative amortization under this plan. The meeting lasted for an hour and a half and Yanes did not express surprise at how the mortgage worked, or that he did not understand its concept. An appraisal was then made, and a credit check run on Mr. Yanes. However, the lender was unable to confirm any credit information on Mrs. Yanes because her employer refused to return the employment verification form. On June 20, 1984, the lender sent a denial notice to the Yanes because of its inability to obtain information regarding Mrs. Yanes. The Yanes made no other efforts to obtain financing on the property. After they executed the contract to purchase, the Yanes engaged counsel in early May to represent them at closing. Their attorney (Lisa Wilson) called all pertinent parties, including the Franklins and Rosen to learn the details of the mortgage. After having the details explained to them again, the Yanes advised counsel that they wished to cancel the contract. On May 23, 1984, Wilson sent a certified letter to Stanleigh Franklin advising that because the financing arrangements had been misrepresented to her clients they were cancelling the contract. She also demanded a return of their deposit plus interest. Just prior to the receipt of the certified letter, Joseph Yanes also telephoned Stanleigh Franklin and demanded a return of his deposit. This was the first time Franklin suspected the deal had gone awry. Shortly after this, the Yanes contacted petitioner to file a complaint against respondents. When Mr. Bush learned that the Yanes were not honoring the contract, upon advice of counsel, Bush made a claim on the $5,350 deposit for breach of contract. Faced with conflicting demands for the deposit, Rosen contacted petitioner to determine how the deposit should be disbursed. The matter was eventually referred by petitioner to its local office in Miami for investigation in October 1984. On November 27, 1984, counsel for petitioner advised Rosen that because of the pending complaint of the Yanes, petitioner could not issue an escrow disbursement order. However, he was told of the remaining two alternatives for resolving the dispute prescribed in Subsection 475.25(1)(d), Florida Statutes. A complaint for interpleader was later filed in circuit court by agreement of counsel for the Yanes, Bush, and Rosen. That complaint is still pending. Rosen, as broker, was never personally involved in the transaction until a complaint with petitioner was filed. He stood to gain no commission on the sale since the Franklins were working on a "100 percent basis" and were to receive the entire commission. Rosen has been licensed for some thirty-one years and has had no prior disciplinary action in all that time.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the administrative complaint be DISMISSED with prejudice. DONE and ORDERED this 5th day of June, 1985, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of June, 1985.
Findings Of Fact During 1982 and 1983, Petitioner was licensed as a mortgage broker and real estate broker in the State of Florida. His mortgage broker's license expired in September, 1983. At all times material hereto, Petitioner utilized his mortgage broker's and real estate broker's license to engage in real estate development speculation. He worked closely with Jeffrey Graham, who was also licensed as a mortgage broker and who was a co-owner with Petitioner of Continental Development, Continental Mortgage Company and the Real Estate Spot. They were engaged in buying and selling existing residential properties and constructing new homes for sale. Financing for Petitioner's speculative real estate transactions was provided primarily by The Bank of Florida, located in St. Petersburg, Florida. The Bank provided financing on 80 to 85 percent of his transactions, but at some point in 1982 or 1983, Petitioner and Graham found themselves unable to obtain further construction financing from the Bank. In order to continue receiving financing from the Bank, Petitioner and Graham initiated the use of "stand-in" buyers. A "stand-in" buyer would not have to use any of his own money as a deposit or down payment, even though real estate contracts executed in connection with these transactions would show an earnest money deposit by such buyers. The buyer's role was simply to lend his credit to the transaction and to share in any profits on the eventual sale of the property. On or about March 25, 1983, Petitioner executed, as seller, a contract for sale of real estate and deposit receipt with Norman Tanner, buyer. The transaction involved the sale of real estate in Pinellas County, Florida, and reflects a total purchase price of $25,000, with an earnest money deposit of $5,000 which the contract specified was to be held by Petitioner, as seller, until closing. Petitioner also executed a Settlement Statement on March 29, 1983, in connection with a loan obtained by Tanner from The Bank of Florida which indicated that Tanner had paid an earnest money deposit of $5,000. Based upon the testimony of Norman Tanner at hearing, it is found that he did not provide the earnest money deposit indicated on the sales contract or Settlement Statement which Petitioner executed as seller. Petitioner testified that this transaction was carried out in his individual capacity as a personal investment, and not under the authority of his mortgage broker's license. In fact, Petitioner did not deal directly with Tanner in this transaction. Tanner's dealings were with Petitioner's partner, Jeffrey Graham. Nevertheless, the evidence and demeanor of the witnesses establishes that Petitioner was aware of the fact that Tanner had not paid the deposit reflected on the instruments he executed, and that such instruments were used to induce the Bank to make a mortgage loan to Tanner. Petitioner, as seller, received $19,665.56 cash at settlement from this transaction with Tanner. On or about February 24, 1982, Petitioner executed a contract for sale of real estate and deposit receipt with Joseph Armendinger, buyer. The transaction involved the sale of real estate in Pinellas County, Florida, and reflects a total purchase price of $48,000, with an earnest money deposit of $6,500 which the contract specified was to be held in escrow by The Real Estate Spot, Inc., until closing. Petitioner and Armendinger also executed an Affidavit of Purchaser and Vendor in connection with obtaining financing for this transaction, and said Affidavit also indicated the buyer's purported cash equity of $6,500 in the property. At the time, Petitioner was co-owner of The Real Estate Spot, and Armendinger was an electrician who was doing some work at The Real Estate Spot and became interested in the "stand-in" buyer transactions he observed while doing electrical work at Petitioner's office. On or about October 27, 1982, Petitioner and Armendinger executed another contract for sale and deposit receipt for a second piece of property, which reflects a total price of $85,000 and an earnest money deposit by Armendinger of $5,000. Thereafter, they executed an Affidavit of Purchaser and Vendor and Settlement Statement reflecting Armendinger's purported cash equity of $4,250.00. Petitioner used the proceeds from this transaction to pay off an existing mortgage and judgment on the property, and realized $1,607.46 in cash, which was shared with Jeffrey Graham, co-seller. Petitioner knew that the contracts for sale and Affidavits which he executed with Armendinger were to be presented to The Bank of Florida and used for the purpose of Armendinger obtaining financing for the purchase of these properties. Based upon the testimony of Joseph Armendinger at hearing, it is found he did not provide any earnest money deposit or downpayment in connection with these two transactions with Petitioner. Armendinger relied on Petitioner, a licensed mortgage broker and real estate broker, in these transactions, and was told by Petitioner that he would not have to put any money of his own into these transactions. Petitioner knew that Armendinger had not made any deposit or downpayments concerning these transactions at the time he executed the contracts for sale and deposit receipts, Affidavits and Settlement Statement. On December 16, 1982, Petitioner executed two mortgages in favor of Patricia G. Herren on property he had previously sold to Armendinger. These mortgages totalled $21,793.35, and were recorded in Pinellas County, Florida, on December 28, 1982. These mortgages were used by Petitioner, along with a $10,000 mortgage he executed in Herren's favor, to obtain a satisfaction from Herren of a mortgage she held on a piece of property she sold to Petitioner in October 1982 in St. Petersburg Beach. The $10,000 Herren mortgage was also recorded on December 28, 1982. Having obtained the satisfaction, Petitioner then sold the St. Petersburg Beach property to Juanita Murdaugh and Jeffrey Graham on December 17, 1982, prior to recording the $10,000 Herren mortgage. He did not disclose on the Affidavit of Purchaser and Vendor which he executed that he had an outstanding $10,000 mortgage in favor of Herren on this St. Petersburg Beach property, although this mortgage should have been disclosed as "secondary financing." In each of the Affidavits of Vendor and Purchaser executed by Petitioner in connection with sales of property as described herein, there is the following statement in Item VII: The certifications of this affidavit are for the purpose of inducing the Lender named above or its assignees to make or purchase the first mortgage described by this affidavit.... By signing the Affidavits of Vendor and Purchaser, Petitioner, as the "Property Vendor," made the following certification: The PROPERTY VENDOR hereby certifies that to the extent PROPERTY VENDOR is a party, the Financial Terms, including Total Purchase Price, and the Liens are as set forth in Items III and IV above, [and] hereby acknowledges the inducement purpose of this affidavit as set forth in Item VII above....
Recommendation Based upon the foregoing, it is recommended that Petitioner's application for licensure as a mortgage broker be DENIED. DONE AND ENTERED this 19th of October, 1987, in Tallahassee, Florida. DONALD D. CONN 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 19th day of October, 1987. APPENDIX (DOAH No. 87-0033) Rulings on Petitioner's Proposed Findings of Fact: 1. Adopted in Finding of Fact 1. 1.(a) Adopted in Findings of Fact 2, 4. 2.(a) Rejected as not based on competent substantial evidence. 2.(b) Rejected in Findings of Fact 5, 6. 2.(c) Rejected in Finding of Fact 10. 2.(d) Rejected in Findings of Fact 6-10. 2.(e), (f) Rejected in Finding of Fact 11. Rulings on Respondent's Proposed Findings of Fact: 1. Adopted in Finding of Fact 1. 2. Adopted in Findings of Fact 2, 3. 3. Adopted in Finding of Fact 2. 4. Adopted in Findings of Fact 3, 4. 5-6. Rejected as not based upon competent substantial evidence. 7. Adopted in Finding of Fact 5. 8. Adopted in Findings of Fact 5, 6. 9. Adopted in Findings of Fact 7, 10. 10-11. Adopted in Findings of Fact 7, 9, 10. Adopted in Findings of Fact 8, 10. Adopted in Findings of Fact 8, 9, 10. 14-19. Adopted in Finding of Fact 11. Adopted in Finding of Fact 12. Adopted in Finding of Fact 13. Rejected as not based on competent substantial evidence. Adopted in Finding of Fact 11. Rejected as unnecessary and cumulative. COPIES FURNISHED: John Swisher, Esquire Dillinger & Swisher 5511 Central Avenue St. Petersburg, FL 33710 Stephen M. Christian, Esquire Office of Comptroller 1313 Tampa Street Tampa, FL 33602-3394 Honorable Gerald Lewis Department of Banking and Finance Comptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 Charles L. Stutts General Counsel Plaza Level The Capitol Tallahassee, FL 32399-0350
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is a Florida corporation headquartered in Boca Raton, Florida. William Kirschner is Petitioner's owner and chairman of the board. Stacey Interlandi is its President and principal broker. Petitioner is in the mortgage lending and brokerage business. All of the mortgage loans it makes are sold to investors. Petitioner held an active mortgage brokerage business registration (No. HB 592567137 00) issued pursuant to former Section 494.039, Florida Statutes, which was effective from September 1, 1990, until its expiration on August 31, 1992. 2/ It currently holds a mortgage brokerage business license (No. MBB 592567137 000) issued pursuant to Section 494.0031, Florida Statutes. The effective date of this license was September 1, 1992. The license expires on August 31, 1994. From October 1, 1989, through September 30, 1991, Petitioner acted as a seller or assignor of mortgage loans and/or a servicer of mortgage loans. Since October 1, 1991, Petitioner has made mortgage loans by advancing funds to mortgage loan applicants. With respect to each of these loans, however, the commitment to advance funds was made prior to October 1, 1991. Since October 1, 1991, Petitioner has sold or assigned mortgage loans to non-institutional investors, but for no monetary gain. Since October 1, 1991, Petitioner has serviced mortgage loans pursuant to agreements into which it entered prior to October 1, 1991. At no time has Petitioner been licensed as a mortgage lender pursuant to Chapter 494, Part III, Florida Statutes. On or about July 31, 1991, the Department sent the following written advisement concerning the revisions made by the 1991 Legislature to Chapter 494, Florida Statutes, to all registered mortgage brokerage businesses, including Petitioner: The 1991 Legislature revised Chapter 494, Florida Statutes, effective October 1, 1991. A copy of the new law is enclosed. Some of the changes which affect mortgage brokerage businesses are: A mortgage brokerage business may not make (fund) loans or service loans. Only mortgage lenders and correspondent mortgage lenders may make (fund) loans. Only mortgage lenders may service loans. A mortgage brokerage business may ONLY act as a mortgage broker. "Act as a mortgage broker" is defined as: "... for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a borrower, or negotiating or offering to negotiate the terms or conditions of a mortgage loan on behalf of a lender." There are no net worth requirements for mortgage brokerage businesses. A principal broker designation form must be completed and maintained in the principal place of business and a branch broker designation form must be completed and maintained at each branch. The required forms will be sent to your office prior to October 1, 1991. To act as a mortgage broker, a licensed individual must be an associate of a licensed brokerage business and is prohibited from being an associate of more than one mortgage brokerage business. "Associate" is defined as: ". . . a person employed by or acting as an independent contractor for a mortgage brokerage business . . ." Under the new law, no fee or notification to the Department is required when a mortgage broker becomes an associate of your business. However, the license of each mortgage broker must be prominently displayed in the business office where the associate acts as a mortgage broker. Note: The Department will discontinue processing change of status requests under the current law effective August 1, 1991. Mortgage brokerage businesses in good standing which hold an active registration are eligible to apply for licensure as a mortgage lender pursuant to the saving clause. The applicant must have: For at least 12 months during the period of October 1, 1989, through September 30, 1991, engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both; Documented a minimum net worth of $25,000 in audited financial statements; Applied for licensure pursuant to the saving clause before January 1, 1992 and paid an application fee of $100. Should you meet the above requirements and wish to apply for licensure as a mortgage lender pursuant to the saving clause or if you wish to apply for licensure as a mortgage lender pursuant to Section 494.0061, please contact the Department for the appropriate application. These applications will be available in early September 1991. THESE CHANGES ARE EFFECTIVE OCTOBER 1, 1991. PLEASE REVIEW THE ENCLOSED COPY OF THE LAW CAREFULLY FOR OTHER CHANGES WHICH MAY AFFECT YOUR MORTGAGE BROKERAGE BUSINESS. As promised, application forms for licensure as a mortgage lender were available the first week of September, 1991. Petitioner requested such an application form on September 18, 1991. The requested form was mailed to Petitioner the following day. On December 31, 1991, Petitioner submitted a completed application for licensure as a mortgage lender pursuant to the "saving clause," Section 494.0065, Florida Statutes. The application was accompanied by an application fee of $100.00 and an audited financial statement reflecting that Petitioner had a net worth in excess of $25,000.00. At the time of the submission of its application, Petitioner had an unblemished disciplinary record.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order granting Petitioner's application for licensure as a mortgage lender pursuant to the "Saving Clause." DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of November, 1992. STUART M. LERNER 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 November, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-4313 The following are the Hearing Officer's specific rulings on the findings of facts proposed by the Department: 1-7. Accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order. 8. Rejected because it is more in the nature of a statement of the law, albeit an accurate one, than a finding of fact. 9-12. Accepted and incorporated in substance. 13. Rejected because it is more in the nature of a statement of the law, albeit an accurate one, than a finding of fact. 14-15. Accepted and incorporated in substance. 16. Rejected because it would add only unnecessary detail to the factual findings made by the Hearing Officer. 17-21. Accepted and incorporated in substance. 22. Rejected because it is not supported by persuasive competent substantial evidence. 24 6/-39. Rejected because they would add only unnecessary detail to the factual findings made by the Hearing Officer. 40. Rejected because, even if true, it would have no bearing on the outcome of the instant case.
