Findings Of Fact The Petitioner is an agency of the State of Florida charged, under Chapter 475, Florida Statutes, with enforcing the licensure standards embodied in Chapter 475, and regulating the manner of practice of licensed real estate brokers pursuant to the standards enumerated in Chapter 475, Florida Statutes and the rules promulgated pursuant thereto. The Respondent, Stewart J. Love, at all times pertinent hereto, has been a licensed real estate broker in the State of Florida, holding license number 0145076. That license is issued to Stewart J. Love, t/a Love Realty, 2120 Westfield Road, Pensacola, Florida 32505. A previous Administrative Complaint was filed against the Respondent by Petitioner on June 23, 1988. That Complaint, in essence, also charged two violations of Section 475.25(1)(b), Florida Statutes involving alleged fraud and misrepresentation, concealment, dishonest dealing, culpable negligence and the like It involved two separate real estate transactions which the Respondent engaged in. The first transaction concerned a piece of property Respondent purchased with an existing mortgage and shortly thereafter resold. The Respondent was charged with failing to assume the existing mortgage and, in essence, with not keeping the mortgage payments current, with receiving funds from his purchasers without properly accounting for them in proper escrow accounts and with failing to formally consummate the sale, as well as with issuing a check to the mortgagee bank holding the delinquent mortgage upon insufficient funds. With regard to the other transaction, the Respondent, in essence, was charged with purchasing a piece of property, recording his warranty deed from the sellers, but never properly paying the sellers monies that were due them for the property nor carrying through with the promise to assume the mortgage on that piece of property. That complaint culminated in DOAH Case No. 88-4570, in which the Respondent was charged in pertinent part with violations of Section 475.25(1)(b), Florida Statutes. During the course of that proceeding the Petitioner and Respondent entered into negotiations such that a stipulated adjudication of that proceeding by the agency was effected. The Respondent neither admitted nor denied the charges, but rather agreed to a fine of $500.00, as well as to making restitution of all monies owed to the alleged injured parties and to having his license being placed on probationary status for a period of one year for "culpable negligence" in violation of 475.25(1)(b), Florida Statutes. A final order is in evidence as part of Petitioner's Exhibit 1 in this proceeding. Donald and Teresa Winingar, husband and wife, in 1986 found themselves in rather straitened financial circumstances. Their home mortgage was in arrears and was threatened by foreclosure by the mortgagee. The ultimate result of their financial problems caused them to search for a new place to reside. They located six acres of land owned by Donna Day Bowers. The acreage had a small frame house approximately 20 years of age on it. They began negotiating with Ms. Bowers concerning purchasing the property from her The Winingars discussed the price with Ms. Bowers and ultimately a purchase price of approximately $12,000.00 was agreed upon. The Winingars realized that they could not pay cash for the property but would have to secure financing arrangements in order to purchase it. The Winingars had approximately $4,500.00 in cash and at first attempted to have the balance financed by the owner and seller, Ms. Bowers. That arrangement did not come to fruition and so the Winingars searched for another source of funds in order to finance the purchase of the Bowers property in this search they somehow came in contact with the Respondent Stewart Love, a real estate broker. After negotiations with Mr. Love he agreed to finance the purchase of the Bowers property for the Winingars. This resulted in a verbal agreement entered into between the Winingars and the Respondent whereby the Winingars would pay Love $4,500.00 in cash and he would finance the balance of $8,500.00 of the purchase price by a mortgage. Love, or the corporation of which he was president and part owner, Courthouse Investments, Inc., would collect interest on the $8,500.00 mortgage and note from the Winingars. Love also assessed the Winingars a $2,000.00 fee for handling the transaction, the purpose of the fee being unclear. It was apparently some sort of "broker's fee," although Love did not represent the Winingars as a realtor. On October 16, 1986 Respondent entered into an agreement called a "Warranty Deed to Trustee Under Land Trust Agreement pursuant to Section 689.071, Florida Statues," with the seller of the property, Donna Day. That instrument conveyed title to the property to the Respondent as Trustee in fee simple. The "warranty deed to trustee" document granted the trustee, Love, full power and authority to sell, lease, encumber and otherwise manage and dispose of the property in accordance with the terms of that instrument and with a trust agreement. The trust agreement itself, providing for powers and duties of the trustee and beneficiary of the trust is not evidence and the terms of it are unknown. In any event, having purchased the property from Donna Day (also known as Donna Day Bowers) the Respondent the following day, October 17, 1986, agreed to sell the property to Donald and Teresa Winingar. The Winingars on that day gave the Respondent $4,500.00 in cash as a down payment for the Bowers property. Thereafter, on or about October 31, 1986, the Winingars executed a mortgage note for the amount of $8,500.00 remaining on the purchase price, payable in favor of Courthouse Investments, Inc., a corporation partially owned by and represented by the Respondent Love and of which the Respondent was President. That mortgage note provides that the note was to be for a principal balance of $8,500.00 with payments of $130.00 per month for 265 months at an interest rate of 18% per annum. The note provided for no prepayment penalties and for $6.00 for late fees for each late payment. Additionally, the Winingars executed a promissory note payable to Stewart J. Love for the above-mentioned fee, in the amount of $2,000.00. That note provided that one balloon payment was to be due six years from October 30, 1986 at the rate of 12% per annum, payable in one payment. The Winingars began making monthly payments on the mortgage note of $130.00 per month and made those payments to Stewart J. Love. They were frequently behind in their payments but made payments sporadically until approximately May of 1988. When the Winingars and Mr. Love first engaged in negotiating the financing arrangement, Love informed the Winingars that he would have his attorney draft an agreement whereby the property would be held in trust by Love on behalf of the Winingars allegedly so that it could not be attached by any creditors of the Winingars. This was apparently because the Winingars were involved in a foreclosure action concerning their previous residential property and feared a deficiency judgment from that foreclosure proceeding which might endanger their rights to the land in question. Whether or not their credit was in such peril, Love assured them that he would obtain title to the property from the seller in the form of a trust arrangement, with the beneficial interest to be conveyed to the Winingars, in order to allegedly protect their interest in the six acres from the claims of creditors. Love then at some point showed a photocopy of a document entitled "Warranty Deed to Trustee Under Land Trust Agreement pursuant to Section 689.071, Florida Statutes," to the Winingars and advised them that form of agreement would be drafted to represent their mutual arrangement regarding the sale and ownership of the property, pending final payment by the Winingars. After the initial down payment of $4,500.00 was made by the Winingars, however, they had to make repeated demands of the Respondent for the execution of an agreement or contract to to formalize their arrangement regarding the purchasing of the Bowers property. The purchase arrangements from October 1986 to May 1987 were merely verbal aside from the execution of the mortgage note in question. Finally, on May 1, 1987, a document entitled "Agreement to Convey Beneficial Interest" was signed and executed by the Respondent as President of Courthouse Investments, Inc., "beneficiary," and the Winingars. That agreement provided, in pertinent part, that the total purchase price should be $8,500.00, which acknowledged, in effect, that the remaining $4,500.00 of the originally agreed upon purchase price had already been paid. The agreement also provided that when the principal sum of the purchase price had been paid in full that the beneficiary would instruct the trustee (Stewart Love) to deliver to the grantees (the Winingars) a warranty deed showing good and marketable title to the property. The beneficiary held the beneficial equitable interest in the property with the legal title being held by the Respondent as trustee. The beneficiary was Courthouse Investments, Inc., of which the trustee, the Respondent, was the President. He signed the agreement to convey beneficial interest as the President of that corporation. The agreement also provided that the grantees would be, permitted to go into possession of the property immediately on the date of its execution (May 1, 1987) and would assume all liability for insurance, taxes and maintenance after that date. ,It was also expressly agreed that all oil, gas and mineral rights were to be conveyed to the grantee. Presumably, that meant that all gas and mineral rights were to be conveyed upon the conveying of the warranty deed to the grantees when the purchase price was paid in full. In any event, the agreement clearly provided that when the principal sum of the purchase price was paid in full that a warranty deed conveying good and marketable title would be immediately conveyed to the grantees and, in that connection, the mortgage note already executed at that time by the grantees and the respondent provided that there would be no penalty for early payment of the purchase price or principal amount of the mortgage note referenced in the Agreement to Convey Beneficial Interest. This Agreement to Convey Beneficial Interest reveals additionally that Courthouse Investments, Inc. was the beneficiary of the trust set up by the above-mentioned warranty deed instrument from the original owner to the Respondent, as well as the fact that the Respondent is the President of the beneficiary corporation. Thus, there is no doubt, based upon the terms of the Agreement to Convey Beneficial Interest and the manner in which it was executed by the Respondent as President of the beneficiary corporation, that the Respondent knew that the parties thereto had agreed that all oil, gas and mineral rights were to be conveyed to the grantee upon the payment of the principal sum of the mortgage involved and that the trustee (the Respondent) would be obligated to transfer fee simple title to the grantees by warranty deed upon full payment, at any time, by the grantees. The "Warranty Deed to Trustee . . . " referenced above, however, clearly reveals that the seller, Donna Day (a/k/a Donna Day Bowers) had retained one-half the mineral rights and thus neither the Respondent/Trustee nor the beneficiary corporation had any ability to convey all gas and mineral rights to the grantees simply because the Respondent as trustee with legal title and the beneficiary corporation, the holder of equitable title, only owned one-half of the oil, gas and mineral rights. Since the Respondent/trustee arranged and conducted the purchase transaction with Ms. Bowers whereby he took fee simple title as trustee to the property in question under an instrument which revealed on its face that Ms. Bowers retained half the mineral rights, and since that same Respondent executed the agreement to convey beneficial interest (analogous to a contract for deed) to the Winingars as president of the beneficiary corporation which was the Grantor under that instrument purporting to convey all oil, gas and mineral rights (upon payment of the full purchase price), the Respondent is chargeable with knowledge that the representation concerning oil, gas and mineral rights contained in the Agreement to Convey Beneficial Interest did not accurately represent the ownership situation with regard to those oil, gas and mineral rights. After the Winingars made the initial down payment of $4,500.00 cash in October 1986 and during the time when they were making repeated demands for the execution of a contract to formalize their agreement regarding purchasing of the Bowers property, Mr. Love brought a representative of a financial institution known as "C&S Family Credit" (C&S) to the Winingars' home, sometime in January 1987. This representative and the Respondent informed Teresa Winingar that C&S Family Credit was considering the purchase of their mortgage from the Respondent. The Respondent and the C&S representative, however, advised Ms. Winingar to continue making her monthly payments of $130.00 to the Respondent and not to C&S. The Following year, in May, 1988, Teresa Winingar went to the Respondent's office to pay off the balance of the $8,500.00 mortgage note. Mr. Love informed her at that time that he could not accept the payoff because he did not have a clear title to the property to transfer to the Winingars at that time. The Agreement to Convey Beneficial Interest required the Respondent to transfer marketable title by general warranty deed upon tender of the payoff of the principal balance on the mortgage note. This he did not do. Thereafter, in June of 1988, a representative from C&S again visited the Winingars at their home. This time he informed Mrs. Winingar that his company was about to foreclose on the property at issue because a mortgage on the Winingar's property was in arrears. This was a mortgage executed by the Respondent in favor of C&S as mortgagee and which encumbered the property the Winingars were purchasing. At some point after that June 1988 visit by the C&S representative, C&S filed a foreclosure action against Stewart J. Love and the Winingars. Prior to the May 1988 offer by Mrs. Winingar to pay off the mortgage note, the Respondent's because he could not convey clear title, and the visit by the C&S representative informing Ms. Winingar of the delinquency of the Respondent's mortgage, the Winingars had no knowledge that the Respondent had executed a mortgage on their property in favor of another party. The mortgage executed in favor of C&S encompassed several pieces of property owned by the Respondent, including the piece of property being purchased by the Winingars. The evidence does not reflect that the Respondent made any arrangements with C&S to obtain a partial release of that mortgage as to the Winingar's property at such point as they should tender full payment of the balance of their purchase money mortgage note. While the Respondent, as trustee and holder of fee simple title to the Winingars' property might have had legal authority to mortgage the property to C&S, he was equally obligated under the agreement to convey beneficial interest to insure that their equitable interest in the property was protected, such that he would be able to convey good and marketable title by warranty deed upon the payment by the Winingars of the principal sum of the purchase price. This he was unable to do because he had failed to make arrangements with C&S for a partial release of mortgage or other means of insuring that the Winingars' property was unencumbered at the point of their tendering payment of the remaining purchase price. This negligent failure to insure that the Winingars' equitable interest in the property was protected resulted in the foreclosure action filed by C&S against the Respondent and the Winingars' interest in the property because the Respondent had not made payments on the C&S mortgage in a timely manner. The conveyance of fee simple title to the Respondent by the "Florida Land Trust Agreement" containing the reservation in the original owner of one- half of the oil, gas and mineral rights was recorded, so that any prospective purchaser or his representative searching the title of the subject property could have determined that the Respondent only owned one-half of the mineral rights to the property. Nevertheless, the Winingars were under the impression that they were to receive all mineral rights to the property. This impression may have arisen from the fact that the clause in the agreement to convey beneficial interest provides that . . . "All oil, gas and mineral rights are to be conveyed to the grantee." This agreement appears to be a form or "fill-in- the-blank" agreement prepared by the Respondent himself and not an attorney. Thus, it appears that the mineral rights clause referenced above is a "standard one" which was probably inadvertently left in that form in the agreement when it was executed due to the Respondent's negligence. It has not been established that he intentionally misrepresented the state of his ownership of mineral rights which he would be able to convey to the grantees. In fact, some eighteen months after the original purchase transaction between the Winingars, the Respondent and Courthouse Investments, Inc. was entered into, the Respondent executed the renewal of a preexisting oil lease with regard to the subject property. He, or his corporation, collected the sum of $238.00 lease payment as a result of that renewal. At the time of that lease renewal the Respondent still had legal title to the property and one-half of the mineral rights. This would not have been the case, however, had he timely transferred title to the Winingars in May of 1988 when they tendered payment in full of the remaining balance of the purchase price and at which point he was unable to convey marketable title for the reasons delineated above. In any event, the Winingars were shown to have been entitled to the Respondent's mineral rights at the point of their tender of full payment of the remaining purchase price in May of 1988, at which point title should have been transferred, together with the mineral rights held by the Respondent, which did not occur. As a result of the Respondent's failure to convey title upon the fulfillment of the condition in the above-referenced agreement regarding payment and the dispute which arose between the parties concerning the mineral rights and the proceeds from the lease, the Winingars apparently obtained counsel and instituted legal proceedings against the Respondent of an undisclosed nature. Criminal proceedings were instituted by the State's attorney against the Respondent. These proceedings resulted in a plea of "Nolo Contendere" by the Respondent in order to avoid the expense and anguish of trial and was a negotiated settlement of the criminal charges. Through the plea negotiation arrangement which was accepted by the Court, on February 14, 1990, an order withholding adjudication of guilt and placing the defendant (Respondent) on probation was entered in the case of the State of Florida v. Stewart J. Love, Case NO. 88-5765 CFA. See Petitioner's exhibit (3) in evidence. That order was entered pursuant to the plea of Nolo Contendere entered by the Respondent to the offense of petit theft. The subject matter of the theft charge was the $238.00 lease payment which the Respondent had maintained he or his corporation was entitled to and which the Winingars believed they were entitled to. In any event, the Respondent was placed on probation for a period of six months and was ordered to pay restitution in the amount of the $238.00 to the Winingars. He was also ordered to pay certain costs and was ordered to set a firm closing date by which the Winingars could obtain clear title to the property upon their payment of the balance due, as well as applicable closing costs, including one- half title insurance. The Respondent was ordered by the Court to attend and assist in the closing of the transaction. The Court also ordered that the Respondent would not be liable to clear any encumbrances to the title to the property which had been caused by the Winingars. Ultimately, the Winingars failed to tender the remaining purchase price and therefore the closing never occurred.
Findings Of Fact The Respondent has at all times material to this matter been licensed by the Board of Real Estate as a real estate broker-salesman. For approximately the past year, she has been employed as a broker-salesman with Century 21 Realtors in Fort Walton Beach. Previously, for a period of approximately 18 months, she was employed with Kruse Realty, Fort Walton Beach, Florida, in the same capacity. During November, 1979, Mr. and Mrs. L. C. Lyons visited Kruse Realty. The Lyonses were seeking to purchase a lot upon which they could build a house. They were introduced to the Respondent. The Lyonses advised the Respondent that they had been approved for a loan by the Farmers Home Loan Administration (FHLA) for the financing of construction. They advised the Respondent that they would be able to spend only $6,000 for a lot and that the property would need to qualify for FHLA financing. The Respondent told the Lyonses that she had lots available that had been approved for FHLA loans. One of them was located in Wynn Haven Beach, and the other was owned by a Mr. Jack Piediscalzi. The Lyonses visited the Wynn Haven Beach property and decided to purchase a lot. This resulted in a contract for sale being signed by the Lyonses. The Lyonses specifically requested that the contract be made contingent upon their securing financing from FHLA. After the Lyonses executed the contract, Mrs. Lyons' father visited the lot. He observed some low-lying areas that he felt would cause building problems. Mrs. Lyons' father also visited the Piediscalzi property and urged that it would provide a better building site. The Lyonses decided to follow this advice, and they asked the Respondent if they could cancel their contract to purchase the Wynn Haven Beach property, and purchase one of the Piediscaizi lots. The Respondent requested that the Wynn Haven Beach property owner cancel the contract, which he did. Thereafter, the Lyonses entered into a contract to purchase a lot from Mr. Piediscalzi. The contract was executed on November 19, 1973. The Lyonses advised Respondent that they would pay for the lot with cash, but that they would be financing home construction through the FHLA loan. They inquired as to whether the contract should be made contingent upon FHLA approval. The Respondent advised the Lyonses that such a contingency clause would not be necessary because FHLA had already approved loans for construction of houses on the Piediscalzi lots. The day after they executed the contract to purchase one of the Piediscalzi lots, the Lyonses presented a loan approval package to FHLA. The FHLA representative immediately advised the Lyonses that the property would not qualify for FHLA financing because the road on which the lot fronted was merely an easement, not a county road as required by FHLA regulations. The FHLA representative advised the Lyonses that they were the first people to present a proposal for FHLA financing of one of the Piediscalzi lots. Mrs. Lyons called the Respondent later that same day. The Respondent's response was, "Well honey, what are you going to do with two lots?" The Respondent indicated that she would speak to her employer. Later, Mrs. Lyons spoke to Mr. Chamberlin, a real estate salesman who is also employed at Kruse Realty. Mr. Chamberlin advised that FHLA financing could be secured and that he would call her back within three days. He did not call her back in three days, and Mrs. Lyons contacted him. He advised that the property had not been approved, but that he would take steps to accomplish it. Mrs. Lyons also spoke to Mr. Kruse, the owner of Kruse Realty. Time was critical to the Lyonses because their FHLA loan package needed to be approved before available loan funds were distributed to other qualified purchasers. The steps that would need to be taken to secure FHLA financing were never accomplished, and the Lyonses did not secure the financing that they were seeking. Kruse Realty did not offer to compensate the Lyonses in any manner. Mrs. Lyons ultimately turned the property over to her father, who sold it. Mrs. Lyons filed a complaint with the Board of Real Estate, and with the Fort Walton Beach Board of Realtors. Mr. Chamberlin from Kruse Realty contacted Jack Piediscalzi sometime prior to November, 1979, about the prospects of Mr. Piediscalzi subdividing and selling his property. Mr. Piediscalzi decided that he would like to sell the property in parcels, and he signed an exclusive contract with Kruse Realty to handle the sales. Mr. Piediscalzi left details of dividing the property to Kruse Realty. Kruse Realty decided to sell the property through "meets and bounds sales" rather than by subdividing the property into lots as required by local planning and zoning regulations. A road was constructed through the property, and efforts were made to dedicate the road to Okaloosa County. The County did not, however, accept the road. Mr. Piediscalzi dealt primarily with Mr. Chamberlin at Kruse Realty. He did not deal directly with the Respondent. The Respondent was advised by Mr. Chamberlin and Mr. Kruse that they had talked to personnel at FHLA and that the property would qualify for FHLA loans. The Respondent saw two building permits that had been issued for lots on the property. The Respondent inquired of Mr. Kruse whether the property met local subdivision requirements, but she was assured that because it was being sold by "meets and bounds," it was not within subdivision requirements. The Piediscalzi-Lyons transaction was the first transaction in which the Respondent had dealt with an FHLA loan. The Respondent did not know specific FHLA requirements. She was not aware that the road through the Piediscalzi property had not been dedicated to Okaloosa County, nor that such dedication was required. The Respondent ceased dealing with the Lyonses after they advised her that FHLA had not approved their loan. Thereafter, the Lyonses dealt with Mr. Chamberlin and Mr. Kruse. The Respondent sought to cancel the Lyons-Piediscalzi contract, and she returned the $240 commission that she had received for the sale to Kruse Realty in January, 1980. She sought to get Kruse Realty to buy the property back, and she was willing to by up to one-third of it. Her employer was not, however, willing to purchase the property, nor to rescind the contract or refund commissions.
The Issue The issues in this case are whether Respondent violated Sections 494.0043(1)(b), 494.0038(1)(a) and (b)1, and 494.0038(2)(a), Florida Statutes (1997), by failing to provide a mortgagee's title insurance policy; by obtaining a mortgage broker fee without a written agreement; and by failing to disclose the receipt of rates, points, or fees on behalf of a lender; and, if so, what, if any, penalty should be imposed. (All chapter and section references are to Florida Statutes (1997) unless otherwise stated.)
Findings Of Fact Petitioner is the state agency responsible for regulating mortgage brokers in Florida. Until September 1999, Respondent was licensed in the state as a mortgage broker pursuant to license number MB9804519. Respondent's license became inactive when Respondent did not renew her license. At all times material to this proceeding, Respondent was the sole owner and operator of Blackstone. Blackstone is licensed in the state as mortgage brokerage business pursuant to license number MBB9901308. On January 8, 1996, Mr. Brian S. Carter and Ms. Lisa G. Carter closed on the purchase of real property located at 1503 Mobile Avenue, Holly Hill, Florida 32117. A non-institutional lender provided a purchase money second mortgage of $19,100 through Karlis and Uldis Sprogis, as co-trustees of the K. E. Sprogis Trust. Respondent was the mortgage broker responsible for the loan in the Carter transaction (the "Carter loan"). On November 12, 1995, Respondent entered into a mortgage brokerage contract with the Carters on behalf of Blackstone. Respondent failed to obtain, or retain in the Carter loan file, a written receipt from the non-institutional lender for the title policy, an opinion of title by an attorney licensed to practice law in Florida, a binder of the title insurance or a conditional opinion of title, or a waiver thereof by the non- institutional lender. In her Petition for Hearing, Respondent admits the foregoing findings pertaining to the Carter loan. On July 11, 1996, Ms. Kay George closed on the purchase of real property located at 2753 Foxdale Drive, Deltona, Florida 32738. Ms. George obtained a purchase money first mortgage in the amount of $56,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the George transaction (the "George loan"). On June 15, 1996, Respondent entered into a mortgage brokerage contract with Ms. George on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by Ms. George would not exceed $400. However, the contract disclosed that Respondent would receive between $500 and $2,000 in additional compensation from the lender. The loan-closing documents in the George loan disclose that Respondent received additional compensation of $1,140 comprised of $840 in loan origination fees and $300 in processing fees. The mortgage broker contract failed to disclose the loan origination and processing fees paid by the lender to Respondent. On December 29, 1997, Mr. Roy J. Piper and Ms. Laura A. Piper closed on the purchase of real property located at 30 Arrowhead Circle, Ormond Beach, Florida 32174. EMB Corporation ("EMB") provided a purchase money first mortgage of $68,400. Respondent was the mortgage broker responsible for the loan in the Piper transaction (the "Piper loan"). On December 1, 1997, Respondent entered into a mortgage brokerage contract with the Pipers on behalf of Blackstone. The mortgage broker contract failed to state the amount of the mortgage brokerage fee to be paid by the Pipers. The contract also failed to disclose any additional compensation Respondent was to receive from EMB. The closing documents show that EMB paid Respondent $1,926.25 in additional compensation as a "broker service release premium." On April 9, 1998, Ms. Sunday S. Reiland closed on the purchase of real property located at 300 Chipeway Avenue, Daytona Beach, Florida 32118. Ms. Reiland obtained a first mortgage in the amount of $96,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Reiland transaction (the "Reiland loan"). On March 9, 1998, Respondent entered into a mortgage brokerage contract with Ms. Reiland on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by Ms. Reiland would not exceed $250. However, the contract disclosed that Respondent would receive between $960 and $3,000 in additional compensation from the lender. The loan closing documents in the Reiland loan disclose that Respondent received additional compensation of $730 comprised of a $480 "cash out fee" and a $250 processing fee. The mortgage broker contract failed to disclose the "cash out fee" and processing fee the lender paid to Respondent. On April 23, 1998, Mr. Brian M. Reigel closed on the purchase of real property located at 931 Aspen Drive, South Daytona, Florida 32119. Mr. Reigel obtained a first mortgage in the amount of $39,425 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Reigel transaction (the "Reigel loan"). On April 8, 1998, Respondent entered into a mortgage brokerage contract with Mr. Reigel on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee for the Reigel loan would not exceed $550. However, the contract also stated that Respondent would receive additional compensation from the lender ranging between $0 and $3,000. The loan closing documents in the Reigel loan disclose that Respondent received additional compensation of $1,038 from the borrower's funds for a loan discount fee and a processing fee. On October 16, 1998, Mr. William M. Netterville, III, closed on the purchase of real property located at 808 South Grandview Avenue, Daytona Beach, Florida 32118. Mr. Netterville obtained a first mortgage in the amount of $66,000 from an institutional lender. Respondent was the mortgage broker responsible for the loan in the Netterville transaction (the "Netterville loan"). On September 10, 1998, Respondent entered into a mortgage brokerage contract with Mr. Netterville on behalf of Blackstone. The mortgage broker contract stated that the mortgage brokerage fee to be paid by the Mr. Netterville would not exceed $1,000. The loan-closing documents in the Netterville loan disclose that an additional mortgage broker fee of $500 was paid from the borrower's funds to Grandview Financial. The mortgage broker contract failed to disclose the fee paid to Grandview. The mortgage broker contract in the Carter loan stated that the mortgage broker "can make loan commitments." However, Respondent could not make loan commitments. Only the lender could make loan commitments pursuant to a written commitment or "lock-in" for the loan. There is no evidence that the Carters ever obtained the necessary loan commitment from the lender. Respondent represented that the mortgage broker was able to provide loan commitments without disclosing the necessity for a written commitment from the lender.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent not guilty of violating Section 494.038(1) in the George, Reiland, and Reigel transactions; guilty of violating Sections 494.043(1)(b) and 494.038(2) in the Carter transaction; guilty of violating Section 494.038(1) in the Piper and Netterville transactions; and issuing a written reprimand for Respondent's violations in the Carter transaction; and imposing fines totaling $2,426.25 for Respondent's violations in the Piper and Netterville transactions. DONE AND ENTERED this 27th day of January, 2000, in Tallahassee, Leon County, Florida. DANIEL MANRY 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 27th day of January, 2000. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350 Chris Lindamood, Esquire Department of Banking and Finance Hurston Tower South, Suite S-225 400 West Robinson Street Orlando, Florida 32801 Teresa M. Steininger 8907 Roberts Drive Dunwoody, Georgia 30350
Findings Of Fact Having heard the testimony and considered the evidence presented at the hearing, the undersigned finds as follows: At all relevant times, respondent was a licensed mortgage broker, holding license number 3256. (Exhibit A) On November 26, 1974, Carl Sciacca and George Williams, the general partners of a limited partnership known as University Professional Plaza Ltd., entered into a written contract with respondent to procure a mortgage loan commitment. Mr. Sciacca first went to respondent because respondent had been highly recommended to him. The amount of the mortgage was to be $2,450,000.00 and the commitment was to be procured "on or before 21 days from date all required exhibits are presented...". The agreement further provided that University would pay to respondent a brokerage fee in the amount of $24,500.00 upon funding of the loan. (Exhibit B) On the same date, November 26, 1974, University delivered to respondent a check in the amount of $7,500.00. This check bears the notation "For partial brokerage commission to be held in escrow." (Exhibit C) On November 27, 1975, respondent used said check to purchase a cashier's check and the money was never placed in escrow by respondent. While some correspondence from someone denoting an interest in the loan did transpire, the loan was never consummated. Sometime after the expiration of 21 days from November 26, 1974, Mr. Sciacca requested respondent to refund the deposit. A dispute arose between respondent and University regarding whether or not respondent had received from University all the required documents pertaining to the procurement of the loan. Respondent stated that University had not acted in good faith and thus was not entitled to a refund of the deposit. When attorneys were brought into the picture, it was learned that respondent no longer had all the deposit money. Respondent still has not refunded the $7,500.00 to University, however, respondent and University have now entered into an agreement whereby respondent and his wife executed a mortgage note to University in the amount of $9,000.00 secured by a second mortgage on their condominium apartment. This arrangement is satisfactory to University and represents complete settlement of the $7,500.00 owed to University, along with attorney There is some dispute in the evidence as to the parties' understanding of both the disposition to be made of the $7,500.00 deposit when the check was delivered to respondent and the actual terms of the mortgage loan commitment agreement. It was Sciacca's and William's opinion that all necessary documents for the procurement of the loan had been delivered to respondent and that if a loan were not procured within 21 days, the deposit was to be returned to University. It was respondent's opinion that the 21 days was to run from the date of receipt. of all necessary documents and that respondent had never received from University an accurate financial statement. Respondent further testified that he informed Mr. Sciacca of some problems involved with procuring the loan and that he would need some of the $7,500.00 to straighten out those problems. It was respondent's testimony that, despite the notation on the check "to be held in escrow", Sciacca told respondent to use whatever he needed to procure a loan.
Recommendation Based upon the findings of fact and conclusions of law set forth herein, it is recommended that: Respondent be found not guilty of violations of F.S. Section 494.05(1)(a) , (b) , or (c) or Section 494.05(2); Respondent be found guilty of violations of F.S. Section 494.05(1)(e) , (f) , and (g) and F.A.C. Rule 3-3.06(7) recognizing that the latter two statutes and the Rule involve the same offense - the failure to place the deposit in a trust fund or escrow account; and The Division of Finance issue, in such manner as it deems appropriate, a public reprimand or censure regarding respondent's violations as set forth above. Respectfully submitted and entered this 31st day of October, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Joseph M. Ehrlich, Esquire Department of Banking and Finance Division of Finance The Capitol Tallahassee, Florida 32304 Barry Chapnick, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Legal Annex Tallahassee, Florida 32304 Attorney for Division of Finance Steve E. Moody, Esquire MOODY & JONES 207 E. Broward Boulevard Suite 200 Fort Lauderdale, Florida 33301 Jack E. London, Esquire 2134 Hollywood Boulevard Hollywood, Florida 33020 Attorney for Carl Sciacca and George Williams, members of the general public
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the Florida Real Estate Commission suspend the license of Gracia Wittmack, t/a Leeside Realty, for a period of one (1) year. DONE and ORDERED this 27th day of July, 1977, in Tallahassee, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 APPENDIX The Respondent, Gracia Wittmack, t/a Leeside Realty, filed a Proposed Recommended Order in this case. This Proposed Recommended Order has been considered and the following findings are made regarding its contents: The findings of paragraphs 1, 3(1)(2) and 4 of the Proposed Recommended Order are included in the Hearing Officer's statement of the case in the Recommended Order. The findings of paragraph 2 of the Proposed Recommended Order is paragraph 1 of the Findings of Fact in the Recommended Order. The findings of paragraphs 5, 6, 7, 8, 9, 10 and 11 in the Proposed Recommended Order are contained in paragraph 2 of the Recommended Order. That portion of paragraph 21 of the Proposed Recommended Order which states that no evidence was introduced refuting Wittmack's and Markowski's testimony regarding deposit of the funds is irrelevant in light of the affirmative finding of paragraph 2 of the Recommended Order that the $500 was deposited to Wittmack's escrow account. The findings of paragraphs 12, 13 and 14 of the Proposed Recommended Order are contained in paragraph 3 of the Recommended Order. The findings of paragraphs 15, 16 and 18 of the Proposed Recommended Order are contained in paragraph 4 of the Recommended Order. The findings of paragraphs 17, 19 and 20 of the Proposed Recommended Order are contrary to the testimony of the Bertzels who knew that the contract contained a no zoning contingency clause. Although Markowski stated he didn't realize the clause had been deleted, he recognized the contract date September 13 1976 as a binding contract. Further, no misunderstanding of the parties would be a basis for releasing Wittmack from her fiduciary duties after demand was made for the funds. The findings of paragraph 22 of the Proposed Recommended Order are irrelevant in light of the findings of paragraphs 2, 3 and 6 regarding the deposit of the $500 to and its removal from Wittmack's escrow account. The findings of paragraph 23 of the Proposed Recommended Order are contained in paragraph 3 of the Recommended Order. The findings of paragraph 24 of the Proposed Recommended Order are rejected in light of the findings contained in paragraph 3 and 6 of the Recommended Order. The findings of paragraph 25 of the Proposed Recommended Order are rejected as being relevant in light of the Hearing Officer's findings that regardless of what escrow account the funds were deposited, they were removed and were not delivered to the Bertzels. The findings of paragraph 26 of the Proposed Recommended Order are contained in paragraphs 3 and 6, and paragraph 7 above, which find that the funds were held in escrow. The name of the account and its location is irrelevant. The record, Exhibit 8, reflects at least a $500 balance at all times in that account until the account was closed. The records of the opening of the Dadeland account were not introduced. But for the Respondent's admission that she removed the money and credited Tri-Sailing's account and the collaborative testimony of Markowski that this occurred, there would be no evidence of the alleged violation of removing the escrowed funds. The findings of paragraph 27 of the Proposed Recommended Order are contained in paragraph 7 of the Recommended Order. COPIES FURNISHED: Bruce I. Kamelhair, Esquire Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Alan J. Kluger, Esquire Myers, Kaplan, Levinson & Kenin Brickell Executive Tower 1428 Brickell Avenue Miami, Florida 33131
Findings Of Fact Respondent is currently licensed, and as of the date of the Administrative Charges and Complaint, held license No. HB-0008511 as a mortgage broker and was president and principal broker of Bay Area Financial Services, Inc. He has held such license since November 1979. He sold the business in April 1980 and has reapplied within six months for an individual license. The application was received on May 16, 1980. Pursuant to Rule 3D-40.03(3), Florida Administrative Code, Respondent is treated as a current licensee, and as an applicant. From October 25, 1977, until June 12, 1979, Respondent was employed as vice-president and principal mortgage broker by United Companies Mortgage and Investment of St. Petersburg, Inc., hereinafter UCMI, a mortgage brokerage firm. United Companies Financial Corporation, hereinafter UCFC, is a Louisiana corporation, authorized to do business in Florida. The company engages in the business as a mortgage lender. On August 31, 1978, UCMI by and through its broker, Respondent, made a loan to "James G. Anderson" and "Lorraine Anderson, his wife," and accepted a note in the amount of $14,500.00 made by "James G. Anderson and Lorraine Anderson," together with a first mortgage also made by "James G. Anderson and Lorraine Anderson, his wife," as security for the repayment of the loan. The first mortgage purported to encumber Lot 25, Oak Harbor Subdivision, according to the plat thereof as recorded in Plat Book 5, page 94, Public Records of Pinellas County, Florida. On August 31, 1978, UCMI, for value, assigned the note and mortgage to UCFC. The Respondent has no objection as to the authenticity and genuineness of Exhibit 11, a copy of a contract for sale of real estate which, on its fact, was executed by "James G. Anderson and Lorraine Anderson," as purchasers of certain real property from the seller, Linda Carol Querry, a/k/a L. C. Querry. The document reflects that the purchase price be $18,500.00, payable $100.00 in cash as a deposit, $900.00 cash within twenty-four hours, $4,500.00 additional deposit at time of closing, and $13,000.00 mortgage balance. (Exhibit 2). Anderson acknowledged his signature on this document but has no recollection of signing it. On August 31, 1978, a Notice to Customers, required by federal law, was executed by "James G. Anderson and his wife Lorraine," setting forth the disclosure requirements of Regulation Z. The lender is reflected as UCFC and the broker as UCMI of St. Petersburg. Respondent Hughes executed such document as a witness to the signatures of "Mr. and Mrs. Anderson." On August 31, 1978, a promissory note was executed by "James G. Anderson and Lorraine Anderson" promising to pay UCMI the sum of $14,500.00. (Exhibit 3). On August 31, 1978, a document entitled Consummation of Loan Secured by Real Property, was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 4). On August 31, 1978, a document entitled Notice to Customer Required by Federal Law was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 5). On August 31, 1978, a document regarding the loan transaction was executed by "James G. Anderson and Lorraine Anderson," acknowledging receipt of the "Good Faith Estimates," and certain other materials. (Exhibit 6). On August 31, 1978, a Notice to Purchaser-Mortgagor was executed by "James G. Anderson and his wife, Lorraine Anderson" acknowledging receipt of such notice. (Exhibit 7). On August 31, 1978, an Owner's Affidavit was executed by "James G. Anderson and his wife, Lorraine." (Exhibit 8). On August 28, 1978, a loan application was executed by "James G. Anderson" for the $14,500.00 to be secured by a first mortgage. Respondent personally handled the application as indicated on the application itself. (Exhibit 1). On August 31, 1978, check No. 15-39091 was executed by Respondent Hughes, as authorized representative of United Companies, Inc., as payor, to James G. Anderson and Title Consultants, as payees, in the amount of $11,014.58. The check was endorsed by "James G. Anderson and Lorraine Anderson." (Exhibit 10). On August 31, 1978, a Warranty Deed was executed by Linda Carol Querry, a/k/a L. C. Querry, as seller of certain real property to "James G. Anderson and Lorraine Anderson, his wife." Respondent Hughes executed the document as a witness to Linda Querry's signature and execution. The property described in the Warranty Deed is the identical property mortgaged by "James G. Anderson and Lorraine Anderson" to secure the loan from UCMI and UCFC. (Exhibit 13). On August 31, 1978, a Mortgage Deed was executed by "James G. Anderson and Lorraine Anderson, his wife," as mortgagors, to UCMI of St. Petersburg, as mortgagee, as security for the repayment of the loan. Respondent Hughes executed the Mortgage Deed as a witness to the signatures of "Mr. and Mrs. Anderson." (Exhibit 9). On August 31, 1978, UCMI, by and through its principal broker and vice president, Respondent Hughes, assigned the Anderson mortgage and note to UCFC. The applicable Florida law governing this matter is Chapter 494, Florida Statutes (1977), and as amended in the 1978 Supplement, and Chapter 3D- 40, administrative rules regulating mortgage brokerage, Florida Administrative Code. In August 1978, James G. Anderson, who worked in the Sanitation Department of the City of St. Petersburg, also worked part-time repainting houses purchased for resale by Vic Vogel, a speculator. While so employed, Anderson had seen Respondent a few times in the company of Vogel, but had never formally met Respondent. Vogel offered to sell one of these houses to Anderson on terms that would require no down payment by Anderson, who would thereafter make monthly payments similar to the rental payments he was then making. Further, there would be no "red tape" and Anderson would be buying a home rather than renting one. Anderson trusted Vogel, who assured Anderson he would take care of all the details. The house Anderson agreed to buy was on 11th Street and 20th Avenue South in St. Petersburg and was one of the houses Anderson had worked on in his part-time job with Vogel. In the contract to purchase signed by Anderson (Exhibit 11) the block for the legal description of the property is blank. The various other spaces on the form now showing the purchase price, down payment, etc., were blank when signed by Anderson. For several years prior to 1977 Anderson had been living with Lorraine Walker but never held her out as his wife. The signature "Lorraine Anderson" on all exhibits except Exhibit 14, the quitclaim deed from Anderson to United Companies Financial Corporation, were signed by someone other than Lorraine Walker. At the instigation of his attorney, Anderson and Lorraine Walker signed Exhibit 14 to clear up foreclosure proceedings that had been instituted against Anderson. The closing of the sale of property to Anderson took place at the offices of United Companies at 300 S. Duncan Street, Clearwater, Florida on 31 August 1978. Anderson was picked up by Vogel and driven to the closing. Accompanying Vogel was Mike Robertson, an associate of Vogel; Linda Querry, Vogel's girl friend, who signed the deed conveying the property to Anderson; and an unidentified black woman. While awaiting Respondent's arrival for the closing, Vogel took the group to lunch. At the closing, Anderson signed numerous documents and other people, including the black woman who obviously signed "Lorraine Anderson," also signed these documents as witnesses and/or notary. Anderson does not recall having seen Verona Krnjaich, who notarized his signature on the documents he signed at the closing and Ms. Krnjaich does not recall a closing at which Anderson was present. However, she testified that her normal practice is to notarize only documents notarized in her presence, and that she follows this practice at all closings. On the other hand, she has good recall of faces seen at closings but does not believe she ever saw Anderson before this hearing. Anderson testified that he trusted Vogel and signed whatever documents Vogel asked him to sign; that all the documents bearing his signature were blank when he signed them; that he did not know the black woman in the room at the closing or that when she signed these documents she did so in the name of Lorraine Anderson; that the closing took place on the second or third floor of a building just off U.S. 19 between Clearwater and St. Petersburg; that he doesn't know the address of this building but could return to it, and in fact, a few months prior to this hearing, took one of Petitioner's agents to the building where the closing took place; that he received no copy of any document signed by him at the closing; that he thought he was buying a house from Vogel; and that he expected Vogel to notify him after the closing when he could move in and how much he would pay each month. Vogel did not again contact Anderson and apparently has left the area. A few months prior to this hearing Anderson accompanied one of Petitioner's agents to show the agent where the closing occurred. The building to which the agent was taken by Anderson is two-storied and occupied by Ellis National Bank. In August 1978 there was no other occupant of this building and the second floor was unfinished but contained restrooms and some offices occupied by bank employees. Anderson made no cash payment before, at, or after the closing on this house; nor did he ever move into it. The legal description on the deed conveying the property to Anderson is for property located at 626-27th Avenue South, St. Petersburg, Florida, and not for the house at 11th Street and 20th Avenue South which Anderson thought he was buying. After Anderson became delinquent on his mortgage payments Respondent went to Anderson's home one Sunday afternoon demanding payment of the delinquent monthly payments owed by Anderson. The latter told Respondent he hadn't bought any house from the lender, owed no money, and wasn't going to pay. Respondent shortly thereafter turned the case over to the United Companies' attorney, who instituted foreclosure proceedings. When served with these papers Anderson took them to his lawyer. After some of the facts surrounding this transaction became apparent, the assignee of the mortgagee accepted a quitclaim deed to the mortgaged property from Anderson. Lorraine Walker accompanied Anderson to the lawyer's office and signed the quitclaim deed "Lorraine Anderson" (Exhibit 14). The deed signed by L. C. Querry conveying Lot 25 to Anderson (Exhibit 13) conveyed the property to "James G. Anderson and Lorraine Anderson, his wife." Respondent had known Vic Vogel for five or six years prior to August 1977 and had been involved in ten or twelve transactions in which Vogel had picked up distressed property, refurbished it and sold it. Anderson had few debts and readily qualified for the mortgage loan without considering the income of Lorraine or his income from his part-time work. He understood he was buying the house without any down payment, and, in fact, Anderson paid nothing down when he signed the contract and he produced no cash at the closing. The only disbursement made at closing was by the mortgagee, whose check for $11,014.58 (Exhibit 10) was payable to Title Consultants and Anderson. The latter endorsed this check and presumably Title Consultants disbursed to the seller. Closing statements for the buyer and seller were not in the files of UCMI or Title Consultants, nor was a contract to purchase in which the description of the property to be bought was shown. Respondent's witness testified that she reviewed all documents prior to a closing; that she recalls the Anderson transaction; doesn't recall who prepared those documents but believes she typed them; that documents were never signed in blank and the blanks subsequently completed; that she did the credit check on Anderson; and that all documents used in the closing were completed in full before the closing at which they were signed by Anderson and the person signing as Lorraine Anderson. A check with the credit bureau should have disclosed Anderson's marital status as not married and this witness was unable to explain the failure to pick this up when Exhibit 1, the loan application, was verified with the credit bureau. Respondent testified that he recalled the Anderson transaction on 31 August 1978 but later in his testimony stated he did not recall this specific transaction. He believes he followed his usual procedure and explained the various documents to Anderson before the latter signed them. Prior to 1978 he had closed many transactions for UCMI without a contract to purchase having been executed. The loan application is mailed to the main office of United Companies in Baton Rouge, Louisiana and telephonic approval is given by Baton Rouge. Accordingly, it was not unusual for Anderson's loan application to be prepared 28 August 1978, the original mailed to Baton Rouge and approval received in time to close the transaction on 31 August 1978. The contract upon which this house was conveyed, and the closing statements of buyer or seller, were not presented at this hearing. Witnesses testified these documents were missing from the files in which they would be expected to keep. Regardless of this, it is uncontradicted that Anderson made no payment at closing and, if any payment was made prior to closing, any such payment would have been accounted for by the escrow agent. It is also evident that no such accounting was made. By signing a note and mortgage for $14,500.00 Anderson purported to purchase a house for slightly more than $11,000.00, which is the amount of the check endorsed by Anderson at closing and which sum presumably went to the seller. Some $3,000.00 was retained by the lender as prepaid finance charges ($1,567.67) and brokerage fee ($1,545.45). (Exhibit 2.) Accordingly, the mortgage of $14,500 represented approximately 130% of the amount paid for this house. This fact was known, or should have been known, to Respondent, who presumably was representing his principal, UCMI, the lender at this closing. Respondent was paid a fixed salary by UCMI and did not receive additional compensation for each transaction he closed. UCMI suffered a financial loss on the repossession of the house from Anderson and filed suit against Industrial Valley Title Insurance Company (Exhibit 15).
Recommendation From the foregoing it is concluded that Respondent was guilty of concealing material facts from UCMI involving the transaction with Anderson at which UCMI was mortgagee, and that, as a result, UCMI suffered injury. It is therefore RECOMMENDED that Robert E. Hughes' license as a mortgage broker be suspended for a period of six (6) months. DONE AND ENTERED this 17th day of October 1980. COPIES FURNISHED: Franklyn J. Wollett, Esquire Assistant General Counsel Office of the Comptroller Room 1302, The Capitol Tallahassee, Florida 32301 George W. Greer, Esquire 302 South Garden Avenue Clearwater, Florida 33516 K. N. AYERS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of October 1980.
The Issue The issue in this case is whether the Petitioner’s application for licensure as a mortgage broker should be approved.
Findings Of Fact The parties set forth an extensive set of stipulated facts in the Prehearing Stipulation filed prior to the commencement of the hearing. The stipulated facts describe the activities of Richard Eric Watts (Petitioner) on behalf of Frederick M. Larry in relation to a $50,000 investment of Mr. Larry's funds with D. F. Owen, Inc., in May 1985. At approximately the same time as the Larry investment was made, the Petitioner contracted with D.F. Owen to act as an investment adviser for a fee of $33,500. The stipulated facts describe the activities of the Petitioner on behalf of Cynthia Halabrin Trust. The Petitioner was the trustee for the trust, which was a residence. During a period of time that the residence was under renovation, the Petitioner allowed Mr. Larry to reside without payment to the trust. The stipulated facts describe the activities of the Petitioner regarding the unregistered operation of "Watts Investment Management, Inc." during 1985 and the subsequent registration of the entity in 1986. The stipulated facts describe the activities of the Petitioner regarding his employment as a broker for Paine Webber from 1982-1985, and the failure to obtain approval for outside employment activities while working for the investment firm. The stipulated facts describe the legal action taken by Cynthia Halabrin Raybuck against the Petitioner and Paine Webber related to the activities of the Petitioner as trustee of the Halabrin trust. The parties settled the case through arbitration. The stipulated facts address the creation of "Danbury Mortgage Company," and describe the preliminary activities of the unlicensed entity. The facts also identify the Petitioner's association with the Paradigm Mortgage Company, based in Jacksonville, Florida. For purposes of this Recommended Order, all stipulated facts set forth in the prehearing stipulation filed by the parties are adopted and incorporated herein. On or about August 29, 1996, the Petitioner filed an application with the Department of Banking and Finance, Division of Finance (Department) seeking licensure as a mortgage broker. The Petitioner’s application disclosed that in 1989 he was denied admission to the Florida Bar. In January 1989, the Petitioner was notified by the Florida Board of Bar Examiners (“Board”) of their intent to deny his application for admission to the Florida Bar. A hearing was conducted in June 1989 regarding the denial. The Petitioner was represented by legal counsel and testified under oath at the hearing. On August 31, 1989, the Board of Bar Examiners denied Petitioner’s application for admission. Based on the facts set forth in the Board's order, the Board concluded that the Petitioner “engaged in acts to serve his own interest to the detriment of others, violated registration laws, neglected payment of student loan obligations and issued numerous worthless checks.” The Board also determined that the Petitioner provided misleading testimony at his Bar hearing and failed to disclose material information on his application. Although at the formal administrative hearing the Petitioner attempted to explain the circumstances under which the Board's determination occurred, the testimony at hearing and the stipulated facts support the findings made by the Board. Upon the filing of the Petitioner's application for licensure as a mortgage broker, the Department undertook a review of the application. Based on the review, the Department determined that the Petitioner had held himself out for business as a mortgage broker without an appropriate license. In December 1995, the Petitioner registered the name "Danbury Mortgage Corporation" with the Florida Department of State, Division of Corporations. In January 1996, the Petitioner established a business location for Danbury Mortgage Corporation. The Petitioner listed the business under the "mortgage brokers" section of the Sarasota Yellow Pages. At no time was the Danbury Mortgage Company licensed by the Department of Banking and Finance. At the hearing, the Petitioner suggested that no mortgage business had been conducted by Danbury Mortgage Company. The Petitioner asserted that he had affiliated with another company (Paradigm) and that the other company was handling the registration of his office as a Paradigm branch. The evidence establishes that the Petitioner was involved in completion of at least one mortgage loan application on behalf of Paradigm Mortgage Company without appropriate licensure. The Paradigm "branch" office was located in the same building as Danbury Mortgage Company, and shared the Danbury telephone number. Based on a cryptic telephone message received by the Petitioner from a Paradigm supervisor, the Petitioner assumed that he was licensed. The Petitioner did not return the telephone call and made no credible attempt at determining whether he was licensed prior to acting on behalf of Paradigm Mortgage Company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order denying the application of Richard Eric Watts for licensure as a mortgage broker. DONE AND ORDERED this 30th day of December, 1997, in Tallahassee, Leon County, Florida. _ _ WILLIAM F. QUATTLEBAUM 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 Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1997. COPIES FURNISHED: Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Richard E. Watts, pro se 1345 Main Street, Suite C-4 Sarasota, Florida 34236 Pamela R. Jacobs, Esquire Regional Counsel Department of Banking and Finance 1300 Riverplace Blvd, Suite 640 Jacksonville, Florida 32207
Findings Of Fact Respondent was issued Mortgage Broker License No. 3082 on September 3, 1974 by Petitioner. Respondent conducted certain transactions under its Mortgage Broker License during the period from September, 1973 until April, 1974. Respondent found client investors who had funds which they wished to invest in mortgages which would pay a greater return in interest than the average land mortgage. The transactions involved the purchase of a promissory note from a land development corporation secured by a mortgage deed on land ostensibly owned by the developer, in which the latter reserved the right and was authorized to convey the premises to a purchaser under an installment land contract subject to the lien of the mortgage. The deed further provided that the developer would deliver to a bank as an escrow agent a copy of any such agreement for deed and a quitclaim deed which would be held in escrow unless a default was established under the mortgage deed. What the investor would receive in such cases would be the developer's assignment of an agreement for deed collateralized by the mortgage deed. The issuance of these high interest notes were for the purpose of enabling the development company to make certain improvements on the land which they were obligated to do under sales contracts. In the transactions in question, Respondent dealt through Financial Resources Corporation of Ft. Lauderdale, Florida to which he remitted the investors funds, less an amount retained for fees or commissions. The land developer/borrower would then issue the note and mortgage in the face amount of the total investment made by the investor. The detailed procedure was that when an investor inquired concerning such mortgages, Respondent would determine from Financial Resources Corporation if any were available. It was the practice of Respondent's President then to look at the land development, determine if, in fact, the land was in development and had streets and the like, and to read pertinent documents concerning the development. He would then proceed to accept the full sum of the investment from the investor pursuant to an agreement by which the investor, in consideration of the stated sum, would authorize Respondent to use its best efforts to secure collateralized promissory notes at a minimum percentage of interest on the declining balance with principal and interest payable monthly if held to maturity. Respondent would then deposit the investor's check, usually on the same day as received, and then in several days send a notice to Financial Resources Corporation authorizing it to prepare and execute a self-amortizing monthly principal and interest promissory note with quitclaim deed in the amount of the investment, together with a check representing the proceeds of the Investment less the Respondent's fee or commission, and a sum for intangible tax on the transaction. Financial would thereafter return to Respondent a copy of the note and mortgage in exchange for the funds remitted. The recorded mortgages would be sent to Respondent within a month or so thereafter. Respondent had no agreements in writing with the land developer, nor with Financial Resources Corporation. Respondent claimed that its fees for services were set by Financial Resources Corporation which usually amounted to about 12 percent of the face amount of the investment, but which was sometimes more and frequently less than that authorized under the applicable statutes and regulations. Respondent did not maintain an escrow bank account and all funds received from investors were deposited into the corporate bank account of the firm. Respondent's agreements with investors set no specific term or period of time in which the secured promissory notes were to be obtained although its president would customarily tell investors that it would take some time for the transaction to be consummated, and that they could not expect to receive the recorded mortgages right away (testimony of Mr. Montague, Petitioner's Exhibits 2-10). Respondent discontinued transactions as described above in April, 1974 because he was dissatisfied with the business. He had been informed that certain lands under some of the mortgages had not been sold until after the mortgage had been executed and that this was in violation of State law. In the fall of that year, he received a memorandum from the State Comptroller on the subject of escrow accounts, dated October 11, 1974, which warned mortgage brokers in the state concerning the practice of remitting investors' funds to land developers in anticipation of receiving a recorded mortgage and note (testimony of Mr. Montague, Respondent's Exhibit 9). In 1975,a financial examiner from Petitioner's office was sent to the office of Respondent to examine his books and records. Pursuant to that examination, it was determined that Respondent had committed various violations of Chapter 494, F.S. on certain transactions. The following findings of fact are made with respect to the transactions in question: Allegation: That Respondent took and received deposits of money from Robert E. Creighton, Hazel R. Hardesty, J. Wilfred Caron, Rose A. Hoadley, Margaret A. Gregory and Willard A. Kotthaus, in the regular course of business, and failed to immediately place such said funds in an escrow or trust account as required by Section 494.05(1) , F.S. As heretofore stated, the Respondent did not maintain an escrow trust account with respect to any of the above-stated transactions. The above- mentioned individuals had authorized Respondent to disburse the funds immediately upon receipt (testimony of Mr. Montague, Supplemented by Exhibits 3- 8). Allegation: Respondent failed to maintain adequate records in violation of Section 494.06(3), F.S., in that its files contained no written agreements on transactions with Della W. Shaw, Lantana Sheet Metal and A.C. Inc., and another transaction with Lantana Sheet Metal. The agreement between Della Shaw and Respondent, although not present in Respondent's file at the time of examination of its records by Petitioner's representative, had been executed on October 15, 1975, and presently is contained in the records of the Respondent. It had been taken out temporarily by one of Respondent's associates who also had Della Shaw as a client. Respondent had entered into two transactions with the trustee of the pension fund and profit sharing plan of Lantana Sheet Metal, one for ten thousand dollars from the pension fund and one for three thousand dollars from the profit sharing plan. At the time of these investments there were written contracts which were executed by the parties. The books and records of both the pension fund and the profit sharing fund were maintained at Respondent's office by a firm which administered both plans. The agreements pertaining to the Lantana transactions were requested and withdrawn from Respondent's files by the trustee of the Lantana funds. Consequently, they did not appear in the records of the corporation at the time of examination by Petitioner's representative (Petitioner's Exhibits 2 and 4; Respondent's Exhibit 10). Allegation: Respondent failed on numerous loan purchase agreements to establish the term for which the agreement was to remain in force before the return of the deposit for nonper- formance could be required by the investor, in violation of Chapter 3-3.06, F.A.C. The transactions in question did not involve applications for mortgage loan, but agreements to purchase secured promissory notes. Respondent's clients were investors/purchasers, not borrowers (testimony of Mr. Montague; Petitioner's Exh. 2-10). Allegation: Respondent charged and accepted fees or commissions in excess of the maximum allowable in violation of Section 494.08(4), F.S., and Chapter 3-3.08(3) and (4), F.A.C., on trans- actions involving Rosa Eichelberger, overcharge of $10.90, Lantana Sheet Metal, overcharge of $62.60; Lantana Sheet Metal, overcharge of $10.91; Rose A. Hoadley, overcharge of $9.10; and Margaret A. Gregory, overcharge of $9.10.
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.
