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
The Issue Whether or not the Respondent, Evers & Associates, Inc. and Dovard J. Evers, its President, a licensed mortgage broker in the State of Florida, has charged and accepted fees and commissions in excess of the maximum allowable fees or commissions on the transactions set forth in the administrative complaint, Exhibit "A," in violation of Sec. 494.08(4), F.S., and thereby subjected the Respondent to a possible suspension under the terms of 494.05(1)(g), F.S.
Findings Of Fact Evers & Associates, Inc. through the parson of Dovard J. Evers, its President, was a licensed mortgage broker in the State of Florida, during the time period contemplated by the administrative complaint. Subsequent to the time of receiving the mortgage brokers-license, Dovard J. Evers, on behalf of Evers & Associates, Inc., entered into an agreement with several other parties to sell notes secured by mortgages on real estate. One of the agreements was with David Edstrom, of a corporation known as S.E.T., Inc., Mr. Edstrom being the President of said corporation, and the location of that corporation being in Fort Lauderdale, Florida. A similar agreement was held with one Gary George of the Mortgage Consultants, Inc., Ocala, Florida. The agreement with Gary George involved a sale of mortgages for the benefit of the mortgagor, Washington Development Corporation. The third such agreement was with Phil Swan of Southeast Florida Corporation. The written conditions of the S.E.T., Inc. arrangement with Mr. Evers can be found in Respondent's Exhibits No. 2 through No. 5. Essentially, the arrangement was to have Mr. Evers, through Evers & Associates, act as a salesman for the benefit of S.E.T., Gary George and Phil Swan. Their agreement envisioned that Mr. Evers would be afforded a percentage discount varying from 14 percent to 16 percent of the amount of a mortgage loan which was a note secured by real estate. In actual , the contact was made between S.E.T., Gary George and Phil Swam Mr. Evers for purposes of placing notes that were for sale. The apparatus worked by having Mr. Evers contact mortgagees/investors who made a check payable to Evers & Associates for the full amount of the mortgage loan, whose price had been quoted by the intermediary; S.E.T., Gary George and Phil Swan. This amount was held in escrow until such time as the note and mortgage which secured the note could be drawn. The executed note and mortgage went directly to the third party mortgagee/investor without ever having the name of Mr. Evers or Evers & Associates, Inc., affixed to such documents. After this note and mortgage had been executed in behalf of the third party investor, Mr. Evers deducted a fee in favor of Evers & Associates, Inc., according to the percentage agreement with S.E.T., Gary George and Phil Swan and sent the balance of the money to S.E.T., Inc.; Washington Development Corporation through the person of Gary George and to Phil Swan of the Southeast Florida Corporation. The arrangement with Washington Development Corporation changed at a later date because Gary George was no longer involved and payments subsequent to his involvement were sent directly to Washington Development Corporation. The facts show that in the transactions found in Petitioner's Exhibit "A," the complaint, charges were made in behalf of Evers & Associates in the person of Mr. Evers which exceed the statutory allowance for fees and commissions in the amount stated in the column entitled overcharges. These overcharges are according to the percentage agreement between Mr. Evers and S.E.I., Inc., Gary George, and Phil Swan, minus adjustments made in behalf of the third party investor/mortgagee, as indicated in the testimony. This finding of facts, excludes the mortgage by M. Berkell which was stipulated between the parties as not being a matter for further consideration in the hearing. There was no evidence offered of the charge, if any, between S.E.T., Inc., Gary George, and Phil Swan in their dealings with their developer/mortgagors. At present the Respondent, Evers & Associates, Inc., and Dovard J. Evers, its President, have failed to renew the license in the current license period and, as of the moment of the hearing, have expressed no further interest in such renewal.
Recommendation It is recommended that the license of Evers & Associates, Inc., by Dovard J Evers, its President, be suspended for a period not to exceed 30 days. DONE and ENTERED this 8th day of June, 1976, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III, Esquire Office of the Comptroller The Capitol Tallahassee, Florida 32304 Earl M. Barker, Esquire 218 East Forsythp Street Jacksonville, Florida 32202
The Issue The issue is whether PMF, Inc.’s (PMF), mortgage broker license should be revoked and an administrative fine imposed on PMF’s principal loan originator, Scott Cugno, for the reasons stated in an Administrative Complaint (Complaint) issued by the Office of Financial Regulation (OFR) on January 18, 2017.
Findings Of Fact Background OFR is the state agency charged with administering and enforcing the provisions of chapter 494, which regulates loan originators, mortgage lenders, and mortgage brokers. Rules implementing the statutory law are found in chapter 69V-40. To ensure compliance with the law, OFR conducts periodic audits of the records and activities of all licensees. In early 2012, Mr. Cugno assumed ownership of PMF. From January 25, 2012, until January 1, 2015, PMF was a licensed mortgage lender with its principal office located at 142 West Platt Street, Suite 118, Tampa. Besides the principal office, PMF operated five branch offices. As a mortgage lender, PMF could offer credit to an applicant, make the mortgage loan, and close the loan in its own name. § 494.001(23), Fla. Stat. To settle an earlier disciplinary action, PMF surrendered its lender license in December 2014. Pet’r Ex. 5. On December 30, 2014, PMF was issued mortgage broker license number MBR 1689, which still remains active. A mortgage broker conducts loan originator activities through one or more licensed loan originators employed by the broker. § 494.001(22), Fla. Stat. A broker shops an applicant’s credit and loan application to different lenders, but unlike a mortgage lender, it cannot close loans in its own name. § 494.001(17), Fla. Stat. Mr. Cugno is the sole owner of PMF and its principal loan originator. By definition, he is the control person of PMF. § 494.001(6)(a), (b), and (f), Fla. Stat. A control person is subject to administrative penalties if the broker or lender engages in prohibited acts set forth in section 494.00255(2). An audit of PMF’s business records and activities was conducted by OFR for the period July 1, 2014, through April 30, 2015. After the audit was concluded, a formal Report of Examination (Report) was forwarded to Mr. Cugno on February 25, 2016. Pet’r Ex. 1. The Report stated that it contained a series of findings “that may be violations of Chapter 494, Florida Statutes.” Therefore, it recommended that management thoroughly review the matter and promptly respond in writing stating any exceptions or disagreements it had, any action taken to correct the possible violations, and any mitigating evidence. A written response was filed by Mr. Edgar, PMF’s independent consultant, who interacted with the auditors on behalf of PMF during the examination and responded to document requests. Pet’r Ex. 2. After receiving Mr. Edgar’s response, the Complaint was issued by OFR on January 18, 2017. Although the Report contains 13 findings that may be violations of chapter 494, the Complaint relies on only eight. Based upon the scope and nature of the violations, the charging document seeks to revoke PMF’s mortgage broker license and to impose a $53,300.00 administrative fine on Mr. Cugno, as the control person of the lender and broker. No action is proposed regarding Mr. Cugno’s loan originator license. The thrust of the Report is the failure of Mr. Cugno to have complete control over the operations of the business. In determining the merits of the charges, the undersigned has considered: a) Mr. Cugno’s responses to OFR’s Requests for Admissions, which admit the allegations in five Counts3/; b) Mr. Edgar’s written response to the Report, which essentially admits all of the violations and outlines the proposed corrective action that PMF intends to implement; and c) the evidence in the record. The Charges Count I Count I alleges that during the audit period, PMF operated a branch office in Delray Beach, Florida, without a license. Each branch office is required to be separately licensed. § 494.0011(2), Fla. Stat.; Fla. Admin. Code R. 69V- 40.036. A branch office is defined in section 494.001(3) as a location, other than a mortgage lender’s or mortgage broker’s principal place of business, where business is conducted under chapter 494, and one of the following is true: Business cards, stationery, or advertising references a licensee’s name associated with a location that is other than the licensee’s principal place of business; Advertising, promotional materials, or signage using a licensee’s name suggests that mortgage loans are originated, negotiated, funded, or serviced at a location that is other than the licensee’s principal place of business; or Mortgage loans are originated, negotiated, funded or serviced by the licensee at a location that is other than its principal place of business. The Delray Beach location was not licensed as a branch office. Without a license, PMF was not authorized to use the Delray Beach address on any materials used in its mortgage business or to originate loans from that location. During the audit period, a PMF employee, Bryan J. Mittler, then a recently admitted attorney who had worked for PMF since around 2012, was using business stationery and business cards under the name of PMF that referenced his name and the Delray Beach location, 2236 Bloods Grove Circle. Pet’r Ex. 10. The printed material contained statements such as “We’re your key to financing your new home” and “For a free no-obligation consultation and instant pre-approval call us anytime!” Id. Another business card identifies Mr. Mittler as an attorney and branch manager of PMF. Id. None of these materials mention the address of the principal office in Tampa. They support a finding that Mr. Mittler was using promotional materials to originate, negotiate, fund, or service mortgage loans at the Delray Beach location. Other indicia of operating a branch office are found in Mr. Mittler’s response to a written inquiry by the auditor in September 2015, in which he signed the letter as “Branch Manager.” Pet’r Ex. 8. Mr. Mittler’s letter states in part that “[w]e became a branch in November 2012 with the first loan disposition in December 2012.” Id. He also acknowledges that “[o]ur branch’s loan files are maintained at 2236 Bloods Grove Circle, Delray Beach, FL.” Id. In yet another letter to the auditor, Mr. Mittler identifies himself as Branch Manager. Pet’r Ex. 10. The Delray Beach office also maintained its own bank account and identified it as a branch bank account. Pet’r Ex. 11. Finally, internet advertising by PMF during the audit period states that Mr. Mittler “was chosen to head our new, Delray Beach branch office.” Pet’r Ex. 13. In response to a request by the auditor that PMF provide a list of all PMF employees, on September 29, 2015, Mr. Edgar submitted a list of employees as of that date, which identifies Mr. Mittler as the branch manager of the Delray Beach office. It describes his duties as “manag[ing] all operations of branch office [and] Originating Mortgages.” Pet’r Ex. 7. Finally, Mr. Edgar’s response to the Report states that “I am surprised to find that the Delray Beach office was not licensed as a branch.” Pet’r Ex. 2. He characterizes this as “negligence” on the part of PMF and represents that PMF intends “to license this branch and be in full compliance.” Id. PMF was eventually issued a branch license for the Delray Beach office in March 2016. At hearing, Mr. Cugno denied that PMF was operating a branch office in Delray Beach. He testified that even though there was no branch office, Mr. Mittler was allowed to use the title of branch manager because Mr. Mittler did not want to be given a less important title. Mr. Cugno also explained that a “statute” or “regulation,” later identified in Respondents’ PRO as Rule 1-3.3, The Rules Regulating the Florida Bar, required Mr. Mittler to provide his Delray Beach address on all documents and materials that he prepared or was using. While the rule requires that an attorney’s official bar name “be used in the course of a member’s practice of law,” it does not specifically require that a member’s address be reflected on all documents prepared. Assuming that the rule imposes this requirement, nothing in the record suggests, much less proves, that Mr. Mittler’s activities on behalf of PMR were part of his practice of law, he was employed as an attorney for PMF, or a law office was even located at the Delray Beach address. The PRO contends the Delray Beach location “may” have been a law office which caused confusion in PMF’s “paperwork.” These arguments have been rejected. By clear and convincing evidence, OFR has established that during the audit period, the Delray Beach location was a branch office within the meaning of section 493.001(3), and it operated without a license. Count II Each mortgage broker and lender must maintain a Mortgage Brokerage and Lending Transaction Journal (Journal) which, at a minimum, contains the name of the mortgage loan applicant, date of the application, disposition of the application, and the name of the lender, if applicable. § 494.0016(1), Fla. Stat.; Fla. Admin. Code R. 69V-40.265(1). Count II alleges that during the audit period, PMF violated the statute and rule by failing to maintain a complete and accurate Journal of all transactions at its Tampa office. PMF’s response to the Report states that, to correct the deficiency described in Count II, the firm would begin “implementing controls” and making “periodic audits” to ensure that a current Journal would be maintained in the future. Pet’r Ex. 2. Also, in its response to the Requests for Admissions, PMF admits that it maintained separate Journals for each of the branch offices, and the principal office Journal was incomplete or inaccurate. Finally, unrefuted testimony by the auditor at hearing established that an examination of PMF’s Journal revealed that certain loans were not listed and “entries that were part of the requirements of the loan journal were not made.” Notably, out of more than 470 transactions identified in PMF’s mortgage loan report (a quarterly report that must be filed by licensed companies indicating their loan activity), the Journal listed only 182 loans. Pet’r Ex. 20. At hearing, Mr. Cugno testified that PMF did not know how to fill out a journal, and efforts by his former compliance manager to get instructions from OFR were unsuccessful. However, this does not excuse the violation. By clear and convincing evidence, the charge in Count II is sustained. Count III A mortgage broker is required to maintain at its principal place of business the complete documentation of each mortgage loan transaction/application for three years from the date of the original entry. § 494.0016(1), Fla. Stat.; Fla. Admin. Code R. 69V-40.175(8). The Complaint alleges that PMF violated this requirement by failing to maintain at its principal office all records of email and electronic communications between PMF and its borrowers. The evidence shows that during the audit period, complete documentation of every application/transaction was not maintained at the Tampa office. For example, some loan originators at branch offices had individual email accounts through which they were communicating and transmitting documents for loan files, but they did not copy those email communications to the principal office. Pet’r Ex. 23 and 24. In his response to the Requests for Admissions, Mr. Cugno admitted that certain documentation for loan applications was kept at locations other than their Tampa office. In his response, Mr. Edgar also acknowledged that PMF did not comply with the statute and rule and represented that PMF would utilize a new “email usage policy and procedure” to correct the problem. While Respondents allege the information from the Tampa and branch offices was available on-line, this does not satisfy the requirement that complete documentation be maintained at the principal office. By clear and convincing evidence, the allegations in Count III have been established. Count IV Section 494.00165(2) requires that a licensee maintain a record of samples of each of its advertisements for examination by OFR for two years after the date of publication or broadcast. The purpose of this requirement is to enable the auditor to verify that the licensee’s advertisements are not deceptive or misleading. To comply with the statute, PMF was required to maintain for two years in a central file a copy of each advertisement. During the examination, the auditor requested that PMF provide its complete file of advertisements during the audit period. PMF initially responded that there was no corporate advertising and therefore no samples were kept on file. Pet’r Ex. 12. A subsequent audit of the branch offices revealed that business cards, flyers, placards, posters, and internet were used by the branch offices for advertising purposes. Pet’r Ex. 10, 11, 13, 15, and 17. The auditor also found entries on PMF’s books reflecting advertising expenses of over $200,000.00 during the audit period. In his response to the Report, Mr. Edgar admitted that due to operating the business as a “decentralized model,” PMF did not have proper supervision of the marketing activities of loan officers. Mr. Edgar went on to state that he was “surprised” to learn that “several Loan Officers appear to have engaged in either limited advertising campaigns or hosting their own independent activities.” He promised that PMF would “begin to exercise more control over the marketing activities of all employees” and to ensure that all documentation related to advertising would be sent to the Tampa office for centralized storage. At hearing and in their PRO, Respondents took a different tack and argued that: it is technically impossible to provide the auditor with every single copy of material that could be characterized as a marketing activity; the $200,000.00 advertising expense on their books was a “coding error”; and during the audit period, Respondents misunderstood what OFR considers to be advertising, and once this misconception was cleared up, they submitted “a more fulsome response.” These arguments have been considered and rejected as being contrary to the clear and convincing evidence. By clear and convincing evidence, the charge has been sustained. Count V Section 494.00165(1)(e) prohibits licensees from engaging in misleading advertisements regarding mortgage loans, brokering services, or lending services. Count V alleges that after January 1, 2015, PMF continued to advertise itself as a lender even though its lender license had been surrendered.4/ As of January 1, 2015, PMF was a licensed mortgage broker and no longer held a mortgage lender license. Advertising by the Fort Myers branch office after January 1, 2015, identified PMF as a “full correspondent lender” and listed the old mortgage lender license number. Pet’r Ex. 15. Also, as late as February 2016, advertising posters were on the windows at the Tampa office, visible to the public, reflecting that PMF was an approved VA lender. Pet’r Ex. 17. Finally, OFR witness Slisz testified that as of March 30, 2018, the Fort Myers branch office still was advertising itself as a full correspondent lender. By advertising in this manner, PMF implied to consumers that it would originate the loan, negotiate the terms of the loan, and determine the fees that would be charged, things it could not do as a broker. In his response to the Report, Mr. Edgar admitted that PMF did not comply with the statute “due entirely to [its] negligence in updating PMF’s logo and promotional materials after the change in licensing that occurred [on January 1, 2015].” Pet’r Ex. 2. However, he asserted there was no intent to deceive or mislead customers. In their PRO, Respondents also concede “there were a few months where this advertisement occurred,” but maintain there is no evidence that any consumer had been impacted. Finally, in their response to the Requests for Admissions, Respondents admit that after January 1, 2015, PMF continued to represent itself as a licensed mortgage lender. In mitigation, Mr. Cugno pointed out that no customer was harmed. Also, he blamed the advertising signs in the windows at PMF’s Tampa office on the building manager, who he says put the signs up for a few days to block the sun while new blinds were being installed. By clear and convincing evidence, OFR has established that the charges in Count V are true. Count VI Section 494.0025(7) provides that a licensee cannot “pay a fee or commission in any mortgage loan transaction to any person or entity other than a licensed mortgage broker or mortgage lender, or a person exempt from licensure under this chapter.” The statute is designed to ensure that every person receiving fees in a transaction is licensed. Count VI alleges that during the audit period, Respondents paid commissions or fees from mortgage loan transactions to entities that were not licensed brokers or lenders. During the audit period, several loan originators established separate entities that were not licensed but were paid fees or commissions for various transactions. Pet’r Ex. 18. In its response to the Report, Mr. Edgar conceded that such fees were paid incorrectly because PMF “mistakenly believed” that its practice of paying a loan officer’s separate business entity was equivalent to paying the loan officer personally. The response added that in the future, “only licensed individuals will be paid commissions on mortgage loan transactions” and “no separate loan entities will be compensated any amount for any work performed on mortgage loan transactions.” Pet’r Ex. 2. Respondents also acknowledge in their response to the Requests for Admissions that they paid fees, costs, and expenses to persons or entities that did not hold loan originator licenses. Finally, at hearing, Mr. Cugno admitted that unlicensed entities were “definitely” paid, but there was no intent to deceive customers. By clear and convincing evidence, OFR has established that the allegation in Count VI is true. Count VII Section 494.00665(1) requires each mortgage lender business to be operated by a principal loan originator who is to have full charge, control, and supervision of the business. The Complaint alleges that Mr. Cugno was not in full charge, control, and supervision of PMF when it held a mortgage lender license. PMF was a licensed mortgage lender during the first six months of the audit period, July 1, 2014, through December 30, 2014. During that time, Mr. Cugno was PMR’s principal loan originator. The Complaint alleges that while Mr. Cugno was the control person in 2014, PMF engaged in two or more of the following acts: Operated a branch office without a license; Failed to maintain complete and accurate Mortgage Lending Transaction Journal; Failed to maintain complete documentation at its principal place of business; and Advertised without maintaining a record of samples of each advertisement. The significance of having committed “two or more” violations was not explained. As previously found, however, all of these charges have been established by clear and convincing evidence. Respondents contend they did not have proper notice as to which of the four acts OFR relies upon to prove this charge. But items (a) through (d) simply track Counts I through IV in the Complaint. In his response to the Requests for Admissions, except for the branch office allegation, Mr. Cugno admitted that the other allegations are true. The response to the Report states that Respondents are “embarrassed” by the auditor’s findings and that new policies and procedures will be implemented to address the deficiencies. The response acknowledges that PMF “has been without a committed and proactive compliance professional in a full time capacity for some time,” and represents that Mr. Edgar will become PMF’s Vice President of Compliance and Human Resources and apply for a license as a loan originator. Pet’r Ex. 2. At hearing, Mr. Cugno did not directly respond to the charges. Instead, he testified that he would defer to the undersigned’s judgment in deciding whether the charges are true. By clear and convincing evidence, the allegations in Count VII have been proven. Count VIII Section 494.0035(1) requires each mortgage broker business to be operated by a principal loan originator who is to have full charge, control, and supervision of the mortgage broker. PMF was a licensed mortgage broker during the last four months of the audit, January 1, 2015, through April 30, 2015. During this same time period, Mr. Cugno was the principal loan originator. The Complaint alleges that Mr. Cugno was not in full charge, control, and supervision of PMF when it engaged in two or more of the following acts: Operated a branch location without a license; Failed to maintain complete and accurate Mortgage Brokerage Transaction Journals; Failed to maintain complete documentation at its principal place of business; Advertised without maintaining a record of samples of each advertisement; Inaccurately advertised themselves as a lender; and Paid fees or commission from mortgage loan transactions to entities that were not licensed mortgage brokers or mortgage lenders. Items (a) through (f) are the six violations described in Counts I through VI of the Complaint. Although the significance of having committed “two or more” violations was not explained, each of these allegations has been proven by clear and convincing evidence. Even the response to the Report admits that Mr. Cugno did not exercise full control over the operations of the business during the audit period. By clear and convincing evidence, the allegations in Count VIII have been proven. Disciplinary Guidelines Rule 69V-40.111 adopts by reference a range of penalties that may be imposed on a mortgage loan originator and mortgage entity for violating each of the 102 statutory provisions that OFR enforces. See Form OFR-494-14. Depending on the nature of the violation, the administrative fines are categorized as Level A ($1,000.00 to $3,500.00), B ($3,500.00 to $7,500.00), and C ($7,500.00 to $10,000.00). In determining an appropriate penalty that falls within the penalty guidelines, OFR must consider the mitigating and aggravating factors set forth in subsection (3) of the rule. Mitigating factors to be considered are as follows: If the violation rate is less than 5% when compared to the overall sample size reviewed; No prior administrative actions by the Office against the licensee or control person within the past 10 years; If the licensee detected and voluntarily instituted corrective responses or measures to avoid the recurrence of a violation prior to detection and intervention by the Office; If the violation is attributable to a single control person or employee, and if the licensee removed or otherwise disciplined the individual prior to detection or intervention by the Office; If the licensee is responsive to the Office’s requests or inquiries or made no attempt to impede or delay the Office in its examination or investigation of the underlying misconduct; or Other control, case-specific circumstances. Aggravating factors to be considered in assessing a penalty are as follows: If the violation rate is more than 95% when compared to the overall sample size reviewed (sample size must be equal to or greater than 25 transactions and cover a date range of at least 6 months); The potential for harm to the customers or the public is significant; Prior administrative action by the Office against the licensee or an affiliated party of the licensee within the past 5 years; If the licensee’s violation was the result of willful misconduct or recklessness; The licensee attempted to conceal the violation or mislead or deceive the Office; or Other control relevant, case-specific circumstances. In its PRO, OFR maintains that PMF’s broker license should be revoked, and an administrative fine in the amount of $53,300.00 should be imposed on Mr. Cugno. On the other hand, Respondents’ PRO contends that revocation of the broker license is not warranted, and “a fine of no more than $10,000.00 total for all matters in the Administrative Complaint is a fair outcome.” The worksheet used by OFR in determining the proposed penalties would be helpful, but it is not in the record. Also, at hearing, neither party addressed in detail the mitigating and aggravating factors. However, testimony by OFR’s Director of the Division of Consumer Finance, Mr. Oaks, briefly explained the rationale for OFR’s proposed disciplinary action. For operating a branch office without a license, the rule calls for a penalty of $1,000.00 per day, with a maximum penalty of $25,000.00. Because this violation occurred every day during the 304-day audit period, Mr. Oaks explained that OFR is proposing the maximum penalty of $25,000.00. For failing to maintain a complete and accurate Journal at the principal office, the guidelines call for a penalty ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. Mr. Oaks testified that after reviewing all mitigating and aggravating circumstances, the maximum penalty of $3,500.00, and license revocation, are appropriate for the violations described in Count II. For failing to maintain at its principal place of business the complete documentation of each mortgage loan transaction/application for three years from the date of original entry, the disciplinary guidelines call for a fine ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. Mr. Oaks testified that OFR is extremely dependent on records when conducting a compliance examination. If complete and accurate records are not kept at the principal place of business, OFR cannot ensure that the business is operating in a lawful manner. Where there is an absence of records, there is potential for great consumer harm. Given the circumstances presented here, he proposes a $2,700.00 penalty and revocation of the license. For failing to maintain a record of samples of each advertisement for a period of two years, the disciplinary guidelines call for a fine ranging from $1,000.00 to $3,500.00 and suspension or revocation of the license. In this case, PMF had no samples of advertisements at its principal office. When no samples are maintained, OFR is unable to determine whether a licensee is engaging in misleading or deceptive advertising. For this reason, Mr. Oaks proposes a fine of $3,500.00 and revocation of the license. For engaging in misleading advertising, the disciplinary guidelines call for a fine ranging from $3,500.00 to $7,500.00 and suspension or revocation of the license. Mr. Oaks characterized PMF’s advertising after January 1, 2015, as “completely misleading” because it erroneously represented to the public that PMF was a correspondent lender. For this reason, he proposes the maximum penalty of $7,500.00 and revocation of the license. For paying a fee or commission in any transaction to a person or entity other than a lender or broker, the disciplinary guidelines call for a fine ranging from $3,500.00 to $7,500.00 and suspension or revocation of a broker’s license. Mr. Oaks explained that the licensing process is designed to protect consumers from unlicensed individuals and to ensure that only licensed individuals will be involved in the transaction. For violating the statute, Mr. Oaks proposes a fine of $4,100.00 and revocation of the license. If a principal loan originator fails to have complete control over the operations of a mortgage lender, the disciplinary guidelines call for a penalty ranging from $1,000.00 to $3,500.00. Because of the number and nature of violations, Mr. Oaks concluded that Mr. Cugno did not have control of his business and did not take adequate steps to ensure that the business was “being run lawfully.” Besides Mr. Oaks’ testimony, OFR witness Slisz, the Tampa area financial manager, also concluded there was a lack of complete control by Mr. Cugno based on loan originators “using emails not on the company server”; an “unlicensed location”; “loan originators taking freedom to advertise on their own without approval”; and PMF’s inability “to produce a log of the loans that the company received applications for.” OFR seeks the maximum penalty of $3,500.00. If a principal loan originator fails to have complete control over the operations of a broker, the disciplinary guidelines call for a penalty ranging from $1,000.00 to $3,500.00. For the reasons enunciated by Mr. Oaks and witness Slisz, OFR seeks the maximum penalty of $3,500.00. Besides the foregoing testimony, the evidence shows that there was a potential for harm to customers or the public; most of the violations proven were “serious”; PMF has one prior disciplinary action in December 2014, which was resolved by PMF surrendering its lender license and paying a $2,500.00 fine; and PMF was issued a notice of non-compliance regarding its late filing of quarterly reports for the year 2012. Pet’r Ex. 4. In mitigation, there is no evidence that any specific customer was harmed or misled. There is no evidence that the violations were the result of willful misconduct or recklessness on the part of Respondents, or that they attempted to conceal a violation or mislead or deceive OFR. The violations cited by the auditor appear to be due to a lack of oversight by management, neglect, or a failure to understand OFR regulations. Although Respondents did not detect or voluntarily institute corrective action or measures prior to the audit, there is evidence that beginning with his assumption of control of the business in 2012, and during the audit, Mr. Cugno occasionally contacted the Tampa district office seeking advice on how to comply with OFR statutes and rules. Finally, there is no evidence that PMF attempted to impede or delay the examination or investigation of the underlying misconduct, or that any customer was harmed. Considering the aggravating and mitigating factors on which the parties presented evidence, the undersigned determines that the mortgage broker license should be suspended for six months and a $20,000.00 administrative fine imposed on Mr. Cugno. Procedural Issues In their PRO, Respondents focus largely on the argument that Mr. Cugno was not qualified to represent himself or PMF, and therefore the case should be reopened to allow Respondents, with the assistance of counsel, “to make [their] record and better present the facts and the circumstances.” PRO at 16. Mr. Cugno is the owner and president of the corporation. As such, he may represent the corporation in an administrative proceeding, even though he is not an attorney. See The Magnolias Nursing & Convalescent Ctr. v. Dep’t of Health & Rehab. Servs., 428 So. 2d. 256, 257 (Fla. 1st DCA 1982)(“it is clear that self-representation by corporations is permissible in administrative hearings”). Because Mr. Cugno is not a “qualified representative” under rule 28-106.106, there is no requirement that a preliminary determination be made that he is "qualified" to represent his corporation. Likewise, the rule does not require that a preliminary determination be made that an individual, acting pro se, is qualified to represent himself. Mr. Cugno is an experienced operator of a mortgage business, having been in that field for 22 years. Besides PMF’s operations in Florida, Mr. Cugno testified that he operates “businesses” in Alabama, Tennessee, Kentucky, Minnesota, and Georgia. Mr. Cugno acknowledged receipt of the Complaint on February 6, 2017. After initially requesting that an informal telephonic hearing under section 120.57(2) be conducted to contest the application of the law, on September 28, 2017, he asked that he be given a formal hearing under section 120.57(1) to contest the factual findings in the Complaint. During the seven-month informal phase of this proceeding, Mr. Cugno elected to represent himself and the corporation. After the proceeding was converted to a formal proceeding, an Initial Order was issued on September 29, 2017, which informed Mr. Cugno that a “party may appear personally or be represented by an attorney or other qualified representative.” Notwithstanding this information, Mr. Cugno voluntarily decided to continue to represent himself and the corporation. Prior to the hearing, he participated in three depositions taken by OFR; he deposed OFR witness Quaid; he responded to discovery requests; and he served discovery on OFR. At hearing, he engaged in extensive cross-examination of the OFR auditor. Finally, in a letter to OFR dated August 19, 2015, Mr. Cugno stated that PMF has its own “legal department,” see Petitioner’s Exhibit 12; and, at hearing, he testified that PMF employed three attorneys, on at least a part-time basis, as loan originators. If these representations are true, legal advice was not far away. In any event, Respondents are not entitled to a second hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order sustaining the charges in Counts I through VIII; suspending PMF’s mortgage broker license for six months; and imposing an administrative fine on Mr. Cugno in the amount of $20,000.00. DONE AND ENTERED this 29th day of June, 2018, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2018.
The Issue Whether the Respondent committed the violations alleged in the Amended Administrative Complaint and Notice of Rights dated June 16, 2009, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The OFR is the state agency responsible for regulating mortgage brokerage and mortgage lending in the State of Florida and for licensing and regulating mortgage brokers. §§ 494.0011(1); 494.0033(2), Fla. Stat. At the time of the final hearing, Mr. Razor held an inactive mortgage broker's license. The license was inactive because Mr. Razor did not apply for a renewal of his license when it expired on August 31, 2009. His license could be reactivated should he submit an application for renewal. Mr. Razor was a member of the Florida Bar and a practicing attorney in Florida until, in an opinion issued September 11, 2007, the Florida Supreme Court ordered Mr. Razor suspended from the practice of law for a period of 18 months. See Florida Bar v. Razor, 973 So. 2d 1125 (Fla. 2007). In its opinion, the court approved the findings of fact contained in the Report of the Referee; approved the Referee's findings that Mr. Razor had violated Rules Regulating the Florida Bar 3-4.2, 3-4.3, 4-5.3(b), and 4-8.4(a); and approved the Referee's recommendation that Mr. Razor's license to practice law be suspended for a period of 18 months. Pertinent to this proceeding, Rules Regulating the Florida Bar 3.4-3 provides: The standards of professional conduct to be observed by members of the bar are not limited to the observance of rules and avoidance of prohibited acts, and the enumeration herein of certain categories of misconduct as constituting grounds for discipline shall not be deemed to be all- inclusive nor shall the failure to specify any particular act of misconduct be construed as tolerance thereof. The commission by a lawyer of any act that is unlawful or contrary to honesty and justice, whether the act is committed in the course of the attorney's relations as an attorney or otherwise, whether committed within or outside the state of Florida, and whether or not the act is a felony or misdemeanor, may constitute a cause for discipline. The Referee based his recommendation that Mr. Razor's license to practice law be suspended for 18 months on "Respondent's [Mr. Razor's] conduct in allowing his collaborator (a suspended attorney) to practice law in an attempt to extort money; his ratification of the misconduct by failing to take immediate remedial action; his attempts to cover for the suspended attorney by defending the letter during the Bar investigation; and his inconsistent defense (lack of knowledge) at the live and final hearings." These acts constitute dishonest dealing. Mr. Razor's license to practice law was suspended 30 days after September 11, 2007, or on October 11, 2007. Mr. Razor did not report the suspension to the OFR because he did not believe it to be a reportable offense.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order finding that Arthur Nathan Razor violated Section 494.0041(2)(i) and (p), Florida Statutes, and revoking his Florida mortgage broker's license. DONE AND ENTERED this 9th day of June, 2010, in Tallahassee, Leon County, Florida. PATRICIA M. HART Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 2010.
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 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.
Findings Of Fact Respondent William H. Hughes was adjudicated guilty of perjury and sentenced on November 11, 1993. This adjudication was at least peripherally related to a mortgage loan he brokered which had closed on June 21, 1989. Mr. Hughes was deposed concerning the loan on December 20, 1991, in which deposition he lied. He was indicted on May 27, 1993 and pled guilty to perjury on September 3, 1993. At all times material, William H. Hughes held individual mortgage broker license number MB 262740745. He is a Respondent herein because he was convicted of perjury. DBF was immediately notified concerning Mr. Hughes' perjury conviction. The agency did not file its amended disciplinary action until July 22, 1994. It may be inferred that there was an original complaint to amend, but its date is not of record. The agency's chief witness testified that the agency did not do an immediate field audit of Mr. Hughes' business upon notification, did not file an immediate cease and desist order against his mortgage brokerage activities, and has at no time considered Mr. Hughes continuing to operate as a mortgage broker to be an imminent threat or danger to consumers. (TR 113-116) Apparently, periodic DBF field audits since the amended administrative complaint was referred to DOAH also have not caused DBF to move to expedite the instant case or take any emergency action. Mr. Hughes operated as a sole proprietorship, license number MBB 591623417, from 1968 until May 17, 1993. The loan at issue was closed June 21, 1989. The deposition that gave rise to the perjury occurred on December 20, 1991. The plea was September 3, 1993. The adjusdication of guilt was November 11, 1993. The sole proprietorship license was current until August 31, 1994. The sole proprietorship is a Respondent in this cause because its license was in effect at all times material. On May 17, 1993, Respondent Hughes converted his sole proprietorship to a corporation in which he was sole stockholder, President, and qualifying broker with license number MB 262740745. Janeen Davis was Vice President. This corporate entity was known as, "William H. Hughes Mortgage Broker, Inc.," license number MBB 593113739. On May 27, 1993, Respondent Hughes was indicted. On September 3, 1993, he entered a guilty plea to perjury. The corporation of which he was sole principal continued to operate until September 23, 1993, when the stock was transferred to James Etheredge as sole stockholder, with Respondent Hughes as qualifying broker. Corporate mortgage brokerage license MBB 593113739, continued in effect until January 12, 1994. This corporation is a Respondent herein because its license was in effect at the time of Mr. Hughes' guilty plea and adjudication of guilt. On November 17, 1993, James Etheredge applied for a corporate mortgage brokerage license in the name of the "new" corporation, "William H. Hughes Mortgage Broker, Inc.," owned exclusively by Etheredge, with Janeen Davis as qualifying broker instead of Respondent Hughes. On November 23, 1993, Respondent Hughes was adjudicated guilty of perjury and sentenced. On January 12, 1994, a new corporate mortgage broker license, number MBB 593113739-001, was issued to the new corporate entity. Respondent Hughes continued to work for the new firm as a mortgage broker. This corporate license, number MBB-593113739- 001, was renewed September 1, 1994 and is current through August 31, 1996. That licensed corporation is not a Respondent herein and DBF has stipulated that it has no charges or evidence against it. (TR 19-21; 47-48; 50). In 1989, William Neufeld had come to Respondent Hughes seeking a mortgage loan for a condominium located at B-801 Grand Mariner, Destin, Florida. Sugar Sands Development Corporation was purportedly selling the condominium to Neufeld. The purported purchase price was approximately eight hundred thousand dollars ($800,000). Appraisals were provided to Respondent Hughes by the Seller to verify the value of the property. Respondent Hughes forwarded Neufeld's mortgage loan application to Carteret Savings Bank, which then accepted the loan. During this period of time, Carteret regularly called for a review appraisal for every loan, regardless of who did the original appraisal. Carteret regularly ordered a review from a different appraisal company to make sure that property valuation was true and accurate. It is inferred that Carteret performed its own separate appraisal on the B-801 Grand Mariner condomimium as it did in every other case. The parties to the loan brokered by Respondent Hughes were Sugar Sands Development Corporation as Seller, William Neufeld as Purchaser, and Carteret Savings Bank as Lender. Carteret Savings Bank funded the mortgage for the condominium after its own investigation and upon agreed terms. Respondent Hughes personally brokered the mortgage loan between William Neufeld and Sugar Sands Development Corporation, which was funded by Carteret Savings Bank. He received a $20,475 commission therefor. His commission amount was based upon points, which was in no way remarkable in the mortgage business. William Neufeld subsequently defaulted on the loan. At the time of the transaction, Respondent Hughes knew that the condominium was owned by an entity named Altus Bank prior to its transfer to Sugar Sands Development Corporation. On December 20, 1991, Respondent Hughes was deposed in a civil action resulting from Neufeld's default, Case No. 91-30398-RV, Carteret Savings Bank, F.A., v. First American Title Insurance Co., Inc., et al., in the United States District Court for the Northern District of Florida, Pensacola Division. In his deposition, Respondent Hughes testified as follows: Q: When, if ever, did you find out an entity by the name of Altus Bank was involved in these transactions? A: I don't know if -- to my knowledge, I did not know -- Altus wasn't involved in our transaction. We never dealt with Altus at all. So, to my knowledge, I don't know if I knew Altus was even involved in this unit until after this had already closed, because here again we were presented a contract of sale, we dealt directly with our customer, the buyer and really never had an occasion to even deal with the seller. * * * Q: You did not know, you had not heard any rumors, you had no indication whatsoever that Altus Bank had any interest in this unit at any time prior to the FBI coming to talk to you a year ago? A: No. I think that's the first time I knew that Altus was involved. Respondent Hughes was subsequently indicted on May 27, 1993 in Case No. 93-03069-01/RV, United States v. William H. Hughes, in the United States District Court for the Northern District of Florida, Pensacola Division. The indictment contained nine felony counts relating to an alleged "flip transaction" on the subject condominium involving Altus Bank, Sugar Sands Development Corporation as "straw man", and William Neufeld, the purpose of which was to artificially inflate the condominium's real property value and obtain an inflated loan amount of approximately $800,000 in loan proceeds for property truly valued at only approximately $385,000. The indictment alerted Carteret Savings Bank, which has since gone out of business, and other lending institutions to audit Respondent Hughes' transactions with them and to otherwise institute quality control reviews of loans he had placed with them. No discrepancies or dishonest dealings of any kind were uncovered by these institutions. On September 3, 1993, Respondent Hughes pled guilty to one count of engaging in perjury in violation of 18 U.S.C. Section 1623, based exclusively upon his deposition testimony quoted supra. The remaining eight felony counts were dismissed. These counts were the counts alleging that Mr. Hughes knew of the "flip transaction" aspects of the loan. Exhibit P-9 shows the foregoing to have been a plea bargain which encompassed evidentiary factors. It was not merely a "plea of convenience." At formal hearing herein, Respondent Hughes admitted that knowing the question in the deposition, he gave the wrong answer. He has accepted responsibility for that wrong answer. However, he credibly denied any knowledge that a flip transaction was intended. He explained that he had understood that the loan amount was determined upon independent evaluations and appraisals which included projected renovation costs to be expended to conform the condominium to the needs of the Purchaser, Mr. Neufeld. On November 23, 1993, a federal judgment was entered against Respondent Hughes. Pursuant to that judgment, Respondent Hughes was adjudicated guilty of violating 18 U.S.C. Section 1623 by engaging in perjury. He was ordered to pay a special assessment of $50.00; to pay $1,724.50 in juror fees; was placed on probation for a term of three years; and was placed on home detention for a period of six months. Respondent Hughes' probation is not scheduled to end until November 1996. Respondent Hughes has continued to practice as a mortgage broker without interruption during the eighteen months since his conviction and is currently employed as a mortgage broker by William H. Hughes Mortgage Broker, Inc., the firm reconstituted with Mr. Etheredge as the sole stockholder and Janeen Davis as its qualifying agent as of January 12, 1994. See, supra. Respondent Hughes has practiced his profession since 1968 (27 years) with only this one bad incident on his record. Respondent Hughes continues to enjoy a good reputation in his wider mortgage brokerage business community, although the reputation testimony herein is diminished by the fact that many of those who have dealt with him and who have expressed reputation opinions to the witnesses who testified were not aware of his perjury conviction or its circumstances. Respondent Hughes' reputation for truth and veracity and for fair dealing in the mortgage brokerage community as it currently exists within the Florida Panhandle has remained "good" and "very good" since knowledge of his perjury conviction has become known in that community. Two mortgage brokers, two employees of lending institutions, one attorney and one bank officer testified as fact witnesses that they were willing to deal with Mr. Hughes as a mortgage broker in the future, despite their knowledge of his perjury conviction. Two of these persons were formerly employed by Carteret Savings Bank and were fully aware of all circumstances of his criminal case. DBF's only expressed reason for requesting license revocation instead of other permissible disciplinary penalties was its perception that the perjury in this case was directly related to the transaction of mortgage brokerage business.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order that: Finds Respondent Hughes individually, license MB 262740745, is guilty of the charged offense; Assesses an administrative fine against Respondent Hughes individually for $3,000, payable within 10 days of entry of the final order; and Places Respondent Hughes on probation until November 30, 1996, termination of probation to be conditioned upon his successful completion of his federal sentence; his practicing during probation under the supervision of a broker approved by DBF, and his being subject during this probation to unannounced DBF audit and review of all his transactions; and further providing that any violation of the final order, any discrepancy in his accounts, or any violation of Chapter 494 F.S. during his probationary period would subject him to immediate and summary revocation of his license. RECOMMENDED this 29th day of June, 1995, at Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 1995. APPENDIX TO RO 94-5114 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: 1-8, 24-26 are covered in FOF 1-8 as necessary. Otherwise accepted but not adopted. 9-20, 22-23 Accepted, except that unnecessary, subordinate and/or cumulative evidence has not been adopted. 21, 27-31 Rejected as conclusions of law or legal argument, not proposed findings of fact Respondent's PFOF: 1-7 are introductory and labelled "Statement of the Case." They are covered within the "Preliminary Statement" of the Recommended Order. 8-17, 20-21, Accepted except that unnecessary, subordinate 23, 25-27 and/or cumulative evidence has not been adopted. 18, 24 Rejected as a conclusion of law, not a proposed finding of fact 19 Irrelevant 22 Accepted only as modified and covered in FOF 27-29 COPIES FURNISHED: Elise M. Greenbaum Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 J. Ladon Dewrell, Esquire Post Office Box 1510 Fort Walton Beach, Florida 32541 Honorable Robert Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350
The Issue Whether the application of the Respondent Melvin Haber for a mortgage broker's license should be approved or denied.
Findings Of Fact Respondent Melvin Haber applied for registration as a mortgage broker by filing an application for registration as a mortgage broker on December 20, 1976. On January 14, 1977, Petitioner issued to Respondent its Notice of Intent to Deny Respondent's Application for registration as a mortgage broker. The reasons for such denial were set forth in an accompanying document entitled "Administrative Charges and Complaint." Petitioner Division of Finance had determined that Respondent Melvin Haber did not meet the proper qualifications necessary to be licensed as a mortgage broker and that he had, through Guardian Mortgage and Investment Corporation, charged and received fees and commissions in excess of the maximum allowable fees or commissions provided by the Florida Statutes; and although he had stated otherwise on his application, Respondent in fact had been charged in a pending lawsuit with fraudulent and dishonest dealings; and had demonstrated a course of conduct which was negligent and or incompetent in the performance of acts for which he was required to hold a license. By letter dated January 19, 1977, to Mr. Joseph Ehrlich of the Comptroller's Office, Tallahassee, Florida, Petitioner received a request from the Respondent Melvin J. Haber in which he acknowledged receipt of his rejection for mortgage broker's license and stated, "I received notice today of my rejection for my mortgage broker's license. I would, therefore, withdraw my application and re- quest return of $75.00 as I will not answer the rejection as I can't afford an attorney at this time." A Special Appearance to Dismiss Complaint was entered on February 11, 1977. The grounds are as follows: "1. The Department of Banking and Finance does not have jurisdiction over this Respondent. There is no jurisdiction in any administrative proceeding over this Respondent. There is no pending application for any mortgage broker's license by this Respondent. The application originally filed for the mortgage broker's license was withdrawn on January 19, 1977. A copy of the letter withdrawing application is attached hereto as Exhibit A. The proceedings are moot and would serve no useful purpose. Permitting this tribunal to proceed on a non-existent request for broker's license would deny to the Respondent due process of law, equal protection of the law, and his rights under the State and Federal Constitutions applicable thereto." On March 4, 1977, the Division of Administrative Hearings received a letter from Eugene J. Cella, Assistant General Counsel, Office of the Comptroller, State of Florida, requesting a hearing in this cause be set at the earliest practical date, and enclosed in the letter requesting a hearing was a copy of the Division of Finance's Administrative Complaint and a copy of the Respondent's Special Appearance to Dismiss the Complaint. A hearing was set for April 22, 1977, by notice of hearing dated March 30, 1977. A letter was sent by Irwin J. Block, Esquire, informing the attorney for the Petitioner that the Respondent "intends to permit the matter to proceed solely upon the written Special Appearance to Dismiss Complaint heretofore filed." Evidence was submitted to show that between May 29, 1973 and continuing through November 25, 1976, Guardian Mortgage and Investment Corporation and Melvin Haber as Secretary/Treasurer charged and received fees and commissions in excess of the maximum allowed fees or commissions in violation of the Florida Statutes and the Florida Administrative Code. Respondent's application for registration as a mortgage broker indicated that Petitioner was not named in a pending lawsuit that charged him with any fraudulent or dishonest dealings. However, on August 5, 1976, a suit was filed in Dade County, Florida, which charged the Petitioner and others with fraud in violation of the Florida Securities Law. The application was filed by Respondent, was processed by Petitioner and a Notice of Intent to Deny Respondent's Application for Registration was filed together with Administrative Charges and Complaint. The Division of Administrative Hearings has jurisdiction upon request of a party for a hearing once an application has been received and the Division has investigated and fully considered the application and issued its Notice of Intent to Deny and filed a Complaint on the applicant. In this cause the question of whether the applicant is entitled to a refund of fees also must be resolved. An orderly procedure to finalize the resolution of the issues is desirable and necessary. The Proposed Order filed by the Petitioner has been examined and considered by the Hearing Officer in the preparation of this order.
Recommendation Deny the application of applicant Melvin Haber for a mortgage broker's license. Refund the Seventy-Five Dollar ($75.00) fee Respondent paid upon filing the application. DONE and ORDERED this 31st day of May, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard E. Gentry, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Irwin J. Block, Esquire Fine, Jacobson, Block, Goldberg & Semet, P.A. 2401 Douglas Road Miami, Florida 33145
Findings Of Fact 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
